# Fiat Money
The contemporary monetary system where [money](money.md) is issued by the state via a [central bank](central-banks.md) without any backing by physical [commodities](commodity.md) such as precious metals. The prefix "Fiat" money is an esoteric name sometimes used in historical scholarship but rarely in practice, instead because of its ubiquity typically money is synonymous with "fiat money."

Colloquially the legitimacy of the [currency](currency.md) is from being declared by "fiat", thus the namesake. In practice the legitimacy of a national currency comes from both a collective social contract about the rule of law and its utility to fulfil the properties of [money](money.md), price stability, and capacity to spur economic growth.

Fiat money notably has a *variable supply* since the central bank can expand or contract the money supply through various means such as adjusting lending terms of commercial banks, quantitative easing, and modifying interest rates. These activities are the primary mechanisms by which price stability and [inflation](inflationary.md) targeting are implemented. A dynamic money supply is a core principle of [Keynesianism](keynsian-economics.md).

See also [dollar](dollar.md) and [central bank](central-banks.md).

## References
1. Varoufakis, Yanis. 2021. ‘What Is Money, Really? And Why Bitcoin Is Not the Answer (Even If Blockchain Is Brilliant & Potentially Helpful in Democratising Money)’. Yanis Varoufakis (blog). 2 August 2021. https://www.yanisvaroufakis.eu/2021/08/02/what-is-money/.
1. Eich, Stefan. 2018. ‘The Currency of Politics’. The Political Theory of Money from Aristotle to Keynes.
1. Corradi, Fiammetta, and Philipp Höfner. 2018. ‘The Disenchantment of Bitcoin: Unveiling the Myth of a Digital Currency’. International Review of Sociology 28 (1): 193–207. https://doi.org/10.1080/03906701.2018.1430067.