Talk:Fiat money

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several problems here[edit]

Andrew Jacksons destruction of the "Bank of the United States", was not -at all- a declaration that government backed currency was illegal -you may have been deceived by the name of the bank, as many are. The "Bank of the United States" was actually a privately owned bank which, through fractional reserve banking, was sucking the lifeblood out of the economy -then and today through the falsely named "federal reserve bank" and banking in general (again via fractional reserve banking).

What most people fail to realize when contemplating banking is that banks aren't earning 5-10% interest based on their loans, they earn vastly more than this (in an expanding economy) because the fractional reserve system allows them to issue 10 times what they hold in reserves, functionally allowing them to 'earn' 50-100% on reserves. As most 'money' in the economy comes through bank loans and as repayment of interest is often far more than the principal, banks functional drain money from the economy UNLESS the economy is growing INFINITELY (and subsequently destructively consuming the FINITE resources of the planet). This means that with fractional reserve banking, FIAT money can never be functional unless the economy is self-destructive i.e. a pyramid/ponzi scheme.

Further, the US dollar, while not backed by metal gold, is backed via the saudi bourse, by black gold. This is the reason why the US economy can maintain such high trade deficits, as so many of the US trade partners must buy their oil with US dollars. i.e. if they revalued their currency against the US dollar, the price of oil would naturally go much higher and they'd have to pay far more while simultaneouly losing business as the deficits rebalanced.

If you have any questions for me about these points, email me:

tyler (at) earthsociety.org

You neglect to consider the liabilities of banks (ie deposits) which multiply under fractional reserve banking and return the bulk of the income to broader society. Banks manage credit not money. Every business has limited cash reserves.
Terjepetersen 20:54, 28 February 2006 (UTC)----

Your arguement needs more detail, I do not know what your point is. It seems as though you disagree with my statement above, but you do not lay out specifics. The liabilities of the bank is primarily the deposits, the deposits make up the bulk of the reserve. The bank pays interest on that reserve (and that reserve alone). The bank, however, loans out, around 10 times the reserve (fractional reserve banking) and earns interest on every bit of it. Hence, at 5-10% interest, they earn 50-100% interest, yet they only pay back interest -to their depositors an amount approximate to 5-10% again. This is why banks often have the largest buildings in town. Further, as the total sum of principle plus interest is more than the principle lent out initially, and as most of the money in an economy comes from bank loans, the economy can only exist if it grows at an ever accelerating pace (more loans going out than being paid in at any one time), as otherwise the banks would suck up every last dollar in the economy and the economy would collapse (this is soon to happen as growth is about to peak on this planet (finite resources). If you have a specific argument, please email me directly and we can discuss it.

ivanleo at gmail.com

Your statement "as the total sum of principle plus interest is more than the principle lent out initially, and as most of the money in an economy comes from bank loans, the economy can only exist if it grows at an ever accelerating pace" doesn't really stand up to scrutiny, you are assuming the interest paid on the loan is shuttled out of the economy for good, however you're forgetting that the profits banks make (including the central banks) are ultimately paid back to the shareholders of the banks, and hence that money goes straight back into the wider economy. Take the Bank of England, each year it has to pay it profits on issuance to HMRC, that money goes into the consolidated fund, so it can be spent on public services (paying wages for teachers, police etc...), so it becomes the income of those who work for the govt, or they may be used to allow everyone else to pay less in tax. You could very well argue that in the US the FED is privately owned, I don't really know who it pays its profits to and you may very well argue that if that money goes to private corporations then maybe the FED should be nationalized, but that's a different story. Since the long term trend for the economy is to grow, and since Bank of England notes haven't been payable in gold for something like 80 years, and yet current GDP is several times larger than it was in the 1930s, your argument doesn't stand up to empirical evidence. —Preceding unsigned comment added by Ivanleo (talkcontribs) 22:04, 6 May 2009 (UTC)

tyler at earthsociety.org

The amount of wrong in your argument is incredible. First of all banks earn nothing on reserves, reserves are a percentage (I believe its around 10 or so percent) of demand deposits that banks must keep as cash in the Federal Reserve. Mean while they can lend out the rest of what they take in (the remaining 90 or so percent of demand deposits, and everything they take in as savings deposits and certificates of deposit). The bank doesn't magically make more money, basically savers lend money to the bank who then lends it to loan applicants. If the bank lends more then it has and accidentally dips into its reserves, then it must borrow money from other banks or the Federal Reserve, or face being closed down by the Fed during the Fed's nightly audit of the bank.
Fiat money does actually exist its what just about every major currency in the world is now a days, the thought that US currency is backed by Saudi oil is absurd, if you must think of it being backed by anything its backs by the US GDP and its Government. The US, and all countries that buy oil from Saudi Arabia, don't buy it in US dollars, its bought in Saudi Riyals, though it may appear to be bought in other currency other then that since the comparative values of every countries currency is well know and exchanging currency is an incredibly simple task.
And to answer your third point, that "i.e. if they revalued their currency against the US dollar, the price of oil would naturally go much higher and they'd have to pay far more while simultaneouly(sic) losing business as the deficits rebalanced." thats pretty wrong too, the reason why other countries don't revalue themselves against the dollar is simple, they have a lot of US dollars, and if they revalue those US dollars that they have in their vaults will be survey says... worth less then they were before. In cases like China who have a whole mess of US dollars, a revaluing would mean a big loss for them. There are other factors too, the US is the worlds largest importer, if a country revalues and says now our money is worth twice as much as the dollar, the dollar buys less, the US shops elsewhere.
roger3 (at) mtaonline (dot) net
Thank you to those who bring factual information to this discussion. This is not a banking conspiracy or an oil conspiracy. Believe it or not, there are smart people in this world who would realize the scheme. This article DESPERATELY needs balance. ask123 (talk) 19:57, 26 March 2008 (UTC)

roger3 (at) mtaonline (dot) net

With regard to the fundamentals of banking, I suggest you read "Modern Money Mechanics" (it's floating about the web as a PDF, just google it) published by the Chicago branch of the FED. They clearly state how the fractional reserve system works and make it clear that banks do in fact create tradable electronic units (you can call it money like I do, or call it credit, or whatever you want). As that money is created it is redeposited in banks and is then used as the basis for another round of monetary expansion. New debts are based on old debts, hence the entire money supply is built as an inverted pyramid. The limits are (as you pointed out) the ten to one ratio (or thereabouts) of loans to reserves and the requirements laid down by BASEL I & II regulations. BASEL II came into effect at the end of 2008 and effectively shut down the loan engine of banks around the globe, triggering the global recession.
The US dollar IS backed by the price of oil. Your view that the other countries of the world buy oil in Riyals is absurd on the face of it. It immediately implies that the middle east is the wealthiest nation on earth and not the US nor Europe. In fact, the major bourse's in the middle east effectively sell oil in US dollars (primarily) and have only recently added the Euro. The Riyals has mostly been pegged to the US dollar and most every country pays in these two currencies. Thus the US and the eurozone have gotten a free-ride as other countries use dollars and now euros to buy oil. Hence they keep their currencies low against the dollar in order to be able to sell junk to american consumers. Now that the FED is monetizing it's debt, the price of oil will go up as the value of the dollar depreciates and the Riyal is being allowed, more and more, to float.
tyler (at) earthsociety.org —Preceding unsigned comment added by 202.168.119.69 (talk) 14:58, 19 November 2010 (UTC)

Literary references[edit]

User:Nbarth - you added the following claim to the text 'This is then referenced in The Master and Margarita by Mikhail Bulgakov, in Chapter 12'. This claim is insufficiently referenced, firstly because Moss says only 'may have its literary source in Part II of Goethe's Faust', so the text makes a stronger claim than is made in the source; and secondly because the source appears to be self-published. I'm not in a hurry to delete it as I quite like the idea. I may initially tag it for additional citation. I like the idea of literary references to fiat money. - Crosbiesmith (talk) 18:11, 4 February 2010 (UTC)

I've moved this to the banknote article as there is nothing to indicate these are references to fiat money specifically. - Crosbiesmith (talk) 10:48, 6 February 2010 (UTC)

Weimar Germany[edit]

In the case of Weimar Germany it was not the government who issued tremendous amounts of money, that power was handed over to the private bankers and it was they, through their privately owned central bank, not the government who caused hyperinflation. see: "The Lost Science of Money: The Mythology of Money - the Story of Power", pg-575, by Stephen Zarlenga. 24.36.78.185 (talk) 21:08, 30 March 2010 (UTC)

Scotland[edit]

User:Nbarth - you added the following:

Further, legal tender is not necessary for effective fiat money – for example, there is no notion of legal tender in Scotland.

Is the example intended to be an example of effective fiat money? If so, which fiat money does this refer to? Thanks - Crosbiesmith (talk) 09:10, 2 April 2010 (UTC)

The claim that legal tender is not necessary for effective fiat money requires a citation. I will remove it shortly until a citation is provided. - Crosbiesmith (talk) 09:40, 2 April 2010 (UTC)
I see you have reintroduced the notion that fiat money need not be legal tender, this time in the lead, again without a source. I will remove this unless a source is provided. - Crosbiesmith (talk) 06:28, 3 April 2010 (UTC)
Nbarth is right, English or Scottish pound notes are not legal tender in Scotland. See Bank of England note issues, [1] and [2]. This fun fact shows that legal tender laws are of slight importance, for fiat money acceptance or any other purpose. So the article needs some minor changes and probably a new ref making this explicit, I'll dig up one when I have time.John Z (talk) 00:10, 16 November 2010 (UTC)

Fiat money is legally convertible to any other currency - about 155 of them.[edit]

All fiat money is created out of nothing: out of thin air. It is, however, backed by all - the sum total of - the underlying value systems in an economy, namely sound governance, sound economic policies, sound monetary policies, sound industrial policies, sound commercial policies, etc. Annual inflation above the central bank´s inflation target indicates the excess of fiat money created in the banking system.

