Is the US dollar fiat money? / Is US money a fiat?

06 Mar 2023

To settle the trading of products and services, we must agree on a medium of exchange, which takes physical forms of seashells, livestock, and gold to the money we know today. Fiat money is a government-issued currency whose value is influenced by various factors, causing it to increase or fall in value from time to time. So yes, you can consider US money as a fiat.

The US dollar is fiat money, it is not backed by a commodity like gold or silver, but rather by the government's decree or legal tender laws. The US dollar is widely accepted as a medium of exchange, unit of account, and store of value both domestically and internationally, and its value is determined by supply and demand in the global foreign exchange market.

Since the US abandoned the gold standard in 1971, the US dollar has been a purely fiat currency, meaning that its value is not tied to the value of any physical commodity or precious metal. Instead, the US Federal Reserve manages the money supply and adjusts interest rates in order to maintain the stability of the currency and promote economic growth.

Fiat money comes in two varieties: paper money and coins, and the latter is dominant in Western countries. Most modern paper currencies, including the US money, Australian dollar, and euro, are considered fiats. The US Dollar is also the global anchor currency.

However, more than ten years ago, Ben Bernanke, former Chair of the Federal Reserve, said in the 60 Minutes interview: “Let’s all please stop calling dollars fiat money. Currencies are not memes that only have value because the governments say they do. The Financial Times had another thing to say: “There is no fiat, no decree. There is no money printer, anywhere. It’s all transactions on a balance sheet, assets for liabilities.”, therefore to say whether or not US money is a fiat is just a matter of perspective."

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