Business and Personal Finance Dictionary

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• BACKED CURRENCY
  
  A currency whose value is guaranteed by a direct correspondence with a product or service (e.g. the gold standard for 19th century U.S. dollars, barter). There are only 3 ways of designing a currency system: fiat (i.e. without reference to anything else); valued by a commodity, when its value is expressed of terms of the value of that commodity (whether or not it is redeemable in that commodity--e.g.: Bretton Woods dollar-gold equivalence standard; airline miles); or backed by a commodity when the currency is in fact a claim to a given quantity of that commodity (which typically requires having a stock of that commodity on hand to meet such requests).
  
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