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The dollar, along with all other monetary obligations of our government, is backed by “the full faith and credit of the United States,” as provided by law. What does that mean?
Both “faith” and “credit” are legal terms with distinct meanings. “Faith” is not belief in a divinity but the “good faith” exhibited by parties to a transaction. You rely on your employer’s good faith when you work for a future paycheck, just as your employer relies on your good faith when he leaves you to perform your job without close supervision. Duties are performed faithfully. Obligations are executed faithfully. That’s the “faith” that backs the dollar. It’s faithfulness to duty and obligation.
“Credit” is not merely the ability to repay a debt, but honesty to a fault, utter worthiness of belief in every particular. Credit is compromised by carelessness and incompetence and sacrificed altogether by dishonesty and sharp practice. Once lost, credit can be difficult to regain.
From a legal and historical standpoint, “full faith and credit” reflects explicit, implicit and plenary adherence to principles of honesty and duty.
Today, the full faith and credit of the United States is grievously endangered. Our chief executive, acting on his own, has repudiated an agreement made by his prdecessors in office and adopted unanimously by a resolution of the United Nations. He did it despite demonstrated good faith compliance among the other parties. Seven nations were party to the agreement, which may or may not remain in force among the other signatories. Whatever happens among the other parties, the withdrawal of the USA must be reckoned a breach of good faith and a credit risk of the highest order. The UN made the agreement binding on all parties, and trying to get out of it is simply cheating.
What happens to known cheats and charlatans? How are dishonest traders treated in our markets? Often enough, they are shunned. If the dollar really is backed by nothing more than an empty promise of “full faith and credit,” can it hold its value when its issuer is universally discredited and no longer seen to be acting in good faith? It is possible that world opinion could turn so adverse that dollars might cease to enjoy special status in foreign countries? What if the general public lost confidence and liquidated its bank accounts or millions of people walked away from their school debt or hospital debt or credit card debt at once?
Some people say the US economy teeters always on the brink of collapse, like a house of cards. Could a breach of full faith and credit be the card that upsets the structure?