Fiat Currency

Fiat currency is a government-issued money that is not backed by a physical commodity, such as gold or silver, but rather derives its value from the public's trust in the issuing government and the central bank's monetary policy, making it the legal tender for all debts. This system allows central authorities, like the U.S. Federal Reserve or the European Central Bank, to actively manage the economy through tools like interest rate adjustments and quantitative easing, directly influencing the currency's supply and purchasing power.