Subject: [OPE-L:1869] Re: Re: Re: Re: the money supply
From: Allin Cottrell (cottrell@ricardo.ecn.wfu.edu)
Date: Wed Dec 08 1999 - 20:51:12 EST
Addendum on a point I missed. Claus wrote:
> This is why the state, which mints the coins, can profit -
> and always has - from minting debased coins, as long as
> people don't notice the fact, i.e., the state falsely
> certifies that a coin has the amount of the commodity money
> stated by the law.
Whether or not people notice is beside the point. The point is
that the state has a well-enforced legal monopoly on the
production of money. If the face value of coin exceeds its
metallic value private agents have an _incentive_ to mint coins
themselves, but if they do so they'll go to prison. (Ricardo
was quite clear that the devaluation of coin has always fallen
well short of its debasement.) Why? The state monopoly on
money is not arbitrary; it is a corollary of the fact that money
is the means of discharging one's tax liability to the state,
and if that is too easily discharged the state is in trouble.
This simple fact is "invisible" if one attempts to derive money
as a "natural" outgrowth of free exchange of commodities.
Allin Cottrell.
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