What the devil is "fiat money" anyway?

Some economists make a big deal about our fiat currency. What the devil is "fiat money" anyway? It means the Federal Reserve note in your wallet is money only by government decree. It's a piece of paper of no value itself. It can be swapped for something of value only because the government declares it "legal tender."

Until 1963 that note was "fiduciary money." It, in itself, had no value - but it could be redeemed in "lawful money" of intrinsic value at anytime.

"Commodity money" is the stuff that once backed up the paper. Richard Nixon removed the last connection to it on August 15th, 1971.

The Founders defined the U.S. dollar as 371.25 grains of silver. Today the dollar is only a computer blip or a piece of paper. (Circulating coins have some intrinsic value, but not much.)

A little nugget clipped from Wrisley.com