Fiat Money: A Key Role in Modern Economies, but with Risks of Inflation
The term fiat money refers to government-issued currency that is not backed by a physical commodity such as gold or silver. Instead, its value is based on government power and public trust in the issuing government. Today, most modern currencies, such as the US dollar and the euro, are fiat money. While it provides greater flexibility in managing the economy, excessive issuance of fiat money can lead to inflation or hyperinflation if not managed properly. Despite its drawbacks, fiat money remains the dominant form of currency in the modern world because it is able to support complex and growing economies for the time being.