It is misleading to state that fiat money is not legally convertible to any other thing. Fiat money is used every day by 6 billion people to buy anything and everything in an economy. Fiat money has real value. All monetary units in the world are fiat money. Every person knows exactly what he or she can buy with 1 or 10 or 100 or 1000 units of money in his or her economy – today. Everyone also knows that the real value of money is eroded over time in an inflationary economy and increases over time in a deflationary economy.

Yes, the special bank paper that fiat bank notes is made of and the metals that fiat bank coins are made of have almost no intrinsic value as opposed to the real value of the actual gold or actual silver in gold and silver coins of commodity money in the past. That is not a logical reason to state that fiat money has no intrinsic value. Every fiat monetary unit´s real value is determined by what it can buy today in an average consumer basket of goods and services. That generally changes every month.

It is equally misleading to state that fiat money is not fixed in value in terms of any objective standard. Even if today´s monetary units were linked to the price of gold they would not be fixed in real value in terms of an objective standard because the price of gold is not fixed and a fixed universal unit of real value has not yet been determined.

Fiat money is money which generally has a monthly changing real value. Only the actual fiat bank notes and coins have insignificant real values. Notes and coins constitute only about 7% of the US money supply.

All fiat monetary units – whether notes and coins or simply electronically represented virtual values - are legal tender in their respective economies.

All fiat functional currencies within economies have international exchange rates with the fiat functional currencies of other economies.

77.54.60.144 (talk) 11:21, 15 November 2010 (UTC)

Thanks for your comments. I note this material is copyright Nicolaas Smith. [3]. Does the lead mislead? I'm not sure. The term is used in many ways by different authors. The claim that fiat money is not legally convertible is referenced to N. Gregory Mankiw. The claim that fiat money is not fixed in value in terms of any objective standard is referenced to John Maynard Keynes. What does one do if one finds the claims of major economists misleading or contradictory? I'm not sure. I added these claims to try to cover all mainstream views. If you have additional mainstream views which are not covered here please provide them, with sources. If you believe the existing definitions are incorrect, and you know of a critique from a reliable source, that is more tricky. We will have to decide how to present such information. The current text represents an attempt to characterise existing mainstream opinion. I don't see the point of criticising the current text without either critiquing the current sources, or providing additional sources which provide additional detail. - Crosbie 12:50, 15 November 2010 (UTC)
Thank you for your response. The fact that fiat money is not legally convertible is made irrelevant by the indisputable fact that fiat money is legal tender. The fact that a creditable expert stated the simple fact that fiat money is not legally convertible - an administrative process - is true: it is a fact. That does not negate the fact that fiat money has real value, the change of which is indicated montly in the change in the Consumer Price Index. It is a fact - which is presented in a misleading manner in the article lead - that fiat money is not legally convertible. That fact does not negate the fact that all fiat money has a changing real value. The fact that fiat money has real value is so mainstream - 6 billion people know it and confirm it daily - 365 days a year - by using fiat money to buy and sell everything in all economies. The fact that fiat money has real value is confirmed once a month by about 155 to 200 economies world wide when monthly inflation indexes are published indicating the change in the real value of fiat money. It is thus misleading to imply - as the article lead does - that because it is a fact that fiat money can not administratively be converted at the central bank or any other bank, that fiat money has no value. The article should reflect the indisputable mainstream fact that fiat money has real value despite the fact that it is not legally convertible and that the bank paper bank notes are made of and metals bank coins are made of have no intrinsic value whereas historically gold and silver coins had intrinsic value equal to the real value of the gold and silver they were made of. The numerous publications of CPI values world wide are the absolutely creditable references to the fact that fiat money has real value. All statistics authorities - except the Argentinian statistics authority under the late President Nestor (that I know of) - are very creditible sources. The article lead should state that it is a mainstream fact that fiat money has real value and can only be converted into a foreign currency at a bank. The fact that fiat money can be converted into a foreign currency at most banks thus negates the statement that fiat money is not legally convertible.OhioWanderer (talk) 14:10, 15 November 2010 (UTC)
N. Gregory Mankiw and the lead in this article are thus wrong, incorrect and false in stating that fiat money is not legally convertible: it is a fact that each one of the world´s at least 155 different fiat monetary units are legally convertible (as legally authorized and legislated in at least 155 different government laws and statutes) at thousounds of banks into at least 154 different other currencies. This article lead thus states something that is completely false, wrong and incorrect. OhioWanderer (talk) 15:26, 15 November 2010 (UTC)
Another generally accepted fallacy bites the dust.OhioWanderer (talk) 15:33, 15 November 2010 (UTC)
I thought the 'convertible' bit referred to the right to demand gold instead of paper. In that sense, the fiat currencies are not convertible because the paper is not a representation of gold in store. Changing fiat money for another currency is nothing to do with convertibility. Not unless you can change your fiat money for another currency that IS convertible - and then actually get your gold. In a way, you have a point in that gold itself is a form of fiat money. It's very little use for anything except decoration, filling teeth (if they still do that with gold) and plating the connectors of overpriced hifi leads. All money represents the potential of goods, and an easily portable way of transferring ownership of goods without the difficulties of someone who makes bows needing an axe, but the person who makes axes wants bricks not a bow. In actual intrinsic value, a dime is worth more than a sovereign, because you could make arrowheads or fish-hooks with it - if society collapsed to a hunter-gatherer stage. A hundred dollar bill would be only good for lighting the fire, or wiping your arse. Which you couldn't do with a sovereign or an eagle. Peridon (talk) 23:09, 15 November 2010 (UTC)
Very good point: that the term convertible in the case of money always refers to convertibility into one single other item, namely, gold. That comes from the fact that bank notes were in the past - at one stage - convertible into gold. But, that must then be stated in the article, namely, that fiat money is not convertible into gold, but, is legally convertible into all other world currencies (about 154) and you can buy everything under the sun - besides the other 154 currencies - with fiat money; i.e. it has real value: it is a medium of exchange of equal real values at the moment of exchange; it is a store of decreasing real value under inflation and a store of increasing real value under deflation and, finally, it is a unit of account of decreasing real value under inflation and a unit of account of increasing real value under deflation.OhioWanderer (talk) 23:36, 15 November 2010 (UTC)
The lead is still wrong in that it states that fiat money is money which is not "legally convertible to any other thing."OhioWanderer (talk) 23:41, 15 November 2010 (UTC)
The text in the lead is meant to distinguish fiat currency from a backed currency, which is convertible on demand, subject to legal guarantees. By definition, a fiat currency does not have any legal guarantee of convertibility ("backing"). The fact that you can purchase other goods with a fiat currency (which is just the definition of money) doesn't make the currency convertible on demand, even though you can purchase other currencies or gold with a fiat currency. It's important to have a clear and correct definition of what fiat currency is in the lead, which means contrasting it with other currencies and not trying to muddle the issue. If you have a suggestion for improved language in the lead, it's best to make a specific proposal for a change to what's already there. Gavia immer (talk) 00:05, 16 November 2010 (UTC)
Fiat moneys which are pegged to another (fiat) currency are sometimes called convertible and still called fiat (probably because the government can always remove the peg) - so although OhioWanderer is mistaken, the language here too could use some improvement.John Z (talk) 00:18, 16 November 2010 (UTC)

I agree that the article should clearly state that the term convertibility as used in this article only refers to convertibility to gold. Fiat money is distinguished in this article as different only from gold (not silver?) backed commodity money. OhioWanderer (talk) 00:30, 16 November 2010 (UTC)

