The Phaserl


Monetary Reform: Fiat vs. Market

from Gary North:

What is fiat money? It comes from “fiat,” which means a formal authorization or proposition or a decree. Synonyms are these: edict, order, command, commandment, injunction, proclamation, mandate, dictum, diktat. It is an arbitrary order.

The phrase “fiat lux” comes from Genesis 1:2: “Let there be light.”

Fiat money is the money issued by a self-proclaimed divine state. It rests on the premise of divine right: no higher appeal. It is the court of final appeal. In short, it is divine.

A free market money system is an operational system to which people can appeal to because it is not statist money. People use gold coins or silver coins to buy what they want. Or they use legal claims to such coins. The state is not in the “money business.”

No nation-state ever allows this. Every nation-state wants to be the highest court of appeal, especially in monetary affairs. Every nation-state claims legal sovereignty over money.

Any gold standard in which civil government is the defining agency is a pseudo-gold standard. It is a counterfeit. When you think “government-guaranteed gold standard,” think “counterfeit.”


In times of great crisis, money dies. The things that money could buy in normal times are not available at any price close to that which prevailed in normal times.

The Bible’s most famous example was the famine in Egypt under Joseph’s administration. We read that the money failed (Gen. 47:15). But there was another case.

And there was a great famine in Samaria: and, behold, they besieged it, until an ass’s head was sold for fourscore pieces of silver, and the fourth part of a cab of doves’ dung for five pieces of silver (II Kings 6:25).

So revelatory are prices of the underlying social conditions that Elisha prophesied the end of a siege by forecasting a dramatic fall in prices: “Then Elisha said. Hear ye the word of the LORD; Thus saith the LORD, Tomorrow about this time shall a measure of tine flour be sold for a shekel, and two measures of barley for a shekel, in the gate of Samaria” (II Ki. 7:1). Before it ended, silver did not count for much. Or put differently, they had to count out a lot of silver to buy anything worth owning. What was worth owning was food.

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