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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)
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)
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
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
tyler at earthsociety.org
roger3 (at) mtaonline (dot) net
Isn't this text suspect?
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)
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)
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)
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)
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)
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." [3] German central bank branches will pay Euros for Deutsche Marks. Therefore, the Deutsche Mark is still backed. - Crosbie 14:48, 26 September 2012 (UTC)
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)
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)
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)
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)
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 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)
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:
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)
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)
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)
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
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)
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)
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)
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)
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)
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)
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)
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)
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.
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) |
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)
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)
Here are my counterarguments to your arguments/disagreements:
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.
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)
The lead (which BTW is too short) says "The first use of fiat money was recorded in China around 1000 AD. Since then, it has been used continuously by various countries, concurrently with commodity currencies."
I believe all nations use fiat money now, so why not simply say that? And what are these "commodity currencies" used supposedly "concurrently". Where is that? Is this concurrent use common or do you know of only a few instances? S B H arris 20:06, 11 December 2014 (UTC)
We have paper , metal, plastic and electronic money ( bitcoin). The material the government uses as currency should be listed.-- Mark v1.0 ( talk) 15:14, 13 September 2015 (UTC)
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An extensive section on criminal activity might be relevant here as fiat currency is used for the vast majority of all criminal activity. 129.205.133.98 ( talk) 12:43, 8 April 2016 (UTC)
Dr. Haslag has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:
Fiat money is more than currency. It is a form of payment created by the central bank that is not backed by some explicit form of commodity. So, bank reserves are part of the fiat money stock.
We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.
Dr. Haslag has published scholarly research which seems to be relevant to this Wikipedia article:
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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)
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)
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)
And according to economist Michael Hudson of the University of Missouri, Kansas City, one of the preeminent money historians, fiat money was found in ancient Babylonia, Sumer and Sumeria. None of these garner even a mention here. Fashoom ( talk) 22:04, 10 September 2016 (UTC)
The Latin is mentioned as an after thought in the head, but in ancient Rome, all laws were established by fiat (not just laws regarding money). The true meaning of the word "fiat" is synonymous with "Act" as in "an Act of Congress."
In ancient Rome (where the Latin originates), the unofficial money first took the form of the aes rude (rough bronze) -- this was a heavy weight of unmeasured bronze -- then Rome passed a law, and by fiat (official decree) created the aes signatum (signed bronze) which was a 5lb bar of bronze stamped with the official seal of Rome certifying that it was of a certain weight of bronze. The first fiat currency of Rome was, in fact, metal and had an intrinsic value.
In light of these facts, this first sentence in the head should be changed from this:
To this:
Further, the rest of the article should be edited to preserve this true meaning.
It is a gross error to presume that simply because some Nations in history have used law to make worthless things their official money that all official money is worthless. This error not only taints this entire article, but many text books written by experts as well. None the less, the facts remain the facts and this article should correct the error, not perpetuate it.
These 2 terms are synonymous: "fiat money" & "official money".
US Gold and silver Coins were established by Constitutional fiat and further by the fiat of Congress as official money.
Christopher Theodore ( talk) 19:46, 22 January 2019 (UTC)
I'm removing this claim. The source cited - Adaptive Learning and the Transition to Fiat Money - only says the following:
A government monopoly of paper money was established early in the 11th century. Around the turn of the 12th century, convertibility was suspended, introducing what may have been the world's first fiat money
This is mere speculation, emphasis mine. I think it stems from conflation of paper money with fiat money.
Some economic historians claim that authorities have always been involved in the ensuring the value of money throughout history, even back to ancient Mesopotamia. This is supported by Graeber's Debt, Alfred Mitchell-Innes What is money?, and lectures by L. Randall Wray. Whilst Graeber isn't an economic historian, Debt is quite well sourced and I think would make a good starting point for finding source material for this page.
This is all related to the issues mentioned here, and when I get the time to do more research I hope to improve the historical accuracy of this page.
-- Zyzzek ( talk) 06:29, 31 March 2019 (UTC)
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)
I appreciate this comment is over 9 years old, but I just couldn’t sit idly by and let this financial quackery go unchecked. The above claim - that it was not the government, but “private bankers” who controlled the issuing of German banknotes, and thus caused the hyperinflation, is categorically untrue.