I was including silver with gold. Read 'precious metal' for 'gold'. No-one's used Platinum yet, so far as I know. Gold is far more commonly used as a standard - even though the pound £ used to be a pound of silver (made up of 240 little silver pennies). Anyway, isn't Fiat money what you pay for a small Italian car? Peridon (talk) 15:58, 16 November 2010 (UTC)
It is obviously not logical to use the daily changing price of an item, e.g. gold, as a "standard". All universal standards (e.g. pound, kg, mile, kilometer, etc) have a fundamental constant. Money does not have a fundamental constant, but, constant real value non-monetary items valued in terms of money can be maintained at constant real values via inflation- or deflation-adjustment in terms of the change in the monthly CPI during low inflation and deflation and in terms of the dialy US Dollar parallel rate (or a daily non-monetary index like Brazil did for 30 years) during hyperinflation. How do you maintain the real values of constant real value non-monetary items constant when a daily variable gold price is the "standard"? How do you price-adjust items valued in a daily changing gold price to maintain constant values (e.g. equity) constant? BTW, I,m not sure, but, I think Fiat owns Ferrari.OhioWanderer (talk) 16:53, 16 November 2010 (UTC)
Who said that royalty, politicians , bankers and merchants were logical? Money is a commodity not a measure. It's worth what people think it's worth. Distance, temperature and volume can be defined by standards. 'Weight' is dependent on gravity, but as we spend most of our time on the surface of this planet the 'mass' measurement will suffice as a standard. How can you have a standard that is fixed and never-changing for money? The nearest I can think of in terms of money measurement is the Mars Bar standard sometimes used here in the UK. But even that fails as relative prices of other products have changed differently. PCs were around £1000 to £3000 at one time. The one I'm using here cost £110 - new earlier this year. Mars Bars have increased in price... The only standard for money is to arbitrarily take one commodity and use that. Gold, silver, copper, cattle, cowrie shells, iron, all these have been tried. Iron rusts. Cowrie shells can be imported from their beaches. Cattle can be bred - and can also die of disease. Copper is common and easily smelted. Gold and silver had the advantage of being relatively useless, distinctly pretty, and fairly corrosion-free - and there wasn't much of them around. The Spanish imports of gold from the New World did very nasty things to their domestic economy and that of the rest of Europe too. Gold was a practical standard once. When it was rare. But, when you give up carting gold around and switch to using bits of paper representing gold, you are reaching the faith test. Do you believe that the Blankshire Bank has the gold in its cellars? If you don't know, you have to depend on reputation. Read Terry Pratchett's book 'Making Money'. Very funny, but with a lot underneath the comedy. (You may need to read 'Going Postal' first, but maybe not. They're all well worth reading anyway.) I won't give the plot away, but it is very relevant to this discussion. Peridon (talk) 18:24, 16 November 2010 (UTC)
Money is first and foremost a medium of exchange: without that function it cannot be money. It is also a store of value which you equate to being a commodity. I would agree. I do, however, adhere to the fact that it has three functions: the third being a unit of account. Money illusion makes us think that money is stable over time. However, we also know it is not. Measuring constant real value non-monetary items (salaries, rent, capital, trade debtors, etc) in units of constant purchasing power – inflation or deflation adjusting them – keeps the real value of these items constant forever only in companies that at least break even. You state that money is worth what people think it is worth. People think it is worth the same all the time (money illusion). The CPI is the lie-detector. The CPI is critical to inflation-adjust constant real value non-monetary items to keep their real values constant forever – in companies that break even. The monthly CPI sorts out the problems with money not being a constant unit of account during low inflation and deflation. The daily US Dollar parallel rate does the same during hyperinflation. You ask: “How can you have a standard that is fixed and never-changing for money?” Zero inflation does the trick – theoretically. In practice it leads to long term deflation because the generally accepted global Historical Cost Accounting model implements the stable measuring unit assumption during low inflation as well as deflation: constant items are not inflation- and deflation-adjusted during low inflation and deflation under the HCA model; a fundamental problem: under low inflation it destroys the real value of equity in companies with insufficient revaluable fixed assets and under deflation it increases the real value of equity and salaries increasing the deflation mentalité. Permanently sustainable zero inflation would be permanently sustainable financial capital maintenance in units of constant purchasing power. We still do not know how to operate our economies at permanently sustainable zero inflation. Zero inflation is not required. Low inflation is fine only if the HCA model is abandoned with the stable measuring unit assumption and financial capital maintenance in units of constant purchasing power as authorized in IFRS in the Framework, Par 104 (a) is implemented. That would maintain the constant real value of constant real value non-monetary items (eg. equity) constant forever in companies that at least break even. That sorts out constant items within an economy. Not holding money sorts out the problem of real value destroyed by inflation. Multiple international currencies is still the final problem. How to create a single universal currency, that is the question. OhioWanderer (talk) 21:05, 16 November 2010 (UTC)
Thank you for the book suggestions. I will add them to my current list: Geoffrey Whittington´s latest book and Jeff Kingston´s “Contemporary Japan.” BTW I read Whittington´s 1983 classic "Inflation Accounting" because he asked me in 2005 why I have not read it and I could not believe my eyes when the term stable measuring unit assumption was not mentioned even once in the entire book. I did not tell him that that was the exact reason I never read a single book on inflation accounting: I knew they were all wrong: so why read them. They all think inflation destroys the real value of non-monetary items when Friedman specifically stated almost 50 years ago: "inflation is always and everywhere a monetary phenomenon." Inflation or hyperinflation has no effect on the real value of non-monetary items. OhioWanderer (talk) 21:23, 16 November 2010 (UTC)
(I lose track of these dots...) The Mars Bar standard was brought in by possibly the Daily Mail to counter the old fogey chant of things like "When I were a lad, you could get drunk, take a bird to the dance, and get chips and t'last tram 'ome and still have change out of half a crown". In the reign of Elizabeth I, a goose cost 1 penny. A labourer's wage was a penny ha'penny. How much different is a turkey (we can get geese where I live, but turkey is the modern equivalent) in price relative to a modern labourer's wage? I agree that a universal (OK, all-Earth really - the inhabitants of Arcturus 14B might not want to join as they're notoriously independent minded) currency might be good. Some smaller nations have dealt with the financial problem by simply adopting a major currency, the dollar or the euro. But who is going to run the currency - and just visualise the reaction from the leeches people who make their money from selling money. Perhaps that's what Jesus meant when he turned the currency dealers out of the Temple... You couldn't have the dollar or the rouble or the yuan (not till they own us totally). An early attempt at a regional currency was the mark in Germany, replacing several local systems. The euro is a better shot - but can you imagine the Republicans accepting it? Or the regimes in Rwanda or Iran (chosen for example only)? I'm not saying it can't be done - but who is to bell the cat? Peridon (talk) 20:57, 17 November 2010 (UTC)
If it had to be done today it could perhaps be done as follows: Determine an international consumer basket. Price it in US Dollars. Change the name of this US Dollar price to Currency. Set up a World Central Bank with the governors of the G20 central bankers as board members. Choose any one of the top 4 as governor. Change all currencies at a predetermined rate into the new Currency like it was done with the Euro. There you are. Inflation has to be kept at zero per cent. If it is not kept at zero percent then the Historical Cost Accounting model (financial capital maintenance in nominal monetary units), or, more specifically, the stable measuring unit assumption, has to be abandoned and the accounting model has to be changed to financial capital maintenance in units of constant purchasing power as authorized in IFRS in the Framework, Par 104 (a) which states "Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power." This is only required if inflation is not at zero percent. So, it has to be done, just in case of positive inflation or deflation. That is it. Done. With no alternative currency, gold will be the only available alternative. OhioWanderer (talk) 19:47, 18 November 2010 (UTC)
But gold is not a fixed quantity stored somewhere (there has to be a fixed amount in the Earth's crust - but that's not all accessible or even discovered). People find it in rivers, and dig holes and bring it to the surface. Other people bury it for safety - or just lose it, and still others find it centuries later. That was the point I made (I think...) about the Spanish bringing the New World gold into Europe and jiggering up not only their own economy but many others. All you need is a big new mine opening, and down goes the value of your gold. Peridon (talk) 20:29, 18 November 2010 (UTC)
My gold remark was simply a casual, throw-away observation - it is not what I am on about: I am thinking about the single world currency. I am not interested in the gold question at all. OhioWanderer (talk) 21:26, 18 November 2010 (UTC)
Has it occurred to you that the reason why gold's price fluctuates is because there is no standard measure for money? An ounce of gold has been able to buy about the same amount of stuff for thousands of years -- for several reasons, not all of them well understood, people have always valued it similarly. When the price of gold fluctuates, then, it's because the currency itself is gaining or losing perceived value, often simply because the amount of money in the supply has changed.--~TPW 18:24, 22 June 2013 (UTC)

So, what isn't fiat?[edit]

I came to this article to see if I could find a short list of currencies that aren't fiat currencies. The article should at least name them, or provide a link to an article that does. ~Amatulić (talk) 19:03, 15 February 2011 (UTC)

If I recall correctly, I don't believe there are any commodity-backed currencies in circulation in any countries today. I can't seem to find any source that suggests otherwise, so until one surfaces I think it's safe to assume that all currencies in circulation are fiat currencies. The only exception would probably be the currency that (at any given time) serves as the world's foremost reserve currency, which is currently the USD (and before that, the GBP), because many crucial commodities are predominantly denominated in reserve currencies when traded (would be more of a quasi-fiat, but certainly not commodity-backed). Another unique quasi-fiat might be the Special Drawing Rights (SDRs) issued by the IMF, which you could conceptually think of as currencies (though they're really assets) based on a market basket of hard currencies. The value of each of the underlying currencies in the portfolio of an SDR are still fiat in nature, but the value of the SDR is based on the market-determined value of the basket of currencies, rather than faith & confidence in the IMF. I will certainly be interested to learn of any government or central bank issuing anything other than fiat currency for circulation. John Shandy`talk 19:45, 15 February 2011 (UTC)
Thanks for that explanation. It would appear that the sentence in the lead is incorrect, which claims "most national currencies are fiat currencies".
From my investigation, it looks like the last non-fiat currency was the Swiss Franc, which had a requirement to be backed by 40% gold until 2000. Now gold represents about 20% of Switzerland's assets. ~Amatulić (talk) 20:01, 15 February 2011 (UTC)
Ah, good find. It's been quite some time since I've actually bothered to read this article. We should certainly correct that, but I notice the lead doesn't even cite any sources for what it asserts at present. Feel free to edit it, I might have a go at it when I find some time and if I don't forget. John Shandy`talk 20:25, 15 February 2011 (UTC)
I just went and noted that ALL national currencies are now fiat, starting with Nixon abandoning the Bretton Woods system. I don't even think the Swiss Franc of 2000 counted then if it was only partially backed-- that would be like saying that a US dime is not fiat money because the metal in it is worth a fraction of a dime. Would it make a difference if the "fraction" were held constant, by law? I don't think so. The remainder is set by fiat. (For obvious reasons I didn't dare use the example of the US nickel, which probably is worth more than 1/20th of a US dollar, though this varies. I hope somebody isn't going to argue that this now makes the US nickel the first modern national commodity money!) SBHarris 20:42, 15 February 2011 (UTC)
(Original research) I don't remember the US nickel containing any actual nickel in my nearly-50-year lifetime — at least not in any significant amount. The Canadian nickel did, as I demonstrated to myself in the 1960s by observing that I could pick up a Canadian nickel with a magnet, but not a US nickel. ~Amatulić (talk) 21:16, 15 February 2011 (UTC)
According to Nickel (United States coin), the American Nickel is 75% copper, 25% nickel. The Canadian Nickel was pure nickel until 1982.—MiguelMunoz (talk) 08:29, 4 June 2011 (UTC)

Honestly and in plain language, ALL currency is fiat. Gold has no intrinsic value. It is only valuable because it is relatively rare and it's pretty, so our ancestors, by fiat, decided this otherwise useless junk had value because it was nice to look at. Gold has no inherent value... unless you believe in alchemy. You can't eat it. You can't build with it. It's only real practical value is as a conductor or a plating to prevent corrosion, and those uses are VERY recent. If we valued gold for it's actual useful properties instead of just because we arbitrarily decided it was valuable (again, fiat) it might be worth just a bit more than copper. People screeching because governments have decided to arbitrarily attribute value to things other than the arbitrarily valuable gold makes me laugh. Whatever we choose to use as currency, it's ALL arbitrary and fiat unless we go to a totally barter economy. And carrying cows and sheep around to trade with is really inconvenient. RyokoMocha (talk) 17:03, 18 August 2012 (UTC)

Ryoko, the problem is not that fiat currency has no value except as a trading commodity, but that governments arbitrarily increase the supply of currency at their own whim (thus devaluing the value of currency held by third parties). This is the real issue, not whether currency has any "intrinsic value" (whatever that means), and the reason why decentralized crypto currencies like Bitcoins and Peercoins are starting to take off. The reason people favor gold over government fiat currency is not because they think gold is "intrinsically useful" as you make it seem in your comment (which would be a complete straw man), but because the government cannot arbitrarily increase the supply of gold from thin air, unlike the case with fiat currency. — Preceding unsigned comment added by 23.16.124.201 (talk) 01:54, 15 November 2013 (UTC)

False claim in lead[edit]

Isn't this text suspect?

