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Jackson6612 Posted 15 years ago
Grammar

Fiat money: Legal tender, especially paper currency, authorized by a government

Hi

I don't understand the definition. I have always thought that paper current could be converted into gold or silver (assuming the issueing authory uses this standard). But according to the definition I was wrong. Could you please help me with it? Thanks.

fiat money (noun)

Legal tender, especially paper currency, authorized by a government but not based on or convertible into gold or silver.

[Am. Heritage Dic.]
  

Top answer

No, coin of the realm needn't be based on anything of value. It is simply wiser to make it so if a country wants its money to be accepted internationally.

  • No, coin of the realm needn't be based on anything of value.
  • It is simply wiser to make it so if a country wants its money to be accepted internationally.
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2 Answers
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No, coin of the realm needn't be based on anything of value. It is simply wiser to make it so if a country wants its money to be accepted internationally.
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Not really. If you trade internationally and back your currency with gold or silver or whatever you run the very serious risk of foreign investors buying up your currency and redeeming it for gold, taking currency out of circulation (a Bad Thing) and depleting your gold reserves (a Very Bad Thing). It's why every modern nation doesn't back their currency. It also makes governmental monetary pol

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