Chapter: 20


The source and root of all monetary evil is the government monopoly on the issue and control of money. If we are ever again to have sound money it will not come from government. It will be issued by private enterprise.”–Friedrich Hayek 1


Money is one of the great inventions of humanity, along with such other developments of human ingenuity as agriculture, art, contract, insurance, language, law, markets, music and science. Money evolved gradually through usage, tradition, and imitation, in the same manner as the evolution of language, law, and markets. 2

The principal characteristic of money is that it is a medium of exchange. Ideal money would be acceptable as payment anywhere in the world; it would hold its value, and would be a reliable unit of account for recording the assets and liabilities and the profits and losses of individuals and businesses.

As early as ancient Greece and Rome, rulers seized upon the fact that monopoly control of money enabled the state to expropriate property of their subjects in order to augment taxation.

Money is not inherently a product or function of that form of government known as the state. Non-state issuers of money have existed at various times and places in the past. It is the premise of this chapter that the political states of the 21st century will continue with uncontrolled deficit spending and consequent inflationary devaluation of national monies which will make such monies increasingly undesirable if not worthless. This phenomenon has occurred already in some nations.

Stable money has become a necessity to human society. Therefore, it seems likely that as state-issued monies lose more and more value, private, i.e., non-state, non-political, issuers of money will come into existence. Competition for business would require money issuers to provide good money. Users of money will have the ability and the means of identifying and choosing the best monies to use. Means of making money safe from loss will develop spontaneously through usage and imitation, as in every other spontaneous development of human culture and civilization.

The only thing stopping private issuers from offering money has always been, and is in the 21st century the jealousy and coercive power with which the state guards its money monopoly.

Historically, paper money was stable in value when it was redeemable in exchange for gold or silver. However, it was not the gold or silver that made paper money stable in value. Rather, it was the self-imposed obligation of the money issuer to exchange its paper money for gold and silver that restrained the money issuer from issuing so much paper money that the monetary units lost value.

As a medium of exchange, paper money and the electronic use of money that developed in the late 20th century, are more practical than gold, provided only that the issuer of a money limits its supply to the extent necessary to preserve a stable value for the monetary unit. It seems such a limitation must depend on asset backing for paper and electronic money. That is, good monies must be exchangeable for something of real value on demand by the holder of the paper or electronic money.

Humanity has assets far more valuable than gold and silver that could be made available to serve as backing for money, namely the productive assets and important commodities that are held or could be held in the form of marketable securities.

Gold has retained its purchasing power value because the supply of gold is limited. 3 As observed by economist and one-time Chairman of the Board of Governors of the U.S. Federal Reserve System (2006-2013), Ben Bernanke, “Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply.” 4 But there’s the rub. Political rulers have no incentive to limit issuance of money and every incentive to use over-issuance and inflation of the money supply to confiscate by stealth a large part of the wealth of the people they rule.

It is widely believed that society cannot have money unless it is issued by political states for example England, Japan, and the United States of America. Nothing could be further from the truth, as this chapter undertakes to demonstrate.

This chapter posits that state monopoly issues of money are in process of becoming discredited by constant over-issuance and depreciation; and that eventually, and probably sooner than later, people will reject state issued monies in favor of monies issued by competing, non-state issuers who will keep the supplies of their monies so limited and safe as to retain purchasing power value over the long term.


In one of his lectures Andrew Galambos held up a U.S. $1 bill and said “this is a money; it is not the only money; it is not even a very good money.” In this regard, let us consider a thought experiment. Imagine that you wake up one day to a world described as follows by anthropologist and historian Jack Weatherford: “In the near future, financial corporations may begin to offer their own electronic money . . . Private currencies may [exist that are] . . .  based on gold, on a particular mixture of commodities or currencies, or simply on the reputation and financial strength of a particular money-issuing entity. We might have Citicorp Currency, Yamamoto Yen or Dresdener Talers, each based on the financial strength and reputation of its backer.” 5

In the early 21st century almost all monies in common use are state fiat money, for example dollars, euros, or yen issued by a nation-state. Fiat money is a monopoly supply of paper or electronic money with no asset backing that is issued by a state that makes it mandatory for its subjects to use its money, and only its money within the territory the state controls. The word “fiat” is a medieval Latin word meaning “let it be done” or “it shall be.”

Money in trade to facilitate barter; the division of labor

Before the development of money, commerce occurred by means of barter—the direct and immediate exchange of goods or services. With the advent of agriculture there arose the division of labor by which, for example, some people were farmers while others would make tools to facilitate labor. Money became essential to the development of the division of labor. Without money people would be stuck in a barter economy, which is characterized by extreme poverty.

The division of labor brings ever increasing specialization in work and with that comes ever increasing productivity. Increasing productivity produces an increase in the standard of living because the more that is produced the more there is available for consumption. As Ludwig von Mises observed, the difference between a Chinese coolie and an American truck driver and the difference between their relative standards of living is—the truck.

Money enabled people to make indirect exchanges. Thus, one of the parties to an exchange would transfer exclusively money to the other party for goods or services. The one who accepted the money could then use it later to buy something that the one who paid the money was unable to supply.

Metal coin money

Relatively early in the history of money, metal coins became the most useful money because, unlike foodstuffs or commodities in common use, which had been used as money, metal is not perishable and retains its utility for a long time. The first metal coins known in history appeared in the kingdom of Lydia in ancient Greece about 600 years B.C.E.  These coins were made of a naturally-occurring alloy of gold and silver known as electrum. It was not long thereafter that gold, silver, and copper coins were in use throughout the Mediterranean region. Other metals have been used as coin money, including brass, copper, iron, tin and alloys of these metals.

Metallic coins proved to be a useful form of money because coins could be made uniform in size and weight, a characteristic that made them fungible, that is capable of mutual substitution, with one coin being as good as another of the same metal and of like size and weight.

Gold and silver have been the most prized form of metallic money because of their relative scarcity, their beauty, and the difficulty of counterfeiting these metals successfully.

Paper money

Paper, printing from movable blocks, and paper money were all invented in China between the first century B.C.E. and the 11th century C.E. 6 Knowledge of the use of paper money in China was communicated to Europe by Marco Polo (1254-1324) in his famous book, The Travels of Marco Polo (ca. 1300).

Once paper money became widely acceptable as a medium of exchange, it had a beneficial effect on trade and commerce. Coin money was heavy, difficult to transport, easily stolen, and, though counterfeiting was difficult, it did often occur. Paper money eliminated the problems of dealing with coins in bulk. As reported by Peter Bernstein, “the rise of trade [in Europe] during the Middle Ages accelerated the growth of finance . . . New instruments such as bills of exchange came into use to facilitate the transfer of money from customer to shipper, from lender to borrower and from borrower to lender . . .” 7

A bill of exchange was a written document stating that a specified amount of money was to be paid at a stated time and place. During the renaissance in northern Italy, bills of exchange were issued by bankers in exchange for a deposit of metallic money, such as the gold florins of Florence or the gold ducats of Venice. The bills of exchange became a medium of exchange—that is money—when they became so widely accepted as being as good as gold or silver money that they were traded among merchants. 8

Digital electronic money

In the early 21st century, in economically developed societies, money is transferred in exchanges most often in digital electronic form, by inter-bank transfers, electronic payments by depositors from their accounts, debit cards and credit cards. Mobile telephones have become “smart phones” that include digital computer capacity to access money in a bank account.

