New Word List Word List. Save This Word! See synonyms for fiat on Thesaurus. We could talk until we're blue in the face about this quiz on words for the color "blue," but we think you should take the quiz and find out if you're a whiz at these colorful terms.
Words related to fiat authorization , command , decree , dictate , dictum , edict , endorsement , mandate , ordinance , permission , precept , sanction , ukase , warrant.
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What Is Fiat Money? Understanding Fiat Money. History of Fiat Money in the U. Advantages and Disadvantages. Fiat Money FAQs. Key Takeaways Fiat money is a government-issued currency that is not backed by a commodity such as gold. Fiat money gives central banks greater control over the economy because they can control how much money is printed.
Most modern paper currencies, such as the U. One danger of fiat money is that governments will print too much of it, resulting in hyperinflation. Provides flexibility Gives central banks greater control over economy Seigniorage. Risk of inflation Not fool-proof way to protect economy Opportunity for bubble. Why Is Fiat Money Valuable? Article Sources. Investopedia requires writers to use primary sources to support their work.
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View more search results. A fiat currency is a national currency that is not pegged to the price of a commodity such as gold or silver.
Learn more. Fiat currency, also known as fiat money, is the opposite of commodity money. The difference between fiat money and commodity money relates to their intrinsic value. Historically, commodity money has an intrinsic value that is derived from the materials it is made of, such as gold and silver coins. Fiat money by contrast, has no intrinsic value — it is essentially a promise from a government or central bank that the currency is capable of being exchanged for its value in goods.
Well-known examples of fiat currencies include the pound sterling, the euro and the US dollar. Besides the government approval and regulation, the main reason why fiat money is considered valid and valuable in our society is due to a collective belief.
In other words, the fiat value is highly dependent on a collective agreement that it has market value and may be used as a medium of exchange, with an intrinsic purchasing power. Thus, the acceptance of fiat money is strongly dependent on a government decree along with a social convention and expectation that it will keep its value in the future.
If either the social belief or the government decree gets compromised, the real value of the currency, as a means of payment, is quickly and greatly reduced. Historical records suggest that the first form of paper money was created in the 11th century China.
The Song dynasty is known for issuing the so-called jiaozi, regarded as the first government-issued paper money in history.
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