Econ 101 Part 1 — Worthless Paper Money

“Currency” is defined as the easiest legal means of exchange. For millennia, money was made from precious metals. A metal that has little value, like nickel or copper, is called a “base” metal. The practice of devaluing money by adding base metal to it is called “debasing.”

A “coin” that has no precious metal in it is not really a coin; it is called a token.

What we use for money today in the US is completely debased, by definition. We use “coins” made entirely of base metals, and paper. Neither has any intrinsic value. So why does our money have value?

By a legal fiction. Say you run up an account with a feed store. You owe the guy $500 for horse feed. You go to the store to settle your debt. You offer cash, but the guy says “No way, dude. That stuff is worthless paper. I only accept gold or silver.” Well, there’s a federal law that says that if he refuses your offer of US currency, the debt is canceled. So he’d better accept it, or else. Thus, the government forces us to accept a worthless means of exchange.

The Constitution authorizes the federal government to coin money. There is no authorization for the government to establish a worthless paper money system.

So how does this affect you? We have a monetary system that is completely debased, and the consequence is the steady erosion of the capitalist system.

“There is no subtler, or surer means of overturning the existing basis of society than to debase the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which only one man in a million is able to diagnose.” — John Maynard Keynes.

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