The Ethics of Money Production: Chapter 3

Chapter 3: Money within the Market Process

Scarcity is a basic economic fact of life as is marginal utility. It follows, that the production of additional units of money will decrease the value of already existing units. Therefore, argues Hülsmann, those owning these additional units will tend to pay more money for goods and services, and demand more money when selling their own goods and services. (It isn't mentioned, that they could strive to pay the same money for the usual expenses and buy additional goods and services, driving the prices up in this way; but that is part of the argument in the end.)

Thus has the production of money a tendency to raise money prices, starting from the producers of money, spreading to other economical actors, without a guarantee of any regularity or a definable timeframe.

How much money should be produced depends in the free market on the consumers. They decide not only the amount of goods (or money) to be produced, but also the the types of money widely used. Historically, coins of several metals and alloys were used concurrently, this appears to be the natural state of things.

It is often asserted, that higher money prices benefit debtors, as it lowers the relative value of their debts. This may not always be the case: if the lender's estimate of the rising prices is too high, the debtor may end up paying more on account of the expected inflation.

The final and possibly most important effect of a rising money supply is in its timing - the positive effect of "having more money" benefits the producer of money and those getting it first; while the negative effects impact the latecomers. This redistribution of wealth and rising prices may be limited to some degree, but cannot be avoided.


It is perfectly acceptable to consider the ethical side of using money, but the ethics of money production are no less important. Part of it is the proper marking of a coin's producer and its content. Here notes Hülsmann a problem of naming a coin after its weight, as it renders different services than the same weight of uncoined metal. (While the difference in value is a valid point, what if the name of a currency becomes a synonym for its weight and is used as such?)

Finally, the Christian aspect is considered: the use of money and banking are legitimate, though there is some discussion on which interest rates are acceptable and and which constitute usury. In the end, what matters is the way, how somebody gets the money and how they use it.

(See also the same chapter from Gil Guillory.)