Fiat money

Fiat money is a type of government-issued <a href="/facts/Currency/g5GPGfTe">currency</a>, authorized by government regulation to be <a href="/facts/Legal_tender/VHLm0xnf">legal tender</a>. Typically, fiat currency is not backed by a precious metal, such as <a href="/facts/Gold/1znknojp">gold</a> or <a href="/facts/Silver/xXe41BGg">silver</a>, nor by any other tangible asset or <a href="/facts/Commodity/zD0Em9v7">commodity</a>. Since the end of the <a href="/facts/Bretton_Woods_system/cQWyMgkC">Bretton Woods system</a> in 1976 by the <a href="/facts/Jamaica_Accords/AQ6gorMH">Jamaica Accords</a>, all the major currencies in the world are fiat money.
Fiat money generally does not have <a href="/facts/Intrinsic_value_(finance)/kwdcWYfB">intrinsic value</a> and does not have <a href="/facts/Use_value/kGRYyczR">use value</a>. It has value only because the individuals who use it (as a unit of account or, in the case of currency, a <a href="/facts/Medium_of_exchange/Xm116Lxq">medium of exchange</a>) agree on its value. They trust that it will be accepted by merchants and other people as a means of payment for liabilities.
Fiat money is an alternative to <a href="/facts/Commodity_money/bKzo7nrV">commodity money</a>, which is a currency that has intrinsic value because it contains, for example, a precious metal such as gold or silver which is embedded in the coin. Fiat also differs from <a href="/facts/Representative_money/hHnBcwg8">representative money</a>, which is money that has intrinsic value because it is backed by and can be converted into a precious metal or another commodity. Fiat money can look similar to representative money (such as paper bills), but the former has no backing, while the latter represents a claim on a commodity (which can be redeemed to a greater or lesser extent).
Government-issued fiat money <a href="/facts/Banknote/mm6H2XI4">banknotes</a> were used first during the 13th century in <a href="/facts/China/lTjIXY5p">China</a>. Fiat money started to predominate during the 20th century. Since <a href="/facts/Richard_Nixon/HS8uXAoC">President Richard Nixon</a>'s decision to <a href="/facts/Nixon_shock/QErGgUmL">suspend US dollar convertibility to gold</a> in 1971, a system of national fiat currencies has been used globally.
Fiat money can be:

<ul><li>Money declared by a person, institution or government to be <a href="/facts/Legal_tender/VHLm0xnf">legal tender</a>, meaning that it must be accepted in payment of a debt in specific circumstances.</li>
<li>State-issued money which is neither convertible through a <a href="/facts/Central_bank/5j5xg3s2">central bank</a> to anything else nor fixed in value in terms of any objective standard.</li>
<li>Money used because of government decree.</li>
<li>An otherwise non-valuable object that serves as a medium of exchange (also known as <a href="/facts/Fiduciary/9s1QKHKw">fiduciary</a> money).</li></ul>
The term fiat derives from the <a href="/facts/Latin/pM3Kge85">Latin</a> word fiat, meaning "let it be done" used in the sense of an order, decree or resolution.

Fiat money open-in-new

Fiat money