What is Fiat Currency?

Fiat currency is a form of money that is created by a government and has a variable value.

[{"selector":"#anim-ac3ab367-6587-4745-873f-6bce3d41fd5a","keyframes":{"opacity":[0,1]},"delay":0,"duration":750,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}]

Its value depends on various economic factors, including the government's ability to print money.

[{"selector":"#anim-a9474136-9b75-4b20-a5b5-138d21619b12 [data-leaf-element=\"true\"]","keyframes":{"transform":["translate3d(0, 6.067961238287115e-7%, 0)","translate3d(0, 0%, 0)"]},"delay":0,"duration":2000,"easing":"cubic-bezier(.3,0,.55,1)","fill":"both"}] Cloud Banner

These factors can cause inflation and weaken the value of a currency.

[{"selector":"#anim-79134dab-0b94-4219-bc06-05d517d6da64","keyframes":{"opacity":[0,1]},"delay":0,"duration":7000,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-a2fa8011-d4b1-4e45-8125-182c8705734d","keyframes":{"transform":["translate3d(-117.13286%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":7000,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-cef44afd-bd4b-4fae-8ad0-56278e6ebb50","keyframes":{"opacity":[0,1]},"delay":0,"duration":750,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}]

These factors are also affected by the government's fiscal policies and regulations.

[{"selector":"#anim-a6c848a6-2488-4c9b-a80a-2c4998a0c191 [data-leaf-element=\"true\"]","keyframes":{"transform":["translate3d(0, -4.826254563856488%, 0)","translate3d(0, 0%, 0)"]},"delay":0,"duration":2000,"easing":"cubic-bezier(.3,0,.55,1)","fill":"both"}] Cloud Banner

Fiat currencies are backed by government authority.

[{"selector":"#anim-20f8e125-4925-4a67-9d20-ad9890cb2df9","keyframes":{"opacity":[0,1]},"delay":0,"duration":750,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}]

The term fiat is derived from the Latin word fiat, which means "decree."

[{"selector":"#anim-036de81d-22fe-4a97-af5f-546f438655c8 [data-leaf-element=\"true\"]","keyframes":{"transform":["translate3d(0, 7.760782355151471e-15%, 0)","translate3d(0, 0%, 0)"]},"delay":0,"duration":2000,"easing":"cubic-bezier(.3,0,.55,1)","fill":"both"}] Cloud Banner

This word refers to money that is not backed by a physical good or commodity.

[{"selector":"#anim-984c6a72-c46c-4f9a-afbf-7fd79b5337a6","keyframes":{"opacity":[0,1]},"delay":0,"duration":7000,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-5e559454-4f5b-4c58-bf8b-107ce715aef5","keyframes":{"transform":["translate3d(-108.60533%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":7000,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-83e807dd-45f4-49b6-8c4b-f52b358d0232","keyframes":{"opacity":[0,1]},"delay":0,"duration":750,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}]

This is a major difference between fiat currency and gold-backed currencies.

[{"selector":"#anim-3535ef2e-754a-4017-87e9-a31c34591a43 [data-leaf-element=\"true\"]","keyframes":{"transform":["translate3d(0, 7.760782355151471e-15%, 0)","translate3d(0, 0%, 0)"]},"delay":0,"duration":2000,"easing":"cubic-bezier(.3,0,.55,1)","fill":"both"}] Cloud Banner

Most paper and coin currencies in the world are fiat.

[{"selector":"#anim-12a65bfc-9c49-489e-ac1d-8ec843b39821 [data-leaf-element=\"true\"]","keyframes":{"transform":["translate3d(0, 7.760782355151471e-15%, 0)","translate3d(0, 0%, 0)"]},"delay":0,"duration":2000,"easing":"cubic-bezier(.3,0,.55,1)","fill":"both"}]

The US dollar, British pound, Indian rupee, and the Euro are all examples of fiat currency.

[{"selector":"#anim-fc7e9bfe-a6ca-419b-a485-24a1e5e2fd2f","keyframes":{"opacity":[0,1]},"delay":0,"duration":750,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}]

Tip 5

Since fiat money is not linked to an underlying asset, it has no intrinsic value and can lose value during economic instability.

[{"selector":"#anim-215035eb-2e29-4b79-92c1-543669e2b24f [data-leaf-element=\"true\"]","keyframes":{"transform":["translate3d(0, 7.760782355151471e-15%, 0)","translate3d(0, 0%, 0)"]},"delay":0,"duration":2000,"easing":"cubic-bezier(.3,0,.55,1)","fill":"both"}]

It can also fall in value due to excessive government printing.

[{"selector":"#anim-5b32f48c-503f-42bf-a7c2-d4d30b349460","keyframes":{"opacity":[0,1]},"delay":0,"duration":2000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}]

Currencies of the World quiz

[{"selector":"#anim-cfcf4dc6-e1c1-4e93-80d4-a13c7fc141df","keyframes":{"opacity":[0,1]},"delay":0,"duration":2000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-b09313eb-1a39-444e-9d6a-2ca19e1cafea","keyframes":{"opacity":[0,1]},"delay":0,"duration":2000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}]

What is Fiat Currency?

Fiat currency is a form of money that is created by a government and has a variable value.

Its value depends on various economic factors, including the government's ability to print money.

These factors can cause inflation and weaken the value of a currency.

These factors are also affected by the government's fiscal policies and regulations.

Fiat currencies are backed by government authority.

The term fiat is derived from the Latin word fiat, which means "decree."

This word refers to money that is not backed by a physical good or commodity.

This is a major difference between fiat currency and gold-backed currencies.

Most paper and coin currencies in the world are fiat.

The US dollar, British pound, Indian rupee, and the Euro are all examples of fiat currency.

Tip 5

Tip 5

The current system of fiat currency started in the United States during the 20th century when countries started shifted away from the gold standard.

Since fiat money is not linked to an underlying asset, it has no intrinsic value and can lose value during economic instability.

It can also fall in value due to excessive government printing.

Currencies of the World quiz

Up Next

Basic Economic quiz