Definitions for fiat currency
This page provides all possible meanings and translations of the word fiat currency
Money that has indirect market value or is given legal tender status by government fiat.
Fiat money is money that derives its value from government regulation or law. The term fiat currency is used when a fiat money is used as the main currency of the country. The term derives from the Latin fiat. Fiat money was first used in China about a thousand years ago. Fiat money has been used intermittently by various countries since, concurrently with currencies that were backed by metals, primarily silver or gold. After World War II, the Bretton Woods accord set up a world-wide system of currencies that was pegged to the US dollar, while the US dollar was itself pegged to gold. The Nixon Shock of 1971 ended the convertibility of the United States dollar to gold. Since then, all reserve currencies have been fiat currencies, including the U.S. dollar and the Euro. A central bank typically introduces new money into circulation in the economy by purchasing financial assets or lending money to financial institutions. Commercial banks then multiply this base money by credit creation through fractional reserve banking, which expands the total supply of broad money. The amount of money in circulation is reduced by the opposite process. The value of fiat currencies is influenced by monetary policy.
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"fiat currency." Definitions.net. STANDS4 LLC, 2014. Web. 17 Apr. 2014. <http://www.definitions.net/definition/fiat currency>.