Mobile telephone banking—making banking available to poor people

Banks and banking have either been unavailable or impractical for the poorest of the world’s people who constitute some 40% of global population as of the early 21st century. The amounts of money that pass through the hands of the poor ordinarily are so small that it is uneconomic for a bank to provide accounts for them.

The cash of the very poor is drained by begging from friends and relatives, robbery and other risks of loss, high transaction costs for wiring funds to relatives, and money as well as time spent traveling to deliver cash to or retrieve it from relatives.

Mobile telephony and digital electronic banking began changing this sad picture for the better in the first decade of the 21st century. The costs of banking via mobile telephone technology are so low that banks in some less developed countries are beginning to welcome this kind of business.

Mobile telephones with digital computing capability can be used at local retail stores to open bank accounts and make deposits and withdrawals. Individuals deposit cash with a retail store for re-deposit with a bank. For example, in Delhi, India, an electronics repair man can walk across the street to a pharmacist and make a cash deposit with the pharmacist to be transferred to the repair man’s account at the State Bank of India via mobile phone technology. In Nairobi, Kenya, mobile phone banking is becoming so ubiquitous that individuals make mobile phone bank deposits for the half hour or so it takes to pass through a dangerous part of town, withdrawing the cash after they have arrived as a safe location. 9


Banks have facilitated the use of money since 14th century renaissance Italy. In the 21st century banks are essential to the use of money, except for the poorest three billion or so people in the world (i.e. nearly half of the population) who still lack sufficient means to hold money in a bank account. 10

Banks are at the heart of the financial system in developed countries, where bank accounts are the medium by which people make payments by checks, debit cards, credit cards, electronic bill payment services, and withdrawals of cash for cash payments. Thanks to digital computer technology and electronic communication at the speed of light, holders of bank accounts have immediate access to the money they hold in bank accounts.

Bank loans as money

A bank creates new money when it makes a loan. This will be examined more thoroughly below. Banks could limit their activities to holding money and serving as the payment mechanism for depositors. In such case, banks would charge for the service provided and would not pay interest on deposits.

Fractional reserve banking

Banks that lend out depositors’ money operate on the “fractional reserve” system. Such a bank keeps in reserve a relatively small fraction of funds that it holds for depositors. The premise of fractional reserve banking is that it is unlikely that all depositors would try to withdraw their funds at once; therefore, a bank needs only to keep a reserve for part of its deposits.

However, there have been occasions when all or most of a bank’s depositors did want to withdraw their funds at the same time, because they had become worried that the bank could go out of business without paying off its depositors.

Losses to depositors can be prevented by cautious lending policies of a bank, by diversification of lending to avoid excessive exposure to the risk of default by any one type of borrower, by deposit insurance, or a combination of all three.

Banks and inflation

The word “inflation” has come to mean the rate of increase in producer and consumer prices. However, price inflation is the consequence of state inflation of the money supply. Absent state inflation of the money supply there would be no price inflation. This is demonstrated in the economic history of the United States. Before WW II, except in times of war, the United States did not inflate the money supply and consequently there was no peacetime price inflation in America.

In his lectures, Andrew Galambos stated that American banks were lackeys of the state. That statement is true. The largest of American banks are the primary means of selling U.S. Treasury debt and are used by the Federal Reserve as instruments of inflating the nation’s money supply.

Noted economic journalist and historian Henry Hazlitt summarized as follows the use of banks by the federal state as an instrument of monetary inflation: “Our government sells its bonds or other IOUs to the banks. In payment, the banks create deposits on their books against which the government can draw. A bank in turn may sell its government IOUs to the Federal Reserve Bank, which pays for them either by creating a deposit credit or having more Federal Reserve notes printed and paying them out. This is how money is manufactured.” 11 By this process the U.S. creates a bank deposit to its credit without first creating value. If a private citizen or company could do this they could increase at will the money in their bank account.

Since the creation of the U.S. Federal Reserve System in 1913 inflation of the money supply by the Fed has eroded the value of the U.S. dollar by 96% in terms of the Consumer Price Index and by over 98% in relation to the market price of gold.

Unfortunately, in general usage by many economists and the general public alike the word “inflation” has come to be used as a description of persistent increases in prices and wages, leaving no distinct term for inflation of the money supply. Price and wage inflation is an effect, the consequence, of monetary inflation. 12

Economist John Maynard Keynes described monetary inflation as follows: “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” 13

Boom and bust: state-caused depressions

The great economist Ludwig von Mises explained that the unchecked issuance of paper money and extension of bank credit, whether by the state or by private banks was bound to stimulate repeated boom and bust cycles, referred to as the “trade cycle” or the “business cycle.” 14

For example, in America’s financial crisis of 2008, according to John D. Taylor, “starting in 2003-05, [the Federal Reserve] held interest rates too low for too long and thereby encouraged excessive risk-taking and the housing boom. It then overshot the needed increase in interest rates, which worsened the bust.” 15

Every depression in U.S. history is attributable in whole or at least significant part to the U.S. expansion of money and credit beyond what would ever have occurred in the absence of the state.  The accompanying note lists sources that explain the role of the U.S. federal state in causing economic depressions throughout the nation’s history. 16


There is good money and bad money. For purposes of this chapter, good money is a medium of exchange that is also a reliable store of value, while bad money is a medium of exchange that is not a reliable store of value. Andrew Galambos in his lectures said that good money has integrity, implying that the issuer never compromises the “store of value” principle by any act that would depreciate, dilute or debase the value of the monetary unit.

Historically, money issued by a political state has been bad money because the state continually debased and depreciated its money. In comparison, money issued by non-state issuers has often been good money.

Private issue money

There is a long history of privately issued money; that is money not issued by a political state. As mentioned above, in renaissance Italy starting in the 14th century, paper bills of exchange came into use. The bills of exchange were private issue money, backed by gold coins such as the Florentine gold florin among others, issued by a city-state. Bills of exchange were used to facilitate the transfer of money from customer to shipper, from lender to borrower and from borrower to lender. The bills of exchange were widely accepted by merchants as being as good as gold.

The Florentine florin gold coin, struck from 1252 to 1533, played a significant role in commerce. 17 Many Florentine banks were international super-companies with branches across Europe; consequently, the florin became the dominant trade coin of Western Europe for large scale transactions. In the fourteenth century, a hundred and fifty European states and local coin issuing authorities made their own copies of the florin. 18

Historically, the paper currency of countries was often handled entirely by private, commercial banks. Within a particular country many different banks or institutions might issue banknotes, which were accepted as a form of money.

The terms of a banknote typically allowed the note holder to exchange the note at the bank for something of value, usually gold and silver coins, called “specie.” Banknotes could be discounted to a bank other than the issuing bank; that is, the notes of one bank could be exchanged at another bank for specie at a discount from the stated amount of the banknote. The size of the discount was based upon the financial strength of the issuing bank, because only that bank was obligated to make payment in specie for its banknotes.

