15 Facts About Fiat money

Fiat money is a type of currency that is not backed by any commodity such as gold or silver.

Fiat money is an alternative to commodity money, 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 differs from representative money, 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, but the former has no backing, while the latter represents a claim on a commodity .

Government-issued fiat money banknotes were used first during the 11th century in China.

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In monetary economics, fiat money is an intrinsically valueless object or record that is accepted widely as a means of payment.

Fiat money's value is created internally by the community and, at equilibrium, makes otherwise infeasible trades possible.

The use of such Fiat money became widespread during the subsequent Yuan and Ming dynasties.

The government made several attempts to maintain the value of the paper Fiat money by demanding taxes partly in currency and making other laws, but the damage had been done, and the notes became disfavored.

Fiat money has other beginnings in 17th-century Europe, having been introduced by the Bank of Amsterdam in 1683.

Fiat money confiscated all the playing cards in the colony, had them cut into pieces, wrote denominations on the pieces, signed them, and issued them to the soldiers as pay in lieu of gold and silver.

Such Fiat money was sold at a discount of silver, which the government would then spend, and would expire at a fixed date later.

The repeated cycle of deflationary hard Fiat money, followed by inflationary paper Fiat money continued through much of the 18th and 19th centuries.

The manufacturing of new physical Fiat money is usually the responsibility of the national bank, or sometimes, the government's treasury.

Since then, huge increases in the supply of paper Fiat money have occurred in a number of countries, producing hyperinflations – episodes of extreme inflation rates much greater than those observed during earlier periods of commodity Fiat money.