fiat money


Money which has no intrinsic value and cannot be redeemed for specie or any commodity, but is made legal tender through government decree. All modern paper currencies are fiat money, as are most modern coins. The value of fiat money depends on the strength of the issuing country's economy. Inflation results when a government issues too much fiat money.

Use fiat money in a sentence

It was fiat money and after I learned that I realized that the money had no intrinsic value and could not be redeemed.

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My boss is a real gold bug, and frequently declares that we should not keep our investments in dollars because those are issued by the government with nothing real behind them and are fiat money.

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Although 'fiat money' sounds inherently risky, it's true that all modern paper money (including coins) falls under that definition -- troubles such as inflation arise generally only when governments issue too much of the currency, if unsupported by a vibrant economy.

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