Updated: 4/13/20
Do not use false measures when measuring length, weight, or quantity. You must use just scales, just weights, a just ephah, and a just hin. I am the Lord your God, who brought you out of the land of Egypt (Leviticus 19:35–36).
I have discussed this passage in Chapter 19 of my commentary on Leviticus. Leviticus 19 announces basic civil laws governing the economic sphere. “Do not steal. Do not lie. Do not deceive each other. Do not swear by my name falsely and profane the name of your God. I am the Lord” (vv. 11–12). It ends with the law governing weights and measures. This law became the touchstone for civil justice under the Mosaic law. (Note: a touchstone was a device for measuring the content of gold in an alloy.) Micah warned: “There is wealth in the houses of the wicked that is dishonest, and false measures that are abominable. Should I consider a person to be innocent if he uses fraudulent scales, with a bag of deceptive weights? The rich men are full of violence, the inhabitants have spoken lies, and their tongue in their mouth is deceitful. Therefore I will strike you with a terrible blow, and I will make you desolate because of your sins” (Micah 6:10–13). [North, Prophets, ch. 27] Ezekiel warned: “The Lord God says this: It is enough for you, princes of Israel! Remove violence and strife; do justice and righteousness! Quit your evictions of my people!—this is the Lord God’s declaration. You must have accurate scales, accurate ephahs, and accurate baths!” (Ezekiel 45:9–10). The Western image of the blindfolded goddess of justice holding scales reflects this original imagery. But the God of the Bible is not blindfolded.
A monetary unit was a specific weight and fineness of a metal. Gold and silver were mixed with hardening metals of less value. For lower-value transactions, copper and bronze units were used. The market assessed the comparative value of these metals, as reflected in their prices. In this sense, they are not different from all other market commodities.
Honest money is governed by the general laws governing ownership. These included laws against tampering with weights and measures. One scale fits all. “You must not have in your bag different weights, a large and a small. You must not have in your house different measures, a large and a small. A perfect and just weight you must have; a perfect and just measure you must have, so that your days may be long in the land that the Lord your God is giving you” (Deuteronomy 25:13–15). [North, Deuteronomy, ch. 65]
Honest money was money that came into existence honestly. Money is unique among commodities because people seek to own it as a substitute for owning other assets. It can easily be exchanged for other assets. It is not held for its own sake, except by misers. Misers are rare. They are also widely recognized as deranged.
The Bible does not specify that the state should have a monopoly on money. The prophets indicated that there was a close connection between evil rulers and dishonest scales. Isaiah made this connection clear: “Your silver has become impure, your wine mixed with water. Your princes are rebels and companions of thieves; everyone loves bribes and runs after payoffs” (Isaiah 1:22–23). [North, Prophets, ch. 3] This does not necessarily mean that the state issued debased money. It does mean that the law against false weights and measures was not being enforced.
Gold and silver were exchanged in terms of weights. These weights were assumed to be of a fixed content of the precious money metal. Round coins did not come into use until about 600 B.C. in Asia Minor. Prior to this, metal bars were common. People made exchanges on the assumption that each bar had the same content of precious metal as all other bars of that size. This could be tested by scales. The scales measured both the commodity money and the commodity being sold.
Hebrew kings may have issued coinage, but there is no evidence of this. We know that smelters produced units that served as money. Smelters owned the metal they mined and turned into bars. They had the right to exchange these units for assets. Private ownership and the right of exchange led to the development of money metals, just as it led to other marketable commodities. The civil laws governing ownership governed the exchange of money. Money was not a separate legal category from the laws governing the protection of private property.
Because of the nature of the economics profession—“guild” may be a better word—it is necessary to put quotation marks around the words, “honest money.” Economists will go to almost any lengths to avoid the use of moral terms when they discuss economic issues. This has been true since the seventeenth century, when early mercantilist pamphlet writers tried to avoid religious controversy by creating the illusion of moral and religious neutrality in their writings. This, they falsely imagined, would produce universal agreement, or at least more readily debatable disagreements, since “scientific” arguments are open to rational investigation. The history of both modern science and modern economics since the seventeenth century has demonstrated how thoroughly irreconcilable the scientists are, morality or no morality.
