I didn't see the correct answer. I had to stop reading by page 3.
I think the correct answer to OPs question is direct convertibility.
Nigel Farage gives a pretty good account of fiat currencies in his book
The Ascent of MoneyNotes, currency, were first circulated as "warehouse receipts", circa 1600's if i remember correctly.
People wanted to safely store their gold and silver. The warehouse aka "bank" gave them a receipt.
Rather than go claim their precious metals before every purchase, people found it more convenient to just hand over the receipt itself. They handed over the ownership claim to an amount of metals stored in the warehouse. This is how paper money was born. (ignoring chinas story that goes back earlier but is unrelated)
Unfortunately unsavory characters realized that they could create more receipts than there was metal backing for and then lend the receipts out at interest. This process is inherently risky and
precious metal bankers are truly skilled people at matching lenders with borrowers. Unfortunately, like most humans, greed won out and the warehouse operators realized they could apply usury with receipts to defraud their customers. There bankers used paper receipts to match lenders and borrowers.
Fractional reserve banking was born. By which characters of what descent is for you to learn about. When one factors in that bankers harmed millions of people... well it changed my understanding of history.
Certain families grew wealthy thru this form of fraud.
Others didn't manage their receipt creation so well and were subjected to warehouse runs.
The founding fathers of the American colonies knew the evils of paper money. It was first introduced 200 years before their time. This was plenty of time to see multiple warehouse runs, booms and busts (tulips for example as people wanted to get a return on their inflationary paper)
The United States has had three central banks.
The first is hardly known to us today unless one is a avid student of history. The first note circulated was called "the continental" which gave birth to the phrase, "not worth a continental",
https://en.wikipedia.org/wiki/Early_American_currencyThe 2nd central bank was shut down by President Andrew Jackson. The famous quote this central bank gave birth to is "You are a den of vipers and thieves. I have determined to rout you out and, by the Eternal, I will rout you out!"
Also something along the lines of "you bankers tell me that if I shut down the central bank 100 families will starve and it will be on me, but if I dont shut down the bank, 10,000 families will starve, and that will be on you." Then he went on to call them snakes.
Finally in 1913 we have a secret meeting on Jekyll Island between Senator Aldrich and other cronies.
The result of this meeting was a plan to again give a private bank a government sanctioned monopoly over money creation.
If i remember correctly, prior to 1913, there were state banks and private banks acting as "warehouses". They each issued their own notes. This led to problems of acceptability outside of a certain range, also this led to multiple "wildcat banks".
They open up, take peoples real metal money, they issued receipt notes, created notes without metal backing, lent these notes, people exchanged for metals and the last ones to arrive found the warehouse empty, and the warehouse bank went bust leaving everyone holding the bag with useless notes. Mt.Gox is a modern day wild-cat bank!!!. The warehouses were the very first exchanges. Literally exchange the receipt note for real money. They stored real money and gave out receipts. Then they defrauded their customers by issuing more receipts at interest for which there was no metal backing.
There was no limit to the amount of receipts printable.
Even if US citizens were aware of this... As many posters before me said.... once 1913 hit.. it was the barrel of a gun that forced acceptance of the warehouse notes.
