I learnt some very basic economics learning about 2, 2.5 decades back. Recently, while reading some article on the web, I came to know about 'fiat money' and 'fiat currency' but have been unable to understand if the two terms are same as what is known as legal tender in most countries or does it have different, subtle implications ? A little bit of contextual and historical context may go a long way in understanding where both these terms came from. Are they recent or rooted in 19th, 18th century or before ? I am not sure of the tags hence using ones which seem to be more appropriate. Please fix if something else is better.
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Difference between money and currency in general (i.e. in any monetary arrangement -fiat money, gold standard etc.) is as follows:
Currency: is the money in the strictest sense of a word. It includes coins and bank notes in the circulation. In foreign exchange the word is also used to as a synonym for unit of money (e.g. $ €) but from your question I think you are looking for the first meaning.
Money: is the whole stock of money in economy, hence not just coins and paper notes which are only small part of all money but also money on accounts etc.
Legal tender: is a money that must be accepted if offered in payment for debt. So for example in principle any debt can be repaid let’s say with labor or with some commodity, but the creditor can say no to all those things unless you had some specific contract but can’t say no to legal tender of the country. Legal tender again does not need to be fiat money it could be some gold backed money or fiduciary money etc.
Fiat money: following the Mankiws definition from his principles of economics (p 220). It is: “money without intristic value that is used as money because of government decree”. So there is a connection to legal tender all fiat money is also a legal tender by definition but it’s a necessary condition not sufficient one as it also has to have no intristic value. Fiat currency is just the coin and note part of the fiat money.
The origin of the word fiat is from Latin: “let it be done”. In modern English it’s synonymous to government decree, edict or act.
The earliest reference to fiat money I could find is in John Maynard Keynes’ treatise on money (1930). But I am unable to say if the word was not used before that.
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$\begingroup$ Is currency always part of fiat money? Can a vendor refuse payment in the form of physical currency and insist on electronic payment? $\endgroup$– GiskardCommented Dec 8, 2019 at 11:34
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$\begingroup$ @Giskard well that depends on a country. I agree currency can be in principle retired and you can still have fiat money or some other monetary arrangement. But from my understanding unless country goes completely currency-less you would not say there is no fiat currency just because law make exceptions for some vendors, and currently no country to my best knowledge went currency-less, although I read proposals to do that to solve the problem of zero lower bounds, tax evasion etc. $\endgroup$– 1muflon1 ♦Commented Dec 8, 2019 at 11:38