Fiat Money

I got into a deep discussion today about currency. The US dollar is based off of a fiat system. Fiat money means that our currency is soley what we perceive it to be and not backed by anything (ex. gold). That means, we perceive a $10 bill to be worth $10 because everyone else around us sees it that way. It also means that I can go into a store and make a transaction with that $10 bill to buy $10 worth of goods. However, if I were to begin believing that $10 bill was not worth as much, I would not be willing to give you $10 worth of goods for it. This means that if perception of the US dollar crashes, the dollar would worth the paper it is printed on, and that's it. A good example of this is the reason how Hitler came to power. After WWI, Germany became so far in debt from having to rebuild everything, their currency dropped to absolutely nothing. That is why if you research it, you will see Germans burning there money to stay warm. This idea that the value of a currency would drop so quickly and drastically is called hyperinflation.

I find fiat money to be a very interesting topic because we can print as much money as we want and it will not change the value of a dollar if no one perceives it to be any less. Also, this is interesting because of the computer generation that we are getting into. So much business is done electronically, we do not even see the actual money flowing but a number on the computer screen. Will it be that someday, money will not even be tangible????