A Detailed Dive Into Stablecoins #014

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Hello crypto friends,

I trust you are all doing great today as we continue our activities in this great community.

I feel very happy to come before this great community to continue our discussion on Important sub-topic of stablecoins in the cryptospace.

In our last discussion, we learnt in details the Importance of fiat currency and we shall resume from where we stopped in our last post.

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ADVANTAGES OF FIAT CURRENCY

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Like I have said and will always say, there are various advantages of fiat currencies in the world we live in today, and we shall examine some of them below.

• MONETARY POLICY TOOLS:

Fiat currency as we know is a form of legal tender that is issued by the government, and as such it has lots of advantages and uses in terms of monetary policy tools, and we shall be examining them below.

CONTROL AND FLEXIBILITY

One major advantage of fiat currency is that it gives the central banks the authority to exercise control over the supply of money.

In contrast to commodity money like gold or silver where the supply of money can only be limited by availability of commodity, fiat currency are often created and regulated when necessary.

With this flexibility, central banks are being able to give a swift response to changing economic conditions

INFLATION TARGETING

Another advantage of fiat currency is that it is being used in inflation targeting.

Fiat currency is a very important tools used by the central banks in inflation targeting.

Central banks can influence inflation in the country through the adjustment of money supply and interest rate.

Price stability is most oftentimes promoted by the ability of the central bank to target specific inflation rates.

And this is important for a predictable and healthy economy.

ECONOMIC STABILIZATION

Another advantage of fiat currency is that it is very important in stabilizing the economy of a nation.

During the down turns, interest rates can be lowered by center banks and money supply expanded to stimulate economic activities.

Also, during periods of inflation and overheating, the monetary policy can be tightened to ease the economy.

This active economic management plays a huge role in ensuring economic stability and growth.

INTEREST RATE MANAGEMENT

Here is another advantage of fiat currency, it is used in the management of interest rates.

Central banks through the help of fiat currency are able to influence interest rate in the economy.

They control the cost of borrowing through the adjustment of policy rate and the supply of money.

By lowering interests rates, investments and borrowing are being encourage, and this are great factors that contribute to the growth and development of an economy.

While raising interests rate discourages borrowing and investment and can curb inflation and speculation.

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CONCLUSION

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Fiat currency is very important, it's Importance can be seen in the above contents.

We have seen how fiat currency helps in the growth and development of a country's economy.

In our next discussion, we shall learn more about fiat currency.