Fiat Money: What Happens When The Nation Is Off The Gold Standard

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fiat-money-photo-by-redjar.jpg In a times like this, when we hear a lot about nations — like the United States — not using a gold standard, you’re probably hearing a lot more about fiat money.

Fiat money is simply any currency which is not backed by something physical, such as a precious metal like gold.

Instead, fiat money’s value is placed primarily in its overall scarcity and the stock which people place in it.

For much of our history, the United States monetary system was based on the gold standard. That meant the value of our money was actually backed by physical gold.

During the Civil War, the U.S. first used fiat money to pay for the staggering expenses associated with the conflict. However, the gold standard resumed by the 1880s. Returns to fiat money in the U.S. occurred again during World Wars I and II.

The U.S. has consistently been using a fiat standard since the early 1970s.

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