Fiatjärjestelmä

Fiatjärjestelmä refers to a monetary system where the value of currency is not backed by a physical commodity like gold or silver. Instead, the currency's value is derived from the faith and credit of the issuing government. This means that the government declares the currency to be legal tender, and people accept it as a medium of exchange because they trust that others will also accept it.

Historically, many monetary systems were based on commodity standards, such as the gold standard. In such systems, the value of a unit of currency was directly tied to a specific amount of gold. This provided a degree of stability but also limited the flexibility of monetary policy. Fiat money, on the other hand, allows central banks to manage the money supply more actively to influence economic conditions like inflation and unemployment.

The primary advantage of a fiatjärjestelmä is its flexibility. Governments and central banks can adjust the money supply to stimulate or cool down the economy, combat recessions, or manage inflation. However, this flexibility also carries risks. If a government prints too much money, it can lead to hyperinflation, severely eroding the currency's value. The stability of a fiat currency depends heavily on the credibility and responsible management of the issuing authority. Most modern economies operate under a fiat currency system.