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 Post subject: What is a fiat currency?
PostPosted: Wed Oct 04, 2017 9:22 am 
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What is a fiat currency?


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PostPosted: Wed Oct 04, 2017 9:32 am 
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Fiat currency is a currency that has been declared as legal tender by a government; however it is not supported by any physical commodity. Its value depends on the demand and supply instead of materialistic value that money possesses. Many currencies like gold and silver depends on physical commodities, but fiat currency or money is completely based on economy’s credit and faith.

Owing to hyperinflation, fiat currency risks becomes worthless as it is not connected to commodities. If one day people lose their faith in the national currency, such as U.S Dollar, fiat currency will lose all its value. However, Gold also holds a great importance, but it is been only used in decoration, jewelry, and in the manufacturing of aerospace vehicles and computers.

There are plenty of paper currencies that comes under fiat currencies. They are just used as payment method and do not possess any intrinsic value. In addition, fiat currency or money can’t be retrieved as it is inconvertible. First, fiat money came into existence in 20th century, when US halted the Dollar conversion in Gold, after the Bretton Woods system collapse.


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