The Economic Lowdown Series: The Most Popular Fiat Money

18.10.2021
51

The Economic Lowdown Series: The Most Popular Fiat Money

Money is an abstraction that describes the power to make money. It is the power to buy and sell, to produce and sell and to save. Money is the means by which exchange of goods and services occurs between individuals and groups in society and/or in relation to the market. Money is any verifiable asset or accepted measure as payment for services and/or products and repayment of outstanding debts, including taxes, in a certain country or socio-cultural context.

There are two kinds of money: physical money and commodity money. Both have distinct purposes, though both can be created, either by governments or private individuals. Fiat money, which is usually created by the central bank, usually becomes money when it is issued by the government. A government often issues its own money after currency has been purchased by the public in the form of banknotes.

The value of a product, i.e., the price of that product, is usually determined by supply and demand. In the case of fiat money, the value is determined by a central, usually government organization, usually the central bank. Private individuals, including commercial businesses and individuals, determine the value of commodities by their private knowledge and experience. Commodity money, on the other hand, is typically determined by the supply and demand in the market for the good to be bought.

A distinction is sometimes made between money and commodity and it is important to recognize the difference. Money is typically a tangible asset while commodities like food and oil are not tangible assets. Therefore, money is transferred from one hands to another and commodity is transferred from one person to another. To buy an apple with cash may mean having to go to a store and to sell it on the spot at the store to purchase it. With a fiat currency, such a transaction would never take place because the buyer and seller do not know each other and the transaction is merely an act of commerce.

Let us now look at the characteristics of currency in the two most common forms of Fiat Currencies – the US dollar and the British pound. The American dollar is the Fiat currency most often used around the world. Its value is derived from the purchases and sales of goods between countries and international monetary transactions. The British pound, on the other hand, is the common Gold Currency.

One major difference between these two common forms of currency is that gold is a physical asset and the dollar is a digital form. As money is defined by the US constitution as “a circulating coin which is legal tender, payable in lawful money” Fiat money, on the other hand, is not a legal tender. It is a piece of paper or plastic which has no real world value aside from being convertible into money. The definition of Fiat money therefore includes any coins which can be easily substituted for money within a few moments. For instance, you can take your family’s gold plated car to the mechanic, and he will give you back your money.

Fiat money is popular because it is easy to counterfeit. Unlike gold and silver which are both difficult to substitute, there are many forms of Fiat money in the world. For instance, the Euro is widely regarded as a legal tender, but you will find very few people, if any, who will give you their Euro without any reason. This brings us to the next question – why is the Euro a fiat money? The simple answer is that the European Union as a political entity cannot print their own money.

On top of this, the Euro has been the common money throughout most of Europe. Furthermore, the EU is the largest economic unit in the world, and its members make up nearly sixty percent of the world’s population. In the end, it is important to remember that money is the most powerful force in human society, and when it is widely accepted and highly leveraged, it can change the world. Please consider the economic lowdown series, which will continue in future articles.

 

AUTHOR INFO
COMMENTS

No comments yet, be the first by filling the form.