"Today, all national currencies are fiat currencies, including the US dollar, the euro, and all other reserve currencies. This trend began with the Nixon Shock of 1971, which ended the backing by precious metal of the U.S. dollar."

Given that Britain dropped the Gold Standard in 1931, and the French Franc (for the second time) in 1936, to name but two examples, isn't it the case that the Dollar was a late-departer rather than a trend-setter? Nick Cooper (talk) 22:22, 17 April 2011 (UTC)

Perhaps- though the GBP was pegged against the USD until very soon before Nixon dropped gold convertibility. Nevard (talk) 08:06, 18 April 2011 (UTC)
So it sounds like the "trend" began with the British in 1931, and culminated in the Nixon Shock of 1971. (Unless the trend began earlier.) Or maybe the era began when the joined the trend in 1971.—MiguelMunoz (talk) 21:03, 3 June 2011 (UTC)

Given that the value of the US dollar, along with other modern money, is regulated through open market operations, it is hard to understand how it fits the definition of fiat money. The thing that makes fiat money "fiat" is that the state mandates a fixed price for a commodity, e.g. when the government demands that its debased coins be treated as the equivalent of gold coins. This is an entirely different situation from setting a target price for a commodity (or other measure of value, such as bond interest rates) and using open market operations to attain that target. The fact that the open market operations are used to buy and sell bonds rather than gold makes no difference in deciding whether the money is a fiat money. Open market operations are the antithesis of fiat. Mazzula (talk) 16:19, 8 June 2011 (UTC)

Your points strike me as original research. Whether money is fiat is hinged on whether money is decreed to be recognized as having value (or having acceptance), not on what that value is in terms of price. Your statement that "The thing that makes fiat money "fiat" is that the state mandates a fixed price for a commodity..." is erroneous, because a mandated commodity price (or a commodity price at all) is not what gives value to fiat money, and is also not what determines/measures the value of fiat money. John Shandy`talk 15:21, 22 July 2011 (UTC)

Gold vs. Specie[edit]

This sentence doesn't make sense: "Attempts were made to reassert currency stability by anchoring it to wholesale gold bullion rather than making it payable in specie." I thought I understood this article until this point, but I thought "specie" meant things like gold. If gold isn't a form of specie, than what is meant by "specie"? —75.4.242.162 (talk) 20:14, 3 June 2011 (UTC)

I think that there is a distinction in that "specie" generally refers to coins that have been minted of a precious metal. So, if we are talking about gold, then all specie is gold, but not all gold is specie. Specie is government-certified to have a particular weight and purity (when minted). But I think that the distinction in the article is not so much between gold and specie, but between "making it payable" and other forms of anchoring, such as by fiat. The problem with the other forms of anchoring was that they didn't work. They didn't prevent the market value of the money from diverging from its nominal value in gold. This problem was solved by returning to a system based on open market operations, although at the "cost" of disentangling currency speculation from commodity speculation. Once the dollar was no longer nominally tied to gold prices, there was no need to maintain the restrictions on individuals owning gold bullion, so we ended up in a good situation where there was a generally stable currency (far more stable than the value of gold) together with the ability of individuals to legally own gold as a store of value. You can even buy specie (such as the American Eagle) from the US mint. So it seems that the author of the article doesn't like what Nixon did, but it is hard to understand exactly what the complaint is. After Nixon, there was less fiat and more access to specie. Mazzula (talk) 16:45, 8 June 2011 (UTC)
Thank you for clarifying. In light of this, I wonder if the article should define "specie" at the beginning. I could alter the first sentence where it's mentioned to look like this: "While specie-backed representative money entails the legal requirement that the bank of issue redeem it in fixed weights of specie (minted coins), fiat money's value is..." I also wonder if the definition of fiat money could be revised. In the sentence "neither legally convertible to any other thing", the word thing could maybe be replaced by scarce resource or something like that, to indicate that it's something that is in demand outside the currency system. (In other words, not just another fiat currency.) —MiguelMunoz (talk) 18:34, 8 June 2011 (UTC)
It might be good to simply replace the word 'specie' where it occurs with 'gold' or 'gold and silver' or 'gold coins'. As it is, we are using an obscure word where a perfectly clear word or phrase could do the job with no loss of meaning. If we accept the definition of specie as being specifically gold coins, we may already be misusing it. For example, the 'Characteristics' section talks of 'specie-backed representative money'. Has there ever been such a thing, in the sense of money backed specifically by gold and silver coins, rather than bullion in a vault? I would suggest going back to the source, except that there is no source for this paragraph. In the interests of boldness, I have replaced 'specie' with 'gold or silver' in this paragraph. It may be appropriate to do likewise with the other occurrences of 'specie'. - Crosbie 06:02, 12 August 2012 (UTC)
Miguel - regarding the word 'thing', the problem with adding anything to the sentence, such as 'scarce resource' is that this claim is sourced to JM Keynes. We cannot change the meaning without making it our own analysis, or at least our own synthesis. The word 'thing' is a bit clumsy. This was my attempt at paraphrase. You can see the original in the reference - ' not convertible by law into anything other than itself, and has no fixed value in terms of an objective standard'. - Crosbie 06:15, 12 August 2012 (UTC)

Quotes section[edit]

Is the quotes section necessary? So far, it only contains quotes commenting negatively on fiat money. I think it would be best to integrate criticisms of fiat money into the article and not have a simple quotes section that ultimately just serves the purpose of a criticism section (though it isn't labeled as such). I think doing so would improve the comprehensiveness of the article. The quotes section seems like a mere list of displaced quotes. Research-based criticisms of fiat money, rather than happenstance remarks by famous people, would be more useful in an encyclopedic work, I think. John Shandy`talk 01:52, 22 July 2012 (UTC)

Initial value by government decree[edit]

The first part of the lead sentence is unobjectionable, and agrees with the first two, sourced, definitions in the 'characteristics' section. However, I have removed the second part: 'the initial value of fiat money is established by government decree'. It is not obviously based on any source, and is not obviously accurate. The lead stands perfectly well without it. The important question is: is there a source for this? I am not randomly asking for its removal - it strikes me as inaccurate, or perhaps meaningless. What was the initial value of the U.S. dollar on the day it became a fiat currency, and was that value due to 'government decree'? Anyway, I say this simply to explain my motivation. My main point is: what is the source for this 'initial value' claim? - Crosbie 06:46, 12 August 2012 (UTC)

The U.S. dollar did not exactly go from the gold standard to fiat overnight, but supposing it had...the value when we woke up that morning was whatever the value was when we went to bed. ---Mattmatt1987 (talk) 06:34, 18 December 2012 (UTC)

Foster Publishing[edit]

The source given for the Bank of Stockholm material is Fiat Paper Money--The History and Evolution of Our Currency, by Ralph T. Foster, published by 'Foster Publishing'. It appears to be self-published. I'm also suspicious of the claims made, based on the version of events given in the Stockholms Banco article. - Crosbie 08:01, 12 August 2012 (UTC)

Loss of backing - Deutsche Mark[edit]

The continued acceptance of the Deutsche Mark is not relevant to the 'Loss of backing' section. The provided source says "So, if they decide to accept marks, retailers and other businesses can still exchange them at German central bank branches." [4] German central bank branches will pay Euros for Deutsche Marks. Therefore, the Deutsche Mark is still backed. - Crosbie 14:48, 26 September 2012 (UTC)

History Problems[edit]

This article is very confused about history. Fiat currency was clearly in use in ancient times, for example, the article on Roman currency (which links here) clearly establishes the use of fiat currency in the form of bronze coins in the 200s BCE. At best, the article conflates fiat (or fiduciary) currency with paper currency giving a history of the latter, and at worse might be indulging in revisionism. In any case, the (significant) use of fiat currency in ancient times, and the experience of the Romans with it, is entirely neglected. I expect if I looked I'd find other ancient examples besides Rome. 216.243.60.172 (talk) 19:15, 30 June 2013 (UTC)

Definition: citation needed[edit]

Morgan Leigh has placed a 'citation needed' tag on the lead definition, 'Fiat money is money that derives its value from government regulation or law' [5]. This definition was added by Lawrence Khoo : [6]. I take this definition to be a summary of the definitions in the 'Characteristics' section - all sourced. In the absence of further comment, I will revert the 'citation needed' tag. - Crosbie 18:47, 22 August 2013 (UTC)

Greetings Crosbie, I see that User:True Pagan Warrior has beaten you to it and added a citation, for which I thank them. The reason I put this tag in as I felt the lead was unclear. As there are three parts to the deinition and the lead only had one I have rearranged the article so that the lead is clearer and there is less confusion and duplication. I also moved the text about Marco Polo's comments about Chinese money out of the Europe section as it isn't about Europe at all.
I note that the section on China has contradictory information. It says that fiat money was first used in the 10th and 11th centuries. It's got to be either one or the other, but both are cited. I don't have a copy of the sources cited so I ask some other editor to please look into this and clarify the situation. Morgan Leigh | Talk 07:39, 23 August 2013 (UTC)
Thanks! - Crosbie 20:47, 23 August 2013 (UTC)

Lead image[edit]

The most widely used example of a fiat currency, at least in the English speaking world, is the U.S. dollar. It is better to illustrate the article with the most typical example of the subject, not the oldest example, so we should lead with a picture of the current U.S. dollar, not a Yuan dynasty banknote. I admit other articles go with the 'oldest' approach - such as 'Automobile'. I would seek to change that too if I were interested enough in the subject. 'Airplane' is more like it - it leads with a picture of a 737, probably the most widely used aircraft today, rather than the Wright Flyer. In the case of fiat currency, I take 'most widely used' to mean that currency which has the largest money supply by value. - Crosbie 07:16, 24 August 2013 (UTC)

I disagree. That reasoning could imply that every article about anything to do with money or currency, or maybe even finance and investing for that matter, should have the US dollar as the lead image. Since all currencies (to our knowledge) are fiat these days, the USD does not have any particular distinction in the context of this topic, and the impact of its image would be little more than to say, "this article has something to do with money". The currently-pictured Chinese currency does have a distinction in the context of fiat money: it was the first one. -- HLachman (talk) 21:34, 24 January 2014 (UTC)

messing with Mankiw[edit]

I reverted Adavidson99's edit of 23 January 2014 because the original Mankiw quote was accurate, and Adavidson99's revision substantially misquotes the cited source.

