Commerce, Chapter 10, Truth in the Coin Shop, August 12th, 2008
You are uptown in a shopping district of a small community, and you pass by the meat
shop, the wine shop, the coffee shop, two churches side by side, a coin shop, an antique
store, and hold it right there.
A coin shop?
This is irresistible, because as implausible as this may sound, all political truth can
be found in a coin-shop. And not just political truth. You find in here the story of the whole
of modern life on exhibit, and learn more from looking than you find in a multi-volume
history.
There they are on display, coins from all lands. Why are they worth more than the coins
in your pocket. Because they are old? That's part of it, but not the essence of it. There
are some new coins here that are also just as valuable as the old ones.
What is critical is that they are made of gold and silver. You can pick them up and
tell the difference. They are heavy. Stack them and let them fall on each other, and
they make a different sound from the coins that usually rattle around in your pocket.
It strikes everyone and anyone immediately. Somehow these coins are real. The coins we
use today are not. But what does this really mean? And what does it imply? The value of
the coins amounts to far more than their marked value. Even dimes before a certain date sell
for 10 and 15 times the face value. The larger coins can be quite expensive. What is real
Real here is their substance, not the printing on the outside.
This is the opposite of modern coins, the substance of which is completely irrelevant.
All that matters is what is printed on the outside.
So the use of the term real here parallels how we use this term in any other context.
Reality TV is said to provide the unvarnished truth about what people really do.
We say someone should get real if we suspect that their thought or behavior is a mask or
a blindfold that is obscuring a more obvious truth.
So it is with coins.
The new coins we use in transactions are not real.
They are wearing a mask, a disguise, one put on by the state.
More absurdly, the state tells us not to look at the reality, but rather to trust God that
All is right with the money in the realm. The old coins, in contrast, are precisely what they say they are, and therefore have nothing to hide. There are no invocations that require a leap of faith. The truth is found on the scale and is told in ounces.
The gold ones are, of course, the ones you really want to hold. Their value reflects the metal content. Melt them, re-stamp them, make them into jewelry, and they are still worth no less than the market value of the metal.
And who decides what the values of these old coins are?
The coins might bear the likeness of a politician.
They might bear the name of the nation-state.
But these pictures and slogans are merely interlopers on the real point.
What you hold is valuable, not because some legislature, treasury department or central bank says it is valuable.
Its worth was and is dictated by the market, which is to say, the choices and values of human beings.
No government can add to or take away this value except by physically manipulating the coin itself.
Not only that, if you dig deep enough in the coin shop, you might run across coins that were not minted by governments at all, but by private manufacturers.
In the early years of the Industrial Revolution, this was the way coins were made in Britain, not by the royal mint, but by entrepreneurs no different from any other. George Selgin tells the whole story in his aptly named book, Good Money.
It turns out that making money is a business like any other, not something that only governments do. In a free world, it would be something done entirely by private enterprise.
The same is true of exchanging money. Some of the world's first great fortunes were
made this way, profiting from the buy-sell spreads and coinage markets. Today the business
is the same in some respects, and one can see the appeal of it all. Bless those who
sustain it and believe in it. So long as this good money is in your hands, it is your independent
and Store of Wealth. There are no taxes due, no withdrawals required, no forms to fill
out. It is the physical embodiment of independence. It gives you freedom. It secures your rights.
And because this coin is valued not by the nation-state, it rises above it and extends
beyond it. Its value is recognized the world over, and not because the UN has proclaimed
it but rather because it is something everyone on the planet agrees on. Geographic mobility
is only part of it. Look at the dates on the older coins, 1910, 1872, 1830, 1810 and earlier
and earlier. They are still beautiful because they are durable. Their value is not diminished
over time, as with just about everything else we know about. Rather, it increases over time.
And by its very nature, gold protects your investment from the depredations of modern
life. How they inspire the imagination. What was the world like when such coins served
as money? The economy wasn't managed by some central authority, it managed itself from
from within by the buying and selling decisions of economic agents themselves.
