To Fiat or Not To Fiat? That is the question!

When I started collecting coins I was sad looking upon old U.S. Currency made of Silver, because I was born during a time after commodity money was ran out of our way of life and fiat money is all that I had ever gotten to earn & spend. I looked at how Beautiful money was when made of a precious metal, in a time when you truly could hold a valuable representation of your time spent working in your own hands and not some paper or cupro-nickel thats value wastes away even whilst you look upon it. These are just mine own feeling, thoughts and opinions. But as a Numismatist I now wonder if others like myself share these same thoughts or feelings or maybe even something completely different? I have found reconciliation in the fact that I am allowed to purchase and own as much silver and gold as I wish or that my Fiat money can buy me at that moment. :smile So if you have any feelings, thoughts, or opinions that you would like to share on this topic I would be very interested to read them.

 

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Not sure I understand your question too well. But, fiat money as people like to think of it today, really isn't anything new. If a money has no value other than that placed upon it by a government or some other authority, and is therefor construed as a fiat, then there has been fiat currency as long as man has used a means of trading through the exchange of items other than goods. paper money has been around as long as paper has. Before that, many means of trade consisted of stone and shell monies. Oil, olives, wine, and on and on, were used not as commodities, but as money for thousands of years. It wasn't until modern times that precious metals were used primarily as money. If a handfull of rocks and a few seashells was acceptable money 3,000 years ago, I find it hard to believe that clad coinage and paper currency could be deemed any less acceptable today. It's all in how you choose to look at it.
Guy~

 

I find few things more enjoyable than holding a old coin and studying its artwork, its beauty and its value. I often wonder who might have held the coin and what collection it may have been held in long ago or how it has survived. The coinage of today is fun to collect, but I think that for me a great deal of that majic is lost without the precious metals of old.

 

I absolutely HATE the term "fiat money"

(Donn, this diatribe is not directed at you, but to the world in general)

Metal, in and of itself, is NOT valueable. Not gold or silver. Or any others. I wish people would get over the mob mentality that has persisted for thousands of years.

Most people are not going to agree with me.

But THINK about it. Why do you think gold, silver etc are "valuable"? Because other people have told you so. You DON'T need it to live, you cannot eat it. I suppose, with enough of it, you could make a house out of it but you rarely see houses made of metal...to much of a chance of lightning striking I would guess.

It it was TRULY rare, they would not have been enough of it to make coins, and there would not be enough of it to collect those coins today.

The only real reason these metals are so expensive, is because the people who have them keep perpetuating the myth that they are rare, and that they are worth a lot of money, so THEY keep getting lots and lots of money into their wallet. (Maybe I would feel differently if I were one of those people who happened to have these so-called precious metals?)

Think of this old saying: "If [soandso] tells you to jump off a bridge, would you do it?"

No, that would be stupid.

I am hoping that someday, somehow...humanity will "wake up" and think for themselves. I don't see it happening in my lifetime, unfortunatly.

And by the way....THIS is a Fiat!

 

Billy,
You are right, we disagree.

The differentiation between fiat and commodity currency is that with commodities there is a finite amount available and it's value is determined by a free market. (Well, in a perfect world a free market...a bit too many regulations prevent a true market in today's day and age.) Gold and silver replaced shells and goats as a more practical means of exchange and have been "money" for a very, very long time.

A "fiat" currency knows no bounds in terms of rarity as the government can simply print as much as it wants. It's inherantly inflationary by design. (See Zimbabwe's current fiscal situation) It's value is whatever the government tells us it's value is, and it makes international trade a rigged nightmare in many circumstances.

If you are interested in the topic, I would suggest reading "What has the government done to our money" by Murray N. Rothbard. It really illustrates things and is an easy read.

Plus, I just like shiny things...

 

I voted for "commodity money".

My first car was a 1972 Fiat 124 Sport Coupe, and it taught me how to double clutch, gap spark plugs and adjust a distributor. Almost every Saturday!

It was red and for all intents and purposes it was my Ferrari.

 

Its not in our head...its been made so in the very real world by the so called authorities...I can think in my head 'gold has no value' but that wont make it so in the real world which we must live. It IS a concept but one that had very real consequence and has been implemented in a very real way so you cant just 'get over it'.

