Fiat Currency – What is a Fiat Currency?

What is a Fiat Currency?

Definition of Fiat Currency:
This is cash declared by the government to become a legal tender. It can also be defined as a state issued cash that cannot be converted in a legal manner to any other item or commodity like money or gold having no inherent value. The expression “fiat” is derived from a Latin word which signifies “let it to be done” as issued in the decree of the government. The dollar along with other country currencies and other reserve currencies is known as fiat currency. The president named as Nixon eliminated the protection of the dollar in 1971 by gold and permitted the dollar to drift to find its cost. Even if fiat money contains metal coins it is regarded as a paper. Generally, fiat currency losses its price once the government refuses to guarantee its cost with the help of taxation, but this does not take place.