My 140 favorite quotes from “The Ethics of money production

Yorick de Mombynes
18 min readSep 28, 2019


Originally published on 7 September 2019 as as a tweetstorm.

The Ethics of Money Production (2008), by Jörg Guido Hülsmann : available in free PDF and on Amazon.

1. “Money is omnipresent in modern life, yet the production of money does not seem to warrant any moral assessment”

2. “To be sure, central bank representatives are lecturing the public on the importance of business ethics; but their concerns do not seem to apply to themselves”

3. “There are innumerable economic writings on money and banking, but the number of works that are truly helpful in understanding the moral and spiritual issues of money production is rather small”

4. “Legal monopolies, legal-tender laws, and the legalized suspension of payments have unwittingly become instruments of social injustice. They breed inflation, irresponsibility, and an illicit distribution of income, usually from the poor to the rich”

5. “The argument for natural money production and against inflation goes back many centuries, to the fourteenth century French bishop, Nicholas Oresme”

6. “When a medium of exchange is generally accepted in society, it is called “money””

7. “The historical selection of gold, silver, and copper was not made through some sort of a social contract or convention. Rather, it resulted from the spontaneous convergence of many individual choices”

8. “To be spontaneously adopted as a medium of exchange, a commodity must be desired for its nonmonetary services (for its own sake) and be marketable, that is, it must be widely bought and sold”

9. “The medieval scholastics called money a res fungibilis et primo usu (a thing that is fungible and primarily used in consumption). It was in the very nature of money to be a marketable thing that had its primary use in consumption”

10. “We may call any kind of money that comes into use by the voluntary cooperation of acting persons “natural money” (the concept of natural money is not much used in the contemporary literature, but it has a venerable tradition in economics) ”

11. “There are good reasons to assume that a free society would harbor a variety of different monies, which would all be natural monies in our sense”

12. “Wherever people are not free to choose the best available monies, a different type of money comes into existence — ”forced money””

13. “One cannot tell on a priori grounds what the natural money of a society is. The only way to find this out is to let people freely associate and choose the best means of exchange out of the available alternatives”

14. “Natural money must possess two qualities. It must first of all be valuable prior to its monetary use, and it must furthermore be physically suitable to be used as a medium of exchange (at any rate more suitable than the alternatives)”

15. “Credit money comes into being when financial instruments are being used in indirect exchanges”

16. “Credit money is only a derived kind of money. It receives its value from an expected future redemption into some commodity. In this respect it crucially differs from paper money, which is valued for its own sake”

17. “Paper money must not be confused with credit money made out of paper, or with money certificates made out of paper. The latter can be redeemed into commodity money; the former cannot”

18. “In no period of human history, has paper money spontaneously emerged on the free market”

19. “Governments have issued paper money along with the legal obligation for each citizen to accept it as legal tender”

20. “The use of paper money carries the risk of total and permanent value annihilation. This risk does not exist in the case of commodity money, which always carries a positive price and which can therefore always be re-monetized”

21. “In a truly free market, paper money could not withstand the competition of commodity monies. The more farsighted and prudent market participants would get rid of their paper money first, and the others would follow in due course”

22. “The precious metals would have become monies even if coinage had never been invented, because even in the form of bullion their physical advantages outweigh those of all alternatives”

23. “Historically, private coinage came first and only later did governments take over”

24. “Nicholas Oresme postulated that the princes did not have the right to alter the coins at all, unless they had the consent of the entire community”

25. “Economic science has put us in a position to understand that competitive coinage is an even better way of preserving the trustworthiness of coins. There is no economic reason not to allow every private citizen to enter the minting business and to offer his own coins”

26. “Competition in coinage is no panacea. Abuses are always possible and in many cases they cannot easily be repaired. The virtue of competition is that it offers the prospect of minimizing the scope of possible abuses”

27. “If certificates may add to the value of bullion then certificates may have a value on their own. Therefore they can also be traded without being physically integrated with the precious metal of which they certify the quantity. Then they are money substitutes”

