Fiat money


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Each dollar bill, euro, yen, gold ingot, or whatever currency you choose enables you to buy things as the need or want arises, thus making the barter system trading one service or product for another mostly obsolete. Money then enables enterprises to develop and societies to establish subspecializations, thus fostering a sort of dynamic progression toward the future.

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For example, before there was money, anyone who owned land produced their own necessities and traded the surplus with other people for the things they needed. Money changed that system by its inherent ability to store purchasing power, thus giving people the opportunity to make plans for the future and to specialize.

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Markets and central banks then value fiat money relative worth of the paper currency based on the perception of how a particular country is governing itself, the current state of its economy, and the effects the interplay of those two factors have fiat money interest rates.

Legal tender means that the money is backed by the full faith and credit of the government that issues it. In other words, the government promises to be good for fiat money.

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At times, the commodity itself actually was used as money. For instance, the use of gold, grain, and even furs and other animal products as commodity money preceded the current fiat system.