6. Summary: Government and Coinage

The compulsory minting monopoly and legal tender legislation were the capstones in governments’ drive to gain control of their nations’ money. Bolstering these measures, each government moved to abolish the circulation of all coins minted by rival governments.10 Within each country, only the coin of its own sovereign could now be used; between countries, unstamped gold and silver bullion was used in exchange. This further severed the ties between the various parts of the world market, further sundering one country from another, and disrupting the international division of labor. Yet, purely hard money did not leave too much scope for governmental inflation. There were limits to the debasing that governments could engineer, and the fact that all countries used gold and silver placed definite checks on the control of each government over its own territory. The rulers were still held in check by the discipline of an international metallic money.

Governmental control of money could only become absolute, and its counterfeiting unchallenged, as money-substitutes came into prominence in recent centuries. The advent of paper money and bank deposits, an economic boon when backed fully by gold or silver, provided the open sesame for government’s road to power over money, and thereby over the entire economic system.

• 10The use of foreign coins was prevalent in the Middle Ages and in the United States down to the middle of the 19th century.