Money which has no intrinsic value and cannot be redeemed for specie or any commodity, but is made legal tender through government decree. All modern paper currencies are fiat money, as are most modern coins. The value of fiat money depends on the strength of the issuing country's economy. Inflation results when a government issues too much fiat money. Well, that definition about sums up the US paper money situation nicely, don't you think? It's funny money with no actual value of its own, other than the strength of the faltering US economy. Even the currently circulating "silver" pocket change falls under the same category since it's made from base, not precious metals any longer. The definition goes on ominously with a final warning about the risk of inflation if the issuing government prints too much fiat money. Inflation, of course, being the silent robber in the night who steals your hard earned money only to replace it with an identical, yet debased copy, that buys less goods and services than the original note.
To further illustrate the inherent inflation mechanism of fiat money, let's return to my Monopoly game. Once to spice the game up my siblings and I started the game with 3x as much starter money as the rules indicated. The result? We bought the same properties, but the bidding wars launched the real estate prices into the stratosphere. Even low rent properties like Baltic went for multiple times its stated value. Without realizing it, of course, we imitated the irresistable force of monetary inflation inherent in and unavoidably linked with the fiat money pantheon. At my family's last Thanksgiving I wanted to test the awareness level of the above basic economic truths (yes, I'm available for parties). A short conversation with my usually very intelligent brother-in-law, Bill, confirmed the consensus in the room. He thought the dollar was backed by gold in Fort Knox (nope), and that today's coins still contained silver (nope again, they haven't since 1964). I believe a countrywide survey would show the vast majority of Americans have similar misconceptions about the real value of their negotiable currency. The current American debt is now a whopping $13 Trillion dollars, and will likely reach 19 Trillion in 2015. The money supply in the US has also been growing alarmingly as the government seeks to stimulate the economy. By fiat money definition, inflation, and even hyperinflation, are axiomatic. The US Dollar is holding strong for the moment, because the world presently lacks another easy replacement to pay for their oil, etc. However, inevitable signs of serious inflation will undoubtedly undermine the confidence of Americans and foreigners alike in the US Dollar. Once that happens...game over man. Speaking of game over, guess how my siblings and I treated the Monopoly money once the game was finished, and we awoke to the fact that it was all just paper and therefore inherently worthless? We threw it in the box (no tidy denomination segregation) and chucked the whole kit and kaboodle into the closet. BUY PHYSICAL GOLD AND SILVER COINS OR ROUNDS NOW! Gold and silver have had value in human society for 5000 years! Let's see if the US Dollar will maintain it's value for a fraction as long. Time is running out fast! Hyperinflation seems unavoidable as fiat paper money is being printed as fast as the US presses can run. To protect your wealth and your family, buy gold and silver now from these top companies, APMEX Gold and Silver and Silver American Eagles. Rick