Getting back to fiat money being supported by imponderables and intangibles: The UK, besides never defaulting on a financial obligation, has gone about 350 years without a civil war. This must be a historic alltime record. Little wonder that its citizens have confidence in their currency, government and institutions. May I suggest that the citizens of Sweden and Denmark feel the same way? Little wonder the people of those nations decline the Euro.
While every nation must be flexible--to a degree--the great stability of the UK rests on the public's confidence. The Brits gain tremendous benefits from that confidence. Persons who wish to erode those strength and confidence giving institutions have not clearly thought through the possible negative effects of change. I am think particularly about Celtic independence and the abolishing of the monarchy.
Want a current events example of money and public confidence? In Argentina, eleven years ago the government pegged its currency on a one to one basis with the US dollar. This seemed like a good move that would boost the public's confidence in the astral/peso. What happened?
The people of Argentina, whenever possible, exchanged their astrals for dollars. Gresham's law at work. The Argie authorities let it slide until the govenment's foreign reserves were exhausted and financial panic set in. The people of Argentina had more confidence in the United States, its government, economy, etc than they did in Argentina's. I bet there is hardly a mattress north of the Straights of Magellan that does not have dollars hiding under them.
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