US currency is not backed by anything. It used to be backed by silver and gold. Four years into the depression, paper-backed currency came out- not backed by anything. It's been that way ever since.
US currency is backed by gold bonds. Gold bonds are Federal bonds worth X-amount in gold, the gold is sitting in Fort Knox... this is the real stuff. It's not currency, it looks like a stock certificate or diploma. (This was the stuff they were stealing in "Die Hard")
However, you can buy gold bonds with paper currency.
Since paper currency is not backed by anything and you can buy gold bonds with paper currency in effect you can buy gold from nothing.
The Federal Reserve prints up paper money. Then they ship it to twelve Federal Reserve banks and it goes into circulation. When the banks need more money, they tell the Federal Reserve and they send truckloads of new money for more circulation.
"Since this is a house of cards, how can money be worth anything?" It's not. But Federal Reserve notes are "legal tender for all debts public and private", as every bill states. This means it's legally enforcable as payment in exchange for goods and services- this means that if someone refuses Federal reserve notes as payment, there is no alternative. As such, people have no choice but to use paper money to pay debts (see: The Liberty Dollar).
Naturally the people in the know know that gold bonds are where it's at, because they are literally worth X-amount of gold. Rich people have safety deposit boxes full of them.
There has to be a proportion between the number of gold bonds and the amount of paper currency in circulation. So when the Federal Reserve doesn't have any more gold bonds (to back new money being put into circulation, because they're all sitting in people's safety deposit boxes), they simply print up more gold bonds ("Don't worry- the gold's all there in Fort Knox even though you can't see it").
Ultimately, the only thing that truly determines the value of an American dollar is its buying power in relation to other currencies- the yen, pound, Euro etc. This is determined by international commerce. Simply put, if a country is selling more stuff than it's taking in, that means its money is getting stronger, it's more in demand; it's more valuable.
Postwar German Marks had virtually no value. This was because most of Germany was either blown up or killed- they weren't exporting anything to the rest of the world. So since the rest of the world didn't have use for German marks, they became worthless. If you were in Germany back then, a trillion marks would buy you a loaf of bread. This is because Germany needed everything and produced nothing.
Today things are slightly different. Slowly and inexorably, world currency is turning black: oil. This is because the world needs gas to run their cars and factories and there's no alternative. The US is by far the largest consumer of oil- this means the bulk of the oil from the Middle East comes to America.
In exchange, America gives The Middle East Federal Reserve Notes (paper money) which has no tenable value.
Let's say you're a sheik in The Middle East. (Overly simplified,) every day a shipment of oil leaves your ports for America and every day a small boat filled with US dollars arrives. Eventually you will realize that America needs your oil more than you need their American dollars. And since oil is worth more than paper money, the world economy is slowly turning black.
At some point, Saudi Arabia took these boatloads of US dollars and started buying American stuff with it- what else are they going to do with American currency in The Middle East- it's worthless there, it only has value in America. Remember Saddam and the container-loads with billions in US currency in them? Remember he used to light cigars with US $100 bills?
This is why Saudi Arabia owns up to one ninth of America. You heard me. The GNP of America is about 9 trillion dollars and the Saud Family has almost a trillion US dollars invested in America- land, oil fields, malls, stocks and bonds and so on (see: Farenheit 9/11).
This is enough money that if they pulled out, a depression would definetly happen here- what do you think would happen if the stock market took a 6,000 point hit in one day?
One last thought. If you had a million dollars in paper currency and buried it in your backyard, 30 years later it would be worth $401,007.00 in "30 years later dollars" because of inflation (3% per year for 30 years).
If you put a million dollars in gold in your backyard in 1976, it would be worth 4.42 million today.
Finally- who runs the Federal Reserve? Research.