Fiat Money

Gaurav Meena
14117023

What is Fiat Money?

Fiat money is currency which derives its
value from government regulation or law. It
differs from commodity money, which is
based on a good, often a precious metal such
as gold or silver, which has uses other than as
a medium of exchange.

History of Fiat Money

Origin 11th Century China
Became widespread during Yuan and Ming
dynasties
The Song dynasty was the first to issue
paper money, jiaozi.

Bretton Woods Agreement

Established in 1944.
Resulted in the formation of :
- IMF
- World Bank
Both of these help to
- Foster Global Monetary Cooperation
- Secure Financial Stability
- Facilitate International Trade
- Promote High Employment and Sustainable Economic
Growth
- Reduce Poverty
It was abandoned for the Free-market Currency Valuation and Exchange system that still exists
today.

Benefits of a Fiat Currency

The Federal Reserve can use monetary policy
to increase general prosperity.
Monetary value is based on supply and demand.
Our growth is not limited by a commodity
Promotes government spending

Dangers of a Fiat Currency

Government controls all money.
We rely on the government too heavily.
If the government goes bankrupt, our money is
worthless.
Creates malinvestments, such as government
issued bonds.
Disenfranchises the producers of real value

Why do Fiat Currencies Fail?

The money isnt connected to anything.
Government is free to print off as much money as
they see fit.
When demand for money drops, inflation starts.
When large sums of debt is owed, government
print money to pay it off. Which leads to
hyperinflation.

How Does a Fiat Currency Effect an Economy?

It makes our currency more susceptible to
failure.
Increases risk for inflation.
Give the government more power than they
should have.
Hurts the producers of real value.

At the end fiat money returns

to its inner valuezero.
- Voltaire
CONCLUSION