Fiat Money

Summary of Fiat Money

Currency that has value only because the state that issues it declares it to be legal tender; money that has no intrinsic value beyond the faith of the government that issues it. Paper money not freely exchangeable for gold or silver is fiat money. The term is often associated with regimes which have permitted money creation to get out of control, resulting in debasement of the currency and Hyperinflation (read this and related legal terms for further details).

(Main Author: William J. Miller)