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brianbezn t1_j1glc5g wrote

Canada is trustworthy enought that people value their currency even if they don't have gold. Most countries, specially ones with good monetary policies have even close to enough bonds, international currencies or metals to back their whole currency. But it doesn't matter, as long as everyone knows it's much better for Canada that their currency continues to operate, nobody will believe they will rug pull all the people holding Canadian dollars.

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XSauravX OP t1_j1gobn5 wrote

So the Canadian gov sold all the gold cuz people believed in the government and expect them to make good economic decisions which will never hard the $CAD?

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brianbezn t1_j1gp7er wrote

The very simplified logic is this:

As long as Canada allows taxes to be paid with canadian dollars, the currency will hold value. As long as the government is making so much money out of taxes, they have no incentive to fuck up their own currency for short term gains.

Not having to have reserves to cover your currency is cheaper and allows you more freedom to do stuff to save the country from recessions or to drive growth among other stuff.

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