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Advantages of fiat money

We have already discussed the reasons for changing the U.S. dollar to fiat currency rather than tying it to gold and silver reserves, but there are other reasons fiat money is preferrable.

The main reason that most governments issue fiat money rather than commodity-based currency is that fiat currency gives a government flexibility in responding to a changing economy. By backing the money supply, the government can react to economic growth, recessions or population changes.

There is an unlimited supply of fiat currency. Whereas linking to a fixed supply of gold or silver places limits on a country’s buying or borrowing power, fiat money is backed only by the trust that users have in the country’s stability and economic status.

You can use fiat money anywhere. It is universally accepted, and its value is somewhat stable.
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