The Freeman 1972 - The Ludwig von Mises Institute

1972 THE CAUSES OF INFLATION 287content of the coins and thus obtainprincely revenues throughcoin debasement. Once this prerogativeof sQvereignty was safelyestablished, the right to· clip, degrade,or debase the coinage wasno longer.questioned. It became a"crown right" that was one of thechief sources of revenue. 2An essential step toward gradualdebasement of the coinage was theseparation of the name of themonetary unit from its weight.While the original names of thecoins designated a certain weightand thus afforded a ready conceptionof their gold or silver contents- pound, libra or livre, shilling,mark, and soon-the newnames were void of any referenceto weight. The pound sterling wasno longer a pound of fine silver,but anything the sovereign mightdesignate as the national monetaryunit. This change in terminologywidely opened the door to coin debasement.The next step toward full governmentcontrol over money wasthe passage of legal tender laws,which dictates to people what theirlegal money can be. Such laws areobviously meaningless and superfluouswherever the ordinary lawof contract is respected. But wheregovernmentwants to issue inferior2 Cf. Elgin Groseclose, Money andM(Ln (Frederick Unger Publishing Co.,New York, 1961), p. 55 et seq.coins or depreciated paper notes,it must use coercion in the formof legal tender legislation. Then itcan circulate worn or· debasedcoins side-by-side with the originalcoins, falsify the exchangeratios between gold and silvercoins, .and discharge its debt withthe over-valued coins, or makepayments in greatly depreciatedfiat money. In fact, once legaltender laws were safely established,debt repudiation throughmonetary depreciation could becomeone of the great injusticesof our time. Contemporary jurisprudenceand jurisdiction were utterlyparalyzed in their defenseand administration of justice oncethey accepted legal tender laws. Adebt of a million gold marks thuscould be legally discharged withone million paper marks thatbought less than one U.S. penny.And a government debt of fiftybillion 1940 dollars can now bepaid or refunded with a 1971 dollarissue that is worth less thanone-third of the original amount.With the blessings of the courts,millions of creditors can now beswindled out of their rightfulclaims, their property legally confiscated.3But absolute government controlover money was only estab-3 LudWig von Mises, Human Action(Yale University Press, New Haven,1949), PP. 432, 444.