What Is Fiat Money?

Fiat money is any form of currency that is in itself worthless, but because it has the backing of a government is deemed to have value. For example, the paper used to print US dollars is essentially worthless, but the dollar bill is worth money. Almost all printed currency is fiat money.

If an asset such as gold or silver backs the currency, then it actually has value as it is a contract, but fiat money itself is based purely on the faith that the government will support the currency bills.

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