I can't claim to know why someone would go out of their way to change an accurate quote to a false one, but I do suspect that the original quote is a bit "inconvenient" to certain factions (such as the pro-Bitcoin community, who might not be in favor of any definition of fiat that could include Bitcoin... not accusing anyone, just saying, there have been NPOV issues on this topic before, so I'm not surprised to see this kind of edit). -- HLachman (talk) 21:52, 24 January 2014 (UTC)

Adavidson99 didn't misquote the cited source - he changed to a different quote from the same book. The cite for his version was 'Fiat money money without intrinsic value that is used as money because of government decree'. That appears in a sidebar in the text [7]. The formatting is confusing. It's not clear to me why a definition was set to the side of main text like that, especially when the main text just to the right states 'Money without intrinsic value is called fiat money'. However, Adavidson99 is not guilty of mis-quoting. I'm somewhat inclined to prefer Adavidson99's version, because the quote he cites explicitly defines fiat money, where the existing quote does not explicitly define it. My only concern is the confusing way it is laid out in the Mankiw book - Crosbie 10:47, 25 January 2014 (UTC)
I just noticed the main text goes on to say 'fiat money is established as money by government decree'. Mankiw makes his views on the nature of fiat money explicit here in the main text, so I support Adavidson99's change. - Crosbie 11:15, 25 January 2014 (UTC)

OK, I see what happened. Adavidson99 changed the citation to p. 851 but the hyperlink still went to p. 659. I followed the hyperlink and compared that to his quotation, and concluded that he had misquoted.

Comparing the three bullet items in the lead, it seems that the criteria for being fiat (according to the first bullet) is government decree, or (according to the third bullet) having no intrinsic value, or (according to the middle bullet) the combination of the two criteria together. Adavidson99's edit seems to have the effect of making the third bullet synonymous with the second (i.e., it simply adds the criterion of government decree). So perhaps the proper edit would have been to remove the third bullet? Or is there some reason why the 2nd and 3rd wouldn't be synonymous with the edit in place?

Next question, looking at pages 644, 659, and 851, we see that Mankiw in some cases seems to be defining fiat money with the single criterion (e.g., p. 659), while in other cases, he specifies that fiat money is established by government decree. Are both criteria fundamental to the definition, or is the part about "government decree" just an operational characteristic (like Webster including "four-wheeled" in its definition of "car" even though that characteristic may not be fundamental)?

Considering the above, I can see that a case can be made for some kind of edit. The case for leaving it alone is that the current text still seems factual ("Fiat money has been defined variously as...", and one can find all three kinds of definitions). I'd suggest leaving it alone until we get some clarity or consensus on the above questions. -- HLachman (talk) 20:50, 25 January 2014 (UTC)

The page 659 definition seems to suggest that government decree is inessential. My reading is that page 851 is definitive, in that it explicitly defines fiat money there, while page 659 is a summary. I originally added the page 659 definition back in 2010 specifically because it was a 'non-government-decree' definition which was an alternative, from a major economist, to the existing two definitions. Now that the page 851 definition has been pointed out, I feel that the Mankiw text no longer clearly supports a 'non-decree' definition. As you say, if the Mankiw definition is not a 'non-decree' definition, it is a bit redundant. It would be reasonable to remove it altogether. The lack of clarity from that source is another good reason to remove it. - Crosbie 21:33, 25 January 2014 (UTC)

Well, then it seems the 3rd bullet has no support. I also checked the other reference on that bullet (Shubik), and it says "a government supplied means of payment with no intrinsic worth" (footnote on first page). It's odd that Mankiw would leave out the 'decree' criterion on p. 659, and also in the p. 644 statement "Money without intrinsic value is called fiat money". Perhaps he didn't imagine that non-commodity money could exist without the power of government decree behind it, so he felt it was implied. The only way I can see to support the 3rd bullet is to use the original Latin meaning of fiat, "let it be done", which seems to mean a declaration by anyone (like someone who creates a cryptocurrency and says, "here, this is money"). But I don't know of any published works that support a "non-governmental declaration" meaning of fiat.

There's also a problem with the first bullet. US gold coins are currently legal tender in the US (at face value), so according to the article as it stands now, they are fiat money. But if you look at the cited source, Rollins' (the author's) complete explanation of fiat seems to specify that money is fiat only to the extent that the face value exceeds the intrinsic value, and for US gold coins, the reverse is currently the case. So are US gold coins fiat money, or not?

Also, Rollins' and Mankiw's definitions of fiat seem to disagree for, say, US nickels. Rollins would say they are fiat money (because their value, 0.05 USD, has a fiat component). Mankiw says fiat money "would be worthless if it were not used as money", and for US nickels, that is not the case (as they are made of copper and nickel). So are US nickels fiat money, or not?

(I'm not going to get into how many BTUs are generated by burning paper dollars, because I'm pretty sure Mankiw wouldn't count that!)

Complicating things further is the private currency article which states, "Private Currency is the opposite of the fiat currency" (unsourced text added 23 Jan 2009). Mankiw's p. 659 text seems to characterize commodity money as being the opposite of fiat money (on the basis of whether is has value if not used as money). So then does "private money" equal "commodity money"? I don't think so. I will add a comment on the talk page over there.

Maybe a whole new taxonomy for money is needed. But we can't do original research here! -- HLachman (talk) 21:06, 27 January 2014 (UTC)

Just to clarify: My US nickels example simply shows a possible distinction between the 1st and 3rd bullets (so this does not imply the need for an edit). But my US gold coin example shows a possible error in the article, in that it does not represent Rollins accurately. Perhaps the first bullet should be changed to something like, "any money declared by a government to be legal tender, at a face value higher than intrinsic value." But then it's nearly indistinguishable from the 2nd bullet. The 3rd bullet could still be considered distinct, even if the 'government decree' part is added, because it specifies that the money has no intrinsic value at all. (But when we consider Keynes observation, "now generally made of paper", the distinctions among all the definitions seem to become insignificant, and especially if the definitions are meant for currency systems rather than specific instruments like nickels.)

So the point is that the 1st and 3rd bullets don't accurately represent the cited sources. The other point is that it's unclear whether the differences between bullets are substantial or just wording differences. -- HLachman (talk) 23:07, 27 January 2014 (UTC)

There is a definition of fiat money in the "Monetary economics" section (citing Walsh) that does not include government-decree. It seems that this would support the 3rd bullet (as it stands now, "money without intrinsic value") or possibly a bullet of its own in the lede. -- HLachman (talk) 12:05, 29 January 2014 (UTC)

Why the desire to define fiat money in such a way that it excludes the ultimate fiat money, bitcoin? I realize that people keep adding and removing bitcoin from this article and I'm not going to get into that. But there are sources that define fiat money without requiring that the source of the fiat be the government. So editors who insert the government decree part seem to have an agenda here rather than NPOV. Economists have, as far as I can tell, not bothered to create a new name for non-governmental-fiat currency. If it's not a fiat currency, what is it? Mankiw defines fiat money both with the government reference and without. Cherry picking just the ones that mention the government misrepresents the source. In a section where he talks about the government, he specifically says "the acceptance of fiat money depends as much on expectations and social convention as on government decree." Bitcoin has no intrinsic value. The only value it has is due to "expectations and social convention" and the fact that other people are willing to exchange goods for it. ---Vroo (talk) 02:49, 27 March 2014 (UTC)

New France 1685-1770[edit]

I added a section on the Playing Card Money in New France because it is the purest example of a fiat currency I know of. It's a textbook case. Take a plain old playing card, print a value on it, sign it, and there you have it - real money. It lasted nearly a century and if people had paid any attention to the monetary principles behind why it worked, they could have saved themselves a lot of trouble over the ensuing centuries. At least they could have avoided a lot of stupid theories. RockyMtnGuy (talk) 23:24, 12 February 2014 (UTC)

Citations defining fiat money[edit]

Hi all. I read the fiat money definitions in the lead using citations of authorities and compared them to the referenced sources. I think that all definitions in the lead were seriously distorted by leaving out substantial parts of the originals:

  • Montgomery Rollins' definition: the major part of the definition was omitted (the part mentioning the relation between face value and real value). Without it, the definition is seriously distorted acquiring a substantially different meaning.
  • John Maynard Keynes' definition: the part mentioning the divorce between the intrinsic value and the nominal value was left out. Without it, the definition is seriously distorted as well, missing the important part.
  • Gregory Mankiw's and Martin Shubik's definition: the part mentioning the government decree was left out from the definitions in both sources. Such an omission changes the meaning of the definition in a significant way.

