The History of the State’s Dealings with Money Is a Long History of Lies and Fraud

The history of government management of money has, except for a few short happy periods, been one of incessant fraud and deception.” 

--Friedrich von Hayek

Today holders of bank notes cannot demand to be paid in precious metal. Recall the speech by the president of the German Bundesbank, Jens Weidmann: “Modern money is not backed by any physical asset. Bank notes are printed paper — those knowledgeable among you know that in the case of the euro, it is made of cotton.”

Just as a passing thought: just for fun, send a 5-euro note to the European central bank or a 5-dollar bill to the Fed. Include a friendly letter and ask for it to be redeemed. If you receive an answer at all, it will consist of a nice letter and a different 5-euro note or 5-dollar bill.

At any rate, history has run its course and you can now understand Hayek’s statement that the history of the state’s dealings with money is a long history of lies and fraud.

The origins of the symbiotic relationship between the state and the banking system, to the benefit of both, goes far back in history. So far back that most of the people living today know only a paper money system; they do not question it because they have known nothing else.

Ludwig von Mises in his 1949 book Human Action wrote:

It is a fable that governments interfered with banking in order to restrict the issue of fiduciary media [bank notes] and to prevent credit expansion. The idea that guided governments was, on the contrary, the lust for inflation and credit expansion.

Governments gave banks privileges because they wanted to remove the limits that market money puts on credit expansion, or because they were eager to make available to the treasury an additional source of revenue.

--Andreas Marquart and Philipp Bagus, Blind Robbery! How the Fed, Banks and Government Steal Our Money (München: FinanzBuch Verlag, 2016), e-book.