After World War 1 Germany was required to pay huge war reparations to France and Great Britain in gold or foreign currency, as the war had left Germany practically bankrupt, the only way the government could do this was by mass printing German banknotes in order to buy foreign currency, but in the process this devalued the German currency as more and more banknotes came into circulation, making the foreign currency more expensive to purchase, requiring an even greater number of banknotes to be printed - a classic feedback loop. This was entirely the doing of the German government, who were in direct control of the central bank, known as the Reichsbank at the time. It was not some conspiracy of shadowy private bankers or whatever it is you are suggesting. 82.34.69.170 ( talk) 00:00, 1 November 2019 (UTC)
The user Ndavidow changed the definition to something incorrect a month ago. Its pretty clear its not the correct definition, as you can see from many many sources:
Ndavidow also changed information that was already cited to information that means very different things. Ndavidow, if you read this, please hold off and discuss your changes here. Thanks.
In any case, I'm going to revert those changes, since they're clearly not correct and not cited. Fresheneesz ( talk) 02:28, 8 March 2021 (UTC)
I have a Masters of Economics and in my classes we validated the concept of fiat money using game theory. I added the following text to the discussion of economics on the page, but someone reverted it. Probably because it did not have citation. I found multiple papers on the topic, but they were dramatically more advanced than my simple text. One advanced paper was this.
"Fiat money can be modeled using Game Theory where N players either treat the fiat money as valuable or worthless. There are two Nash equilibria, one where everyone treats it as valuable and one where everyone treats it as worthless."
I think it is a good concept to include on the page. It provides the intellectual foundations for fiat money. I'll leave the text here and maybe someelse can included it. Mdnahas ( talk) 21:32, 17 March 2021 (UTC)
John Maynard Friedman I was trying to add a quick bit of information without doing all the work. I spent an hour to find a good source ... and it ended up that the one I liked --- Kiyotak and Wright --- was already cited in the section! I rewrote the section to explain the differences between the two works cited in it. Hopefully, you're happy with the result. If you are, you can delete this part of the Talk page. Mdnahas ( talk) 03:03, 18 March 2021 (UTC)
The section on Inflation had a number of sentences with citation needed. An IP editor provided two valid journal citations and one invalid (not RS) citation. User:SPECIFICO reverted the whole change, giving as reason Dubious, UNDUE. Investopedia not RS (which is true, but not a reason to revert everything rather than deal with that specific issue, per policy). I reinstated the journal citations. SPECIFICO reverted again, this time giving as justification No. Please see the reasons for the entire revert. You can use talk. This article is about Fiat, not undue theories of inflation. It is not obvious to me that it is invalid to provide requested citations. If the challenge is to the whole section on inflation, then a case for its removal should be made. Removing citations seems petulant. -- John Maynard Friedman ( talk) 11:32, 19 January 2022 (UTC)
The adoption of fiat currency by many countries, from the 18th century onwards, made much larger variations in the supply of money possible. Since then, huge increases in the supply of paper money have occurred in a number of countries, producing hyperinflations – episodes of extreme inflation rates much greater than those observed during earlier periods of commodity money. citation needed The hyperinflation in the Weimar Republic of Germany is a notable example. citation needed
References
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)
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)
Hi user:Mdnahas great addition on Game Theory Foundations!
I made a new section sourced from Sveriges Riksbank [1] attempting some sort of taxonomy between fiat and commodity monies. This summary should give historical insight how we began with commodities and ended up with fiat. Constructive inputs from you and user:John Maynard Friedman are much welcome.
Constructive edits also welcome from you user:Magnolia677. The three of us hope this link containing twenty-six archives of editwarring are not representative of the contributions we can expect from you >> /info/en/?search=User_talk:Magnolia677/Archive_26
Ciao! Oppa gangnam psy ( talk) 01:36, 29 April 2022 (UTC)
user:John Maynard Friedman the whole article comes from just one source but spanning few pages. Chopping up the attributions by chapter & paragraph would reinforce this thing.
And thanks for your concern re these recent goings on. much appreciated. i'll go thru links you shared to clear my head on the best path fwd.
