Fiat currency is a legal tender whose value is backed by the government that issued it, not by a physical commodity like gold or silver. It’s money, basically. Money that we use daily, like dollars, euros, or yen. Its value is based on the stability and credit of the economy, not on the value of a physical asset.
Fiat currency is a confidence game, and when confidence is lost, the game is over.
James Rickards
In Simpler Terms
Think of fiat currency like a concert ticket. The ticket itself is just a piece of paper, but it grants you access to an event because the venue and everyone else agree on its value. Similarly, when you pay with a dollar or euro, it’s not the paper that’s valuable but the trust and agreement in the economy that it represents. The term fiat is Latin for let it be done. When governments issue fiat currency, they essentially say, Let this be money! Ironic, isn’t it?
