what is fiat

Fiat is a term used to describe a type of currency that is not backed by a commodity such as gold or silver. Instead, it is declared legal tender by a government and its value is derived from the relationship between supply and demand and the stability of the issuing government. Fiat money is generally authorized by government regulation and is an alternative to commodity money, which is a currency that has intrinsic value because it contains a precious metal such as gold or silver. Fiat money generally does not have intrinsic value and does not have use value. It has value only because the individuals who use it as a unit of account agree on its value. The United States Dollar (USD), the Euro, and most other major currencies are fiat monies.