SD can only be created by the blockchain itself. New Steem are created and immideately locked up as collateral.

IOUs are not bad in their essence...the concept was used even when people were bartering. It is how they are created and who is backing them that make them of good quality or bad quality...same thing for derivatives.

@tshering-tamang I like Mike Maloney and consider myself a goldbug too and the video has many good points, but also misses a few concepts.    Yes there are many things wrong with the current traditional fiat/central banking system, but that's another huge topic to discuss.  With Steem,  the software network distributes new Steem just like the Bitcoin distributes new currency to miners.   Part of the allocation of new Steem is used to create Steem dollars.  Let's say hypothetically the Bitcoin network wanted to issue Bitcoin dollars instead of issuing just Bitcoin to miners.  The Bitcoin network could created 1 new Bitcoin and then create a loan on the Bitcoin of $35 and issues that to miners.  Miners now have $35 in Bitcoin dollars backed by a Bitcoin that is worth around $700.   People would be extremely comfortable with that.  The Steem network does something similar and tries to maintain the debt level at  5%.  That's very conservative.  In the modern economy banks sometimes create fiat money at 100% loan-to-value (LTV) meaning if real estate prices go down banks have less collateral to back some of the money that they created in the past.    

The Steem software network could be designed to just issue you Steem directly.  However when you eventually sell $1,000 in Steem to someone else it could be worth $800 or $1,200.  Instead the network issues you $1,000 of Steem dollars based on $20,000 worth of Steem collateral so you don't have to worry about the volatility.

I love the video... I have been giving this some though.   Steem differs from Federal reserve notes like this:
* First and most significant for the long term:  Steem does Not charge interest to those that use it.  This is not an obvious risk which is a big reason for the scam the video mentions.  When you charge interest on every dollar and try to add it up, this is never ending every increasing aks compounding debt!  Charging interest on a core asset is a guarantee that that money can never be paid back.  Almost instantly and for eternity more money will be owed than is in circulation.   This means it will have an out of control never ending dept.  This is the scam used by centralized banking.
* Steem prints money only on behalf of the steem platform using well known and well understood rules.  Our chain does not print money to pay anyone royalties.  The royalties come from holding assets like Steem or Steem Power in the hopes that it will increase in value.  It does not do this to pay "owners" or founders just because and for doing nothing.  For this reason Steem is like a non-profit.  Instead, owners and founders usually do hold shares and reserve the right to sell them.
* Steem is not a monopoly.  Users are not forced to hold it.  

Finally (probably a re-cap) .. Dilution is really cool because it is so efficient and seamless.  It is the best way I know of to help distribute growth of the platform and share price back out to active users and content providers.  So, just buying in and holding and getting very rich can now be offset a little by re-allocating some of those profits to new active users.  When you re-allocate you are basically forcing a re-investment.  That re-investment can in turn offset the dilution if it triggers growth and demand.  That only happens in bull markets, even during the bull markets prepare for the bear markets and make profits by providing content.  When you see full circle like this you can simply just average everything.  Large movements in price don't mean much it is only the average that matters.  Additionally, we have the Steem Dollar where it is undesirable to invest and price stability is needed (to pay others, for base expenses or liabilities, etc).  Welcome to self-made entrepreneurship, enjoy the ride!