Craig Duling Numismatist

Fiat Money

I have often found that there is a common misconception about the term fiat money and how it applies to our currency here in the United States. Fiat money is money declared by a government to be legal tender and useable for exchange of goods or services.The term is derived from the Latin word fiat, which translates to “let it be done”. Fiat money only has value because a government accepts it as payment for taxes and says it can be used within the country as a “tender” (meaning offering) to pay any and all debts. In effect, this allows it to be used to buy goods and services and to pay tax. Where fiat money is used as currency, the term fiat currency is used. The most widely-known and most held reserve currency, the US dollar, is a fiat currency because it is backed by the federal reserve bank, a large corporation which among other things determines fiscal policy for the United States.