28. “The potential abuse of substitutes is a very considerable disadvantage. One may therefore justly doubt that on a free market they could have gained any larger circulation”

29. “The only sure way to bring paper notes into circulation was to impose them on the citizenry”

30. “In a free society, the market participants would constantly weigh the advantages and disadvantages of the various certification products”

31. “The overall tendency of money production is to increase prices beyond the level they would otherwise have reached. This implies in turn that the purchasing power of any unit of money diminishes”

32. “Money production entails a tendency for prices to increase, but this increase occurs step by step in a process spread out through time and affects each price to a different extent”

33. “Money production redistributes real income from later to earlier owners of the new money”

34. “Nicholas Oresme distinguished three ways of gaining through money in unnatural ways: (1) the art of the money-changer: banking and exchange, (2) usury, and (3) the alteration of the coinage. “The first way is contemptible, the second bad and the third worse””

35. “To have a paper money means to allow the government to significantly curtail the personal liberties of its citizens”

36. “Any quantity of goods and services can be exchanged with virtually any money supply”

37. “In the last three decades of the nineteenth century, both Germany and the U.S. experienced high growth rates at stable and declining consumer-price levels. The same thing is observed more recently in the market for computers and information technology”

38. “Hoarding per se might be pathological, but it does not deprive other people of what is rightfully theirs. And in particular it does not prevent the efficient operation of the economy”

39. “Hoarding cannot serve as a pretext for the artificial extension of the money supply. In some extreme cases it might merit the attention of spiritual leaders and psychologists. But it is never a monetary problem”

40. “The harmful character of deflation is today one of the sacred dogmas of monetary policy”

41. “In historical fact, deflation has had no clear negative impact on aggregate production

42. “It is true that unexpectedly strong deflation can incite people to postpone purchase decisions. However, this does not by any sort of necessity slow down aggregate production”

43. “Deflation certainly has much disruptive potential. However, it mainly threatens institutions that are responsible for inflationary increases of the money supply

44. “The destruction entailed by deflation is often “creative destruction” in the Schumpeterian sense”

45. “The hope that tricking capitalists into accepting lower real interest rates entails more economic growth is entirely unfounded”

46. “What the artificial decrease of the real interest rate does is to increase the number of projects that are launched. But the total volume of investments that can be completed has not thereby increased”

47. “Nicholas Oresme wrote an entire treatise that exposed the physical alteration of the coinage as a fraudulent and harmful practice”

48. “Throughout the entire twentieth century, in all countries, the purchasing power of money managed by public authorities declined and oscillated as never before in the entire history of monetary institutions”

49. “The basic rationale for a stable standard of value is a spurious one in all cases”

50. “The natural costs that go in hand with producing gold and silver are in fact a supreme reason why these metals are better monies than paper .The fact that they are costly means that they cannot be multiplied at will”

51. “Inflation is an extension of the nominal quantity of any medium of exchange beyond the quantity that would have been produced on the free market”

52. “Inflation is that part of the money supply that comes into being because of the invasion of private property rights”

53. “Before the age of banking, debasement had been the standard form of inflation. Debasement is a special way of altering coins made out of precious metal”

54. “In the Western world, debasement was the standard form of inflation until the seventeenth century”

55. “As in the case of debasement, banknotes have been falsified both by ordinary criminals and by the “guardians” themselves”

56. “In 1781 the Bank of Amsterdam started counterfeiting its own banknotes. It was no longer a money warehouse. It became a fractional-reserve bank”

57. “The fundamental practical problem of fractional reserves is that it is impossible for the issuing bank to accommodate all demands for redemptions at the same time (as warehouse banks can)”

58. “Fractional-reserve banking can arise as a perversion of money warehousing. But it can also originate as a perversion of credit banking”

59. “Debasement and fractional-reserve banking are unjustifiable. No theory of ethics defends lies or, for that matter, counterfeiting”