English and Scottish banks issued banknotes from 1694 to 1844. Scottish bank money issuance was almost totally unregulated. There were many competing banks issuing notes for £ 1 and above. 19

The notes of Scottish banks circulated throughout Scotland. All the banks participated in an effective note-exchange system, so that notes of one bank would be honored at other banks. Contemporaneously, private banks in England also issued notes. 20 In order to achieve a complete money monopoly, starting in 1844 the British state suppressed the freedom of private banks to issue notes in England, Scotland, and Ireland. 21

From 1787 until 1821 in England, privately owned companies issued copper and silver coin money. They did so because of a chronic and severe shortage of silver and copper coins issued by the British Royal Mint, which is the state-owned body that manufactures the coins of the United Kingdom. 22

In 1787, Birmingham was England’s second largest city and a center for manufacturing. Matthew Boulton (1728-1809) of Birmingham was a manufacturer of metal buttons and a business partner of Scottish engineer James Watt of steam engine fame. In order to pay his workers, Boulton decided to issue copper coins bearing the markings of his firm. By innovating  new technologies Boulton made coins of very high quality. Eventually Boulton made millions of coins for Britain and other countries, and even supplied the Royal Mint with up-to-date equipment.

Throughout much of Britain other English manufacturers followed the lead of Boulton and produced a multitude of copper coins, and even some silver coins, until the British Parliament suppressed private issuance of coinage in 1821. Nevertheless, privately issued copper and silver coins continued in circulation in England, Scotland and Wales for several decades thereafter. 23

In America, the U.S. Constitution did not create a federal monopoly on the issuance of money. Rather, it authorized Congress to coin money and prohibited the states from making “. . . anything but gold and silver Coin a Tender in Payment of Debts.” 24 Gold and silver coins were referred to as “specie.” Banknotes were often issued under terms, stated on the note itself, that the issuing bank would redeem the note (pay it off) in specie on demand.

Paper money that was not payable in specie was called “irredeemable,” and was held in low esteem in America because of experience with the irredeemable dollars issued by the Continental Congress to finance the War for Independence. This paper money, called Continentals after its issuer, became worthless.

Spanish silver dollars were in common and widespread use as money in America from colonial times up until 1857. 25

From 1840 to 1863 all banking business in the U.S. was done by private banks chartered under state laws that permitted anyone to engage in the business of banking, upon compliance with specified conditions. During this period there were as many as 1,500 state-chartered private banks issuing banknotes in the United States. At the time there was no national currency of the United States. Private bank issuance of paper money in the U.S. from 1840 to 1863 often ended with the money becoming worthless if it was not backed by a promise to redeem the banknotes in specie. 26 However, except for a few periods (1814–15, 1836–42, and 1857), Americans were able to redeem paper money for specie from the time of the ratification of the Constitution in 1787 to the onset of the Civil War. 27

After the discovery of gold in California in 1848, private issues of gold coins and ingots were the dominant median of exchange in the state. When the U.S. issued irredeemable paper currency during the Civil War, it was little used by the people of California who preferred to use gold. 28


Before paper money came into use and the money of a country was metallic coins, rulers established a monopoly of the minting of coins. The monopoly status of the ruler’s money issuance was signified by the sovereign’s image that was stamped upon coins. In keeping with the English reverence for tradition, in the early 21st century there were still in production and use in Britain, and in the former British colonies of Australia, Canada and New Zealand coins bearing the image of British Queen Elizabeth II.

Wherever a strong, centralized state monopolized the issuance of money, eventually the rulers would steal from the money of the people by seigniorage, debasement, and inflation.

Murray Rothbard explained seigniorage as follows. “. . .[T]he mint melted and recoined all the coins of the realm, giving the subjects the same number of ‘pounds’ or ‘marks,’ but of a lighter weight. The leftover ounces of gold or silver were pocketed by the King and used to pay his expenses . . . The profits of [such] debasement were . . . claimed as a ‘seigniorage’ by the rulers.” 29

Debasement was the continual reduction of precious metal in successive issuance of coins by a monopoly issuer of coin money. Debasement was accomplished by mixing base metals such as copper or tin with the precious metals—gold or silver—used to mint state-issued coins. This was inflationary because more and more coins had to be issued as the public realized that the coins had less of the desirable precious metal, so that sellers of goods and services demanded a greater weight in debased coins than they had before debasement started.

With the advent of paper money, rulers used their money monopoly to issue paper money and to require that the state’s paper money be accepted as the only money of the realm. That requirement is the source of the term “fiat money,” in which the word “fiat” comes from the medieval Latin word meaning “let it be done,” which was synonymous with the decree or commandment of a ruler. 30

The fiat money status of U.S. currency, the Federal Reserve Note (dollar bills) is signified by the legend “legal tender for all debts public and private” that is printed on all Federal Reserve Notes. The U.S. Legal Tender Act of 1862, authorized issuance of paper money by the U.S. to finance the Civil War without raising taxes. The paper money depreciated in terms of gold and became the subject of controversy, particularly because debts contracted earlier could be paid in this cheaper currency. The U.S. Supreme Court initially held the Legal Tender Act to be unconstitutional, but soon reversed itself and upheld the legality of the Act. 31

The creation and mandatory use of state-issued fiat money freed political states from the restraints of redeeming their monies in gold, and thus enabled governments to inflate the money supply at will as a means of augmenting the state’s revenues from taxation.

State suppression of privately issued money

Once a strong, centralized, political state possesses a well-entrenched money monopoly, it will suppress competition to its money. Historical examples are provided in this chapter. In 2009 there was introduced a non-state money payment system called Bitcoin and an accompanying form of digital, electric money. Agencies of the U.S. federal state asserted jurisdiction to control operation of Bitcoin, and in 2013 seized assets of Mt. Gox, a bitcoin exchange based in Tokyo, Japan. 32

A man named Bernard von Nothaus was prosecuted by the U.S. Dept. of Justice for producing and putting into small-scale circulation coins made of silver that had a resemblance to the U.S. silver dollars that circulated in the United States until the mid-1960s. In 2011 Von Nothaus was convicted of counterfeiting and conspiracy and as of 2012 faced a federal sentence of up to thirty years in prison and a fine of $750,000. 33

The international gold standard

Between 1880 and 1914 a number of leading industrial countries, including the United States, France, Germany, Great Britain and Japan were on what has been called “the gold standard,” under which they committed to a policy of exchanging their paper currency for gold at a stated rate of exchange. The era of the gold standard ended with World War I when Germany, Britain, France and the U.S. all went off the gold standard in order to inflate their paper currencies as a means of financing war expenditures that far exceeded tax collections. The U.S., the U.K. and France went back on the gold standard after WW I, but abandoned it permanently during the Great Depression of the 1930s.

The gold standard kept states honest in their dealing with money by preventing inflation of paper money. The gold standard did not protect the integrity of state-issued money because countries could and did go off the gold standard at will when they decided to implement inflationist policies.

The gold standard was abandoned not because it failed in its purpose, but because it was successful in preventing monetary inflation, at a time when an inflationist ideology was becoming prominent in the monetary policies of states around the world.

