Fiat money

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Fiat money is legal tender, or currency (bank notes and coins), which has value only because a government says so. Fiat money such as US dollars can be used as an exchange for goods and services.

Some economists argue that an economy can only grow if it can produce more capital goods and not more money in the form of credit. This means that good economies must produce things rather than borrow money to buy things produced in other countries.

Alan Greenspan was an early critic of fiat money arguing that "Deficit spending is simply a scheme for the confiscation of wealth."[1] He thought the value of money should be backed by gold.

References[change | change source]

  1. Greenspan, Alan (1966). "Gold and Economic Freedom" (in English). http://www.constitution.org/mon/greenspan_gold.htm. Retrieved 2009-11-15.