60. “Inflation provides not just gains; it provides illegitimate gains. Its alleged benefits are not really different from the benefits of robbery and fraud”

61. Ludwig Von Mises argued that inflation by its very nature contradicted the principle of popular sovereignty”

62. “There seem to be good grounds for arguing that inflation, independent of any attenuating circumstances, is an inherently bad action (intrinsece malum) in the sense of Catholic moral doctrine”

63. “Governments at nearly all times and places have been the main beneficiaries of inflation”

64. “Governments still intervene in the production of money and money certificates in order to obtain additional income. The difference between our time and the age of Oresme is that present-day governments have received absolution from the scientific authorities of our day”

65. “Many princes blushed when they were caught debasing the currency of the country. But modern presidents, prime ministers, and chancellors can keep a straight face and justify inflation with the alleged need to stabilize the price level and to finance growth”

66. “As long as the citizens are free to produce and use the best money available, sound money prevails, whereas debased money and fractional reserves lead a fringe existence”

67. “Only the government has the power to make inflation a widespread, large-scale, and permanent phenomenon, because only the government has the power to systematically prevent the citizens from spontaneously adopting the best possible monies and money certificates”

68. “The gain that the government and its allies derive from fiat inflation can most adequately be called “institutional usury,” as Dempsey has pointed out”

69. “The state theory of money is untenable on grounds of both theoretical reasons and historical experience”

70. “The characteristic feature of fiat inflation is that it is done openly and legally. However, official approval does not diminish the pernicious effects of inflation; and it is far from removing its ethical offensiveness”

71. “The fiat inflation of privileged coins and banknotes always and everywhere goes hand in hand with a fiat deflation of the other monies and money certificates”

72. “The legal privileges that governments use to create fiat money and fiat money certificates fall into four large groups: legalized falsifications, legal monopolies, legal tender laws, and legalized suspensions of payments”

73. “Debasement has never been orchestrated under the mere protection of monopoly privileges. In practice, debased government coins have always been protected by the additional privilege of legal tender laws”

74. “In the nineteenth century, most Western governments established banknote monopolies, which were granted to banks with especially close ties to the government”

75. “As in the case of coins, monopoly privileges for banknotes are inherently harmful and socially disruptive, but their quantitative impact is likely to be rather small”

76. “A legal tender is money or a money certificate that may be used to make payments against the will of one of the exchange partners. Thus the law overrides private contract and provides that the legal tender shall be accepted as payment”

77. “Legal-tender laws typically establish a legal or “fiat” equivalence between the privileged money (the privileged money certificate) and other monies and money certificates”

78. “Legal-tender laws entail an inflation of the legally privileged money, because this money is produced and held in greater quantities than would be the case in the absence of the price control”

79. “When legal-tender laws establish fiat exchange ratios between coins made out of different precious metals, the resulting monetary system is called bimetallism

80. “Legal-tender laws tend to reduce social cooperation and to impoverish society”

81. “Whereas on a free market there is a tendency for the best available products to be used, legal-tender laws combined with false certificates incite a race to the bottom”

82. “There is a solid historical record documenting how governments have abused the trust that the citizens put into them. There was in fact hardly a dynasty that did not in this way abuse its monopoly of coinage”

83. “Ancient Greeks and Romans, medieval princes, dukes and emperors, as well as democratic parliaments have recklessly debased the coins of their country, knowing that the law imposed the bad coins on their subjects at a nominal value determined by the government”

84. “Legal-tender laws eliminate all technical obstacles to an infinite debasement of coins”

85. “The reason why governments have abandoned debasement and started cooperating with fractional-reserve banks was the technical superiority of this type of fiat inflation”

86. “Fractional-reserve banking leverages the inflationary impact of legal-tender laws quite substantially. And inversely, legal-tender laws are a boon for fractional-reserve banking”

87. “As with all forms of inflation, fractional-reserve banking (and credit money) backed by legal-tender privileges brings about an illegitimate redistribution of income”