A brief history of state money fiascos

Volumes of history have been written on debasements and inflations. We present here only a brief chronicle limited to the place, time, and extent of a few of the more notable examples and their consequences.

Rome: The silver Denarius was in daily use as the principal money of the Roman Republic and the Roman Empire (509 B.C.E. to 476 C.E.). During a fifty-year interval in the third century C.E. the rulers of Rome reduced the silver content of the Denarius to one five-thousandth of its original level. 34 This caused tremendous hyperinflation, during which the state blamed merchants for high prices resulting from debasement of the Denarius. In 301 C.E. the Emperor Diocletian issued an edict fixing the prices of thousands of items in an effort to stop rising prices. The edict imposed the death penalty for selling or buying above the legally fixed price. To avoid losses merchants stopped offering goods for sale and farmers stopped raising food for sale, limiting their production to just what they needed for themselves. To combat the shortages of everything subject to price controls, the edict of Diocletian imposed punishment by death for withholding farm products and other goods from the market. The edict caused so much havoc that it was repealed, but not before a great deal of blood was shed both in civil strife and in enforcement of the edict.

After Diocletian, the rulers of Rome continued to debase the coinage of the empire and tried to control the consequent rise of prices. The ruin of the economy of Rome by monetary inflation and price controls was so great that historians report that by the time of the fall of Rome to the barbarians in the 5th century C.E., all classes of Roman people were at least resigned to barbarian domination if not actually glad to have the Empire destroyed. 35

China: In China under Mongol emperors (1190-1448 C.E.), paper notes issued for the nominal amount of one thousand in cash eventually traded for three. Then the nation switched to silver, a system that lasted into the twentieth century. 36

England: From 1542 to 1551 King Henry VIII and his son King Edward VI, reduced the silver content of England’s standard silver coin by two-thirds. 37 This drove out of circulation silver coins issued before the debasement, giving rise to a maxim known as “Gresham’s Law” after Sir Thomas Gresham, advisor to King Henry’s daughter, Queen Elizabeth I, that bad money drives good money out of circulation.  The effects of the debasement on trade and commerce were  sufficiently adverse that under Queen Elizabeth I 38  the inferior coins were were gradually withdrawn from circulation.

France: In 1716 John Law of Scotland persuaded the rulers of France that issuance of paper money could pay off massive debts of the monarchy and restore prosperity in France. Paper money issued in France starting in 1716 became worthless by 1720. The money hyperinflation of this time caused financial ruin to all but those clever enough to use the paper money to buy real assets. People began to shun the paper money and resort to the gold and silver coins (specie) that they trusted. The regents then ruling France issued an edict making it illegal to use specie. Consequently all specie disappeared from circulation and with no money of any value in circulation the commerce of France descended into chaos and economic depression with people going hungry even amidst the country’s abundant farmlands. 39

Paper money issued in France during the French Revolution that started in 1789 became worthless by 1796. This paper money inflation impoverished unskilled laborers and older people living on their savings. Food shortages developed in consequence of the inflation, which made farmers reluctant to sell their production for rapidly depreciating paper money. To combat inflation and food shortages the National Assembly enacted wage and price controls known as the Law of the Maximum or “The Maximum” imposing imprisonment or death for price control violation. Farmers and merchants charged with violation of the Maximum were sent to the guillotine during the Reign of Terror of 1793-1794. 40 Despite the Law of the Maximum, between May 1795 and August 1796 inflation accelerated to the rate of 304% per month, with prices doubling every fifteen days. 41

From 1913 to 1958 the French monetary unit, the franc, lost 99% of its exchange value against the U.S. dollar which itself had been devalued 41% in terms of gold. 42

Germany: In 1914, immediately before World War I, the national money of Germany, the mark, had an exchange value of 4.2 marks to the U.S. dollar. Following Germany’s defeat in WW I violent political revolutions erupted that were suppressed with military force. Out of this turmoil there emerged in 1919 something new for Germany, a political democracy known as the Weimar Republic. In 1920 the republic’s central bank embarked on a policy of printing ever-increasing amounts of paper money based on the premise that this would stimulate the economy and fend off high unemployment. The unrestrained money printing caused a hyperinflation that climaxed in 1923 when the Mark to Dollar exchange ratio was 4,200,000,000,000 (4.2 trillion) to one and people stopped using the worthless Mark at this culmination of the most sensational, but not the largest, monetary hyper-inflation in world history.  A man who lived through the years 1920-1923 in Germany described some of the effects of the hyperinflation as follows.

Anyone who had savings in a bank or bonds saw their value . . . obliterated . . . [A] salary of sixty-five thousand marks brought home the previous Friday was no longer sufficient to buy a packet of cigarettes on Tuesday . . .” 43

With the mark worthless, barter became a usual form of exchange. According to author Andrew Fergusson “a cinema seat cost a lump of coal. With a bottle of paraffin one might buy a shirt; with that shirt, the potatoes needed by one’s family.” 44

The hyperinflation bankrupted the middle class, caused starvation among older people living on fixed pensions that became worthless, and enriched debtors at the expense of creditors.

The hyper-inflation together with the Great Depression of the 1930s discredited democracy in Germany and predisposed many of the German people to look for a strong man to lead their country. German dictator Adolf Hitler seized this opportunity to take power over Germany in 1933. 45

Hyper-inflation returned to Germany in 1945 after military defeat in WW II. With the German mark again worthless in the immediate postwar years of 1945-1948, people were going hungry, and cigarettes, chocolate and nylon stockings became the preferred media of exchange.

Italy: The monetary unit of Italy, the lira, went from an exchange rate of five to the U.S. dollar in 1913 to 900 to the dollar in 1947, even while over the same time period the dollar lost 55% of its purchasing power in terms of the U.S. Consumer Price Index. 46

Argentina: From 1967 to 1991 the cumulative rate of inflation was 2.1 billion percent (2,100,000,000%). In 1992 the Argentine state tried to eschew printing-press inflation by pegging the Argentine peso to the U.S. dollar. This required drastic cuts in state spending and government employment. Hyper-inflation was eliminated only to be succeeded by hyper-unemployment and social unrest. The state’s pension system went bankrupt at the climax of the inflation of 1967-1991. Starting in 1994 the system was changed to one of individual retirement accounts (IRAs) funded by workers’ payroll deductions. In 2001 the state took a large share out of these IRAs to pay international debts, replacing the confiscated assets with Argentine state bonds, which themselves became virtually worthless by 2008.

After eight years, 1991-1999, on a fixed exchange rate of one to one with the U.S. dollar, inflation re-emerged and quickly became a hyper-inflation climaxing with a 26,000% increase in prices in just thirteen months in 1999-2000. 47

At the peak of the Argentine hyperinflation in 1999-2000 the state’s fiat money lost purchasing power so rapidly that people rushed to spend their wage and salary payments on something of real value, such as food, as soon as they were paid. Doing business in the Argentina peso became impossible so every day business people changed their pesos into U.S. dollars.

By 2001 the state’s credit was exhausted. To continue its spending, the state expropriated three-fourths of the bank accounts and individual retirement savings of Argentines. This was done in a most deceitful way. In the early 1990s the state encouraged people to hold U.S. dollars in bank accounts and in their individual retirement savings, apparently to stem the flight of capital out of the country. Then in 2001-2002 the state forced these U.S. dollar assets to be converted into a new Argentine peso worth only one-fourth as much as the dollar assets it replaced.

