The Fiat standard can have three different types, such as utopian, involuntary, and standard currency management. In practice, only the last two are seen so far.
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Standard utopian paper. For academic interest, this type is included for discussion.
The philosophy behind the acceptance of this rule is that it is now desired primarily for the money it will bring to the individual in the form of goods and services, and not to replace it, whether in the weight and fineness of gold or silver. Its proponents anticipate that the government seal and the attribute of legal value are all necessary to approve the money issued under this standard. So following this line of thinking, it is said that there is no need to build gold stocks as required in the case of standard gold.
On the other hand, its main drawback is that the money to be put into circulation is unspecified by any commodity and is therefore irreversible. Therefore, critics point out that this standard carries high risks of unrestricted inflation.
Voluntary Paper Rule. When a nation, in the gold or silver standard, finds itself in a serious state of inability to exchange its money, that state leads to the result of an unwanted standard paper on its way.
This situation is often seen as a result of a war. Thus, despite the government’s desire to return its paper money, circumstances prevent it from doing so. However, the government and the people are still passionate about the hope of one day returning the gold or silver standard.