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Home >> Why Is Real Money Better Than Fiat Currency?

Author: Gold Why Webmaster
Updated: September, 2009
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Fiat Currency  
©iStockphoto.com – skodonnell  
The image to the left depicts a sheet of US Dollars before they are cut into individual dollars. The US Dollar is an example of fiat money or fiat currency. Fiat money basically means that the currency has no intrinsic value (nor can it be redeemed for precious metals or something of intrinsic value). Rather, the currency is only backed by the goodwill of the government that issues it.

Consequently, we are easily able to answer the question posed above (Why is real money better than fiat currency?). Quite simply, real money (such as the Gold American Eagle) has intrinsic value. Gold is the ultimate example of real money because it is a very scarce and very sought after metal. You can exchange it anywhere in the world for fiat money in the local currency. Should fiat money be worthless, gold will always be a valuable asset which can be exchanged for goods and services. Unfortunately, all major currencies in circulation today (not just the US Dollar) are all fiat currencies.

The US Dollar Was Not Always Fiat Money

Our nation actually started out with the US Dollar being backed by the gold standard. The US Government would store gold and silver in its reserves to back each and every dollar. During the great depression, however, they reduced the amount of gold on reserves per dollar. Later, in 1975 they completely removed the gold standard. It's hard to believe that just 33 years ago the US Dollar was not fiat currency, it was backed by real gold and silver. Want proof? Check out pictures of my genuine US Government Silver Certificate showing that the dollar used to be backed by silver. Ron Paul is an advocate of returning to the gold standard and backing the US dollar with real assets.

Don't Store All Your Wealth In Fiat Currency

So what does all of this mean for you? It's quite easy: Make sure to diversify your portfolio away from fiat currency. There exists the belief that all fiat currencies come to an end at some point. One opinion is that the US Dollar is not immune from total collapse. It's even easier to believe this during our current economic crisis.

How can you diversify away from fiat money? Gold bullion is a great first start. There are many ways to buy gold bullion and one of the best is gold coins. You may wish to check out our top 10 reasons to buy gold coins. Interested in more than just gold? Complementing your portfolio with other metals is a super idea, there are some great deals in platinum, palladium, silver, copper and more. One last way diversify: Buy shares of stock in great companies, both big consumer brands and also gold companies (you may wish to check out our article on investing in shares of gold mining companies. Overall, the purpose of this site is to answer how you can diversify away from fiat money so please feel free to look around!

Don't want to scare you away from fiat currency completely. It definitely has its time and place. In fact, I have recently started hoarding one dollar bills because I find it a great way to save money while preparing for the future. The best portfolios are well rounded and that means having some portion of your assets in fiat currency (or currencies).

Buy Stacks of Uncirculated Dollar Bills on eBay

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