What is Money? (1913)
<i>But throughout the whole range of history, not only is there no evidence of the existence of a metallic standard of value to which the commercial monetary denomination, the “money of account” as it is usually called, corresponds, but there is overwhelming evidence that there never was, a monetary unit which depended on the value of coin or on a weight of metal; that there never was, until quite modern days, any fixed relationship between the monetary unit and any metal; that, in fact, there never was such a thing as a metallic standard of value.</i><p>This is a very slippery argument. The overall point of the essay is to show that basing one&#x27;s currency on a metallic standard is silly and destructive. In this quote, the author is correct in that rarely in history has the monetary unit been permanently and inalterably fixed to an exact weight of metal. But -- it has been the norm in history to have a substantial precious metal content in money, with that content being fixed in the short term, and any lessening of the amount leading to charges of debasement, and possibly even the refusal to accept the currency.<p>The reason why precious metals have been an important part of money is trust -- an issue which the author fails to address. It takes a very strong government to make its subjects accept fiat currency. If the sovereign pays his soldiers in fiat currency, the soldiers know that the sovereign can infinitely dilute the currency, making the currency worthless. Whereas if the sovereign pays in coin containing precious metal, the soldier knows the precious metal is likely to be of value in many markets, no matter what the sovereign does. And by requiring money to be made from previous metals, it slows down the rate at which the sovereign can debase the currency (although of course the sovereign can and does slowly reduce the metal content).<p>If you trust your a particular government (or organization, or corporation) completely, then the author&#x27;s arguments make sense, and you can accept the scrip of that government as currency. But if you don&#x27;t trust that government completely... then you need a more complete assessment of the pros and cons of different monetary arrangements.