Fiat currencies are the legal tender whose value is backed by the government issued money. Most World currencies like the U.S.dollar, the Euro are fiat money. Precious metals or commodity backed currency is also called commodity money.
History of the Fiat currencies
Historically, a lot of currencies were based upon physical products such as silver or gold, but fiat cash is based entirely on the faith and credit of the economy.
The majority of contemporary paper currencies are fiat currencies; they have no intrinsic worth and are utilized exclusively as a method of payment. Historically, federal governments would mint coins out of a physical product, such as silver or gold, or would print fiat money that might be redeemed for a set quantity of the physical commodity.
Fiat loan is inconvertible and can not be redeemed. Fiat loan increased to prominence in the 20th century, particularly after the collapse of the Bretton Woods Arrangement, which was dissolved in between 1968 and 1973 while President Richard Nixon was sitting in the White House in the United States of America, when the United States stopped to permit the conversion of the dollar into gold.
Most Common problems produce by FIAT Currencies are inflation, when the Government in charge finds itself with no liquidity and starts printing money without at least being backed by one of the main Fiat Currencies.