Finance
What is Fiat money?
Fiat money is currency that has value because a government says it does — not because it's backed by gold or another physical commodity. Its worth comes from trust in the issuing government and its acceptance for trade and taxes.
See it, don’t just read it.
Watch a 2-minute lesson with voice + animation that explains fiat money.
Key things to understand
- 1It's money not backed by a physical commodity.
- 2Its value rests on government decree and public trust.
- 3Almost all modern national currencies are fiat.
- 4It gives governments flexibility to manage the economy.
Frequently asked questions
- What is fiat money?
- Government-issued currency that has value by decree and trust, rather than being backed by gold or silver.
- Why does fiat money have value?
- Because people trust the issuing government and accept it for goods, services, and paying taxes.
- What's the difference between fiat money and the gold standard?
- Gold-standard money is convertible to gold; fiat money is not backed by any physical commodity.