Oppa gangnam psy ( talk) 07:12, 29 April 2022 (UTC)
p=
or loc=
) or {{
RP}} (which only supports page numbered sources). --
John Maynard Friedman (
talk)
07:40, 29 April 2022 (UTC)user:John Maynard Friedman I also need to familiarize with BRD as I've never wiki soaked unlike the rest of you lol. any other materials to get my stuff eventually critiqued and included will be appreciated. tnx Oppa gangnam psy ( talk) 07:19, 29 April 2022 (UTC)
References
Good day user:John Maynard Friedman user:SPECIFICO user:Magnolia677! As proposed above and as promised, in blockquotes below is proposed draft of 2nd section (classification of commodity and fiat standards) for which your opinion and/or endorsement for page inclusion is sought after. Adequately quoted from solidly WP:RS working papers: primary source from the Swedish Riksbank [10], supplementary points from a Federal Reserve paper. [11]
I propose to put it between "Intro" and "Treatment". Proposed addition is the most objectively neutral way of discussing fiat without the usual emotional discourse, and hopefully enlightens on its history (rather than think fiat was invented overnight in order to steal our gold lol). Source goes deep on many many topics like bimetallic etc so points (1)-(5) helps focus solely on commodity-vs-fiat. Pls advise what else needs straightening up in draft so it go to the article, thanks in advance for all your efforts.
Classification of commodity and fiat monetary standards
Understanding how 20th century fiat money emerged from the millennia-old commodity money system requires a systematic classification of historical monetary instruments and standards such as that published by Rodney Edvinsson (Department of Economic History, Stockholm University). [1]: 32 Its most important points are summarized in five points below:
(1) Commodity money is defined as one which exists in physical form and primarily valued for its physical properties [1]: 28 , while fiat currency is defined as an abstract unit of value not linked to a commodity (like gold or silver) [1]: 32 . While commodity money has been around for thousands of years, a permanent global move to fiat money only happened in the closing decades of the 20th century.
(2) Even during the long existence of commodity money, stamped ingots and coins of precious metal were never 100% pure commodity money, but more of a hybrid of commodity and money. Coins have a face value greater than the intrinsic value of its raw metal stemming from: [1]: 28
- The ruler creating a universally accepted medium of exchange of guaranteed metallic content, resulting in savings costs on transactions;
- The convenience on coins’ ability to circulate by counting its face value rather than by weighing; [1]: 31
- Or otherwise by the government's power to mint currency [1]: 30 and enforce its circulation.
The difference of face and intrinsic value can be descibed as a coin's "fiat component". [1]: 28
(3) A condition often set for a pure metallic standard is free minting - the unlimited ability of individuals to import / export the monetary metal and then turn them to coins. When strictly adhered to, the bullion price under this currency system has an upper bound (above which coins are melted to bullion and then exported) and a lower bound (below which bullion is imported and then minted to coins). [1]: 32
(4) Restricting free minting, however, tended to give government-stamped coins a scarcity value with a significant fiat component. Such coin would find a market value based on scarcity & mandatory status as payment, and with no lower bound on instrinsic value as it can theoretically be made from any material. [1]: 33
(5) Ultimately, the process of minting metals into coins was connected to the government's power and authority to define currency by fiat. This process was not linear, and the evolution from commodity to fiat money can best be described as follows: [1]: 30 The monetary evolution of the West has not been guided by an invisible hand of progress, but largely imposed by conspicuous actions of government... Many of the foremost features of the monetary systems we know today, in fact, are the result of governmental improvisations following crises.
From the points made above, the evolution of the different Western currencies may be described as follows:
- International trade before the 20th century was generally conducted using gold and silver of high fineness consistent with (3), freely converted to coins or bullion, and trusted for the largest transactions. [1]: 36
- Coins of silver, billon or copper occassionally slipped under type (4), fiat money minted only on government account, though all such fiat systems tended to be only temporary [1]: 36 as such financial instruments were of limited use in international trade.
- Small-value billon or copper pennies for small purchases represented fiat currency of type (4) and of a more permanent type, necessary for the conduct of domestic trade, and issued by the state facing constraints due to its high minting costs relative to its value. Sargent & Velde (1999) expounds on this topic in detail. [2]
- Banknotes or fiduciary money emerged in Europe initially convertible to pure metallic money of type (3), but owing from various improvisations following crises as described in (5), banknotes eventually evolved in the 20th century as a permanent and global type of fiat currency of type (4). Most remarkable was the transition of the predominant form of international payments from gold to the fiduciary pound sterling and the U.S. dollar in the 20th century, with both transitioning in turn from the gold standard to fiat money. [1]: 34 .