Nevertheless, traditions die hard. Economists insist that they do not inject questions of morality into their analyses. Economics is supposedly a “positive” science, one concerned strictly with questions of “if . . . then.” If the government does A, then B is likely to result. If the government wants to achieve D, then it should adopt policy C. The economist is completely neutral, he insists. He is just an observer who deals with scarce means of achieving specific ends. The economist can therefore deal with “complete neutrality,” with this sort of problem: “If the Nazis wish to exterminate unarmed citizens, which are the most cost-effective means?” No morality, you understand—just simple economic analysis.
The problem with the theory of neutral economics is that people are not neutral, the effects of government policies are not neutral, social systems are not neutral, and legal systems are not neutral. When pressed, even economists are not neutral. Because God’s law is not neutral, the costs of violating a society’s first principles should be taken into account by policy-makers. This includes economists. But no economist can do any more than guess about such costs. There is no scientific way to assess the true costs to society of having its political leaders defy fundamental biblical principles and adopt any given policy. If the economic advisors guess wrong—not an unlikely prospect, given the hypothetical moral vacuum in which economists officially operate—then the whole society will pay. (This assumes, of course, that policy-makers listen to economists.)
The inability of economists to make scientifically valid cost-benefit analyses of any and all policy matters is a kind of skeleton in the profession’s closet. The problem was debated back in the late 1930s, and a few economists still admit that it is a real theoretical problem, but very few think about it. Here is reality, according to methodological individualism (nominalism): there is no measuring device for balancing total individual utility vs. total disutility for society as a whole. You cannot, as a humanistic scientist, make interpersonal comparisons of subjective utility. Epistemologically sophisticated humanistic economists know this, but they prefer not to think about it. They want to give advice, but as scientists they cannot legitimately say which policy is better for society as a whole.
This is why politicians and policy-makers have to rely on intuition, just as the economists do. There is no scientific standard to tell them whether or not a particular policy should be imposed. Without a concept of morality—that some policy is morally superior to another—the economists’ “if . . . then” procedure will not answer the questions that need to be answered. Without moral guidelines, there is little hope of guessing correctly concerning the true costs and benefits to society as a whole of any policy. The economist, as a humanistic scientist, is in no better position to make such estimations than anyone else. If anything, he is in a worse position, since his academic training has conditioned him to avoid mixing moral issues and economic analysis. He is not used to dealing with moral questions.
I wrote Honest Money in 1986. An updated edition was published by the Mises Institute in 2011. Honest money is a social institution that arises from honest dealings among acting individuals. Money is best defined as the most marketable commodity. I accept money in exchange for goods or services that I supply only because I have reason to suspect that someone else will do the same for me later on. If I begin to suspect that others will refuse to take my money in exchange for their goods and services in the future, I will be less willing to accept this depreciating money today. I may ask the buyer to pay me more, just to compensate me for my risk in holding that money over time.
A currency unit functions as money—a medium of voluntary exchange—only because people expect it to do so in the future. One reason why they expect a particular currency unit to be acceptable in the future is that it has been acceptable in the past. A monetary unit has to have historic value in most instances, if it is to function as money.
I have emphasized voluntary exchange. Any attempt by the state to create money, regulate money, or in any other way substitute its monopolistic power over the market’s pricing process is an inherent move towards the assertion of state sovereignty over money. Money has nothing to do with sovereignty, except the sovereignty legally of anyone to produce coins or would-be money, and then to persuade others to accept this money in exchange. Whether or not a private form of money is accepted by others is a matter of voluntary exchange. The only aspect of money over which the state should have any authority has to do with the enforcement of contracts and honest weights and measures. The state has a legitimate right to impose negative sanctions against individuals who claim that a particular currency unit is backed by gold or silver of specific weight and fineness, when the coins do not conform to the claims of the issuing agency. But this fraud of misrepresentation is not unique to money. This has to do with the general prohibition against false weights and measures.
Private agencies should have the right to issue money. In the Bible, the first mention of privately issued money is the shekel of the sanctuary. “Then the Lord spoke to Moses, saying, ‘When you take a census of the Israelites, then each person must give a ransom for his life to the Lord. You must do this after you count them, so that there will be no plague among them when you count them. Everyone who is counted in the census is to pay half a shekel of silver, according to the weight of the shekel of the sanctuary (a shekel is the same as twenty gerahs). This half shekel will be an offering to the Lord’” (Exodus 30:11–13). Clearly, this money was based on weight. It was based on a precious metal: silver. This was currency. It could be used, and it was used, to support the priests. This meant that the priests could spend this currency into circulation. The priests could buy goods and services for themselves and their families. There is no question that this was money. The state had nothing to do with it. The quality of the money would have been estimated by the priests who received the money.