The undistorted versions of the definitions of fiat money from the various sources are essentially in agreement, the differences between the definitions being substantially smaller than the article lead using the distorted versions suggests. I think that this needs a serious correction Ladislav Mecir (talk) 18:23, 22 February 2014 (UTC)


Mr. Guye edits[edit]

The latest edits by Mr. Guye introduced a copyright violation against Merriam-Webster, and weird formatting around the Latin derivation. I confess I could not at once discern the purpose of this formatting, but it did not look right. I have reverted both. - Crosbie 07:05, 27 February 2014 (UTC)

Shubik source[edit]

The Shubik source, The Theory of Money is a discussion paper only. It is not a reliable source. - Crosbie 20:42, 28 February 2014 (UTC)

New lead sentence[edit]

The new lead sentence states 'Fiat money is money, often issued and controlled by a government, which is not backed by any physical quantity'. All the sources for the definitions in the previous lead defined money as something controlled, issued, or defined by the state. The new lead defines fiat money in terms of a lack of 'backing'. The new lead does not summarize or reflect the sourced definitions. It is not itself sourced. The concept of 'backing' is not defined. The previous approach of providing multiple definitions was not ideal, but it is better to provide multiple sourced definitions than a single definition which does not reflect any of the sources. The previous version of the lead, written by User:Lawrencekhoo, was also suitable: "Fiat money is money that derives its value from government regulation or law." This accurately reflects the sources. The article should either use the single Lawrencekhoo definition, which does summarize the sources, or list the multiple definitions which paraphrase the sources directly. The current version does neither. - Crosbie

No, they didn't all imply control by a government, see the fourth definition (which is still in the article in the very next section).GliderMaven (talk) 21:11, 28 February 2014 (UTC)
See the source of the fourth definition, by Mankiw. As I commented above on 25 January: I just noticed the main text goes on to say 'fiat money is established as money by government decree'. [8]. - Crosbie 21:15, 28 February 2014 (UTC)
So, to summarize, we have the Rollins source - 'government declares', Keynes - 'issued by the State', and Mankiw - 'government decree'. We have no reliable source which does *not* define fiat money in terms of government or state. - Crosbie 21:20, 28 February 2014 (UTC)
Even if you could find a hundred sources to say that, it's not true. See for example: http://www.forbes.com/sites/pascalemmanuelgobry/2013/01/08/all-money-is-fiat-money/. I mean sure, by far the most common fiat currencies are governmental, but not all fiat currencies are governmental. If the Disney corporation wanted to created Disney dollars as a fiat currency, they're perfectly able to do that. Or if they prefer to back it, they can back it with lollipops. It's up to them. Fiat money has particular properties, and not only the governmental ones.GliderMaven (talk) 21:51, 28 February 2014 (UTC)
Mmm. There seems to be two different definitions. One is the fact that it's decreed (usually by the state), and the second is that it's allowed to float without having a backing, and where its value is controlled by monetary policy. If you go to the money article it implies the second, whereas you prefer to emphasise the decree aspect.GliderMaven (talk) 22:14, 28 February 2014 (UTC)
It's not entirely clear whether they should both be covered in the same article.GliderMaven (talk) 22:14, 28 February 2014 (UTC)

Representative money[edit]

The article currently states, "Although historically fiat money has often been representative money that can be reliably exchanged with a commodity such as gold, modern fiat currencies have no fixed conversion to any specific goods". As far as I can tell, the basis for this statement in available sources is Keynes's statement,

Fiat Money is Representative (or token) Money (i.e something the intrinsic value of the material substance of which is divorced from its monetary face value) - now generally made of paper except in the case of small denominations — which is created and issued by the State, but is not convertible by law into anything other than itself, and has no fixed value in terms of an objective standard

However, here Keynes has defined 'representative money' in terms of intrinsic value versus face value, while the lead defines representative money as something exchangeable for commodities. The definitions do not match. Keynes term has been taken, and attached to someone else's meaning. Secondly, the lead suggests there has been some change in the nature of fiat money - that it *was* representative money, and is no longer representative money, due to its loss of exchangeability. However, according to Keynes's definition, nothing has changed. At the time he wrote this this, and before he wrote this, fiat money was something for which the intrinsic value differed from the face value, and today fiat money is something for which the intrinsic value differs from the face value. Nothing has changed. If we are going to reference Keynes for the claim that fiat money is representative money, we have to use the term in the way Keynes used it. Of course, if we are *not* basing the claim on Keynes use of the term, then we are basing it on nothing - no other source claims that fiat money is representative money - and the claim is unsourced. Either way, this claim is not well sourced. I will remove it. - Crosbie 09:25, 1 March 2014 (UTC)

article is completely lacking in detail, detail is being arbitrarily removed[edit]

When I go to an article, I expect to come away knowing everything about the topic. This clearly is not the case with this article.

I added some entirely relevant material, but it's been largely removed twice now.

The article has been and still largely remains almost entirely uninformative about how fiat money works.

Stuff like: how is fiat money created, how is the removed, what institutions are involved, what systems it replaced, what views notable experts have on fiat money systems, details of major historical events that lead to it- these kinds of things are mostly or completely missing or have been unreasonably summarised out of the article; in many cases they have been edit warred out completely one or more times.

It currently looks to me like there's big failures of NPOV and balance going on.GliderMaven (talk) 15:01, 9 March 2014 (UTC)

@GliderMaven: that statement looks about fair to me, after reading through the edit history and talk page. As someone who came by and made one little edit to test the waters only to be reverted IMMEDIATEly, this seems to be a heavily patrolled zone, where crosbiesmith bites newbies and oldies, the apparent owner of this page. maybe that's what the dog photo on user talk:crosbiesmith is supposed to convey...I d consider 3 messages demanding a source a virtual scream (uncivil), but deleting a sentence if no source is added within 24 h not impatience but inability to collaborate and poor judgement.--Wuerzele (talk) 06:33, 25 March 2014 (UTC)

This was exactly my impression on viewing the history. While I think some of the edits may have added too much detail that would be better served by a reference, NPOV seems to be lacking. ---Vroo (talk) 02:54, 27 March 2014 (UTC)

Fractional reserve banking in lead[edit]

We don't need a mention of fractional reserve banking in the lead. The lead is a summary of the article's most important aspects. The subject of fractional reserve is a related topic, not an important aspect of the article. The material included is a literal cut and paste of the existing text of the article. It is not a summary - Crosbie 20:40, 13 March 2014 (UTC)

With all due respect, this is so very wrong on multiple levels. There's no rule that says you can't copy material within articles into the lead of the article.
A very large amount of the fiat money that is in circulation is not created by the government, it's created inside commercial banks. When the government hands what is essentially a glorified IOU to a central bank, the bank then in turn hands out even more IOUs (in return for money, under fractional banking rules) to the commercial banks, and the commercial banks then lend against those IOUs (again under fractional banking rules) multiples times, because they are considered assets of the bank.
The overall effect is that far more money enters circulation than was originally created by the central bank to give to the government in return for the IOUs.
So when you go along to a bank and get a loan, they actually create fiat money on the spot (provided they have enough assets to legally do so) along with an overdraft. The fiat money then enters circulation, and that's the money you would actually spend in a takeaway.
So fiat money isn't really created by the government or even the central bank, (well some of it is) but their control over it's value is actually very indirect, it depends on how much the bank wants and is able to lend out, which is why the banking crisis was such a very big deal (but that at least is outside the scope of this article).
Let me say that again, because it's critically important: fiat money isn't really created by the government or even the central bank,GliderMaven (talk) 21:52, 13 March 2014 (UTC)
Commercial bank deposits are not fiat money. I will remove the reference to fractional reserve banking from the lead. - Crosbie 22:07, 13 March 2014 (UTC)
Not unless you want to get in an edit war you won't.GliderMaven (talk) 22:10, 13 March 2014 (UTC)


@Crosbiesmith, GliderMaven: why not have a request of comments and notify the relevant WikiProjects to build census. Jonpatterns (talk) 13:00, 14 March 2014 (UTC)

'Inflation' section[edit]

The inflation section of the article is a straight copy-and-paste from the inflation article. This adds no value to Wikipedia. Additionally, most of the material is not specifically relevant to the subject of fiat money. I will remove this material from this article in due course. - Crosbie 11:07, 30 March 2014 (UTC)

Nonsense. The use of WP:Subarticles is a perfectly legitimate and useful part of Wikipedia, and in and of themselves they involve duplicating material. It's not possible to have articles that do not overlap to some extent while having an article be a useful resource in its own right. Note that that is the point of any article, readers are not expected to have prior knowledge, to guess where directly related material is found.
With all due respect I think you've missed the point of Wikipedia. The point of an article is get a complete overview of a topic. In this case, fiat money, what it is, where it comes from, why it's used, what dangers of using it are; not simply to contain a definition and a list of (the relatively small number of) cases where it has failed.
Really I'm getting pretty fed up with what are your obvious attempts to slant the article, when I put information about how fiat money is used to create low level of inflation in the article, and link to where it is covered more fully, you remove it and leave only unsourced material about hyperinflation. When I added material on how central banks create fiat money you removed it also. Your idea of what should be in a Wikipedia article is clearly very skewed indeed. The fact that material is also elsewhere is never an obstacle to it being included; the best we can do is appropriately summarise and minimise duplication. You're instead applying a deletion approach. That doesn't work; each article has to be a standalone summary of its topic.GliderMaven (talk) 11:36, 30 March 2014 (UTC)
I am not attempting to slant the article. Do not make further claims that I have attempted to slant the article. - Crosbie 12:39, 30 March 2014 (UTC)
Well, certainly many people believe that fiat money is just a way of debasing currency; and that all fiat money is certain in the long run to fail; but I don't think that that's the opinion held by most academic economists, and Wikipedia has an academic bias.GliderMaven (talk) 16:34, 30 March 2014 (UTC)
Copying-and-pasting material from the inflation article is not an example of splitting an article. I have listed this disagreement at Wikipedia:Third opinion. - Crosbie 17:04, 30 March 2014 (UTC)
On the contrary, this is a perfectly proper use of a 'subarticle'. Subarticles are not only used when articles are split, they are also used when material could have been split off. The order in which material is added in Wikipedia to articles and topics varies, and they have the same effect. The use of fiat money to create and control inflation is a perfectly standard economic activity. How is it that you can think that such uses of fiat money are off topic?GliderMaven (talk) 17:21, 30 March 2014 (UTC)
Searchtool-80%.png Response to third opinion request:
I am responding to a third opinion request for this page. I have made no previous edits on Fiat money and have no known association with the editors involved in this discussion. The third opinion process is informal and I have no special powers or authority apart from being a fresh pair of eyes.

