The near-universal belief that money must be regulated implies that it can’t exist without state control.  This assumption pervades modern economic thought.  Yet money, the most critical good in society, represents half of every economic transaction.  Its integrity is vital to the economy’s stability.  When the state manipulates money, it disrupts the delicate balance that underpins markets.  Sound money, free from interference, is the only safeguard against such chaos.

Fiat money embodies state control.  It is, at its core, a system of legalized counterfeiting.  State-imposed controls inevitably distort the economy.  Consider price controls—they lead to shortages and inefficiencies.  The same principle applies to fiat money.  By controlling the money supply, central banks effectively manipulate every transaction.  This isn’t a matter of setting price floors or ceilings for goods.  Instead, it involves altering the value of the money itself.  This distortion infects the economy at its core.

Fiat money facilitates a vast, covert transfer of wealth.  Through central banks, states can bail out their allies without accountability.  When the central bank creates money, it siphons value directly from the savings, paychecks, and retirement accounts of ordinary people.  This expansion of the money supply dilutes purchasing power, making goods and services more expensive over time.  The real theft occurs at the moment of money creation, as the new money benefits those closest to its source while everyone else bears the cost.

While fiat money may function as a medium of exchange, it only does so by leveraging the credibility of the sound money systems that preceded it.  Fiat can’t replace commodities like gold or silver as a store of value because it lacks intrinsic worth.  Its unlimited supply ensures that its value can evaporate at any moment.  Savings and retirement funds are particularly vulnerable, as central banks print more money, the value of saved wealth diminishes steadily, sometimes catastrophically.

Few forces are as destructive to the economy as fiat money.  Many of the world’s gravest problems—unsustainable wars, corporate cronyism, and bloated bureaucracies—are funded by fiat systems.  Without the state’s ability to conjure money at will, these excesses could not exist.  Sound money would curtail such abuses.  The inefficiency of the state is well recognized in its failure to produce goods effectively.  Why do we trust it to produce money—a good more complex and essential than any other?

Fiat money is not merely a flawed system, it’s the engine of economic instability.  The solution lies in rejecting state-controlled money in favor of systems rooted in free markets and sound principles.  Only then can we escape the mirage of control and secure lasting prosperity.

References

Murray Rothbard; Man, Economy, and State

Murray Rothbard; The Case for A 100 Percent Gold Dollar