Okay, I’m not sure if this applies to those of you with U.S. bank notes, but my English bank note says ‘I Promise To Pay The Bearer On Demand The Value of £10’. So what happens when I take this to the bank and demand my ten pounds? Can I get gold? Do notes on other countries say this sort of thing?
You would have had to present a note to the Bank of England prior to 1931 to get paid in gold.
These days, as in the US and every other country, banknotes are backed by only the good faith in the country. As long as the next person takes it in exchange for goods or services, you are fine.
Phrases such as “…Promise to pay…on demand…” are just a carryover from the old days when notes actually mentioned redeemability in gold, silver or whatever.
Yeah, American currency doesn’t even have that pretense anymore. They’ll pay you 10 one dollar bills or forty quarters or 100 dimes for a 10 dollar bill though. Paper money was originally sort of a warehouse certificate. It represented an actual physical amount of gold or silver, called “specie” held by banks or the government. The currency was redeemable on demand by the bearer for a specified amount of specie based on the law.
Wars and deficit spending trashed any relationship between the paper money and hard cash, so they stopped the charade.