I suspect that a couple of misunderstandings may have derailed your discussion on this. I will try to address those and then suggest how you may want to position the Inflation section.

  1. In fact WP:Subarticle is a redirect to Wikipedia:Article size#Splitting an article and is concerned solely with the process and the result when a section in a more general article (the parent) is a summary of a more detailed article (the child). For example, Insect#Reproductive system is a summary of Insect reproductive system. This is described in more detail in the documentation of Template:Main (along with a controversial usage that isn't the case here). The third paragraph of the template documentation says specifically: "Its usage should be restricted to the purposes described above." Now, this article on fiat money isn't a parent article to the Inflation article. Thus the use of {{Main}} in the Inflation section is mistaken. (This may be the case for the use of {{Main}} in other sections as well, though I haven't examined this carefully.
  2. All the same, there is no rule against copy-pasting from one Wikipedia article to another, provided that there is sufficient attribution and that the copy doesn't give rise to a POV fork now or in the future (remember that the section will get further edited over time). The details are in WP:COPYWITHIN. The edit summary for the edit that copy-pasted the inflation text provides the required attribution, so I think your hands are clean on this.

In my view, this article doesn't need a section on the general concept of inflation, and including such a general description runs a real risk of giving rise a POV fork in the future. The concept itself is familiar enough that all that's needed for people who want more detail about it. The present article should of course discuss the relationship of fiat money to inflation. Do you think you can achieve agreement on that relationship with further discussion? If not, I think you need to call upon other experts to discuss it. Perhaps the best way to start that would be to post at WT:ECON.

I hope this has helped. I will keep this on my watch list for a few days in case you want me to clarify any of that, and you are both welcome to ping me if you wish. Stfg (talk) 21:52, 30 March 2014 (UTC)

Thanks for your comments, we seem to mostly agree that inflation should be here, and that copying information as I have done is not unreasonable, although perhaps it could be a little shorter and perhaps less general than it currently is.
I would however really like to include a specific section for inflation, since it helps the reader find the information (Wikipedia is a reference work after all) inflation and hyperinflation is very important in (but not completely unique to) monetary systems that use fiat money, and it makes clear that the full treatment of inflation is in another article.GliderMaven (talk) 23:32, 30 March 2014 (UTC)
I had better clarify my advice. I pointed out that copy-paste from one Wikipedia article to another with attribution is allowed per se. But I also suggested that it is inadvisable for this article to contain a summary-style introduction to inflation as a concept, especially because of the danger of it developing into a content fork. In Wikipedia articles, when we introduce an unfamiliar term, in addition to wikilinking it we often give a one-phrase definition in parentheses. But that is as far as we generally go: we don't provide a whole section of introduction. A reader who wants that may follow the wikilink and get a summary from the article in question. (And inflation isn't even an unfamiliar term. Anyone who doesn't understand it will have been left behind well before they reach that section.)
If that seems too restrictive, please consider what it would look like if every Wikipedia article contained a potted introduction to every major thing that it referred to. So, for example, someone developing the article on Johannes Brahms could write a section on the composers who influenced him, and use that as a WP:COATRACK for little half-page discussions of [his own view of] the style of Bach, Beethoven, Mozart, ...
So my advice is to confine the discussion of inflation here strictly to the relationship between inflation and fiat money, and to exclude any summary-style introduction to the general topic of inflation. I hope that clarifies it. --Stfg (talk) 09:56, 31 March 2014 (UTC)
There's different degrees of strictly that could be used, at one pole we have crosbiesmith who will apparently only allow mention of hyperinflation. I've trimmed it down to what I consider to be a very reasonable degree; to my mind this article is about fiat money and the effects of fiat money. It's not quite straightforward to differentiate as a lot of the discussions of the effects of fiat money are implicit rather than explicit in most material; as in the modern world virtually all money is fiat.GliderMaven (talk) 15:20, 31 March 2014 (UTC)
Thank you. Yes, it should be about fiat money. I'll leave it to you experts to negotiate the content of that section in detail. May I just point out that the template you need at the top of that section is {{See also}}, not {{Main}}. Or wikilinking the first mention of inflation in the section would be enough. Please take a look at MOS:BODY. --Stfg (talk) 16:12, 31 March 2014 (UTC)
I respectfully disagree, a See also is probably inappropriate here because that implies that the topic is disjoint to this one but is more something you should also be aware of; whereas inflation is part of the overall topic of fiat money. I am recently seeing more wikilinking used as a shorthand instead of doing a main, to achieve nearly the same effect, but I'm sure that a main in this case is not in any way incorrect.
Note that WP:BODY itself uses main in a very similar way to the way I have used it.GliderMaven (talk) 16:23, 31 March 2014 (UTC)
I'm sorry I've been unable to help resolve this. If you two would like to get wider input on the subject, WP:DRN is one possibility. WT:ECON may be another. --Stfg (talk) 16:41, 31 March 2014 (UTC)
Stfg - thank-you for your detailed response. Stepping into other editors' disputes is an incredibly public-spirited thing to do.
Unfortunately more posts are required to resolve this dispute, possibly in due course following one of the dispute resolution procedures you suggest.
Regarding the dispute itself: if we are to have a section in the fiat money article about inflation, it must contain content which is explicitly about fiat money, and it must be based on sources which are explicitly about fiat money.
The only paragraph in the fiat money section which is explicitly about fiat money is the paragraph beginning ' The adoption of fiat currency...'. All the other paragraphs in this section should be removed from the article. If we have reliable sources discussing the relationship between inflation and fiat money it is appropriate to have a section on inflation in this article. We do not have such sources. - Crosbie 18:42, 31 March 2014 (UTC)
I will not negotiate with someone who is effectively claiming that every sentence that gets added to the article must use the term 'fiat money'. If you continue to act like this I will be getting the administrators involved.GliderMaven (talk) 20:07, 31 March 2014 (UTC)

definition of fiat money[edit]

I added what seems to me a missing dimension of fiat money. backing by the force of government. the krugman quote summed it up - in contrast to bitcoin. the edit was reverted with the reason as "not adding to the article". i reverted the deletion because i do not see this argument is valid.My addition is sourced.--Wuerzele (talk) 03:33, 7 May 2014 (UTC)

User:Volunteer Marek re-reverted and accused me of "misrepresenting the source" and "POV pushing" in his editsumary. I cant see how. Again no valid arguments: The sentence is in the source and it isnt a particular POV. User:Volunteer Marek may not like it but thats not a reason to delete.--Wuerzele (talk) 03:39, 7 May 2014 (UTC)

What exactly does adding the statement: Economist Paul Krugman has said, “Fiat money, if you like, is backed by men with guns.” add to the article? You are blatantly misrepresenting the source (Paul) by cherry picking a quote out of context. What is that statement, removed from context, supposed to mean? All that Paul means is that fiat money is backed by a government. You're trying to cram some nefarious reasoning into that statement. Quit it.Volunteer Marek (talk) 03:49, 7 May 2014 (UTC)
these are strong and angry words, not interested in discussion or consensus:
Blatantly misrepresenting: How? The quote is not misrepresenting.
Cherry picking out of context: How ? it is Paul Krugman's a definition of fiat money. what more context would you want?
what is it supposed to mean: this is one more form of a definition.
I neither crammed , nor is there anything nefarious, with all due respect.
Your deletions show intolerance for other editors contributions, I find your talk is uncivil.
Your reversals and the above sound like you are the boss of this site, without reasoning. --Wuerzele (talk) 04:12, 7 May 2014 (UTC)
I agree with Volunteer Marek's revert and assessment of the edit. There are factors other than verifiability considered in whether or not material is suitable for inclusion in an article, and how it is to be used in an article. This particular quote, especially taken out of its context, doesn't really add any value for the reader. The article already conveys in its first sentence that fiat money is backed by government. Could you imagine the article on gravity saying something akin to "Gravity is most commonly recognized and experienced as the agent that gives weight to physical objects, and causes physical objects to fall toward the ground when dropped from a height. Isaac Newton has said, 'I once experienced gravity when I accidentally knocked a frying pan off of my stove and my pancakes fell immediately to the floor.'" ? John Shandy`talk 04:25, 7 May 2014 (UTC)
Thanks for your message. First I d like to see what other factor than verifiability you need to see to include this statement. Second please indicate how you would describe the context, to compromise. As far as the made up and ridiculing example and your question: if there was such a source, I would not be against it. If it was a rhethorical question, I think your comment defeats the purpose of discussion.--Wuerzele (talk) 04:53, 7 May 2014 (UTC)
I'm sorry but I'm having trouble understanding you. Can you explain what the purpose or the value added of the sentence you're trying to add is? In terms of its encyclopedic purpose? Volunteer Marek (talk) 05:03, 7 May 2014 (UTC)