The silver shekel was money. It served as money long before round tokens known as coins came into existence in Asia Minor about six centuries before the birth of Christ. The silver shekel was privately issued. It was not state-issued money. The state had no role in the production of money under the Mosaic law.
Even more relevant is this: the census was taken only prior to a holy war. This was not a tax imposed by the state. It was atonement money for the blood that would be shed during the war. This was ecclesiastical money. It was not state money. Also, this was not a regular state census. There was no state census in Mosaic Israel. David sinned when he numbered the people of Israel when there was no prospect of any war (I Chronicles 21).
There is no indication in the Bible that the state ever issued money under the Mosaic law. State sovereignty, biblically speaking, is not justified when it comes to the issuing of money. The issuing of money by the state is an assertion of sovereignty that the Bible does not authorize for a biblically structured state. The state’s assertion of such authority is an assertion of a wide-ranging sovereignty over the affairs of men. This was why the Pharisees attempted to trap Jesus by the use of a Roman coin that was used in taxation (Matthew 22:15–21). They fully understood that this coin was a political tool used by the Roman Empire for the suppression of political and religious movements that were not under the direct authority of the Roman state.
Because state sovereignty has been associated with the issuing of money, which goes back to the issuing of coins in Asia minor, the public automatically assumes that state-issued money is the only legitimate form of money. There is nothing biblical about this attitude. In fact, the attitude is anti-biblical.
There is no need economically for the sovereignty associated with civil government to be associated with the issuing of money. It does not take the sovereignty of the state to make a particular form of money acceptable in society. Historically, this is best seen in the widespread use of the Spanish dollar, beginning around 1500. Spain was able to issue large quantities of these one-ounce coins because of the enormous inflow of silver bullion from its South American and Mexican mining operations. This coin, called a piece of eight, circulated throughout Western Europe. It was the primary form of money in the United States throughout the colonial period until 1857. Spain had no sovereignty in English-speaking North American colonies. It was a rival nation’s currency. Yet its easily recognized coins functioned domestically as money because they were a universally acceptable currency unit in international trade. The government of Spain did not tamper with the quantity or fineness of silver in these coins throughout the entire period. These coins had greater historic value than any other form of currency in the West. No other currency unit in the history of the West has had such widespread acceptability for as long a time. It had widespread acceptability precisely because it was not associated with state sovereignty outside of Spain and its colonies in the Western Hemisphere.
A similar function is provided by the paper currency of United States outside of the United States. Inside the United States, paper money is not used for most transactions greater than $20. Most people use credit cards and debit cards to conduct their economic affairs. The main use of paper money inside the United States is for illegal drugs imported by way of Mexico. This money flows through the Mexican drug cartels into the general economy of Mexico and other Latin American countries. The second most widespread use of paper dollars is paying immigrants, especially illegal immigrants from Third World countries in the Western Hemisphere, who work inexpensively “off the books.” They mail a portion of their earnings to their families back home. This paper money circulates throughout Latin America as an alternative currency. Citizens trust these worn-out dollars more than they trust the currencies of their own nations. It is precisely because these dollars have no connection with political sovereignty in these foreign nations that the dollar functions as an alternative currency. Citizens do not trust their politicians to provide stable money.
God created the private property order as His authorized social means of extending the dominion covenant in history. Individual and institutional owners represent God judicially (trusteeship) and economically (stewardship).
From the beginning, the Genesis narrative acknowledged the existence of gold. “A river went out of Eden to water the garden. From there it divided and became four rivers. The name of the first is Pishon. It is the one which flows throughout the whole land of Havilah, where there is gold. The gold of that land is good. There are also bdellium and the onyx stone” (2:10–12). Gold is the first mineral mentioned in the Bible. In Moses’ day, gold was at the center of international trade.
Consider a man who owned land in Havilah. He came across evidence of gold flakes in a cave or along a riverbed. As the owner of the land, he was owner of the gold. He could have done several things to capitalize on his specialized knowledge. He could have patiently separated gold from the dirt. He could have accumulated containers of pure gold. He could have taken this to an assayer: a buyer of gold. But what would he have received in exchange? What assets were of greater value in trade? So, more likely, he would have created gold ingots out of melted gold. He could have spent these as money for whatever he wanted to buy. He would have set up a small local mint.
