fiat money


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Related to fiat money: gold standard, Commodity money

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 ?
Adaptive Learning and the Transition to Fiat Money.
If there is no sovereign behind fiat money then it cannot withstand strain.
Second, where the portion of money held as money in-exchange is taken into account on a national basis the money supply is variable as the Federal Reserve is free to add liquidity to the fiat money supply to foster exchange.
Local central banks could adopt an identical monetary policy that has a contrary effect on the quality of capital: lower artificial rates are negatively altering savings and the real capital, replacing it with unsound fiat money.
Bernanke may believe they are doing "virtuous" work, but can the injection of fiat money into the marketplace actually make the economy healthier and stronger?
The leader should act for the sovereign people, and not for the benefit of a one-world government cabal that will rule with fiat money - paper vouchers that you are told you must use as money.
In 1690, Massachusetts inadvertently created a second type of fiat money, "bills on credit," when the colony issued certificates--short-term government bonds--to finance an attack on Quebec during King William's War (1689-1697).
Today the Fed has virtually unlimited power and the dollar is a pure fiat money.
Because Bell speaks incessantly about the dangers of fiat money and the wisdom of the gold standard, some people dismiss him as a one-issue candidate whose issue is an anachronism.
It's also a part of analyzing the significance of the previous literature reviews which claimed that the fiat money was inflationary bias and gold could be the best substitution to fiat money.
There is no doubt that many central banks have made a mess of things with their own fiat money without linkage to reality, and it is entirely conceivable that the private sector could also in the area of currencies do a better job than public sector institutions.
Such fiat money is anything but a storehouse of value, and only fools would keep their lifetime savings in such Monopoly money.