Gold Information Page 8

In economics, fiat currency or fiat money is money that enjoys legal tender status derived from a declaratory fiat or an authoritative order of the government. It is often associated with paper money because, without government fiat, bank notes are not a legal tender in payment of debt, and only specie is unlimited legal tender for money debts. However this is not universally true, as some currencies, (notably sterling issued by Scottish banks), are not legal tender but are accepted by longstanding confidence.
A bank of issue whose notes enjoy legal tender status by government fiat can use its own notes, making their redemption in specie optional - a matter of the 'monetary policy' of the bank in question. Historically, the institution of fiat currency has preceded and enabled the demonetisation of specie, via a monetary policy decision not to offer payment in specie at par, e.g. by suspension, devaluation or redemption in bullion or foreign currency instead. Eventually this leads to no form of payment, redemption or exchange whatsoever being offered by the issuer and a system of irredeemable freely floating national currencies.

Courtesy of: www.wikipedia.org

Back to Westdale Coins & Gold

Westdale Coins & Gold Site Map

Hosting & Design by:
StaFo Web Services

Westale Coins ©
Copyright 2007 All Rights Reserved
319 396 7760
Fax: 319 396 3565
or write us at:
Westdale Coins
P.O. Box 2022
Cedar Rapids, Iowa 52401

Westdale Coins since 1971

Gold Information Page 8
What is Fiat?