What Is Fiat Money?

A Short Primer

The term "fiat money" − more correctly "fiat currency" − is becoming more wide-spread than it was seven years ago when we put out a movie called FIAT EMPIRE. I certainly didn't invent the term, so I am just going along with the economic jargon as best I can. But for anyone that doesn't understand what fiat currency is, it's reasonably simple. Here's a primer.

Fiat currency is PAPER currency that is issued by government "fiat" or decree. The reason it's issued by government decree, or fiat, is because ordinarily no one would accept or use it because it can no longer be REDEEMED for gold or silver. After all, it's just PAPER. "Redeem" simply means the act of taking your PAPER currency into your local bank and having them give you GOLD or SILVER in exchange for it. In other words, the bank will redeem specie as evidenced by your paper. They will give you the amount of gold or silver specie written on the FACE of your paper bill (its "face value"). If the face of your paper bill says "$10 Silver Certificate" (instead of 10 dollars or 10 Federal Reserve Notes) the bank will give you 10 "dollars" worth of silver.

So how much silver is this? Well, it depends on the current definition of the "dollar" when you try to redeem your silver.

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