Oppa gangnam psy (
talk)
18:38, 30 April 2022 (UTC)
https://www.historia.se/Riksbanken__nat_upplaga.pdf
Oppa gangnam psy ( talk) 21:21, 30 April 2022 (UTC)
References
”classify”
was invoked but never defined (see the
help page).In the first paragraph of the Treatment in Economics section there is a sentence that reads:
“This stands in contrast with earlier monetary theories from the Middle Ages which were more similar to the coins-as-commodity valuation of the Arrow-Debreu model.”
There are a few problems with this sentence. The first is that I have no idea what Middle Age monetary theories are. There’s no citation for what this is referring to. The second, and more major one, is the conflation of the Arrow-Debreu model with money that has intrinsic value. The Arrow-Debreu model is a model of general equilibrium, not monetary economics. In fact, there is no “money” in most formulations of this model. The prices of goods are just relative prices where one price has been normalized. So for example price(1) = .5 and price(2) = 1 means the same thing as price(1) = 1 and price(2) = 2 in Arrow-Debreu world. 2600:1700:5F80:2070:B8FF:5BAC:BA72:A543 ( talk) 05:33, 17 November 2022 (UTC)
"So essentially, banks create money, not wealth." (BoE) - you have to notice, especially Michael Kumhof (see " banks are not intermediaries of loanable funds ...") since 2015 he is pushing CBDC (see FED 2022 also) and in a way of monocausal postulations telling us, that credit cyles are cause of depression in front of bust 1929 as like as 2007/8. That is in a way oversimplified. In 1929 US Banks received a lot of gold or goldcovered money (out of war credits repayments), also before 2007 they received a lot liquidity out of foreign countries. To US commercial banks it is not necessary to create bank money (but they do in prosperity). Also in citation of BoE "not wealth" is problematic postulation. Anyway. 62.240.134.151 ( talk) 17:38, 30 March 2023 (UTC)
"
Lautenbach (1952) then showed that debtor to debtor and creditor to creditor transactions leave the volume of bank credit unchanged while creditor to debtor transactions reduce (‘bank money destruction’) and debtor to creditor payments increase (‘bank money creation’) the volume of credit."
See archived Page WEF, Goodhart (2018):
Credit mechanics: A precursor to the current money supply debate. --
213.162.65.110 (
talk)
04:49, 31 March 2023 (UTC)
This is an archive of past discussions. Do not edit the contents of this page. If you wish to start a new discussion or revive an old one, please do so on the current talk page. |
Archive 1 | Archive 2 |
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)
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)
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
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
tyler at earthsociety.org
roger3 (at) mtaonline (dot) net
Isn't this text suspect?
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)
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)
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)
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)
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)
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." [3] German central bank branches will pay Euros for Deutsche Marks. Therefore, the Deutsche Mark is still backed. - Crosbie 14:48, 26 September 2012 (UTC)
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)
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)
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)
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)
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 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)
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:
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)
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)
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)
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
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)
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)
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)
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)
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)
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)
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)
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)
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.
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) |
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)
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)
Here are my counterarguments to your arguments/disagreements:
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.
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)
The lead (which BTW is too short) says "The first use of fiat money was recorded in China around 1000 AD. Since then, it has been used continuously by various countries, concurrently with commodity currencies."
I believe all nations use fiat money now, so why not simply say that? And what are these "commodity currencies" used supposedly "concurrently". Where is that? Is this concurrent use common or do you know of only a few instances? S B H arris 20:06, 11 December 2014 (UTC)
We have paper , metal, plastic and electronic money ( bitcoin). The material the government uses as currency should be listed.-- Mark v1.0 ( talk) 15:14, 13 September 2015 (UTC)
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An extensive section on criminal activity might be relevant here as fiat currency is used for the vast majority of all criminal activity. 129.205.133.98 ( talk) 12:43, 8 April 2016 (UTC)
Dr. Haslag has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:
Fiat money is more than currency. It is a form of payment created by the central bank that is not backed by some explicit form of commodity. So, bank reserves are part of the fiat money stock.
We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.
Dr. Haslag has published scholarly research which seems to be relevant to this Wikipedia article:
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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)
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)
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)
And according to economist Michael Hudson of the University of Missouri, Kansas City, one of the preeminent money historians, fiat money was found in ancient Babylonia, Sumer and Sumeria. None of these garner even a mention here. Fashoom ( talk) 22:04, 10 September 2016 (UTC)
The Latin is mentioned as an after thought in the head, but in ancient Rome, all laws were established by fiat (not just laws regarding money). The true meaning of the word "fiat" is synonymous with "Act" as in "an Act of Congress."
