Fiat Currency
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A Fiat Currency is a currency without intrinsic value.
- AKA: Fiat Money.
- Context:
- It can range from being a Bank-Debt-Backed Fiat Currency (where banks can lend well beyond their holdings) to being a Bank-Debt-Free Fiat Currency.
- It can become an Nonconvertible Currency, such as after a currency sell-off.
- …
- Example(s):
- The US Dollar Currency (of US dollars).
- The Euro Currency (of Euros).
- The BitCoin Currency (of Bitcoins).
- …
- Counter-Example(s):
- See: Legal Tender, Intrinsic Theory Of Value, Representative Money, Reserve Currency, Currency Deflation.
References
2014
- (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/Fiat_money Retrieved:2014-2-1.
- Fiat money has been defined variously as:
- any money declared by a government to be legal tender.
- state-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.[1]
- money without intrinsic value. [2] The term derives from the Latin fiat ("let it become", "let it be done", "it shall be"). [3] While gold- or silver-backed representative money entails the legal requirement that the bank of issue redeem it in fixed weights of gold or silver, fiat money's value is unrelated to the value of any physical quantity. Even a coin containing valuable metal may be considered fiat currency if its face value is defined by law as different from its market value as metal. The Nixon Shock of 1971 ended the direct convertibility of the United States dollar to gold. Since then, all reserve currencies have been fiat currencies, including the U.S. dollar and the Euro.[4]
- Fiat money has been defined variously as:
- ↑ John Maynard Keynes (1965
) [1930
]. "1. The Classification of Money
". A Treatise on Money. 1
. Macmillan & Co Ltd. p. 7
. "Fiat Money is Representative (or token) Money (i.e something the intrinsic value of the material substance of which is divorced from its monetary face value) - now generally made of paper except in the case of small denominations — which is created and issued by the State, but is not convertible by law into anything other than itself, and has no fixed value in terms of an objective standard.
"
- ↑ Shubik, Martin. (April 2000). The Theory of Money. Cowles Foundation for Research in Economics at Yale University. http://cowles.econ.yale.edu/P/cd/d12b/d1253.pdf
- ↑ Fiat is the third-person singular present active subjunctive of fiō ("I become", "I am made").
- ↑ Scheurer, Vincent (1 July 2011). "Can our current system of fiat money survive in the long term?". The Magic of Money. The Motley Fool. http://www.fool.co.uk/news/investing/2011/07/01/the-magic-of-money.aspx. Retrieved 2 July 2011.