Perhaps a larger regional mint would have offered him more commonly recognizable ingots. He would have taken a small discount on the gold he presented. This is called a seigniorage fee. He would have been buying tokens with a wider market by paying this fee. Perhaps there were rival mints offering tokens in exchange. Buyers competed against buyers.
Maybe one of the mints would have offered him ingots for ownership of his land. This would have taken uncertainty out of the picture for him: the life of the mine, the cost of defending his ownership claim, and the threat of thieves stealing his gold while transporting it to a mint. With every increase of a person’s wealth there is an increase of responsibility. Some people prefer reducing their responsibility. As my friend, entrepreneur Jimmy Napier says: “When someone puts a million dollars in your hand, close your hand.”
The mint would have made its profit by purchasing goods and services with its tokens. It would have spent these tokens into circulation. This is the great advantage of owning a gold mine. The gold is money. A person who owns a gold mine that is still profitable to operate has a stream of money. But mines can become unprofitable. Costs rise; output remains flat or falls. Owning a mine is not like owning a printing press. A counterfeiter can create money out of paper and ink. The supply of money produced by a gold mine is a tiny fraction of all the gold still being used as money. The output of a mine has little or no effect on prices. This is the greatest advantage of gold and silver as money: it is expensive to produce more money. This restricts the supply of new money coming into the economy.
Money has these characteristics:
Divisible
Portable
Recognizable
High exchange value to weight ratio
Stable exchange value over time
Gold and silver possess these characteristics. They have enjoyed the longest period of success of being used as money compared with all other commodities. Gold has these additional characteristics: (1) immunity to rust; (2) immunity to acids, other than aqua regia.
What is the morality of a gold coin standard? Simple: it is the morality of a legal contract. What about state-issued gold coin standard? A government’s word is its bond. A government promises to restrain itself in the creation of money, in order to assure citizens that the monopoly of money-creation will not be abused by those holding the monopoly grant of power.
The case for a gold coin standard is the case against arbitrary civil government. While politicians may well resent “automatic pilots” in the sphere of monetary policy, if we had a more automatic pilot, we would have less intensive “boom-bust” cycles. When the “automatic pilot” is subject to tinkering by politicians or central bank officials, then it is no longer automatic.
The appeal of specie metals is not the lure of magical talismans, as some critics of gold seem to imply. Gold is not a barbarous relic. Gold is a metal which, over millennia, has become acceptable as a means of payment in a highly complex institutional arrangement: the monetary system. Gold was part of civilization’s most important economic institution, the division-of-labor-based monetary system. Without this division of labor, which monetary calculation has made possible, most of the world’s population would be dead within a year, and probably within a few weeks. The alternative to the free market social order is government tyranny, some military-based centralized allocation system. Any attempt by the state to alter men’s voluntary decisions in the area of exchange, including their choice of exchange units, represents the true relic of barbarism, namely, the use of force to determine the outcome of men’s decisions.
The gold coin standard offers men an alternative to the fiat money systems that have transferred massive monopolistic power to the civil government. The gold coin standard is not to be understood as a restraint on men’s freedom, but just the opposite: a means of restraining that great enemy of freedom: the arbitrary state. A gold coin standard restores an element of impersonal predictability to voluntary exchange—impersonal in the limited sense of not being subject to the whims of any individual or group. This predictability helps to reduce the uncertainties of life, and therefore helps to reduce the costs of human action. The gold coin standard is not a zero-cost institution, but it has proven itself as an important means of reducing arbitrary government. It is an “automatic pilot” which the high-flying, loud-crashing political daredevils resent. This is a vote in its favor.
It has been common for defenders of the gold standard to speak of gold as possessing intrinsic value. This is a conceptual error. This error is a legacy of the implicit philosophical realism associated with pre-modern classical economic thought. Some classical economists believed in the labor theory of value. Others believed in the cost-of-production theory of value. Both of these concepts are incorrect. Economic value is imputed subjectively by consumers. Then they bid against each other in the marketplace to gain ownership or control of the highest valued goods and services in their subjective estimations.
Gold does not have intrinsic value. Neither does silver. What gold and silver have had historically is historic value. Whatever gold will buy today is closely related to what gold bought yesterday, last year, and perhaps a decade ago. The same is true of silver. These specie metals once circulated in the form of coins. People had the legal right to demand gold or silver coins from their banks. Under these circumstances, the public’s knowledge of the value of gold and silver coins was considerable. Because of this, gold coins and silver coins circulated as money all over the world. A gold coin that was known to be of a particular quantity and fineness of gold that was issued by another nation’s government-owned mint had almost identical value in exchange as a comparable coin issued by the domestic national mint. What mattered was the quantity and fineness of the gold, not the nation’s stamp on the coins.
