Fiat - Deepstash

Fiat

Fiat currency is “legal tender” backed by a central government, such as the Federal Reserve, and with its own banking system, such as fractional reserve banking. It can take the form of physical cash, or it can be represented electronically, such as with bank credit.

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Each country in the developed world has a central bank that issues paper money, manages the supply of credit in the interest of commerce, uses fractional-reserve banking, and has joint-stock companies that pay dividends.

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Fiat money is a government-issued currency that is not backed by a commodity such as gold. Most paper notes started as being backed by a reserve of valuable commodities, usually gold (the "Gold Standard"). Tying a currency to gold limits inflation and money suppl...

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Banks loan money they don't have. Most hold a limited reserve to serve the few who decide to make redraws. When the majority decides to liquidate their bank accounts we have what is called a bank run.

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