By 2002 a quarter of the Argentine population was unemployed; and over half the population had incomes below the official poverty line. Rioters were looting supermarkets. People would fight over carcasses of cows when cattle-trucks overturned. Cash disappeared since only limited bank withdrawals were allowed. Barter was rampant in private transactions. The entire banking system was bankrupt.

Long ago, those Argentines who could do so moved out of the country as much of their assets as possible. 48

High inflation and increasing poverty returned to Argentina in the second decade of the 21st century. 49

Zimbabwe: In the nation of Zimbabwe the soil is so fertile and the climate so conducive to agriculture that the country was considered the breadbasket of Africa before its economy was ruined by the regime of dictator Robert Mugabe starting with his ascendance to power in 1980.  Over a period of years climaxing in 2002 the nation’s best farms were confiscated, then given to Mugabe cronies who expelled native farm employees and then abandoned the farms. Mugabe’s regime ran constant budget deficits despite relentless inflation of the money supply. In 2007-2008 Zimbabwe experienced the second highest inflation rate in a survey covering over 50 hyperinflations of the 20th century and a few earlier examples. 50 During the years following confiscation of farms, food production plummeted, there was widespread hunger, and people tried to escape across the borders into neighboring countries. 

The United States of America: To finance the American War for Independence (1776-1781) the Continental Congress issued paper money that became worthless by the end of the war. During the Civil War, the Confederacy of secessionist states issued paper money that became worthless by the end of the war.

From colonial times (before 1776) up to 1933, gold was the premier money in America. In 1933 the U.S. confiscated all gold owned by its citizens. According to historian and anthropologist Jack Weatherford, “. . . people who . . .  surrendered their gold . . . received compensation of $20.67 per ounce in paper notes . . . [O]n January 31, 1934 the federal government devalued the paper money from $20.67 to $35 for each ounce of gold. [Before the change, one dollar would buy nearly five ounces of gold. After the change one dollar could buy not quite three ounces of gold.] Thus, everyone who had complied with the law and exchanged gold for paper lost 41 percent of the gold’s value.” 51

From 1933 to 2013 the U.S. dollar lost 96% of its purchasing power in terms of the federal Consumer Price index, and over 98% of its purchasing power relative to gold. 52

The global age of inflation: In the 20th century, from the beginning of WW I, for the first time in the history of the world, practically every nation-state eliminated any asset backing for its paper money. Hyper-inflations occurred during the 20th century in more than fifty countries. 53

In 1944, near the end of WW II, representatives of 44 countries meeting in the United States at Bretton Woods, New Hampshire agreed to establish a new international money system that has become known as the Bretton Woods System or just “Bretton Woods.” The participating nations sought to create economic order after the chaos of two world wars. Under Bretton Woods, the U.S. dollar was the unique currency that had to be convertible into gold, but only at the demand of central banks of other countries. All the other currencies were to be convertible into the dollar. 54

From the end of WW II onward, spending of the U.S. on its military and on social welfare programs contributed importantly to perennial budget deficits and a constantly rising public debt. 55 Therefore, the U.S. could not keep its promise to redeem U.S. dollars in gold at the request of foreign central banks. In 1971 the U.S. abrogated responsibility to redeem dollars for gold. With that final abandonment of a gold standard, nations around the world engaged in money devaluation directly and also indirectly through high inflation.

Coercive enforcement of state money monopolies

People try to protect themselves from money debasement and inflation. One way is to avoid the state’s money and use other money, usually gold and silver. If the use of gold and silver is outlawed, people will raise prices for goods and services in order to offset the loss of purchasing power of the state’s monetary unit. The response of states has been to outlaw the use of gold and silver and to outlaw price and wage increases. Punishment by imprisonment and even death has been imposed by states for refusal to use their money and for violation of wage and price controls, for example in ancient Rome, in China under the Mongol emperors of the 14th century, in France during the French Revolution, and in a significant number of other countries. 56


According to financial journalist and historian Philip Coggan, writing in the year 2012, “In the last forty years, the world has been more successful at creating claims on wealth, than it has in creating wealth itself. The economy has grown, but asset prices have risen faster, and debts have risen faster still. Debtors, from speculative homebuyers to leading governments have made promises to pay that they are unlikely to meet in full. Creditors who are counting on those debts to be repaid will be disappointed. . .  The debts may be repaid in inflated money, or devalued currency . . . or they may result in outright default. Breaking those paper promises will result in economic turmoil, as both debtors and creditors suffer.” 57

The United States of America has by far the largest debt of any nation in the world and for that matter in the history of the world. The United States, as a political entity, is headed towards the largest sovereign default in history.

Alarms about U.S. finances have been sounding at least since 1960. In that year British historian and author C. Northcote Parkinson propounded his “second law,” namely that “expenditures rise to meet income.” Concerning state taxation and spending, he wrote: “Government expenditure rises . . . toward a maximum that has never been defined; toward a ceiling that does not exist. It rises, therefore, unchecked, towards levels which past experience has shown to be disastrous. In several modern countries the symptoms of approaching catastrophe are already obvious; and in none more so than in Britain. But this is not a matter in which Americans can afford to feel complacent. They are moving in the same direction even if they have not gone so far. They too have failed to fix a limit beyond which taxation must not go.” 58

In 2004 the International Monetary Fund (IMF) issued a report to the U.S. warning that to fund Social Security and Medicare adequately “. . . would require an immediate and permanent 60 percent hike in the federal income tax yield, or a 50 percent cut in Social Security and Medicare benefits . . . with the burden on future generations increasing if further corrective measures are delayed.59 [Emphasis added]

Economics professor Lawrence J. Kotlikoff together with co-author Scott Burns has written a book entitled The Clash of Generations (2012) in which the first chapter is entitled “The United States is Bankrupt.” 60 Kotlikoff and Burns state: “Thanks to six decades of incredibly profligate and irresponsible . . . policy . . . the United States is bankrupt. . . You won’t learn this by looking at [the] nation’s official debt [called Public Debt of the U.S.] . . .  Unfortunately, the $11 trillion official debt is but a small fraction of our nation’s true  $211 trillion indebtedness . . . [which is] the value in the present (the present value) of all [U.S.] future spending obligations . . . net of all future tax receipts [or]. . . twenty-two times the official debt . . .” 61

In America, the massive buildup of debt at the federal and state levels could have dire consequences similar to those in other countries whose misfortunes are described above. Such consequences are not inevitable, but they will be unavoidable unless America’s political and intellectual elite experience the political equivalent of an epiphany such as occurred in Germany in 1948 when Ludwig Erhard and Konrad Adenauer took the decisive steps towards economic freedom that launched West Germany’s postwar economic miracle. 62

In the U.S., unless corrective measures are taken to turn away from constant deficits, Americans could suffer all of the following consequences:

  • rapidly escalating producer and consumer prices
  • wage and price controls and consequent shortages of goods, including food
  • crushing taxes on people at every level of income
  • bankruptcy of the banking system
  • breakdown of the system of payments which are bank-centered
  • extremely high unemployment,
  • Widespread bankruptcies among the fifty states
  • Federal repudiation of debts of the United States to foreign and domestic creditors, including social welfare obligations, either by direct renunciation of liability to pay, or indirectly by inflation that extinguishes the real worth of the debt liabilities and bankrupts the people of America.


