Question

What is Money? What is Fiat Money?

Answer 1

Money is a medium of exchange; it helps people to get what they need to survive on. Bartering was one way before money was produced people traded goods for other goods. Cash, like gold and other precious metals, has meaning as it represents something important for most people. Fiat money is a currency issued by the government, which is not backed by a tangible product but by the issuing country's stability.

Fiat money is a currency without intrinsic value, and is defined by government regulation as a legal tender. Currencies have historically been dependent on hard resources such as silver and gold but fiat money is dependent on the economy's credit. The value of fiat money depends on supply and demand, and as an alternative to commodity money and representative money was introduced. Commodity money is created from precious metals such as gold and silver, while representative money represents a claim that can be redeemed on a commodity. Unlike traditional commodity-based currencies, one can not convert or redeem fiat currency. It is intrinsically worthless and used by order of government. To be effective in a fiat currency, the government needs to defend it from counterfeiting and control the money supply responsibly.