What is Fiat Currency?

Right now, the U.S. uses fiat currency, which means it’s not backed by any commodity such as gold or silver.  It derives its value by being declared by the government to be legal tender.  That is, it must be accepted as a form of payment within the boundaries of the country for all debts, public and private.  Our money is referred to as fiat money.

In addition to the U.S. dollar, the euro and all other reserve currencies are fiat currencies.  This trend began with the Nixon Shock of 1971 which ended the backing by precious metal of the U.S. dollar.

Here is an entertaining explanation from a Canadian’s point of view.  Yes; they have fiat currency too.

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