Fiat Money as an Administrative Good Yuri K-~,netsov Hoppe, H ans-Hermann in his excellent article "How Is Fiat Money Possible? or, The Devolution of Money and Credit, "1 explained that fiat money can come into existence through the progressive degeneration of commodity money substitutes. I would like to suggest an additional scenario by which fiat money can come about, a scenario which may be useful for understanding some events in recent Russian histor)~ Imagine a community with a barter economy where a group of men are permitted to impose a great deal of violence on their fellow citizens. Let's call this group the State. The State prints paper tickets denominated in numbers, passes them out to the population, and declares that everyone must hand over a certain amount of these tickets to the State or face a harsh punishment, say, five years in prison. When the State acquires these tickets, it exchanges them for goods and services. The tickets distributed in this way have some important proper- ties. First, they have an initial use-value for members of the commu- nity (excluding members of the State): they can be used as a means of rescuing oneself from physical violence. Second,
The Review of Austrian Economics – Springer Journals
Published: Nov 27, 2006
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