The coins were selected by the market to serve as the facilitators of exchange, the things
by which we were permitted to rise above the limits of barter.
They made possible calculation between goods and services that were as widely diverse as
the whole of the human project, and revealed what was profitable and what was not.
So these coins made it possible to organize the world's resources into lines of production
that serve society in the most efficient way.
And how did the politicians figure into this mix?
When they got their hands on these coins, they could do terrible things.
But it was rather difficult for them to get them.
They had to demand that the citizens fork over the coins or else, which is to say, they
had to tax people.
You have to have a pretty good reason to do this, or the lie you tell has to be pretty
darn compelling.
You can only tell fibs so many times before people catch on.
If this is the only money that circulates, the aspiring Leviathan state faces a serious
limit on its capacity to expand, a limit imposed by physical reality and the unwillingness
of people to give up something for nothing.
This is why every state is so anxious to see money substitutes circulate widely, preferably
in the form of paper that can be made at will.
If that same state can get banks to cooperate in creating more paper than can be redeemed
by gold and silver coins, it can begin to habituate the population to the idea of fiat
currency, that is, money that is invented out of whole cloth.
Even better for this state is a system that completely separates paper money from its historical
roots in good money.
Then there are no limits at all to how much money it can make to fund itself and pay its
friends even if that means that money in general becomes even less valuable.
On this process, see Hayek's Prices and Production.
And here we have the short history of how money came to be destroyed and how the modern
and World came to host the ghastly Leviathan that dominates the world.
Here is the basis of destructive and unnecessary wars that last and last, the character-shredding
welfare state, and the swarms of bureaucrats who run our lives in every respect.
It all comes down to the way money was destroyed.
You can tell from looking at the dates on coins that all of this happened surprisingly
recently.
The process began in the early 20th century with the cartelization of the banking system
so that banks could loan out money out of deposits they promised to pay on demand.
The government's own debts would be paid no matter what.
This helped with the war.
Taxes don't cut it when it comes to funding global war, and so the financial system was
encouraged to set aside its usual concerns over stability since it was now guaranteed
not to fail.
The process continued with the attack on gold during the New Deal under the influence of
people like John Maynard Keynes who believed that paper money would usher in a new utopia
of a government-managed economy.
So desperate was FDR to have people stop trading good money that he demanded it all be turned
in.
He said this was necessary to stop the Depression.
Then the paper money revolution was furthered by people like Milton Friedman who believed
We thought that a pure paper money would somehow bring about a stable price level through a formula that may have looked good on paper, but failed to account for the realities of politics.
In the end, we ended up on the other side of the great divide between freedom and tyranny, all symbolized by the contrast between the coins of the past and the coins of the present.
It is reality versus fiat, independence versus dependence, value that lasts versus value
that is the whim of the transitory political class.
You discover all this when you walk into the coin shop.
Have a conversation with the proprietor who tends to be of a type, perhaps a bit crusty,
but highly knowledgeable and independent-minded.
At his office, he lives amidst this history.
He is surrounded by the truth about money that most people never discover.
He is daily faced with the beauty of what once was and perhaps too he imagines the possibility
that it could be again.
He is not usually the despairing type either.
He sees the difference between what is permanent and what is transitory.
If you take the time, you can learn from him.
If you trade with him, you can enter into his world of knowledge and partake in the
ancient truth about money, politics and civilization.
To own these coins helps grant some sense of independence to you too.
You will possess a store of wealth that is not subject to wild bubbles, state-manufactured
inflations and political whims.
It is a kind of privatized secession.
Is it any wonder that people who enter this world think differently from others?
Their blinders are off, they see what is real and true.
They no longer believe in the great modern lie that the State is our wise master in whom
we should trust our very lives.
The owner of gold and silver coins is just a bit less attached to the State than others.
And should a time of great crisis come, and you look among the survivors, you can be pretty
sure that preeminent among them will be those who love the coin shop as much as I do.