What is a fiat currency?

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.S. dollar, are fiat currencies.

Why is fiat money a good investment?

In contrast to commodity-based money like gold coins or paper bills redeemable for precious metals, fiat money is backed entirely by the full faith and trust in the government that issued it. One reason this has merit is that governments demand that you pay taxes in the fiat money it issues.

What is the difference between representative money and fiat money?

Representative money is backed by a physical commodity such as precious metals or instruments such as checks and credit cards. Fiat money can be used to buy goods and services because both parties involved in a transaction agree on the currency's value. Before 1971, the world's currencies were representative and backed by gold. 2

What is a paper currency?

Most modern paper currencies are fiat currencies, including the U.S. dollar, the euro, and other major global currencies. 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.