Business and Personal Finance Dictionary

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• FIAT CURRENCY
  
  Currency created by fiat (Latin, "let it be made" or "let it be done") whose value is guaranteed by the authority issuing it rather than by any external reference or backing. All national currencies today are issued and managed by Central Bank fiat. Ithaca HOURS is also issued by fiat (when you join the HOURS community, you agree to accept HOURS and pay $20 U.S. and are issued two HOURS in return) and managed according to policies set at monthly HOURS community potlucks. For more information on fiat currencies, see Beyond Greed and Scarcity. 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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