Nope - they just print it - and that goes for pretty much all countries.
(The only exception I can think of is Scottish banknotes)
Here in the UK, the Treasury prints some Treasury Notes or Bills,
hands them over to the Bank of England, and get a wad of currency in
return.
I've oversimplified it, but that is the jist.
Ultimately, of course, a currency is backed up by 'confidence', so if
a country ran massive balance of payments deficits, its value on the
World market would decline due to over supply - well that is the
theory - but few academic Economists have watched a hysterical FOREX
dealing room at work.
Also the World value of a currency is not of the greatest significance
to someone buying a pint in their local bar.
Similarly if a Government simply printed masses of currency (or
electronic currency as in what is in our bank accounts) then there is
a fair chance that people will regard it as of low value and inflation
will set in.
That is Milton Friedman's 'helicopter money' theory.
- a gross simplification of course
Of course in South America if a domestic currency is worthless people
would just use US Dollars. |