88. When the economy is flooded with legal-tender fractional-reserve notes, the whole economic body of society begins to cater excessively for the needs of those who control the banking industry”

89. “Fractional-reserve banking has the power to delude cost calculations, and thus to induce businessmen into laying foundations that are too large to be completed with the resources available in society”

90. “Wherever it proved to be impossible to establish voluntary cartels, governments have cartelized the banking industry by more or less stringent laws, often at the behest of the most powerful banks”

91. “The cartelization, centralization, and regulation of the banking industry are but organizational techniques (however misguided) to cope with problems of fractional-reserve banking under legal-tender laws”

92. “It is impossible to justify legal-tender laws, especially when they are applied to protect debased coins and fractional-reserve money certificates. Inflation is here at its worst. The floodgates are open and the citizens are denied any protection”

93. “Already in his day, Oresme stated that institutionalized inflation — as it can only exist under the protection of government — turns such a government into a tyrant. And this tyranny becomes perfect if the government can enshrine inflation into law”

94. “The very term “suspended payments” is a shameless euphemism designed to cover up the reality of breach of contract”

95. “Fractional-reserve banknotes had emerged in the seventeenth century and experienced exponential growth rates during the eighteenth century, invariably as a form of government finance and sustained by various privileges”

96. “During the nineteenth century, the issues of several privileged banks — the later central banks — acquired monopoly legal-tender status, while the monetary use of silver was out- lawed either directly (Germany, France) or indirectly through bimetallist systems (England, U.S.) ”

97. “To finance the unheard-of destructions of World War I, the central banks of France, Germany, and Great Britain suspended the redemption of their notes. Needless to say, this happened with the approval and in fact at the behest of their national governments”

98. “Paper monies have been introduced in each single case through various progressive infringements on private property, and through massive breaches of contract perpetrated by the central banks”

99. “Paper money is by its very nature a form of (fiat) inflation. It exists only because of continued legal privileges. It is always and everywhere in greater supply than it would be on the free market, for the simple reason that on the market it could not sustain itself at all”

100. “The legal act that authorized the suspension of August 1971 transformed the U.S. dollar into a paper money, and by the same token it transformed the bank- notes issued by all other central banks into paper money too”

101. “The most visible consequence of the global paper-money inflation of the past thirty years is the explosion of public debt”

102. “Moral hazard is implied in the very existence of paper money. Because a paper-money producer can bail out virtually anybody, the citizens become reckless in their speculations; they count on him to bail them out, especially when many other people do the same thing”

103. “Central planning or hyperinflation (or some mix between the two) — this is what the future holds for an economy under paper money. The only third way is to abolish paper money altogether and to return to a sound monetary order”

104. “Paper money has never been introduced through voluntary cooperation. In all known cases it has been introduced through coercion and compulsion, sometimes with the threat of the death penalty”

105. “Inflation is what happens when people increase the money supply by fraud, imposition, and breach of contract”

106. “The government’s fiat makes inflation perennial, and as a result we observe the formation of inflation-specific institutions and habits. Thus fiat inflation leaves a characteristic cultural and spiritual stain on human society”

107. “Inflation benefits the government that controls it, not only at the expense of the population at large, but also at the expense of all secondary and tertiary governments”

108. “Inflation spurs the growth of central governments. It allows these governments to grow larger than they could become in a free society. And it allows them to monopolize governmental functions to an extent that would not occur under a natural production of money”

109. “The inflation-sponsored centralization of power turns the average citizen more and more into an isolated social atom. All of his social bonds are controlled by the central state”

110. “Among the most gruesome consequences of fiat money, and of paper money in particular, is its ability to extend the length of wars”

111. “Fiat inflation allows the government to ignore the fiscal resistance of its citizens and to maintain the war effort on its present level, or even to increase that level. The government just prints the notes it needs to buy cannons and boots”

112. “The printing press allows the government to tap the property of its people without having obtained their consent, and in fact against their wishes. What kind of government is it that arbitrarily takes the property of its citizens? ”

