Fiat Money?

Question

Does issuing fiat money lead to inflation?

Answer 1

see most money today is fiat money, even in india the minimum reserverves requirements are fixed and is to be understood as decreasing with inflation and we have exp how bad money drives out good, coming to inflation, as dr. manmohan singh rightly said, (but may be misapplied) that inflation fluctuations are the root of all evil i.e. the costs of inflation-shoeleather costs(keeping money in banks), menucard costs( temporary price stickiness) etc. are due to inflation fluctuations though whenever inflation is high even in india inflation fluctuations are also high...........................

again there is a trade-off between unemployment entitlements and inflation..................................

but note issuing of fiat money per se is not the root of all inflation(currency depriciation) as some supporters of fiscal responsibility and  budgetary management act feel.........

if the govt issues money & r falls and this has a good enough effect on investment ( *** on all businesses forecast), the problem is resolved but whenever prices r sticky or say forecasts inadequate there shall b inflation, issuing money is not bad per se but money squandering in unproductive activities is!

Answer 2

Not necessarily.  But it doesn't prevent inflation either, so fiat money and an undisciplined fiscal policy can lead to inflation.

There are good things about fiat money.  In particular it makes it easier to stimulate the economy or to curb inflation during a boom.  But the discipline has to be there or else you're just printing money to pay off debts.