Can a society keep going without sound money?

Political money is unsound money, and while civilization cannot exist without sound money, it can do without predatory government.

Money will never be safe as long as there are states. But first, let's get clear.

Ludwig von Mises says that sound money has two parts: It is used as a common way to trade goods and services, and it is hard for governments to mess with it. We can see right away that there is no sound money in the world today. All the talk about banks and their systemic risks right now is about money that can be used for political purposes, which is the kind of money that brings civilization to its knees.

There is, however, at least one group that is fighting back. In the US, the Sound Money Defense League is working with individual states to make gold and silver coins legal again. On their website, it says:

. . . sound money activists are launching exciting initiatives at the state level to challenge the monetary monopoly of the Fed….
From Alabama to Wyoming, states across the U.S. continue to pass legislation to eliminate taxes on gold and silver, establish in-state depositories, protect state taxpayer funds with sound money, and more.

It's good to see people stand up for better money and try to get it recognized for the benefits it has, especially since the Fed's "mandate" is to cause inflation. The movement also brings attention to the Constitution's rule that no state can accept anything but gold and silver coins as payment for debts. Later, this rule was replaced by the phrase "national emergency." But the League does say:

Ultimately, individual states cannot bring soundness to America’s monetary system on their own. The root of the problem is the Federal Reserve, U.S. Treasury, and Congress who have fully embraced fiat money and abandoned monetary restraint.
Even more deeply rooted is the fact that most people, including monetary economists, don't know much about money and banking. Henry Ford is said to have said that if people really knew what was going on, it would start a revolution overnight. This shows how dangerous the accepted corrupt story is. Recognizing this, the Federal Reserve has bet on Mark Twain's observation that "virtue has never been as respectable as money" and hired economists, making "real criticism of the central bank a career liability for members of the profession."

So, people usually ignore or make fun of people who say the Federal Reserve System is just a big fake money ring at the heart of the economy.

Currencies Unbacked by Gold - the Sound Money are Doomed - Commodity Trade  Mantra

Can a gold-standard state fund war?

But things are even worse than that. Randolph Bourne famously said in his unfinished essay The State that "war is the health of the state" because it brings "a sense of the sanctity of the state." And most wars happen when the printing press is going full speed. Only the Mexican War of 1846-1848 was not affected by inflation. This was because it was paid for by the newly created Independent Treasury.

World War I was one of the deadliest wars in history, which is what made Bourne write his essay. Both sides of the war gave up on sound money (gold) to fight it, even though Gary North said that "sound money" was just a promise from the government to support it. During a war, the government never wants to run out of money, and money that comes off the printing press (or its electronic equivalent) is much better than money that can only be made in small amounts, like gold.

Rothbard, following in the footsteps of Oppenheimer and Nock, said that a state is a predatory organization because it doesn't make anything but uses its monopoly on force to keep itself going and grow. In this way, all governments in the world today are like predators. War is a threat to their lives, and they are willing to do anything to stop it except make good money.

“National security” wasn’t always our foundational principle

During the Writs of Assistance case in February 1761, James Otis, Jr. spoke for a long time in Boston's State House against the legality of the writs. General search warrants are what we call writs today. The Fourth Amendment says that they can't be used. One of the people there was a young John Adams, who would later remember that:

Otis was a flame of fire; with a promptitude of classical allusions, a depth of research, a rapid summary of historical events and dates, a profusion of legal authorities. . . . Then and there the Child Independence was born. ... The seeds of Patriots & Heroes ... were then & there sown.

Researcher A. J. Langguth in Patriots: The Men Who Started the American Revolution described it this way:

In wig and black gown, James Otis stood up to speak, and something profound changed in America. . ..

The British constitution [had become] only and whatever Parliament said it was. But Otis soared beyond that argument. Every man lived in a state of nature, he said. Every man was his own sovereign, subject to laws engraved on his heart and revealed to him by his Maker. No other creature on earth could legitimately challenge a man’s right to his life, his liberty and his property. That principle, that unalterable law, took precedence . . . even over the survival of the state. (Emphasis added; P. 23)
Even though Otis's five-hour defense failed in the end, it put him at the top of the list of patriot leaders. Also, in 1764, Otis wrote, "The colonists are free by nature, as are all men, whether they are white or black."

As Jefferson wrote, states exist to protect us or to protect our inalienable rights. Every state is a failure, to say the least, because of how predatory it is. James Otis, Jr. pointed the growing revolutionary spirit in the right direction, whether he knew it or not. Who among our leaders would say that each person is more important than the state, and really mean it?


Gary North said in 2011 that the coming "Great Default" will be the "final stage of the politicians' addiction to debt." This means that states will be in danger because of their own problems. He wrote, "Future generations will vote in new politicians who will take advantage of the trusting, naive people who own government debt."

North believed in a small government, which meant that he wanted a small state. Most libertarians do. But think about it from a different angle. Small governments get bigger. The future doesn't depend on "new politicians" bringing us clean versions of the same mistakes from the past. It depends on figuring out how a government based only on market incentives works and then putting it into place. In a lot of ways, we still live under that government.