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According to economic textbooks, fiat currency is defined as "faith-based currency." Today, the U.S. dollar is an example of a fiat currency, meaning that it is not physically backed by any precious metal such as gold or silver. While critics view this as a weakness, proponents of fiat currency argue that it exemplifies the significance of trust and even faith in supporting economic relationships. For instance, when a parent gives a child a dollar for school, they demonstrate confidence and faith in their child's ability to use the money responsibly. Similarly, when an individual invests a dollar, they do so because they have faith in the underlying business's potential for success. Ultimately, without some level of trust and faith in one another, it would be impossible for economic relationships to exist, regardless of scale.
