what is the deal with fiat currency? how does it arise and where does it attain its exchange-value? i’m currently participating in the hexbear capital reading group and in chapters 2 and 3 marx goes heavily into the way that gold standard money becomes exchange-value. fiat money is discussed only a little, and somewhat dismissively, although as far as i can tell none of the actual theory of the time precludes it from existing. are there any texts that go into it in detail?
important context: https://lemmygrad.ml/post/10346359/7603669
In the absolute most simple explanation possible I can give:
Non-fiat= Currency that can be directly translated to a certain universally valuable good at anytime (i.e. gold, silver), either through reserves or the money itself being made of said material (coins). The concrete measure of wealth helps gives investors and whoever else confidence that your government won’t go bankrupt.
Fiat= Currency that’s worth something because the government says it is. Look at us, we are big, our military is strong, don’t you trust we will always be powerful, wealthy and stable? You better or else we send that military after you if you put our financial solvency into question. Notably used by the Mongol Yuan Dynasty and the US today.
Another thing that gives fiat money value (at least domestically) is that the state will only accept tax payments in its own currency. Those taxes, which remove money from circulation, also moderate inflation. The sovereign’s debt is the money in the economy[1], which is why it’s in no one’s interest for the sovereign to pay off its debt.
There’s also money created by private banks, with permission from the sovereign, by writing loans. ↩︎