In ancient Rome (where the Latin originates), the unofficial money first took the form of the aes rude (rough bronze) -- this was a heavy weight of unmeasured bronze -- then Rome passed a law, and by fiat (official decree) created the aes signatum (signed bronze) which was a 5lb bar of bronze stamped with the official seal of Rome certifying that it was of a certain weight of bronze. The first fiat currency of Rome was, in fact, metal and had an intrinsic value.
In light of these facts, this first sentence in the head should be changed from this:
To this:
Further, the rest of the article should be edited to preserve this true meaning.
It is a gross error to presume that simply because some Nations in history have used law to make worthless things their official money that all official money is worthless. This error not only taints this entire article, but many text books written by experts as well. None the less, the facts remain the facts and this article should correct the error, not perpetuate it.
These 2 terms are synonymous: "fiat money" & "official money".
US Gold and silver Coins were established by Constitutional fiat and further by the fiat of Congress as official money.
Christopher Theodore ( talk) 19:46, 22 January 2019 (UTC)
I'm removing this claim. The source cited - Adaptive Learning and the Transition to Fiat Money - only says the following:
A government monopoly of paper money was established early in the 11th century. Around the turn of the 12th century, convertibility was suspended, introducing what may have been the world's first fiat money
This is mere speculation, emphasis mine. I think it stems from conflation of paper money with fiat money.
Some economic historians claim that authorities have always been involved in the ensuring the value of money throughout history, even back to ancient Mesopotamia. This is supported by Graeber's Debt, Alfred Mitchell-Innes What is money?, and lectures by L. Randall Wray. Whilst Graeber isn't an economic historian, Debt is quite well sourced and I think would make a good starting point for finding source material for this page.
This is all related to the issues mentioned here, and when I get the time to do more research I hope to improve the historical accuracy of this page.
-- Zyzzek ( talk) 06:29, 31 March 2019 (UTC)
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)
I appreciate this comment is over 9 years old, but I just couldn’t sit idly by and let this financial quackery go unchecked. The above claim - that it was not the government, but “private bankers” who controlled the issuing of German banknotes, and thus caused the hyperinflation, is categorically untrue.
After World War 1 Germany was required to pay huge war reparations to France and Great Britain in gold or foreign currency, as the war had left Germany practically bankrupt, the only way the government could do this was by mass printing German banknotes in order to buy foreign currency, but in the process this devalued the German currency as more and more banknotes came into circulation, making the foreign currency more expensive to purchase, requiring an even greater number of banknotes to be printed - a classic feedback loop. This was entirely the doing of the German government, who were in direct control of the central bank, known as the Reichsbank at the time. It was not some conspiracy of shadowy private bankers or whatever it is you are suggesting. 82.34.69.170 ( talk) 00:00, 1 November 2019 (UTC)
The user Ndavidow changed the definition to something incorrect a month ago. Its pretty clear its not the correct definition, as you can see from many many sources:
Ndavidow also changed information that was already cited to information that means very different things. Ndavidow, if you read this, please hold off and discuss your changes here. Thanks.
In any case, I'm going to revert those changes, since they're clearly not correct and not cited. Fresheneesz ( talk) 02:28, 8 March 2021 (UTC)
I have a Masters of Economics and in my classes we validated the concept of fiat money using game theory. I added the following text to the discussion of economics on the page, but someone reverted it. Probably because it did not have citation. I found multiple papers on the topic, but they were dramatically more advanced than my simple text. One advanced paper was this.
"Fiat money can be modeled using Game Theory where N players either treat the fiat money as valuable or worthless. There are two Nash equilibria, one where everyone treats it as valuable and one where everyone treats it as worthless."
