# Money Isn't Real? (DD-186)

> Fiat money is currency that isn't backed by a physical commodity such as gold or silver. Its value comes from government decree, its status as legal tender, and people's trust in the issuer. It lets central banks adjust the money supply and interest rates, but it can lose value through inflation if trust or discipline fails. Most major currencies, including the US dollar, euro and Japanese yen, are fiat currencies. The US ended the dollar's last link to gold in 1971, when President Nixon suspended its convertibility for foreign governments. The footage shows banknotes and money, with the presenter.

- Department: History
- First published: 2024-01-17
- Last updated: 2024-01-17
- Permalink: https://detailenjoyer.com/case/money-isnt-real/
- Author: Marcus Easterling (DetailEnjoyer), The Detail Department

## On the timeline

- **1971**: President Nixon suspends the dollar's convertibility to gold

Full timeline: https://detailenjoyer.com/timeline/?case=money-isnt-real

## Quick facts

- **DD-186-F01**: Fiat money isn't backed by gold or silver. _(Write-up · Exhibit A (No commodity))_
- **DD-186-F02**: Its value rests on decree and trust. _(Write-up · Exhibit B (Legal tender))_

## Write-up

Most of today's money isn't backed by gold. Its value rests on trust and legal tender laws.

1. **No commodity**: Fiat money isn't backed by gold or silver.
2. **Legal tender**: Its value rests on decree and trust.
3. **Monetary policy**: Central banks can adjust the money supply.
4. **Major currencies**: The dollar, euro and yen are fiat.
5. **1971**: The US ended gold convertibility in 1971.

## Related case files

- [Fresh Fiat (DD-622)](https://detailenjoyer.com/case/fresh-fiat/): I linked how US paper money is made
- [Fair & Efficient Markets (DD-187)](https://detailenjoyer.com/case/fair-efficient-markets/): I paired it with the agency that polices US markets

## Reel vs. record

- **Note**: 'For governments to manage monetary policy': in most countries this is done by central banks, often independent of the government.

## Video: Money Isn't Real?: Most of Today's Money Isn't Backed by Gold

- Duration: 36.9 s · Published: 2024-01-17
- File: https://detailenjoyer.com/assets/videos/C2NSl50ubkA.mp4

### Transcript

Fiat Currency refers to a type of currency that is issued by a government and is not backed by a physical commodity like gold or silver. Instead its value is a derived from the trust and people have in the issuing government. DID YOU KNOW? Fiat currencies have no intrinsic and are not redeemable for a commodity but they are declared legal tender by the government. The advantage of fiat currency lies in its flexibility for governments to manage monetary policy, control money supply, and respond to economic conditions. However, it is also susceptible to inflation and can be affected by changes in public perception and government stability. The majority of the world's currencies including the US Dollar, Euro, and Japanese are fiat currencies. NOW YOU KNOW!

## Questions & answers

**Q: What backs fiat money?**  
A: No commodity. _(Source: Write-up · Exhibit A (No commodity) · Wikipedia: Fiat money)_

**Q: What does legal tender mean?**  
A: By law. _(Source: Write-up · Exhibit B (Legal tender) · Wikipedia: Fiat money)_

**Q: Who usually manages monetary policy?**  
A: Often independent. _(Source: Write-up · Exhibit C (Monetary policy) · Wikipedia: Fiat money)_

**Q: Which is a fiat currency?**  
A: Also the euro and yen. _(Source: Write-up · Exhibit D (Major currencies) · Wikipedia: Fiat money)_

**Q: When did the US end gold convertibility?**  
A: The Nixon shock. _(Source: Write-up · Exhibit E (1971) · Wikipedia: Nixon shock)_

## Sources

- [Wikipedia: Fiat money](https://en.wikipedia.org/wiki/Fiat_money)
- [Wikipedia: Nixon shock](https://en.wikipedia.org/wiki/Nixon_shock)

## Cite this case file

Easterling, Marcus. "Money Isn't Real?." The Detail Department (DetailEnjoyer), case file DD-186, last updated Jan 17, 2024. https://detailenjoyer.com/case/money-isnt-real/