Fiat Money (Noun)
Meaning
Money that the government declares to be legal tender although it cannot be converted into standard specie.
Classification
Nouns denoting possession and transfer of possession.
Examples
- Most modern currencies are forms of fiat money, not backed by any physical goods but instead relying on government decree.
- The abundance of fiat money circulating in the economy often raises concerns about inflation and decreased purchasing power.
- Critics of fiat money argue that its use can lead to reckless government spending, since it can be printed and circulated freely.
- One of the primary issues with fiat money systems is that, without a physical standard to anchor their value, currencies are left vulnerable to economic shocks.
- Historians have shown that the widespread adoption of fiat money occurred around the early 20th century when countries abandoned the gold standard.