"All technologies eventually become outdated"
There are easy counterexamples:
* Wheels
* Fire
* Knives
These are technologies that predate written records (did I mention writing as another example?) yet they all remain use and are actually fundamental in our daily lives. I am not going to claim that fiat currency will be so enduring, but I see no reason to assume that it will be replaced by anything short of a post-scarcity age.
knives superseded by guns (weapons) and fork (cutlery).
I'll give you the wheel only because I'm still waiting for my hovercar
Knives are not just weapons, and if you think forks can replace knives then you have never actually cooked anything more complicated than instant ramen. Go to your favorite restaurant's kitchen, and you will see lots of knives, specialized for various purposes. Knives are among the most useful tools ever invented. Quite a few people (myself included) carry a pocket knife or multitool (which almost always includes a knife) everywhere. There are a lot of situations in life that call for cutting things.
"I'll give you the wheel only because I'm still waiting for my hovercar"
Your hovercar will probably have wheels, unless you think there will be no need to cool any of those high-tech components (or that the cooling will be accomplished without any fans -- I doubt it). Even if we had a world of hovercars, there would be wheels all over the place, in various machines both in our homes and in factories and other industrial settings.
Fires are also better for everyday domestic cooking, whether due to basic usability (in the case of a hob) or warm-up time (in the case of a grill or oven).
Passing electricity through bits of metal until they heat up is fine, but I don't appear to be unique in my feeling that simply setting stuff aflame works better. So all in all, I don't see the humble fire going anywhere.
(Lest you think I'm a stick-in-the-mud, do note that I fully approve of the use of electric light over candles.)
Last I checked, my gas furnace was basically a controlled fire.
I don't get what you're trying to say. Bitcoin is a fiat currency.
You could say that the creator of Bitcoin decreed that it had value (I'm not sure I would agree), but it's still different from government backed money because nobody is forced to use Bitcoin (to pay taxes for example).
It certainly seems that within the Bitcoin community the word fiat now means government backed money, I suspect if Bitcoin becomes more successful it may end up redefining the word.
A fiat currency is fiat because it gives you no claim to anything. A pound of silver gives you a claim to a pound of silver. A US dollar used to give you a claim to a certain weight of gold. Today the price of gold is uncontrolled.
(Side note: owing to the special nature of facio/fio, using "fiat" doesn't necessarily require an agent. The verb is indeed the passive form of "facio" [do/make], but it's also the standard way to express [happen/occur].)
How exactly does the US government require businesses to take cash? I briefly looked into the state of the law concerning this, and there were two lessons that people discussing it take pains to pound into the reader:
1. Those places that say "we will not accept $20 bills" are on completely safe ground, legally.
2. The text "this note is legal tender for all debts, public and private" on US paper currency was added for historical reasons and has no legal meaning.
It's true that US taxes get paid in US dollars, but, as I point out in another comment, that fails to distinguish "fiat currency" from metallic weights, which are universally considered "not fiat currency". So I'll put the question to you as well: if your taxes were assessed in silver, would that make silver, to you, a fiat currency?
> as long as the supply remains limited the currency will have value.
A technicality: e.g. Zimbabwe's money lost 100% of its value (it was abandoned by the population) long before an infinite quantity was available. I don't really disagree with the idea here, but the phrasing isn't right.
EDIT:
I might also point out that the Somali shilling (a paper currency) is widely used in transactions despite not being backed by any law or government at all. Since anyone can print them, they tend to trade at a value roughly equal to the cost of printing.
I would argue yes, because:
(1) Under such a system, silver would be used as currency because people would need to acquire enough to pay their taxes (and other metals e.g. gold, platinum, copper would not be used as currency).
(2) You would be hard-pressed to find a market where silver (by weight, not by "face value") is used as currency in today's world. Once upon a time silver was used as currency, and I would say that it is no coincidence that back then silver was a way to pay taxes (among other things).
As for people saying that metal-based currencies are not fiat currencies, the subtle assumption hiding in there is that there is some other source of demand for metals that has nothing to do with the law. I am not a huge fan of this sort of idea, because to me it looks like this:
Step 1: Metals have certain properties that are useful for currencies to have.
Step 2: ???
