We know from anthropological records that the first money in world history was credit money, in particular state credit money, aka fiat money, which is money introduced by a violent authority that imposes a tax in its currency and then proceeds to spend the currency into existence to move resources and labor into the public sector, as I’ve explained before, and as you can read in books like London School of Economics anthropology professor David Graeber’s Debt – The First 5000 Years.
Even the barter economy that supposedly preceded the advent of gold as money has never existed outside the minds of many “gold standard” theorists. This compounding effect of piling unproven falsehoods upon more unproven falsehoods has had absolutely disastrous consequences in the realm of economic thinking.
Recently I’ve encountered some arguments from people suggesting that while I may be correct as far as world history goes, surely at least in the United States money was initially gold & silver coins, before the advent of fiat money issued on top.
This is also a made up claim.
Here are some relevant, documented, referenced excerpts in the Wikipedia post on Early American currency:
One by one, colonies began to issue their own paper money to serve as a convenient medium of exchange. In 1690, the Province of Massachusetts Bay created “the first authorized paper money issued by any government in the Western World.” This paper money was issued to pay for a military expedition during King William’s War. Other colonies followed the example of Massachusetts Bay by issuing their own paper currency in subsequent military conflicts.
The paper bills issued by the colonies were known as “bills of credit.” Bills of credit were usually fiat money: they could not be exchanged for a fixed amount of gold or silver coins upon demand. Bills of credit were usually issued by colonial governments to pay debts. The governments would then retire the currency by accepting the bills for payment of taxes. When colonial governments issued too many bills of credit or failed to tax them out of circulation, inflation resulted.
After the American Revolutionary War began in 1775, the Continental Congress began issuing paper money known as Continental currency, or Continentals. Continental currency was denominated in dollars from $1⁄6 to $80, including many odd denominations in between. During the Revolution, Congress issued $241,552,780 in Continental currency.
Continental currency depreciated badly during the war, giving rise to the famous phrase “not worth a continental”. A primary problem was that monetary policy was not coordinated between Congress and the states, which continued to issue bills of credit. “Some think that the rebel bills depreciated because people lost confidence in them or because they were not backed by tangible assets,” writes financial historian Robert E. Wright. “Not so. There were simply too many of them.” Congress and the states lacked the will or the means to retire the bills from circulation through taxation or the sale of bonds.
States have fixed prices of certain things throughout history, always to please certain special interest groups. The so called gold standard is nothing but a fiat money system with a gold price fixed by the state, a policy supported by special interest groups for various reasons, and suspended whenever expedient to the plans of other powerful groups.
The people who claim the “natural” gold money came first, and then was replaced by fiat money issued on top of it, have it precisely backwards. Fiat money came first, and was at times off and on accompanied by a government policy of fixing the gold price at a certain level.
1 thought on “The First US Money Was Fiat, Not Gold; The “Gold Standard” Is A Fiat Money System With A State Fixed Gold Price”
Brilliant comment excerpt from Reddit (even though I disagree with everything else the guy says lol):
‘Throughout human history all forms of money has always been issued and/or regulated by a central authority.
Precious metals may have been used in inter-society trade from time to time, but they were almost never used as currency in the absence of a central authority authorizing and enforcing their value. Hence why gold coins were often called “crowns”. They had the image of the central authority stamped onto them.’