Fiat Currency

Fiat Currency refers to a currency that is established by a government decree.

Arguments in favor of Arguments opposing
It provides leverage to the government in managing the money supply in the economy.
Fiat currency provides a mean to the government to control the money supply in the economy and hence influence the economic growth and employment trends. By mismanaging the money supply through fiat currency, the government may have a significant negative influenece on the economy or may cause unintended consequences.
It functions based on trust in government's ability to manage its finances.
By creating a strong link between government finances and exchange value of the currency, fiat currency can increase the scrutiny on government finances. Fading trust in government finances can have a significant erode the exchange value of the cash savings of the populaion in fiat currency.

Competing Views...

Comment awaiting approval 1 year, 11 months ago

John Maynard Keynes: "There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.", The Economic Consequences of the Peace (1919), Chapter VI, pp. 235-236, [URL]

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