I think it is a good concept to include on the page. It provides the intellectual foundations for fiat money. I'll leave the text here and maybe someelse can included it. Mdnahas ( talk) 21:32, 17 March 2021 (UTC)
John Maynard Friedman I was trying to add a quick bit of information without doing all the work. I spent an hour to find a good source ... and it ended up that the one I liked --- Kiyotak and Wright --- was already cited in the section! I rewrote the section to explain the differences between the two works cited in it. Hopefully, you're happy with the result. If you are, you can delete this part of the Talk page. Mdnahas ( talk) 03:03, 18 March 2021 (UTC)
The section on Inflation had a number of sentences with citation needed. An IP editor provided two valid journal citations and one invalid (not RS) citation. User:SPECIFICO reverted the whole change, giving as reason Dubious, UNDUE. Investopedia not RS (which is true, but not a reason to revert everything rather than deal with that specific issue, per policy). I reinstated the journal citations. SPECIFICO reverted again, this time giving as justification No. Please see the reasons for the entire revert. You can use talk. This article is about Fiat, not undue theories of inflation. It is not obvious to me that it is invalid to provide requested citations. If the challenge is to the whole section on inflation, then a case for its removal should be made. Removing citations seems petulant. -- John Maynard Friedman ( talk) 11:32, 19 January 2022 (UTC)
The adoption of fiat currency by many countries, from the 18th century onwards, made much larger variations in the supply of money possible. Since then, huge increases in the supply of paper money have occurred in a number of countries, producing hyperinflations – episodes of extreme inflation rates much greater than those observed during earlier periods of commodity money. citation needed The hyperinflation in the Weimar Republic of Germany is a notable example. citation needed
References
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)
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)
Hi user:Mdnahas great addition on Game Theory Foundations!
I made a new section sourced from Sveriges Riksbank [1] attempting some sort of taxonomy between fiat and commodity monies. This summary should give historical insight how we began with commodities and ended up with fiat. Constructive inputs from you and user:John Maynard Friedman are much welcome.
Constructive edits also welcome from you user:Magnolia677. The three of us hope this link containing twenty-six archives of editwarring are not representative of the contributions we can expect from you >> /info/en/?search=User_talk:Magnolia677/Archive_26
Ciao! Oppa gangnam psy ( talk) 01:36, 29 April 2022 (UTC)
user:John Maynard Friedman the whole article comes from just one source but spanning few pages. Chopping up the attributions by chapter & paragraph would reinforce this thing.
And thanks for your concern re these recent goings on. much appreciated. i'll go thru links you shared to clear my head on the best path fwd.
Oppa gangnam psy ( talk) 07:12, 29 April 2022 (UTC)
p=
or loc=
) or {{
RP}} (which only supports page numbered sources). --
John Maynard Friedman (
talk)
07:40, 29 April 2022 (UTC)user:John Maynard Friedman I also need to familiarize with BRD as I've never wiki soaked unlike the rest of you lol. any other materials to get my stuff eventually critiqued and included will be appreciated. tnx Oppa gangnam psy ( talk) 07:19, 29 April 2022 (UTC)
References
Good day user:John Maynard Friedman user:SPECIFICO user:Magnolia677! As proposed above and as promised, in blockquotes below is proposed draft of 2nd section (classification of commodity and fiat standards) for which your opinion and/or endorsement for page inclusion is sought after. Adequately quoted from solidly WP:RS working papers: primary source from the Swedish Riksbank [10], supplementary points from a Federal Reserve paper. [11]
I propose to put it between "Intro" and "Treatment". Proposed addition is the most objectively neutral way of discussing fiat without the usual emotional discourse, and hopefully enlightens on its history (rather than think fiat was invented overnight in order to steal our gold lol). Source goes deep on many many topics like bimetallic etc so points (1)-(5) helps focus solely on commodity-vs-fiat. Pls advise what else needs straightening up in draft so it go to the article, thanks in advance for all your efforts.
Classification of commodity and fiat monetary standards
Understanding how 20th century fiat money emerged from the millennia-old commodity money system requires a systematic classification of historical monetary instruments and standards such as that published by Rodney Edvinsson (Department of Economic History, Stockholm University). [1]: 32 Its most important points are summarized in five points below:
(1) Commodity money is defined as one which exists in physical form and primarily valued for its physical properties [1]: 28 , while fiat currency is defined as an abstract unit of value not linked to a commodity (like gold or silver) [1]: 32 . While commodity money has been around for thousands of years, a permanent global move to fiat money only happened in the closing decades of the 20th century.
(2) Even during the long existence of commodity money, stamped ingots and coins of precious metal were never 100% pure commodity money, but more of a hybrid of commodity and money. Coins have a face value greater than the intrinsic value of its raw metal stemming from: [1]: 28
- The ruler creating a universally accepted medium of exchange of guaranteed metallic content, resulting in savings costs on transactions;
- The convenience on coins’ ability to circulate by counting its face value rather than by weighing; [1]: 31
- Or otherwise by the government's power to mint currency [1]: 30 and enforce its circulation.