Step 3: People use metals as currency (profit, at least if you can dig up some metal).
Are you wondering what step 2 might be? Step 2 is the reason people use particular metals rather than wampum, geodes, or Somali shillings. Step 2 is usually ignored in these discussions, but it should not be. To bring things full circle, let's turn your question about silver around: if the government allowed taxes to be paid with wampum, would wampum be a fiat currency? If your answer is "yes" then the real question is, "What differentiates wampum from silver?" If your answer is "no" then the real question is, "What differentiates wampum from dollar bills?"
> Under such a system, silver would be used as currency because people would need to acquire enough to pay their taxes (and other metals e.g. gold, platinum, copper would not be used as currency).
This is false. Read some history.
> Once upon a time silver was used as currency, and I would say that it is no coincidence that back then silver was a way to pay taxes (among other things).
The history of Chinese taxation (and currency) is quite interesting. I'm only minorly informed, but here are some things that seem relevant:
In what I'll call "phase 1" of the chinese economy, farmers conducted transactions in copper, merchants conducted transactions in silver, and taxes were assessed in kind (grain). This led to major logistical issues in collecting taxes; there was a point where the government announced a tax increase because the ships were arriving at the capital empty. (After a successful effort at reforming delivery, the increase was canceled!)
In "phase 2", farmers still used copper, and merchants still used silver, but taxes were assessed in silver. This was an enormous boon to the logistics of collection, but occasionally beggared farmers when the exchange rate swung against them.
At some point in all this, the government started issuing paper notes. (Notably, these were very common as "reciprocal gifts" to trade missions.) Merchants in the capital would accept these, but silver was far and away the dominant medium of exchange.
It all suggests to me that silver was a way to pay taxes for the same reasons that it was used as a currency, but not because the government needed to have silver available to spend; clearly it didn't. Instead, silver was fairly dense (in terms of buying power per unit volume) and didn't spoil like grain does.
I'm not clear on what you think the difference is between using silver by weight and using silver by face value. The whole idea of a mint is that coins have a standard weight. (Also potentially of interest: over the whole period I've described, China minted copper coins, but never silver ones. This didn't stop silver from being the metal of large-scale commerce and tax collection.)
"I'm not clear on what you think the difference is between using silver by weight and using silver by face value"
The face value of a coin does not need to track the market value of the metal used to make the coin. Typically it is advantageous for the face value to be higher than the value of the metal (otherwise people will just melt down the metal); it could happen the other way, e.g. what happened with US pennies. "Face value" only makes sense with fiat currency, which is why I drew the distinction.
"The whole idea of a mint is that coins have a standard weight"
This is not true of modern coins; all the really matters with modern coins is their face value, which can have nothing to do with their weight. It is not uncommon for a smaller coin to have a larger face value than a larger coin. Relating the physical measurements of a coin with its face value is convenient but not at all necessary in a fiat currency. The US has dollar coins with different weights and dimensions, all with a face value of one dollar, and the value of those coins is independent of the market value of the metals they are made from.
Copper, bronze, and iron (depending on location). But not silver, even when taxes were required to be paid in silver. You've taken the position that the medium of tax payment will necessarily be used as a currency, but this isn't true.
What distinguishes the farmers, with their tax obligations in silver and their business in minted copper (or iron), from the merchants with their tax obligations in silver and their business in unminted silver? It can't be the tax obligations. I've taken the position that the distinction is in the amount of value they generally handled; silver was worth more than copper and used for large transactions.
> "Face value" only makes sense with fiat currency, which is why I drew the distinction.
This is actually untrue; clipping a minted coin creates a discrepancy between its face value (which it has, since it's minted) and its value by weight. Forging an adulterated coin does the same. Clipping only makes sense for "non-fiat" coins; it would be pointless to clip a fiat coin as they are not made from precious metals. The value of a traditional, minted coin of precious metal was entirely in the weight; the minting was a QA program.
Anyway, I don't think a fiat currency can be said to "use silver" in any sense, which is why I was confused at your distinction between using silver by weight or face value. The GBP is named the "pound sterling", but that's just a name. I guess in my mind, if we use $10 of platinum to mint commemorative not-intended-for-use $500 coins, the use of platinum is more of a coincidence than an actual use of metal-based currency.