Heading for a fall, by fiat?

The author speculates about whether paper money, no longer backed by gold, could lose its value if the world's major economies continue to run up debt. Given the dollar's role as a currency of last resort, some wonder if its decline heralds not just an economic adjustment by the United States, but a crisis of sorts in the value of paper money itself. Money in its present form is a relatively new invention. For most of human history money meant either gold or silver, either directly, or indirectly by means of the "gold standard" which meant, at least in theory, that all paper money was backed by gold. But it came to an end in 1971, when inflationary pressures in America caused the country's manufacturers to become uncompetitive and forced the country off the gold standard. Since then the world has relied on "fiat money", so-called because it is created by government fiat and is backed only by the promises of central bankers to protect the value of their currencies. It is the value of those promises that some are now questioning. Although central banks around the world still hold about 30,000 tonnes of gold in their reserves, many have been offloading their stocks over the years. Those who doubt the continued worth of paper money as a store of value point to two things. The first is that the price of gold has been rising even though official inflation is low. But the rise in the price of gold in particular has raised questions. The biggest of these--and the second main reason for concern--is the amount of debt that rich-country governments have been running up.