The Problem with Modern Money

For most of modern history, paper money was backed by gold — you could walk into a bank and exchange your dollar bills for a fixed amount of gold. This ended in 1971 when President Nixon took the US off the gold standard. Since then, the money we use every day — dollars, euros, yen, colones — is called fiat currency. The word 'fiat' comes from Latin meaning 'let it be done.' Fiat money has value simply because a government declares it does and people trust that declaration.