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What is the difference between a fiat currency and a gold standard?

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What is the difference between a fiat currency and a gold standard?
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    1. In everyday terms, the main difference between a fiat currency and a gold standard is what gives them their value. Fiat Currency: Think of fiat currency like a magic trick. Its value isn't backed by a physical substance like gold; instead, it's based on trust. Governments say, "This piece of paper iRead more

      In everyday terms, the main difference between a fiat currency and a gold standard is what gives them their value.

      1. Fiat Currency:
        • Think of fiat currency like a magic trick. Its value isn’t backed by a physical substance like gold; instead, it’s based on trust. Governments say, “This piece of paper is worth something,” and as long as people believe it, it works.
      2. Gold Standard:
        • Now, imagine if money had a best friend, and that friend was gold. In a gold standard, each bill or coin represents a specific amount of gold that’s stored somewhere. It’s like saying, “This money is as good as gold” because, in theory, you could exchange it for real gold.

      So, in a nutshell, fiat currency relies on trust, while the gold standard ties the value of money to actual gold reserves.

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