Fiat money

fiat currencyfiatfiat currenciesnational currencyfiduciary currencynational currenciesnominalpaper currencyPaper moneyby the city itself
Fiat money is a currency without intrinsic value that has been established as money, often by government regulation.wikipedia
407 Related Articles

Currency

currenciesforeign currencycoinage
Fiat money is a currency without intrinsic value that has been established as money, often by government regulation.
Currencies can be classified into two monetary systems: fiat money and commodity money, depending on what guarantees the currency's value (the economy at large vs. the government's physical metal reserves).

Commodity money

speciecommoditycommodity standard
It was introduced as an alternative to commodity money and representative money.
This is in contrast to representative money, which has little or no intrinsic value but represents something of value, and fiat money, which has value only because it has been established as money by government regulation.

Medium of exchange

mediums of exchangeexchange mediumfreely exchangeable for goods
Commodity money is created from a good, often a precious metal such as gold or silver, which has uses other than as a medium of exchange (such a good is called a commodity).
Most forms of money can act as mediums of exchange including commodity money, representative money and most commonly fiat money.

Representative money

representativecommodity backednegotiated
It was introduced as an alternative to commodity money and representative money.
Unlike some forms of fiat money (which may have no commodity backing), genuine representative money must have something of intrinsic value supporting the face value.

Monetary economics

monetary theorymonetary economymonetary
In monetary economics, fiat money is an intrinsically valueless object or record that is widely accepted as a means of payment.
Monetary economics is the branch of economics that studies the different competing theories of money: it provides a framework for analyzing money and considers its functions (such as medium of exchange, store of value and unit of account), and it considers how money, for example fiat currency, can gain acceptance purely because of its convenience as a public good.

Nixon shock

Dollar hegemonyclosed the gold windowsuspension in 1971
Since the decoupling of the US dollar from gold by Richard Nixon in 1971, a system of national fiat currencies has been used globally.
By 1973, the Bretton Woods system was replaced de facto by the current regime based on freely floating fiat currencies.

Gold

Aunative goldgold dust
In 2007 the Royal Canadian Mint produced a million dollar gold bullion coin and sold five of them. This was a series of economic measures taken by United States President Richard Nixon in 1971, including unilaterally canceling the direct convertibility of the United States dollar to gold.
In the past, a gold standard was often implemented as a monetary policy, but gold coins ceased to be minted as a circulating currency in the 1930s, and the world gold standard was abandoned for a fiat currency system after 1971.

Gold standard

goldgold exchange standardbacked by gold
Commodity money is created from a good, often a precious metal such as gold or silver, which has uses other than as a medium of exchange (such a good is called a commodity).
It was a fiat money (not convertible on demand at a fixed rate into specie).

Monetary system

monetary standardcurrency systemsmonetary
Fiat money is a currency without intrinsic value that has been established as money, often by government regulation.
The alternative to a commodity money system is fiat money which is defined by a central bank and government law as legal tender even if it has no intrinsic value.

Hyperinflation

hyper-inflationinflationgalloping inflation
The costs of the war with the British led to rapid inflation in New France.
Most hyperinflations in history, with some exceptions, such as the French hyperinflation of 1789–1796, occurred after the use of fiat currency became widespread in the late 19th century.

Kublai Khan

KublaiKhubilai KhanKubilai Khan
The founder of the Yuan Dynasty, Kublai Khan, issued paper money known as Jiaochao in his reign.
Kublai Khan is considered to be the first fiat money maker.

United States Note

greenbacksUnited States Notesgreenback
During the American Civil War, the Federal Government issued United States Notes, a form of paper fiat currency popularly known as 'greenbacks'.
Often termed Legal Tender Notes, they were named United States Notes by the First Legal Tender Act, which authorized them as a form of fiat currency.

Gresham's law

Gresham’s Laweconomic theorygood money
In an application of Gresham’s Law – bad money drives out good – people hoarded gold and silver, and used paper money instead.
Today all circulating coins are made from base metals, known as fiat money.

Early American currency

Continental currencyContinental dollarContinentals
Examples include the “Continental” issued by the U.S. Congress before the Constitution; paper versus gold ducats in Napoleonic era Vienna, where paper often traded at 100:1 against gold; the South Sea Bubble, which produced bank notes not backed by sufficient reserves; and the Mississippi Company scheme of John Law.
Bills of credit were usually fiat money: they could not be exchanged for a fixed amount of gold or silver coins upon demand.

Jiaochao

government issued paper moneyChao (currency)paper currency
The founder of the Yuan Dynasty, Kublai Khan, issued paper money known as Jiaochao in his reign.
Unlike earlier notes, this was a fiat currency and was widely rejected.

Greenback Party

GreenbackGreenbackerGreenback-Labor Party
During the 1870s, withdrawal of the notes from circulation was opposed by the United States Greenback Party.
A dual currency system emerged in which this fiat money circulated side by side with ostensibly gold-backed currency and gold coin, with the value of the former bearing a discount in trade.

Legal tender

demonetizeddemonetizationdemonetised
This resulted in a situation in which the greenback "Legal Tender" notes of 1862 were fiat, and so gold and silver were held and paper circulated at a discount because of Gresham's law.

Central bank

central bankscentral bankingcentral banking system
A central bank introduces new money into the economy by purchasing financial assets or lending money to financial institutions. Generally, these monetary authorities are the central banks that control monetary policy through the setting of interest rates, through open market operations, and through the setting of banking reserve requirements.
In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base in the state, and also generally controls the printing/coining of the national currency, which serves as the state's legal tender.

United States dollar

US$$USD
This was a series of economic measures taken by United States President Richard Nixon in 1971, including unilaterally canceling the direct convertibility of the United States dollar to gold.
Since the suspension in 1971 of convertibility of paper U.S. currency into any precious metal, the U.S. dollar is de facto fiat money.

Bretton Woods system

Bretton WoodsBretton Woods AgreementBretton Woods Institutions
From 1944 to 1971, the Bretton Woods agreement fixed the value of 35 United States dollars to one troy ounce of gold.
On 15 August 1971, the United States unilaterally terminated convertibility of the US dollar to gold, effectively bringing the Bretton Woods system to an end and rendering the dollar a fiat currency.

Banknote

paper moneybanknotespaper currency
Government issued banknotes began to be used in 11th century China.
Today, most national currencies have no backing in precious metals or commodities and have value only by fiat.

Ming dynasty

MingMing ChinaMing Empire
The use of such money became widespread during the subsequent Yuan and Ming dynasties.

Deflation

deflationarydeflationary spiralmoney supply contracted
Low (as opposed to zero or negative) inflation reduces the severity of economic recessions by enabling the labor market to adjust more quickly in a downturn, and reduces the risk that a liquidity trap prevents monetary policy from stabilizing the economy.
Most nations abandoned the gold standard in the 1930s so that there is less reason to expect deflation, aside from the collapse of speculative asset classes, under a fiat monetary system with low productivity growth.

Money creation

credit creationprinting moneycreate money
The central bank's activities directly affect interest rates, through controlling the base rate, and indirectly affect stock prices, the economy's wealth, and the national currency's exchange rate.

Reserve requirement

reserve requirementsreserve ratiocash reserve ratio
Generally, these monetary authorities are the central banks that control monetary policy through the setting of interest rates, through open market operations, and through the setting of banking reserve requirements.
Historically a central bank might once have run out of reserves to lend and so have had to suspend redemptions, but this can no longer happen to modern central banks because of the end of the gold standard worldwide, which means that all nations use a fiat currency.