113. “Monetary theorists from Oresme to Mises have pointed out that fiat inflation, considered as a tool of government finance, is the financial technique characteristic of tyranny”

114. “Fiat inflation is an inherently unstable way of producing money because it turns moral hazard and irresponsibility into an institution. The results are frequently recurring economic crises”

115. “The devolution of monetary institutions has been underway for centuries, and it has still not quite reached the absolute bottom, even though the process has accelerated considerably in our age of paper money”

116. “Fiat inflation makes business more dependent on banks than they otherwise would be. It creates greater hierarchy and central decision-making power than would exist on the free market”

117. “Fractional-reserve banking makes business more conservative than it otherwise would be. It benefits the established firms at the expense of innovative newcomers. Innovation is much more likely to come from independent businessmen, especially if income taxation is low”

118. “Through their monetary policy, Western governments have pushed their citizens into a state of financial dependency unknown to any previous generation”

119. “Inflation does not bring into existence any additional resource. It merely changes the allocation of the existing resources”

120. “The debt-ridden individual eventually adopts the habit of turning to others for help, rather than maturing into an economic and moral anchor of his family, and of his wider community. Wishful thinking and submissiveness replace soberness and independent judgment”

121. “The old way for ordinary citizens to make savings was the accumulation of cash. Under fiat inflation this strategy is suicidal”

122. “Money and financial questions come to play an exaggerated role in the life of man. Inflation makes society materialistic. More and more people strive for money income at the expense of other things important for personal happiness”

123. “Perennial inflation slowly but assuredly destroys the family, thus suffocating the earthly flame of morals”

124. “Fiat inflation is a juggernaut of social, economic, cultural, and spiritual destruction”

125. “The classical gold standard eliminated the exchange-rate fluctuations between gold and silver and thus boosted the international division of labor”

126. “The classical gold standard created a considerable fiat deflation due to the demonetization of silver”

127. “The glory of the classical gold standard was that it demonstrated, for the last time so far, how a worldwide monetary system could emerge without political scheming and red tape between national governments”

128. “The classical gold standard was hardly a bulwark of liberty. It was a crucial breakthrough for the societal scourge of our age — government omnipotence”

129. “The classical gold standard differed only in degree, not in essence, from its successors, all of which have been widely and deservedly criticized in the literature on our subject”

130. “From the very outset, the gold-exchange standard was meant to encourage irresponsible behavior. Designed to facilitate inflation, it was not surprising that it lasted only six years”

131. “The Bretton Woods system was a gold-exchange standard writ large. It was far more expansionary than its predecessors because it applied the pooling technique to a far greater extent”

132. “The Bretton Woods system was so far the most ambitious attempt ever to create an international monetary system through a cartel of fractional-reserve banks”

133. “From an economic and ethical point of view, the euro does not bring any new aspects into play. It is just another paper money”

134. “European monetary integration had to be built on paper money, for the sole reason that paper money is the source of virtually unlimited government income, at the expense of the population”

135. “The story of the euro is not a success story, unless the standard of success is to be seen in the expansion of government power. Yet the euro story could be seen as a model for further monetary integration on a global scale”

136. “There is a strong tendency for the formation of currency blocks around the paper monies used in the countries with the largest capital markets”

137. “The connectivity between international capital markets creates an incentive for competing standard paper-money producers to cooperate and, eventually, to merge”

138. “Even a national paper money is a powerful engine of economic, cultural, and spiritual degradation. How much more would this be the case with a global paper money? Such a monetary regime would provide the economic foundation of a totalitarian nightmare”

139. “In the long run, a global paper money cannot evade the fate of national paper money. It must either collapse in hyperinflation or force the government to adopt a policy of increasing control, and eventually total control, over all economic resources”

140. “We need to abolish the legal privileges of central banks and monetary authorities. There is no tenable rationale for preventing the citizens from using the best monies and money substitutes”