The Progressive Pulse blog had a really useful post by Charles Adams yesterday asking two questions. The first is what is fiat money, which is the type we use? And second, how to maintain confidence in the fiat money system? I strongly recommend the post, but could not resist sharing its opening:
What is fiat money?
Fiat means ‘let it be‘ or ‘let there be’. In the bible, God says ‘Fiat lux’— let there be light. The Lord’s prayer says, ‘fiat voluntus tua’ — thy will be done! In a sovereign country, the Sovereign says ‘Fiat money’ — let there be money. In a democracy, the Sovereign is the state which means all of us. We say let there be money and there is!
Illustrated by Cohenbaum.
It's almost back to the theme of economics as religion, and in a very real sense it is. Fiat money has value because we believe in it.
Bravo!
“Fiat money has value because we believe in it.”…
Nope, sorry I dont agree….its more obvious than that!
Tax man: “You owe us £10,000”
Me: “….but, money has no value – Its an abstract human concept that people believe it has value because it does. I don’t believe in it…so, QED”
Tax man: “We don’t care about your beliefs. If you don’t pay up, we’re throwing you in the clink….”
Money has value because the government demand…..with threat of imprisonment, that you damn well better value it!
If the government decided tomorrow that £20 notes were no longer acceptable as payment for tax owed…watch how quick they would loose their value!
Not so much the taxman as the rule of law which ensures that we make good on our promises (pay our debts), whether to the government (tax) or anyone else.
I don’t think ‘Let It Be’ would have been as big a hit for The Beatles if they’d been singing “Fiat-fiat, fiat-fiaaaaaaaaat” :p
I agree!