The Ethics of Money Production: Chapter 7

Chapter 7: Enters the State: Fiat Inflation through Legal Privileges

1. Inflation is profitable for the creator of new, debased money and states were always its biggest users. When people can choose their money, inflation is limited to the fringes of society. But the state has the power to force its citizens to accept a certain money and extract the resulting profit off them.

2. It is noted, that a government can't force any sort of money on its citizens, but it must be in some way based on existing money. It also cannot (at least initially) lose its value too rapidly. Two ways have been used until now: a government issues paper money with the same name as another, already existing money and mandates its citizens to use this replacement. Or, it grants some already existing money legal privileges, turning them into fiat monies and fiat money certificates.

3. Money privileged by law will be in greater circulation, than it would have be on its own. It is by its nature inflationary. Other moneys will have a reduced circulation, creating a forced deflation.

There are a few groups of legal privileges granted by the state (there is usually more than one present):
- legalized counterfeiting
- monopoly
- legal tender laws
- legalized suspension of payments

Each will be analyzed separately in separate chapters, then the effect of all of them together.

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This has been a short chapter, so let me add a few thoughts. I am now in about a half of the book. Until now it was pretty readable and nicely categorized - excellent for an inclusion of its points into the wiki. There were some shorter chapters, that are more summaries of previous material and pointers to the next, but they don't detract from the really important content. Good book.

I have also updated the chapter titles and added links, that were missing. This Gil Guillory guy doesn't seem to post anymore, which is a shame, he was writing pretty well. Hope he comes back to the topic.