Originally, it could, however, be converted into gold or silver. This was the basis of the Gold Standard which backed the American dollar until 1971 when Richard Nixon took the USA off the gold standard. What backs the value of such fiat money is trust and expectations of all market players about the productive capacity and balance of payments of a country. Taken together, all of the bills and coins issued by a Nation are known today as M1 money. The final form of 'normal' money is deposit money.
Most individuals deposit their earnings and income into deposit-taking institutions like banks.
Most consumers and firms pay for goods and services by transferring part or all of the deposit by a cheque or debit transaction. The institution simply alters the books. No currency or fiat money changes hands yet such deposit money is the main means of settling transaction in the modern world. Together with M1, all 'personal' deposits form M2 money. The Price Bargain - Commodity Tickets and Price Tickets .