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Currency holds value when it can buy stuff. Any other explanation is just a derivative of "being able to buy stuff." Production is the "tangible exchange." And if you like gold better, feel free to buy gold with your dollars. It's not difficult.
Why would people lose confidence? Because there is nothing on the shelves to buy with their dollars. And bonds are just a temporary way to store dollars. Bonds hold their value because the dollars they are storing can still buy stuff. Bonds hold their value because dollars hold their value, and dollars hold their value because our economy produces a lot of stuff to buy.
That's patently false John.
People don't lose confidence "because their is nothing on the shelves to buy with their dollars"....
They lose confidence that people won't accept those dollars for the things on the shelves....