Fiat money
Government-issued currency not backed by a commodity.
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In monetary economics, an object or record that lacks intrinsic worth and is broadly accepted for payments is called fiat money.[1] The value of fiat money arises solely from the collective agreement of its users, who employ it as a unit of account or medium of exchange.[1]
Key facts and history
The Song dynasty in China issued paper money called jiaozi around the 10th century, though conversion to gold or silver was never allowed in practice.[2] During the 13th century, Marco Polo described the fiat money of the Yuan dynasty in his book.[3] The Bretton Woods system, which fixed the value of 35 US dollars to one troy ounce of gold, was ended by the Nixon shock in 1971 when the US canceled direct convertibility of the dollar to gold.[4][5] Johan Palmstruch, through the Bank of Stockholm and under a royal charter from Sweden, introduced the West's first regular paper currency in 1661.[6]
Merchants and the public readily accepted these playing cards, which then circulated at their stated value.[7] Provincial governments in the American Colonies issued "bills of credit," an early fiat currency.[8][9] United States Notes, a paper fiat currency called 'greenbacks', were issued by the Federal Government during the American Civil War.[10]
What the cited sources add
The EH.Net Encyclopedia account by Michener notes that colonial monetary systems evolved dramatically, as when Massachusetts abolished paper money in 1750 and returned to a specie standard.[9] Michener explains that colonial bills of credit were fiat money, with no legally binding claim on the government for a fixed sum in specie.[9] The colonies whose currencies depreciated due to over-issue were those bordering a hostile neighbor, such as New England colonies bordering French Canada.[9] A 1740 pamphlet observed that commodity money like tobacco in Virginia and rice in South Carolina was still in use in the British plantations.[9]
By the middle of the eighteenth century, commodity money had essentially vanished from northern port cities but continued to be used in hinterlands and plantation colonies.[9]
References
- Wikipedia, "Fiat money" (CC BY-SA 4.0), which cites: Goldberg, "Famous Myths of "Fiat Money"", Journal of Money, Credit and Banking, 2005, p. 957–967 (original not read by us) en.wikipedia.org
- Wikipedia, "Fiat money" (CC BY-SA 4.0), which cites: Ramsden, "A Very Short History of Chinese Paper Money", James J. Puplava Financial Sense, 2004 (original not read by us) en.wikipedia.org
- Wikipedia, "Fiat money" (CC BY-SA 4.0), which cites: "Macroeconomics: Understanding the Wealth of Nations", John Wiley & Sons, January 14, 2005, p. 273; Marco Polo, "The Travels of Marco Polo, a Venetian, in the Thirteenth Century: Being a Description, by that Early Traveller, of Remarkable Places and Things, in the Eastern Parts of the World", 1818, p. 353–55 (original not read by us) en.wikipedia.org
- Wikipedia, "Fiat money" (CC BY-SA 4.0), which cites: ""Bretton Woods" Federal Research Division Country Studies (Austria)", Library of Congress (original not read by us) en.wikipedia.org
- Wikipedia, "Fiat money" (CC BY-SA 4.0), which cites: Jeffrey D. Sachs, Felipe Larrain, "Macroeconomics for Global Economies", Prentice-Hall, 1992 (original not read by us) en.wikipedia.org
- Wikipedia, "Fiat money" (CC BY-SA 4.0), which cites: Foster, "Fiat Paper Money – The History and Evolution of Our Currency", Foster Publishing, 2010, p. 59–60 (original not read by us) en.wikipedia.org
- Wikipedia, "Fiat money" (CC BY-SA 4.0), which cites: Bank of Canada, "New France (ca. 1600–1770)", A History of the Canadian Dollar, 2010 (original not read by us) en.wikipedia.org
- Wikipedia, "Fiat money" (CC BY-SA 4.0), which cites: Michener, Ron (2003). "Money in the American Colonies ." EH.Net Encyclopedia, edited by Robert Whaples. (we also read that source) en.wikipedia.org
- Michener, Ron (2003). "Money in the American Colonies ." EH.Net Encyclopedia, edited by Robert Whaples.. facts only, no text reused. eh.net
- Wikipedia, "Fiat money" (CC BY-SA 4.0), which cites: "Fiat Money", Chicago Daily Tribune, May 24, 1878 (original not read by us) en.wikipedia.org
Each numbered sentence above was checked against the source it cites before publication. Sentences citing Wikipedia adapt text from the English Wikipedia article Fiat money (contributors), used under CC BY-SA 4.0; this entry is available under the same licence. Other sources were used for facts only; no text or images are copied from them.
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Sources
Compiled from Wikipedia and the sources listed below. Text from Wikipedia is available under CC BY-SA 4.0; this entry is adapted from it.
- Wikipedia: Fiat money (CC BY-SA 4.0).
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