Fiat
Also: fiat currency, fiat money
economics · beginner
Money whose value comes from government decree, not from any underlying commodity or fixed supply rule.
"Fiat" is Latin for "let it be done." Fiat money is money because a government says it is — legal tender for taxes, debts, and trade — and not because it's backed by gold, silver, or any other scarce asset. Every major currency today is fiat: the US dollar since 1971, the euro since inception, the pound, the yen, the yuan, and so on.
Fiat is not, by itself, a slur. It's a description of where authority lives. The trade-off fiat makes is flexibility for discipline: a central bank can expand the money supply during recessions, wars, or crises without needing to mine more gold. The cost is that there is no hard ceiling on issuance — the supply is whatever the issuer decides, and history shows issuers eventually decide on "more."
The US M2 money supply expanded roughly fivefold from 2000 to 2024. Argentina, Turkey, Lebanon, Venezuela, and Zimbabwe show the more dramatic end of the curve. Bitcoin's proposition isn't that fiat is worthless; it's that a parallel system with a fixed supply rule is worth having alongside it.