Fiat money was around as far back as Rome. When you see a big bronze coin that has SC on it...how I understand it is that SC is the senate of Rome basically 'signing off' on that coins value as it was bronze and not silver or gold so the coins required the backing of the senate to transfer monetary value to it.

I also tend to agree that gold and silver value is exactly what the masses have placed on it, not to say that one cant look at different substances like Gold Silver, and paper and rate these substances inherent value, rarity and unique properties thus placing value on them on a very real basis.

I disagree that the term means nothing...its just subjective in relation to the norms of a chosen system. If corn was deemed to be the value system to be used for money, and all money was made of corn...then they decided to instead use rocks (which they deem far less valuable in this imaginary scenario) then the rock money would be fiat, someone would have to use their authority to transfer the value to the money made of the lesser valuable item. In the real world people long ago saw gold, saw it has unique properties, its appearance, and it was a more rare metal. They deemed it to be valuable (even salt has been used as a basis of value). Silver and bronze were also deemed valuable but lesser than gold. Much of the world ended up valuing their money in these terms. Fiat in this case was when people decided instead to print onto paper or other substances deemed (again, usually based on good reasoning) less valuable and call THAT money. Paper certainly isn't gold and I would even argue that for several reasons it ISN'T as valuable or as rare as gold...so someone had to use their authority to attach a relative worth to it.

Certainly in the beginning someone had to attach authority to the value of gold and I can certainly see why it wasn't that hard to convince people that this metal was special. In the end, all money could be said to be fiat because there MUST be a system and there must be an authority that places that value and enforces it and the people must go along with it. But in many cases when someone calls something fiat, they simply mean money made of something that is deemed to have lesser value compared to something they see as having real value relative to a certain valuation system.

It is not what YOU think is valuable but more what system has been put in place and is in use. Everything is relative to what system is being used. You can say gold is just another metal, and it might be, but men have put great value on gold long ago and still do today and in the end, this system was the norm and when people chose to discard this system, then some authority had to endow similar value to something they saw as far less valuable and in this we get the term 'Fiat' which simply means 'by decree' which basically means 'because we said so' and is commonly used to refer to money that is made of something that is of far lesser perceived value than what that particular system deems to be valuable enough to be money.

then again...how long have we been off the gold standard? How long does a system have to be in place until it stops being fiat and becomes the norm.

In WWI the Germans minted and printed money on almost anything and everything...they were doing this contrary to the established gold standard. Many of these bills even said on them they would be exchanged once they get back on the gold system, that these coins and bills were fiat, they had no value save for what some governing body had decreed they have. That was a typical 'fiat' situation.

Lastly I would say to those people who are hoarding gold in a panic because they think the monetary system will collapse...will that gold still have worth in monetary terms without a monetary system or an authority to place value on it? Gold has inherent value but as money it only has the value given it by an authority. Germans found that you could have gold but if you didn't have a working economy, a system with authority to up keep a value system, gold wasn't going to buy anything if there was nothing to buy.

So in short, I think the designation of Fiat money is valid but relative. No need to get upset about the use of the term...but then again, how long after a system has turned fiat does it just become the norm. If people STILL believe only money made of, or backed by, precious metals is correct...then certainly we are still in a fiat system....and I think this is true because I think the most people still place FAR MORE inherent value on gold than a piece of paper with a some graphics stamped on it. That paper (that has been printed on so you cant even use it to write on) only has any real value at all to anyone because the government says it does while people still see inherent value in precious metals and things that are rare.

 

Have never heard that term "Fiat" money before!! Looks like i just learned
Something new today!!

 

Great responces!

I was a little afraid everybody would say "you're insane, get out of here" but I decided to post what I honestly felt anyway. Even the posts that don't agree with me are civil and sensible. I'm not used to that, I guess, from more then a decade on message boards...

I'm really pleased to see such well thought out and reasoned responces.

I didn't realize that the term fiat meant by decree. (Latin, I take it?). Whenever I have seen it used, it is always seemingly in contempt of modern currency.

Correct me if I am wrong, folks, but when coins first started, they weren't made of either silver OR gold, but a combination of the two? I thought I had read that the ability to seperate them didn't come until a little later. I could be wrong though as I don't remember where that info came from.

