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<p>[QUOTE=&quot;Numbers, post: 781473, member: 11668&quot;]Exactly.&nbsp; <i>Fiat</i> in Latin translates roughly to &quot;let it be&quot;, &quot;make it so&quot;, as in <i>fiat lux</i> &quot;let there be light&quot;.&nbsp; So &quot;fiat currency&quot; is something that has value because somebody said so.</p><p>&nbsp;</p><p>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.&nbsp; If a government forces the people to accept a currency that they don&#039;t want or don&#039;t believe in, it&#039;s clearly fiat money.&nbsp; But if paper money is widely and confidently accepted, how &quot;fiat&quot; is it really?</p><p>&nbsp;</p><p>In the US we have &quot;legal tender&quot; laws that require paper money to be accepted in certain situations.&nbsp; 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.&nbsp; And some nations, such as the UK, have no &quot;legal tender&quot; laws at all; they just print paper money, and essentially everybody chooses to accept it.&nbsp; Such a system has a lot more in common with a gold-based economy than you&#039;d think--there are still differences, of course, but throwing around the words &quot;fiat currency&quot; somewhat misses the point.</p><p>&nbsp;</p><p>Suppose you&#039;re in modern America, and you want to buy your neighbor&#039;s used car, and you&#039;ve got five ounces of gold.&nbsp; 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.&nbsp; Most likely, you&#039;ll have to go sell your gold to someone who deals in metals, get some cash, and use that to buy the car.&nbsp; And the metals dealer has to make a living somehow, so you&#039;ll probably lose a few percent of your gold&#039;s value in that transaction, too....</p><p>&nbsp;</p><p>Suppose instead that you were in California 140 years ago, trying to buy a mule, and you had some US currency.&nbsp; The situation would be precisely reversed--you&#039;d probably have to find someone to exchange your paper for gold before you could spend it, and you&#039;d probably lose a fair amount in the exchange.</p><p>&nbsp;</p><p>That is, in California in 1870, paper currency might&#039;ve had some value, but gold was *money*.&nbsp; And today it&#039;s the opposite.&nbsp; (And a hundred years from now...who knows?)[/QUOTE]</p><p><br /></p>

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