It is expensive to discover new mines, dig the gold out of existing mines, and smelt it into usable forms. This limits the supply of gold. Most of the gold ever dug out of the ground is in somebody’s possession. So, the amount of new gold that is dug out of the mines each year is a tiny fraction of the total gold already in private hoards and in central bank vaults. The supply of gold is limited. Therefore, prices denominated in gold do not change much, year-to-year. If anything, the prices of goods and services in gold tend to decline slowly over time. There are few surprises with respect to the purchasing power of gold, and therefore gold has historic value. Its purchasing power is predictable. This is important for any form of money. There should be few surprises with respect to its purchasing power.
The stability of gold’s purchasing power when it was a widespread form of currency was not based on any physical property of gold that was not also shared by silver. It had unique properties, but its main property was its scarcity. The same was true of silver.
Because gold and silver are different metals, and because the economics of digging them out of the ground is not the same, there is no fixed ratio of prices between gold and silver. Silver is basically a byproduct of the mining of other metals: copper, lead, and zinc. Gold is a primary metal of high value, which is why gold mining companies invest so much money in digging deep holes in the ground to obtain it.
Historically, it was assumed that gold was about 15 times more valuable than silver. This has proven to be an inaccurate assessment in modern times. The ratio between the price of gold and the price of silver varies widely. Therefore, any attempt by governments to establish a legally fixed ratio between the price of gold and the price of silver is doomed to failure. It is just another price control. This system is known as bimetallism.
There is a famous law, known as Gresham’s Law, that states the following: “Bad money drives good money out of circulation.” It supposedly goes back to Sir Thomas Gresham, an advisor to Queen Elizabeth I in the 1560s. There is no evidence that he ever announced it. On the face of it, the statement seems to be wrong. In a free market, bad products do not drive good products out of the market. Why should anything like Gresham’s Law be associated with two different forms of money? Why should bad money prevail in the marketplace?
The answer is this: there is a government-enforced price control. If, at any point in time, silver is more valuable in relation to gold than the official government price of silver says it is, well-informed people will hoard silver coins. They would rather spend gold coins, which are worth less in the marketplace that the government price control says they are. People may export the silver coins to a foreign country that does not honor the official price control in their own nation. It is not wise to pay more to buy something than you need to pay. So, you will spend the artificially overvalued currency, and you will hoard the artificially undervalued currency.
Under different economic conditions, the reverse can be true. The government may officially overvalue silver. Under these circumstances, gold will go out of circulation, and silver will be used to conduct exchanges. Thus, Gresham’s Law should be modified: “The artificially overvalued money drives out of circulation the artificially undervalued money.” This does not have the same rhetorical power as the older law, but it is accurate.
This specific monetary analysis is an application of the economics of price controls. A price ceiling creates shortages: lots of buyers at a bargain official price, but not enough suppliers willing to sell. A price floor creates gluts: lots of sellers at a profitable official price, but too few buyers willing to pay it. If the government says that gold is more valuable in the marketplace than it really is, then it pays people to go down to their banks or to the government mint and exchange the artificially overvalued gold coins for the artificially undervalued silver coins. If gold is really worth less in the marketplace than the official price declares, then it pays to take in gold coins and exchange them at the artificial rate for silver coins. Take the silver coins, and go into the marketplace to buy even more gold coins at a bargain price. Repeat the exchange. Eventually, the government mint will run out of silver coins. This is the effect of bimetallism.
The solution is freely fluctuating exchange rates between gold and silver coins. The market sets the exchange rate. Under these conditions, both gold and silver will circulate widely in society. For smaller purchases, silver would probably be more likely to be used. Gold coins would be used for purchasing large quantities of raw materials or capital goods.
This would be a free market monetary system. This would be the auction process at work. A nation would not be on a gold standard or a silver standard. The market would determine which form of coinage would be used in particular circumstances. There would be considerable predictability between the exchange rates of the two forms of domestic money. The government could insist on tax payments in gold coins or receipts for gold coins. People would have to pay their taxes by exchanging silver coins for gold coins.