Conditions for existence of private issue money

When commerce has come to a virtual standstill because the only legally permitted money is worthless, human ingenuity will produce monies that keep their value, that serve as a reliable medium of exchange, that make saving meaningful, not an exercise in futility because money is losing value constantly.

What form could private money take?

The form taken by good money of the future will be determined by spontaneous development of humanity, as have so many of the most important human social inventions, of which money is only one. Historically, monetary gold and silver coins and paper money backed by gold and silver were in widespread use until political states suppressed their use in order to enforce the state’s monopoly issuance of state fiat money.

Transition to money of the future

A few things seem certain or at least likely, about the future of money.

  • Eventually most of humanity will realize that a monopoly of money by a politically coercive state produces bad money which is used to steal from the people.
  • People will reject bad money and choose good money when they are free to do so.
  • Competitive private issuance of money will have a renaissance.
  • When and where there is competitive issuance of money, good money will prevail and bad money will go out of use and out of circulation.
  • Competitive issuers of money will succeed in having people use their money only if they back the money with valuable assets. Good money of the future could have ample backing of valuable assets.
  • Digital money seems likely to make it easier than it ever was in the past to deal with money, so easy that people of modest means will be using digital money as much as the more affluent. As of the year 2012 that was already happening for poor people in India and Kenya, for example, where digital, electronic transfers of money were enabling rapid, low cost banking to eliminate most of the risks and costs of dealing with paper money. 63
  • Digital technology will not turn bad money into good money. The U.S. dollar, the Euro, and the Japanese Yen, for example, are all fiat monies. Just because they can be used digitally does not make them good monies. Electronic digital technology could actually speed up the state’s destruction of its money, because the amount of money issued by a state can be multiplied much more rapidly by digital and electronic means than by the printing press, paper and ink.

NOTE: In the remainder of this chapter, the market values of various assets are given as of the year 2014, unless otherwise indicated.

Asset backing for money

It is foreseeable that future non-state issuers of money could provide gold-backed and silver-backed paper and digital, electronic money. However, as of 2014, the amount of gold and silver in the world was far short of the amount that would be needed to serve as backing for all the world’s money. There was in existence in 2014 about US $50 trillion of money, defined as currency and demand bank deposits, compared to about US $6 trillion of gold, valuing gold at US $1,340 per troy ounce more or less, as of early in 2014. The total amount of silver in the world is worth less than one-tenth the value of the total world supply of gold. Furthermore, for the time being, much of the world’s gold is in the possession of political states and thus not available for backing privately issued money.

Private money issuers need not be limited to using precious metals as backing for their monies. Humanity possesses total non-monetary but valuable assets that are liquid or could be made liquid through the securities markets. Those assets include but are not limited to global equity securities, global debt securities of non-financial corporations, and proven reserves of petroleum capable of being owned by investment funds whose shares would be liquid assets by virtue of being marketable securities themselves. These non-monetary assets are greater in market value than the $50 trillion global supply of money. Such assets had an aggregate total market value of about $58 trillion early in the second decade of the 21st century. 64 There are other valuable global commodities that could be held by investment funds whose shares would be marketable securities, such as coal, natural gas and iron ore to name just three.

Some might think it questionable to use volatile, marketable securities as backing for money intended to be good money. To this question there are two answers: first, asset backing is something no fiat money has, so asset backing would be an improvement in money. Second, at least in the U.S., the interest on cash (in short-term bank deposits and the safest short-term debt obligations) has provided a lower long-term rate of return than the returns from holding precious metals and equity securities.

Historical returns on cash compared to gold and marketable equity securities

In the 80-year period from 1933 to 2013, since the United States confiscated gold owned by Americans, the market value of gold increased an average of 5.2% per year. 65 That was significantly more than the 3.6% average annual pre-tax returns on cash, defined as the shortest-term U.S. Treasury securities. 66

The rate of return on cash, in the form of interest, has, at least in America, been less than the increase in the Consumer Price Index, taking into account the tax on interest income. In comparison, the Dow Jones Industrial average has returned an average of about 9% per year including dividends since its inception in 1896. 67

The S&P 500 index is a broad gauge of U.S. stock market returns as its component companies represent approximately 75% of total American stock market value. The S&P 500 long-term rate of increase has been similar to that of the Dow in exceeding the returns on cash by a wide margin. 68

Leading business corporations, the kind whose performance dominates the stock market averages, have proven more stable than the nation-states in which they are domiciled and a far better long-term store of value than cash in the form of state fiat money. This assertion will be supported fully in a subsequent chapter about corporations. However, at this point we confine its examples to three companies in Germany and three in the United States.

In Germany, Siemens AG, Bayer AG, and Daimler-Benz AG are in the 21st century world leaders, respectively, in electronics and electrical engineering (Siemens), chemicals (Bayer), and automobiles (Daimler-Benz). 69 These companies trace their origins, respectively, back to 1847 for Siemens, 1863 for Bayer, and 1886 for Daimler-Benz. All three, and other German companies, survived the turmoil of German defeat in two World Wars, the hyper-inflations that followed each war, the Great Depression of the 1930s, the brutal, totalitarian rule of Germany by the Nazi party of Adolf Hitler and his cohorts, and the division of Germany into two separate countries from 1945 to 1989, one under a communist dictatorship and the other as a political democracy.

In the United States, DuPont, 70 Johnson & Johnson, and Cigna Corporation are in the 21st century world leaders, respectively, in chemicals, health care, and insurance. The history of these companies began, respectively, in 1802 for DuPont, 1886 for Johnson & Johnson, and 1792 for Cigna.

An equity or bond mutual fund is a form of money to the extent that it has liquidity—that is the capacity to be converted readily to cash. Mutual fund shares have, in the past, been readily convertible into state issued fiat money. Suppose that a private-issue money was like a mutual fund, but with one important difference.  Instead of redemption being via cash payment, redemption would be accomplished by issuance of shares of a different fund representing ownership in equity, debt and commodity securities.


The development of money by humans led eventually to the highest productivity and consequently the highest average standard of living in world history, as represented by the economically advanced societies such as the political democracies in the United States, Western Europe, the English speaking countries of what was once the British Empire and those parts of Asia where economic freedom has been increasing since the end of WW II.

Stable money is a necessity for maintenance and improvement of productivity and the average standard of living. The stability of money under political regimes depends on the state refraining from the historical practice of rulers in cheapening money aggressively as a way of taking more money from the people than could be extracted by taxes alone. People—who produce all the goods and services that the state taxes—are able to produce adequately if the rate of inflation stays relatively low. However, once inflation accelerates to the point where it places great difficulty in the way of work and commerce, productivity and the standard of living will decline as people waste energy and resources trying to avoid or at least mitigate the impact of monetary inflation.