Its a definition (see subject heading). Please answer my questions: What other factor than verifiability you need to see to include this statement. Second please indicate how you would describe the context, to compromise. --Wuerzele (talk) 05:29, 8 May 2014 (UTC)

relevance and accuracy.Volunteer Marek (talk) 17:00, 8 May 2014 (UTC)
Volunteer Marek The sentence is relevant and accurate, see discussion with John Shandy below. You got what you wanted: Reversal without discussion <--> WP:TALKDONTREVERT --Wuerzele (talk) 00:49, 11 May 2014 (UTC)
Wuerzele, please understand that we are not trying to be nitpick at your edits. I am challenging you to think about whether, and precisely how, your proposed edit would add value for the reader. Regarding your questions about factors other than verifiability, consider that Wikipedia values types of sources differently. For example, per WP:Identifying reliable sources, "When available, academic and peer-reviewed publications, scholarly monographs, and textbooks are usually the most reliable sources." Although Paul Krugman is a very reliable academic on subjects directly and indirectly related to the article's topic, we already have sources of higher quality (scholarly works, such as the textbooks/monographs cited in the Definition section) for the definition of fiat money than Krugman's Business Insider interview containing the quote you wish to include. The context of his quote (in which he says fiat money is backed by men with guns) is that he is obviously criticizing (or at least contrasting) the legitimacy of cryptocurrency versus fiat currency. Krugman also defines fiat money as "backed ultimately by the fact that you pay taxes with it," yet you have selected in particular his subsequent statement that "fiat money, if you like, is backed by guns." Immediately at the end of that sentence, Krugman goes on to say "Bitcoin is not, so why should this thing have any value? And of course, it doesn't pay interest. On the other hand, maybe the ability to do transactions that you think... are invisible." Krugman is clearly comparing the legitimacy of fiat money (backed by government) to the legitimacy of bitcoin (not backed by government, but ostensibly backed by a complex algorithm with a definitely limited potential quantity). At the onset of the interview, Krugman even states "I mean, I basically think that it's the digital version for gold cranks..." Aside from the quote being redundant (as essentially just a version of "fiat currency is backed by government guarantee"), I think it is fair to voice, on behalf of Marek as well as myself, that including the quote at all, especially absent its context, appears to promote the idea that fiat currency's backing by government (and the coercion of law, or "men with guns") is somehow a bad thing, or otherwise a "nefarious" aspect of fiat currency. That is not a view held by Krugman, or a view supported by academic consensus or by a preponderance of the reliable scholarly literature on fiat money. John Shandy`talk 00:24, 9 May 2014 (UTC)
User:John Shandy Thanks for your reply. I can now see how you see it, but I do not see it that way. (We have met at the global financial system page a year ago and so I have seen how you tick, a bit.) You support Marek's revert of my sentence x 2. Your arguments: a) form: redundant, b) POV: Including the quote at all appears to promote the idea "fiat currency's backing by government is somehow a bad thing (your interpretation) and c) form: absent context, a universal criticism applicable to almost any edit. For a compromise WP:TALKDONTREVERT, lets work from where we agree: you agreed on the source as valid ("a very reliable academic") and I agree the sentence has no context, of course.

Here are my counterarguments to your arguments/disagreements:

a) the sentence is not redundant, because it adds the meaning of force, which I consider crucial semantics. The power of a fiat currency is and feels different under different governments, a dictatorship, for example. (I assume you are a US citizen and have not lived under a dictatorship? universal )

The sentence also adds a differentiation from non-fiat currencies, such as bitcoin. That happens to be one important reason why readers turn to Fiat currency.

b} I am not promoting any particular POV. I simply inserted Paul Krugman's POV of a definition of fiat currency, the raw quote, even ATTRIBUTING the (reliable, mainstream) source. This is impartial tone, good research, gives balance, neither sympathizing nor disparaging, nor giving it undue weight, but due weight. You need to deliver proof. I am challenging you to think about precisely how, you see I introduced POV. It may turn out, that you may be biased in your interpretation of teh source in the first place and secondly by not allowing a quote that seems ... what? you havent said. Lastly, since you refer to WP values, like a teacher, I feel I may do the same: Regarding reverts, consider that Wikipedia values to "not remove sourced information from the encyclopedia solely on the grounds that it seems biased."
c)the sentence has no context; fair enough, but you did not hear/ answer my q WHAT context you wish to see (see above). Absent suggestions of both you and Marek I will now choose whatever context I think fits best. I will mention the sentence that follows, which has the advantage that it shows "Krugman's view" of both fiat and bitcoin. The preceding sentence "backed ultimately by the fact that you pay taxes with it" would work also, and would include a non-nefarious aspect of fiat money, as you called it, but it would swell the issue significantly, where conciseness was the strength.--Wuerzele (talk) 00:51, 11 May 2014 (UTC)
I still to see any point in adding the quote. For starters, the "definition" section should provide the definition of fiat money. Examples, quips, anecdotes, even if made by prominent authorities such as Krugman, are not definitions. I also see no point in contrasting fiat money with bitcoin in this particular article. The subject of "Fiat Money" is a fairly general level topic and it should be treated in general fashion, and not include every tid bit of info someone can find out there that is just sort of relevant.Volunteer Marek (talk) 01:30, 11 May 2014 (UTC)
Volunteer Marek. The above "reply" is stonewalling. Seeing 'no point' is actually a POV (undocumented). Note, that my quote was at the end of the def section and under the bullets of the textbook def's. Note that even economic "definitions", which you hold in such high regard, are POV, as this talk page amply proves. Note, that I treated the "fairly general level topic" in "general fashion".
Note, that you refuse to reply to my points above and the improved edit; you also refuse to discuss by dismissing my insert as "quips, anecdotes, tid bit of info" (derogatory). this is stalling, non-productive, like the 3 reverts on 7 May 2014, running against the spirit of WP:BRD. you violate wikipedia values WP:NPOV to "not remove sourced information from the encyclopedia solely on the grounds that it seems biased." a dispute in edit summaries is defined as WP:edit warring. you've been accused of innumerable times on your talkpage, and determined to be, per the block log. --Wuerzele (talk) 04:06, 11 May 2014 (UTC)
Actually, you seem to be suffering from a case of WP:IDIDNTHEARTHAT. Just because you fail to understand or listen to reasons given, does not mean that these reasons have not been provided.Volunteer Marek (talk) 04:17, 11 May 2014 (UTC)
Volunteer Marek Please explains what you mean by failing to understand or listen to reasons given. I suggest to use the a) b) and c) I used in the reply to John Shandy. (BTW I consider your above mean spirited sentence "suffering from..." unproductive and an escalation to a personal attack).--Wuerzele (talk) 04:45, 11 May 2014 (UTC)
Wuerzele, I consider my previous reply to have already explained the full context (the point Krugman was attempting to illustrate). To clarify what I meant when I credited Krugman as being a reliable academic: He certainly is one, but his scholarly publications would obviously be more reliable than his interviews with broadcast journalists. So for example, the scholarly works (by other academics) already cited in the Definition section are more reliable for the academic consensus definitions of fiat currency than Krugman's obviously facetious remarks in a Business Insider interview, in which he is making an effort to contrast the legitimacy of bitcoin with that of fiat currencies.
Krugman has authored numerous textbooks on economics. Here are a few examples from two of his textbooks in which he explains fiat money. Of course, I have only pasted small excerpts.
From Krugma, Paul. (2009) Economics, 2nd Ed.
Pg. 803 "U.S. dollar bills are pure fiat money: they have no intrinsic value, and they are not backed by anything that does."
Pg. 815 "Remember, the modern dollar is fiat money, which isn't backed by anything. So the Fed can create additional monetary base at its own discretion."
From Krugman, Paul. (2009) Macroeconomics, 2nd Ed.
Pg. 385 (emphasis is Krugman's) "Money whose value derives entirely from its official status as a means of exchange is known as fiat money because it exists by government fiat, a historical term for a policy declared by a ruler."
Pg. 410 (emphasis is Krugman's) "Today the dollar is pure fiat money, whose value derives solely from its official role."
Pg. 446 "Modern economies use fiat money - pieces of paper that have no intrinsic value but are accepted as a medium of exchange. In the United States and most other wealthy countries, the decision about how many pieces of paper to issue is placed in the hands of a central bank that is somewhat independent of the political process. However, this independence can always be taken away if politicians decide to seize control of monetary policy."
Any of these would be more accurate to include than the quote from the Business Insider interview. If his Business Insider quote does belong anywhere on Wikipedia, do you not agree that it would be the Bitcoin article instead? And I would argue that including his quote as another "definition" could potentially give it undue weight (at least in comparison to his scholarly definitions). "Backed by men with guns" certainly isn't a literal definition of fiat money, and it isn't the definition he assigns in his textbooks. Fiat currencies are backed, as Krugman says, their "official role." Their official role derives from factors like: a country recognizes a specific currency as its national currency and citizens have confidence that its recognition will endure over a long period of time; a government requires you to denominate your tax payments in the country's nationally recognized currency; a government will enforce contracts and by extension require parties to contracts to accept the national currency as a medium of exchange. Why are the semantics of how a government enforces laws in support of a fiat currency's "official role" relevant? What do they help the reader to understand? With regards to Marek's reverts and the discussion here, aren't we just participating in an instance of WP:BRD? John Shandy`talk 03:00, 11 May 2014 (UTC)
John Shandy, (dont know why you dont ping me or use user name, so I'll do the same, may be your preference). Your reply is not constructive, in that it dwells on Krugman quotes, thank you very much. It appears as if you forgot to put your listening ears on, or maybe you hadnt even read, what I wrote, because you do not reply to the issues raised. I perceive ivory tower arrogance when you write "I consider my previous reply to have already explained the full context". But where s the productive collaboration to get to the compromise? That's exactly why this is not [[WP:BRD]. You stonewall too. Remember, that you also removed any and all edit I made (referenced) on global financial system which you expanded single-handedly (!) and sanitized to death. I perceive a narrow minded POV, unable to open to other POV's. Above, I explained why the semantics of how a government enforces laws of a fiat currency's "official role" is relevant, and I explained how it helps the reader to understand. Yet you ask, as if I hadnt, and you dont answer a single question yourself, but bathe in undisputed (!) academic details, which I consider almost show off, lecturing on Krugman. And then you show the door. No, I dont think this sentence belongs to Bitcoin.--Wuerzele (talk) 04:34, 11 May 2014 (UTC)

Give the writer a break![edit]

The article can't reflect the truth due to extreme enforcements in the real world. I do believe that the writer tried in good faith to cover the subject.

The example with declared money supply (actual numbers) needs a disclaimer that independent auditing and law enforcement on the Federal Reserve are illegal at this time even though sampling and statistics might reflect a mismatch. The article should have covered also counterfeiting and degradation (paper specs) as a temporary money supply.

As I said, some of the articles in Wiki need visible disclosures that the subject can't be covered truthfully or completely. — Preceding unsigned comment added by 162.254.168.5 (talk) 12:27, 13 July 2014 (UTC)