If the money supply remains almost constant, and if capitalist production continues to increase the number of goods and services available to the public, then the competition of sellers against sellers will lead to either improvements in quality or lower prices or both. Sellers need to find buyers for their output. If this output is increasing every year, then the main way for all sellers to sell the output of their production processes is to lower their prices. This has been the tendency of the free market system ever since 1800 in the West. The constant increase in per capita output of the manufacturing system has led to increased competition among sellers to gain buyers for this output. Price competition has been fundamental to the marketing strategy of Western capitalism. This is based on this economic law: when the price falls, more is demanded. Put differently, if sellers want more to be demanded, they must reduce their prices.
Sometimes, this across-the-board reduction of prices is called deflation. This is incorrect. Deflation should be defined as a decline in the money supply. It may produce falling prices, but it may not. Price deflation is what we find in a productive capitalist system in which the money supply is kept relatively constant. It usually is a slow process. People do not perceive that it is taking place.
There has been a huge exception to the slow-but-sure nature of price deflation: the cost of information transmission. Here, the rate is rapid and sure. The cost of transporting information has been falling steadily ever since the invention of the commercial telegraph in 1844. Card punch tabulation machines were used in the 1890 census in the United States. These became the basis of early computer technology. After 1960, the development of hard disk drives dramatically lowered data storage costs. This was the result of dramatically increasing the efficiency of digital storage devices. The Internet has accelerated this process: cloud computing. The constant pressure of the increased efficiency of these technologies has produced constant pressures to cut the prices of data storage.
The public now expects steady improvement of digital devices for the same monetary price. Sellers must offer these improvements or else face bankruptcy. This is a form of price deflation. Devices will sell for lower prices a year or two later. This process is accelerating as digital technologies make recent innovations obsolete. This is new in human history. To use an ancient metaphor, the technological genie is out of the bottle. It was free market capitalism that uncorked this genie around 1800 in Great Britain and English-speaking North America.
It is a serious mistake for anyone to argue that there is not enough gold or silver in the world to facilitate trade. Such an argument always rests on an unstated assumption, namely, that the price level should be fixed. Whatever it is today should be the case tomorrow, next year, and in 50 years. There is no such price stability in a free society.
Gold and silver can be traded in tiny quantities by means of electronic exchange. The digits can refer to specific quantities of gold and silver of a particular fineness. Most people would not buy and sell goods and services in exchange for coins made out of gold or silver. They would exchange them as they exchange digital money. Prices denominated in gold and silver would fall over time, corresponding to increased quantities of goods and services being offered for sale.
The specific legal arrangements that establish honest money are applications of the general legal arrangements that establish honest trade: honest weights and measures. These definitions can and should be established by the civil government, which has the responsibility of publishing these definitions and then enforcing them. A unit of weight has a name. Any seller who invokes this name in making a sale must be able to prove to a law-enforcement agent that the weights on his scales are the same as the state’s criteria. The buyer can have confidence that he is not being cheated.
There is no biblical case for state-issued money. There is no biblical case for the concept of state sovereignty over money. Again and again, politicians have cheated the public. They had promised to provide stable currency, but they fail to do so. There have been two main exceptions in history: the gold coins issued by the Byzantine Empire from 312 until 1025. The other case was the Spanish silver dollar. The first of these coins were minted by Castille in the mid-fourteenth century. They remained relatively stable in silver content until 1868, when they ceased to be issued.
Who is best equipped to police the issuing of precious metal coins? Answer: experts within the precious metals industry who compete against each other. Competitors in every industry have an incentive to do their own policing. If they can prove that some seller is using weights when he buys that are different from the ones he uses when he sells, they can go to the authorities with this evidence. The authorities would then make the seller pay restitution to his victims. This would open the seller to huge losses.
This pricing process applies to the money metals. This is why money has so often been commodity-based money. There may be other forms of money, meaning notational money, but always notational money and commodity money serve as equivalents of money. If notational money increases in supply, but commodity money does not, the price of commodity money will rise in relation to notational money. It will take more units of the notational money to buy a unit of commodity money.
This is why counterfeiters seek ways of deceiving the public. They seek to persuade sellers of scarce resources to exchange them for resources that appear to be scarce, but which in fact are far less scarce because of the counterfeiters’ expertise in producing monetary units that appear to be real. This is theft through fraud. This is dishonest money.
Throughout history, the most consistent counterfeiters have been civil governments. They declare a monopoly over the production of money. Then, over time, they debase the money. This is taxation by inflation. I discuss this in the next chapter.
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