Humanity will never be truly free as long as political states assert a monopoly over the supply of money and over the use of banking as a means of saving, storing and spending money.

Political states guard jealously their money monopoly by requiring its use, and making use of other monies impractical or even treating as a crime the issuance or use of competing monies.

To people living during the early part of the 21st century it may seem that state control of money is an inevitable and permanent part of the human condition. That is a short-sighted view that fails to recognize that political states are constantly in the process of self-destruction. That is why Andrew Galambos said that the phrase “the decline and fall of the Roman Empire” would be equally valid if one substituted for the Roman Empire the name of any other human civilization that ever existed, including those that now exist.

When a political state destroys the purchasing power of its fiat money, people turn to other monies that still have purchasing power. The 20th and 21st centuries have numerous examples of the U.S. dollar, a relatively strong fiat currency, being adopted as the de facto money in countries around the world. However, the U.S. dollar may have a limited future as viable money because the U.S. appears to be in process of destroying the purchasing power of its fiat money.

As economist and former chief of the Federal Reserve System Ben Bernanke pointed out “. . . U.S. dollars have value only to the extent that they are strictly limited in supply.” 71 Allan H. Meltzer, a leading expert on the Federal Reserve, commented in May 2014, “Never in history has a country that financed big budget deficits with large amounts of central-bank money avoided inflation. Yet the U.S. has been printing money—and in a reckless fashion—for years.” 72

It is foreseeable that in every political democracy the ideological pressure for perpetual inflation will lead to destruction of the fiat monies of such nations. Not until that happens will the political rulers of democracies give up, however unwillingly, their monopoly of money. As this chapter posits, if and when political money monopolies end, the people of the world already have the knowledge to establish dependable, asset-backed private-issue monies. That eventuality would be a monumental step forward in the ascent of mankind from war, slavery, and poverty to peace, freedom, and prosperity.