 

The first coins, I believe, were gold, silver or a mix from Lydia in asia minor (example below)...a mix of silver and gold (with trace amounts of copper) is electrum called just gold or white gold by the ancients depending on the mix, and was certainly used often in ancient coinage.

 

What model?

My 1st car was a Fiat~& THAT is a Fiat? Never knew they made a V~8!!! Mine was a 4 banger 1100 D and usually had three of the bangers working.

But I think Gold got popular back in the days when one could pull it out of the ground, "RAW", beat it with a rock and then polish it purdy & shinny to impress another.

Heck, I think the first mirrors were made from Gold/Silver.

So Take a look at yourself. PM's don't rot quickly, have Heft and tend to collect the next generation because of their durability, malleability and intrinsic appeal.

Some Fiats are an acquired taste, but it is nice to have an established value, such as fiat monies.

 

Exactly. Fiat in Latin translates roughly to "let it be", "make it so", as in fiat lux "let there be light". So "fiat currency" is something that has value because somebody said so.

Of course, as some folks in this thread have already pointed out, the difference between fiat currency and other types of currency is not always as clear-cut as that definition makes it sound. If a government forces the people to accept a currency that they don't want or don't believe in, it's clearly fiat money. But if paper money is widely and confidently accepted, how "fiat" is it really?

In the US we have "legal tender" laws that require paper money to be accepted in certain situations. But those laws are a lot more narrowly worded than most people realize--most of the times when you spend US currency, the other party to the transaction is accepting it because they *want* it, not because the law says they must do so. And some nations, such as the UK, have no "legal tender" laws at all; they just print paper money, and essentially everybody chooses to accept it. Such a system has a lot more in common with a gold-based economy than you'd think--there are still differences, of course, but throwing around the words "fiat currency" somewhat misses the point.

Suppose you're in modern America, and you want to buy your neighbor's used car, and you've got five ounces of gold. Certainly the gold is valuable enough to purchase the car, but the average American is probably not going to be prepared to accept such a payment. Most likely, you'll have to go sell your gold to someone who deals in metals, get some cash, and use that to buy the car. And the metals dealer has to make a living somehow, so you'll probably lose a few percent of your gold's value in that transaction, too....

Suppose instead that you were in California 140 years ago, trying to buy a mule, and you had some US currency. The situation would be precisely reversed--you'd probably have to find someone to exchange your paper for gold before you could spend it, and you'd probably lose a fair amount in the exchange.

That is, in California in 1870, paper currency might've had some value, but gold was *money*. And today it's the opposite. (And a hundred years from now...who knows?)

 

I had been itching to pop this thread out there for awhile but was fearful it would come to close to being deleted for being too political. LOL
Personally I just really like the gold standard, I am not saying I want to pay for everything in gold. I am saying that I want gold = X Paper.

 

I’ll have to agree with the posters here that state, precious metals have no real value other than what is placed on it. And, I’ll have to state, that yes, our current system of using “fiat” money can be abused by a government that prints too much of it (much of the reason we’re heading into inflationary times now, but necessary). However, it doesn’t matter what we use for money (as long as its supply is controlled), as money is only a vehicle used to facilitate trade, goods for goods, services for goods, etc. In today’s society, for some reason, enough accept a precious metal’s worth to make it a traditional hedge against inflation, although that does not always hold true. As others have mentioned, what good is precious metal, one can’t eat it or use it for shelter? As my first accounting professor told our class, when speaking about investments and hedges against inflation, in a worst case scenario disaster/financial collapse, the only thing that’s going to get you a loaf of bread is a gun. So, I guess if one wants to cover all the bases, they should be investing in lead.

 

And here I thought FIAT meant "Fix It Again Tony"

 

Yeah, it means that too. lol One I use for my Ford truck, but not too often, is found on road dead. Any others?

 

The term "Fiat" I would attach that to cheap transpertation or you
Could look at it this way:

(F) Fix (I) It (A) again (T) Tony

 

I also drive a Ford but I was told it stood for Fix Or Repair Daily

 

Lets see here are a couple i could think of right off hand:

Ford- "Found on road dead"

Ford- "First on race day"

Owned a Ford Pinto in High school, Got ribbed on it until i put
351W out of a 69 cougar in it, They werent laughing anymore