fiat money

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fiat money

(fī`ət, fī`ăt), inconvertible money that is made legal tender by the decree, or fiat, of the government but that is not covered by a specie reserve. It is commonly understood to be of paper, although it may also consist of overvalued metal coins. The circulation of fiat money may lead to inflation, whereas money redeemable in gold or other securities is held much less likely to do so. Under conditions of proper monetary management, however, fiat paper money can be a stable currency. In fact, contemporary American money is essentially fiat money. All Federal Reserve notes and most circulating coins are money because the government says they are, not because they are backed by precious metals. Earlier, less stable examples of fiat paper money were the continentals issued by the American government during the Revolutionary War, the assignats issued during the French Revolution, and the greenbacks issued by the U.S. government during the Civil War. Most such issues were accompanied by severe price rises.

Bibliography

See W. C. Mitchell, History of the Greenbacks (1903, repr. 1960); F. Reinfeld, Story of Paper Money (rev. ed. 1960).

References in periodicals archive ?
A world fiat currency, then, would be the surest way to accelerate the development of a true global government and the accompanying destruction of national sovereignty.
Former Fed boss and current chairman of Obama's "Economic Recovery Advisory Board" Paul Volcker, for example, has long been a strong proponent of a global fiat currency and a global central bank.
53) Ultimately, that the Bank planned on ending the suspension of specie payments prevented the government, and the Bank, from enacting more inflationary policies as it might have under a pure fiat currency.
Thus, in a sense, dollars, euros, pounds, yen, Swiss francs, and Chinese yuan are really somewhat different flavors of one single option--today's floating fiat currency status quo.
Bitcoin may not be the ultimate market-driven response to government-issued, monopoly fiat currency, but it certainly has been a provocative beginning.
The obvious solution to the problems caused by fiat currency and trade deficits is to get rid of fiat currency, but unfortunately, it's not that simple.
It is still by all evidences the premier currency where no fiat currency, including the dollar, can match it.
The demand for diamonds and other gemstones has substantially increased over the past years as global investors look for hard assets as a potential safe haven from the degradation of fiat currency, said by Paul Zimnisky, co-founder and CEO of PureFunds.
Co-Founder Alan Yong, a respected technology visionary since the emergence of personal computer and wireless communication in the 1980's, stated that Digital Currency like DNotes has the built-in capabilities to be far superior to money or fiat currency.
With QE3, silver is expected to rise like it did after the QE1 and QE2 announcements, but maybe even more so because this time in addition to the Federal Reserve, the other central banks around the world are also printing more fiat currency.
Their model does not include fiat currency via the standard approach.
By contrast, traders who consider switching from a domestic to an alternative fiat currency as a medium of exchange find that there is no simple common metric.