The difference of face and intrinsic value can be descibed as a coin's "fiat component". [1]: 28
(3) A condition often set for a pure metallic standard is free minting - the unlimited ability of individuals to import / export the monetary metal and then turn them to coins. When strictly adhered to, the bullion price under this currency system has an upper bound (above which coins are melted to bullion and then exported) and a lower bound (below which bullion is imported and then minted to coins). [1]: 32
(4) Restricting free minting, however, tended to give government-stamped coins a scarcity value with a significant fiat component. Such coin would find a market value based on scarcity & mandatory status as payment, and with no lower bound on instrinsic value as it can theoretically be made from any material. [1]: 33
(5) Ultimately, the process of minting metals into coins was connected to the government's power and authority to define currency by fiat. This process was not linear, and the evolution from commodity to fiat money can best be described as follows: [1]: 30 The monetary evolution of the West has not been guided by an invisible hand of progress, but largely imposed by conspicuous actions of government... Many of the foremost features of the monetary systems we know today, in fact, are the result of governmental improvisations following crises.
From the points made above, the evolution of the different Western currencies may be described as follows:
- International trade before the 20th century was generally conducted using gold and silver of high fineness consistent with (3), freely converted to coins or bullion, and trusted for the largest transactions. [1]: 36
- Coins of silver, billon or copper occassionally slipped under type (4), fiat money minted only on government account, though all such fiat systems tended to be only temporary [1]: 36 as such financial instruments were of limited use in international trade.
- Small-value billon or copper pennies for small purchases represented fiat currency of type (4) and of a more permanent type, necessary for the conduct of domestic trade, and issued by the state facing constraints due to its high minting costs relative to its value. Sargent & Velde (1999) expounds on this topic in detail. [2]
- Banknotes or fiduciary money emerged in Europe initially convertible to pure metallic money of type (3), but owing from various improvisations following crises as described in (5), banknotes eventually evolved in the 20th century as a permanent and global type of fiat currency of type (4). Most remarkable was the transition of the predominant form of international payments from gold to the fiduciary pound sterling and the U.S. dollar in the 20th century, with both transitioning in turn from the gold standard to fiat money. [1]: 34 .
Oppa gangnam psy (
talk)
18:38, 30 April 2022 (UTC)
https://www.historia.se/Riksbanken__nat_upplaga.pdf
Oppa gangnam psy ( talk) 21:21, 30 April 2022 (UTC)
References
”classify”
was invoked but never defined (see the
help page).In the first paragraph of the Treatment in Economics section there is a sentence that reads:
“This stands in contrast with earlier monetary theories from the Middle Ages which were more similar to the coins-as-commodity valuation of the Arrow-Debreu model.”
There are a few problems with this sentence. The first is that I have no idea what Middle Age monetary theories are. There’s no citation for what this is referring to. The second, and more major one, is the conflation of the Arrow-Debreu model with money that has intrinsic value. The Arrow-Debreu model is a model of general equilibrium, not monetary economics. In fact, there is no “money” in most formulations of this model. The prices of goods are just relative prices where one price has been normalized. So for example price(1) = .5 and price(2) = 1 means the same thing as price(1) = 1 and price(2) = 2 in Arrow-Debreu world. 2600:1700:5F80:2070:B8FF:5BAC:BA72:A543 ( talk) 05:33, 17 November 2022 (UTC)
"So essentially, banks create money, not wealth." (BoE) - you have to notice, especially Michael Kumhof (see " banks are not intermediaries of loanable funds ...") since 2015 he is pushing CBDC (see FED 2022 also) and in a way of monocausal postulations telling us, that credit cyles are cause of depression in front of bust 1929 as like as 2007/8. That is in a way oversimplified. In 1929 US Banks received a lot of gold or goldcovered money (out of war credits repayments), also before 2007 they received a lot liquidity out of foreign countries. To US commercial banks it is not necessary to create bank money (but they do in prosperity). Also in citation of BoE "not wealth" is problematic postulation. Anyway. 62.240.134.151 ( talk) 17:38, 30 March 2023 (UTC)
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Lautenbach (1952) then showed that debtor to debtor and creditor to creditor transactions leave the volume of bank credit unchanged while creditor to debtor transactions reduce (‘bank money destruction’) and debtor to creditor payments increase (‘bank money creation’) the volume of credit."
See archived Page WEF, Goodhart (2018):
Credit mechanics: A precursor to the current money supply debate. --
213.162.65.110 (
talk)
04:49, 31 March 2023 (UTC)