Question

Describe in 3 or 4 sentences the difference between debt-based versus non debt-based fiat systems. Provide examples of both

Answer 1

What is debt

Debt refers to money acquired by one individual from the other .The borrower receives money under the condition that he or she will pay back with interest on a later date.

Explanation:

Fiat money is government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it. The value of fiat money is derived from the relationship between supply and demand and the stability of the issuing government, rather than the worth of a commodity backing it as is the case for commodity money. Most modern paper currencies are fiat currencies, including the U.S. dollar, the euro, and other major global currencies.

• Fiat money is a government-issued currency that isn't backed by a commodity such as gold.
• Fiat money gives central banks greater control over the economy because they can control how much money is printed.
• Most modern paper currencies, such as the U.S. dollar, are fiat currencies.
• One danger of fiat money is that governments will print too much of it, resulting in hyperinflation.

• Debt based system refers to when the loan principle is payed back by the borrower to the bank or lender that money is no longer in circulation it no longer exists from money overall supply.The supply of money usually increases when the banks issues loans to the population and the vice versa happens when the loan is paid.Example mortgage loans

  Fiat money is any currency that does not have natural value which is declared by a government unlike currencies that are made from gold or silver.Fiat based sytsem does not put any intrinsic value in fiat money example much coinage and paper money.

• Example of

  The African nation of Zimbabwe provided an example of the worst-case scenario in the early 2000s. In response to serious economic problems, the country's central bank began to print money at a staggering pace. That resulted in hyperinflation, which ran between 230 and 500 billion percent in 2008. Prices rose rapidly and consumers were forced to carry bags of money just to purchase basic staples. At the height of the crisis, 1 trillion Zimbabwean dollars were worth about 40 cents in U.S. currency

  Fiat money is the opposite of commodity money, which is money that's based on a valuable commodity, a method of valuation that was used in the past. At times, the commodity itself actually was used as money. For instance, the use of gold, grain, and even furs and other animal products as commodity money preceded the current fiat system.

  A fiat system is based on a government's mandate that the paper currency it prints is legal tender for making financial transactions. Legal tender means that the money is backed by the full faith and credit of the government that issues it. In other words, the government promises to be good for it

• The main difference is that a debt-based fiat currency is one that is made or manufactured as a result of the availability of an open loan that is already preapproved. An open loan is one where the borrower has the liberty to borrow a couple of times and is given an open opportunity to pay the loan after an extended or indefinite period of time.

  An example of such a system is the U.S Dollar. A non-debt-based fiat currency or system is one that is backed by the fact that there is increased demand of money and is manufactured on the basis that it has a backup of a valuable commodity like silver or gold.

  There was a time when all currencies were backed by gold but currently all currencies are fiat based