  1. Quoted from Friedrich Hayek, “Toward A Free Market Monetary System,” in James A. Dorn and Anna J. Schwartz, eds., The Search for Stable Money (1987), page 383
  2. The sentence to which this note is appended is an observation of human progress expressed by F.A. Hayek (1899-1992) in his book The Fatal Conceit: The Errors of Socialism (1988), pages 9-10
  3. Historically, the global supply of gold has increased at a rate of only 1.5% per year.
  4. Quotation from “Remarks by Governor Ben S. Bernanke Before the National Economists Club, Washington, D.C., November 21, 2002,”
  5. Weatherford, Jack, The History of Money: From Sandstone to Cyberspace (1997), page 247.
  6. The Invention of Paper, Robert C. Williams Paper Museum, Georgia Institute of Technology (Georgia Tech) Wikipedia, List of Chinese Inventions, and Weatherford, Jack, The History of Money: From Sandstone to Cyberspace (1997), pages 125-126
  7. Quoted from Bernstein, Peter L., Against the Gods: The Remarkable Story of Risk (1996), pages 93-94
  8. Weatherford, Jack, The History of Money: From Sandstone to Cyberspace (1997), pages 74-76
  9. See Wolman, David, The End of Money (2012), chapter 7
  10. Even some of those poor people are beginning to have access to banks, as explained above.
  11. Quotation from Hazlitt, Henry What You Should Know About Inflation (1964) reproduced at Mises Daily, March 11, 2008
  12. For a clear and succinct explanation of the misuse of the word inflation by the eminent economist Ludwig von Mises see “Defining Inflation,” by Frank Shostak, Mises Daily, March 06, 2002,
  13. Quoted from pages 235-236 of Keynes’ book The Economic Consequences of the Peace (1919), reproduced at The Every Day Economist,
  14. Mises, Ludwig von, Human Action: A Treatise on Economics (3rd rev. ed. 1966), Chapter XX entitled Interest, Credit Expansion, and the Trade Cycle
  15. Quoted from “The Dangers of an Interventionist Fed,” by John D. Taylor, The Wall Street Journal, Op-Ed, March 29, 2012, John D. Taylor is a professor of economics at Stanford University.
  16. In most of the works listed below the subject of state-induced depression runs throughout the entire source, so no specific page or chapter citations is given except where it appears that specific page citations would be helpful in directing attention to a short part of a much longer text. See Anderson, Benjamin M., Economics and the Public Welfare: A Financial and Economic History of the United States, 1914-1946 (2nd ed. 1979); Hazlitt, Henry, The Inflation Crisis and How to Stop It (1964); Melloan, George, The Great Money Binge: Spending Our Way to Socialism (2009); Von Mises, Ludwig, Human Action: A Treatise on Economics (3rd Rev. Ed. 1966), Chapter XX on “Interest, Credit Expansion, and the Trade Cycle; Rothbard, Murray, N., What Has Government Done to Our Money (1964), pages 19-20, 36-38; Sennholz, Hans F., Age of Inflation (1979), pages 129-133; Sennholz, Hans F., The Great Depression: Will We Repeat It? (1988); Samuelson Robert J., The Great Inflation and Its Aftermath: The Past and Future of American Affluence (2008); Stockman, David A., The Great Deformation: The Corruption of Capitalism in America (2013); for Mr. Stockman’s summation of his book see “State-Wrecked: The Corruption of Capitalism in America,” by David A., Op-Ed, The New York Times, March 30, 2013,
  17. The florin contained 3.5 grams of gold, equivalent to a little over 0.11 troy ounces in the troy system of mass measurement used for precious metals.
  18. Bernstein, Peter L., Against the Gods: The Remarkable Story of Risk (1996), pages 93-94; Weatherford, Jack, The History of Money: (1997), pages 74-76; Wikipedia, Florin (Italian Coin),
  19. The £ symbol stands for the British pound sterling, which throughout the years 1694-1844 had a weight in silver of 350 grams, equal to 11 troy ounces or twelve avoirdupois ounces, which as of the year 2014 was worth 0 to 0 in U.S. dollars.
  20. White, Laurence H., Free Banking in Britain (2nd ed. 1995), pages 22-32
  21.   White, Free Banking in Britain cited above, at page 85.
  22. The reason for the shortages of silver and copper coins is beyond the scope of this chapter; suffice it to say here that the shortage was due to political acts of the British state concerning silver and copper. The story is told in Selgin, George, Good Money (2008), Chapter I, “Britain’s Big Problem.”
  23. See Selgin, George, Good Money: Birmingham Button Makers, the Royal Mint, and the Beginnings of Modern Coinage: Private Enterprise and Popular Coinage (2008)
  24. U. S. Constitution, Article I, sections 8 and 10.
  25. Wikipedia, Spanish Dollar,
  26. Hazlitt, Henry, The Inflation Crisis and How to Resolve It (1978), pages 182-183, citing Groseclose, Elgin, Money and Man (1934), pages 180-193); and Rothbard, Murray N., What Has Government Done to Our Money? (1964), page 45.
  27. See Specie payment, Encyclopedia Britannica,
  28. Hazlitt, The Inflation Crisis and How to Resolve It (1978), p. 189; and Rothbard, Murray N., What Has Government Done to Our Money? (1964), pages 45-46.
  29. Quoted from Rothbard, Murray N. What Has Government Done to Our Money? (1961), page 32. The etymology of the word “seigneiroage” is from the 16th century French word for a feudal lord and signifies the power of a ruler to confiscate money in the manner described by Rothbard.
  30. See “Fiat” in the Online Etymology Dictionary,
  31. See Wikipedia, The Legal Tender Cases,
  32. See Wikipedia, Bitcoin, and
  33. See Wolman, David, The End of Money (2012), chapter six.
  34. Schuettinger, Robert and Eamonn Butler, Forty Centuries of Wage and Price Controls (1979), p. 21
  35. See Schuettinger, Robert and Eamonn Butler, Forty Centuries of Wage and Price Controls: How Not to Fight Inflation (Heritage Foundation 1979), Chapter 2, pages 19-27.
  36. Attributed to Bootle, Roger, The Death of Inflation (1996), cited by Coggan Philip, Paper Promises (2012), p. 33, and note 20, p. 278
  37.   Wikipedia, the Great Debasement,
  38. Queen of England 1558-1603
  39. Mackay, Charles, Extraordinary Popular Delusions and the Madness of Crowds (2nd ed. 1852), Chapter 1, which is still the best account of the John Law paper money fiasco
  40. See White, Andrew Dickson, Fiat Money Inflation in France (1912, reprinted in 1958 by The Foundation for Economic Education. The full text is reproduced online at
  41. World Hyperinflations by Steve H. Hanke and Nicholas Krus, Institute for Applied Economics, Global Health, and the Study of Business Enterprise, The Johns Hopkins University, August 15, 2012, page 12, 
  42. See Coggan, Philip, Paper Promises: Debt, Money, and the New World Order (2012), page 105.
  43. Haffner, Sebastian, Defying Hitler (2000), pages 54-58.
  44. Fergusson, Andrew, When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany, p. 139.
  45. Much of the discussion of the Post-WW I German hyper-inflation is based on the history When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany, (1975, re-published in 2010) by Andrew Fergusson, cited herein as Fergusson, When Money Dies
  46. See Coggan, Philip “Paper Promises: Debt, Money, and the New World Order (2012), page 105 and U.S. Dept. of Labor, Bureau of Labor Statistics, CPI Calculator,
  47. Rojas, Maurcio, The Sorrows of Carmencita: Argentina’s Crisis in Historical Perspective (English language edition 2002), originally published in Spanish under the title Historia de la Crisis Argentina
  48. The foregoing is based primarily on Rojas, Mauricio, Historia de la Crisis Argentina (2nd ed. 2004), published in English under the title The Sorrows of Carmencita: Argentina’s Crisis in a Historical Perspective (2002). See also Acemoglu, Daron and James A. Robinson, Why Nations Fail: The Origins of Power, Prosperity and Poverty (2012), pages 383-384; and Wikipedia, Argentine Debt Restructuring,; “A Tear for Argentina’s Pension Funds,” by P. S. Srinivas, The Hindu Business Line, July 4, 2012,
  49. See “The ‘Walking Dead’: Dealing with the economic collapse in Argentina,” by Veronique de Miguel
  50. ] World Hyperinflations by Steve H. Hanke and Nicholas Krus, Institute for Applied Economics, Global Health, and the Study of Business Enterprise, The Johns Hopkins University, August 15, 2012, page 12, 
  51. Quoted from Weatherford, Jack, The History of Money (1997), pages 181-182.
  52. U.S. Dept. of Labor, Bureau of Labor Statistics, CPI Calculator,
  53. World Hyperinflations by Steve H. Hanke and Nicholas Krus, Institute for Applied Economics, Global Health, and the Study of Business Enterprise, The Johns Hopkins University, August 15, 2012, page 12, 
  54. See Wikipedia, Bretton Woods System,
  55. Federal deficits in 1998-2001 were reported as surpluses due to misleading accounting by the U.S. The national debt actually went up every year from 1998 through 2001. See Answers, How much surplus did the US have when Clinton left office?
  56. See Schuettinger, Robert and Eamonn Butler, Forty Centuries of Wage and Price Controls: How Not to Fight Inflation (1979); Weatherford, Jack, The History of Money (1997), p. 127; and “Hyperinflation in China,” Gold News: Bullion Vault, July 21, 2008,
  57. Quoted from Coggan, Peter, Paper Promises: Debt, Money, and the New World Order (2012), pages 267-268. Mr. Coggan is The Buttonwood columnist of The Economist and previously worked for the Financial Times for twenty years.
  58. Quoted from Parkinson, C. Northcote, The Law and the Profits (1960), pages 244-245. Parkinson’s famous first law, that “work expands to fill the time available for its completion,” appeared in his book Parkinson’s Law (1957).
  59. “U.S. Fiscal Policies and Priorities for Long-Run Sustainability,” Martin Mühleisen and Christopher Towe, Editors, International Monetary Fund (2004),
  60. Lawrence J. Kotlikoff is a professor of economics at Boston University; Scott Burns is a financial journalist and financial advisor.
  61. Quoted from Kotlikoff and Burns, The Clash of Generations, page 3
  62. At the time West Germany, though a democracy, was still occupied by the U.S., British and French military. East Germany was under East German communist rule and the ultimate control of the communist Soviet Union dominated by Russia.
  63. See Wolman, David, The End of Money (2012), chapter 7
  64. In trillions of U.S. dollars as of the first quarter of 2014, the trillion total included trillion in equities, .9 trillion in debt securities of non-financial corporations, .0 trillion in gold and trillion in proven reserves of petroleum. Sources for these amounts are, for global equities The World Bank, Market Capitalization of listed companies,; for global debt securities of non-financial corporations, Bank for International Settlements, Debt Securities Statistics,; for gold, Bullion Vault, Global Gold Supply vs. the Money Supply,, adjusted for the change in price from an average of around ,000 per troy ounce in 2009 compared to ,340 per troy ounce in spring 2014; for petroleum, at 0 per barrel for crude oil proven reserves, Wikipedia, Peak Oil, under heading “Reserves,”
  65. The 5.2% rate is calculated as a compound, annualized rate of return
  66. For data on cash returns, as defined in the text, a widely used source is Morningstar, Ibbotson SBBI Classic Yearbook, described at (Available on a subscription basis only)
  67. If the Dow Jones Industrial Average (which started at 40 in 1896) had been calculated with all dividends reinvested, at the end of 1998 its value would have been 652,230, according to Buttonwood’s Notebook, The Economist, April 2, 2014, By the end of 2013 the dividends-reinvested value of the Dow would have been nearly 1,200,000, as calculated by CTLR.
  68. A chapter of CTLR on Corporations will provide information regarding the validity of the reported rates of return on equities as represented by the leading American equity index funds, a topic of interest but one that is beyond the intended scope of this chapter on Money.
  69. “AG” in the name of these German companies is short for aktiengesellschaft, the German terminology for a company owned by shareholders
  70. Full company name E. I. du Pont de Nemours and Company
  71. Source cited in a note above
  72. Quoted from “How the Fed Fuels the Coming Inflation: As Milton Friedman said, ‘inflation is always and everywhere’ a result of excessive money growth,” by Allan H. Meltzer, Op-Ed, The Wall Street Journal, May 6, 2014,

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