Farley on Nostr: Distinction Between Fiat, Credit, and Money 1. Fiat as Credit: Fiat currency ...

Distinction Between Fiat, Credit, and Money

1. Fiat as Credit: Fiat currency fundamentally operates within a credit-based system. Central banks utilize terms like "credit creation" to describe how new money enters circulation. This terminology underscores that fiat is not inherently money; rather, it represents a claim on future economic output, which is fundamentally a form of credit.

2. Nature of Currency: While currency serves as a medium of exchange, it does not fulfill all the functions of money—such as being a store of value or a unit of account—without the backing of intrinsic value. Fiat currency lacks intrinsic value, which further distinguishes it from traditional forms of money.

3. Legal Framework: The legal framework surrounding fiat currency often frames it in terms of obligations and promises rather than as an asset or tangible value. This creates a perception that what is being transacted is not true money but rather a negotiable claim that can be manipulated or created at will.

4. Public Perception and Misrepresentation: The government's framing of fiat currency as money can lead to widespread misunderstanding among the public. By promoting fiat as money, the government obscures its true nature as credit, which allows for manipulation, inflation, and centralized control over the economy.

5. Implications for Society: This distinction has far-reaching implications for individual freedom and economic stability. If the public understood that fiat currency is essentially a tool of credit management, they might advocate for more transparent and equitable monetary systems that truly reflect value and ownership.

6. Need for Reform: Recognizing the distinction between fiat and true money could pave the way for reforms in monetary policy and the adoption of alternative systems, such as decentralized cryptocurrencies, which aim to restore the principles of sound money.