The emergence of state money and the centralization of economic power

The development of economic systems is inextricably linked to the evolution of exchange mechanisms. For a long time, theoretical considerations focused on how markets seem to produce tools for trading by themselves. However, historical reality shows that ruling authorities have always had a tremendous influence on the design of these systems. theAppropriation of monetary sovereignty by state agencies marks a turning point in human history. This process turns an organic tool of freedom into an instrument of central control.

The organic origin of the medium of exchange

Originally, the medium of exchange is completely spontaneous from the countless small decisions of free market participants. These decentralized processes create a tool that greatly simplifies the exchange between strangers. Individuals can prove each other’s favors without immediately demanding real consideration. The service rendered becomes socialRecognized by receiving a generally accepted exchange of interests. This object acts as social proof of the service rendered and stores the value of work for the future.

The abstract function of value measurement

At the same time, this exchange object serves as a universal measure for the value of various goods, although every person evaluates these goods in a completely different way. The subjective preferences of the individual are made comparable and marketable by this general denominator. Over time, the medium of exchange achieves a higher degree of abstraction and is deeply embedded in legal structures.It migrates to the center of large human communities and only enables their complex organization. The system acts as a huge social network of relationships that goes far beyond what human memory could remember.

The physical accounting system of the society

This amazing organizational performance accomplishes the medium of exchange because it essentially represents a pure accounting system. It works completely independent of modern calculating machines or cumbersome written account books. Even possession of a font is not mandatory for this basic function. Physical money forms an easy-to-understand systemBasis of suitable and forgery-proof materials. Anyone who accepts a goods or service from another person posts this to the large social register by handing over the safe object to the other person as recognition.

The temptation of the central exercise of power

Of course, such a system that is enthroned in the absolute center of the social structure arouses enormous desires. It is obvious that the one who takes control of this accounting system can gain a massive advantage. At the same time, the centralized organization of the system also offers functional advantages for general administration.Ruling instances quickly recognize the potential to direct and monitor the economic flows of the population. The introduction of a state-controlled medium of exchange becomes a logical step for every expanding authority.

The declaration of the state monopoly money

In this constellation, the so-called prince’s allowance arises, in that a higher authority declares a monopoly estate to be an official medium of exchange by means of a sovereign decree. This is done through a mere charter, i.e. a written order from the authorities, without the property having to face a real economic value. The object thus monetized retains its character as puremedium of exchange and will not be used to securitize debt. This form of money is carried into the economy from outside and does not endogenously arises from the free market events. The state authority is thus replacing a purely legal construct in the place of the organically grown market.

The differentiation from the credit-based medium of exchange

For the conceptual sharpening, this state decree money must be strictly delimited from the credit-based medium of exchange. The latter can only arise if every newly created object is faced with a tested real value as cover. If the credit-based medium of exchange is also declared the official means of payment, it is not just a matter ofprincely money. The fundamental difference lies in the lack of economic coverage for pure sovereign money. This differentiation is essential to understand the true mechanisms of state money creation and their impact on society.