Perry writes:
Most major economies are using fiat money today, so it is clear that fiat money will work.
Fiat money works because guns are used to force people to accept it. You have to pay your taxes in it, the laws are written so that all commercial paper requires that you use it, the government makes all its purchases in it, etc. The result of this is that it is accepted. It is substantially harder for people to accept fiat money that doesn't have guns barrels backing it up.
Fiat money works because people can get other people to accept it, though guns are a popular way of making that happen. Most major economies use it because it's a good deal for guys with guns. You don't have to pay taxes in fiat money in the US; they'll accept real gold or silver money if you want to use it instead of the cheap paper. It's still legal _payment_ for debts, as opposed to mere tender like greenbacks. But bad money does drive out good, so people spend fiat money. Green stamps were fiat money, but somewhat useful once. US postage stamps are fiat money, and they do use guns to prevent other people from offering competing mail service, but people will often accept them as money for small purchases; it used to be a popular way of sending small payments by mail before checking accounts became nearly universal. Bill