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Advancing Austrian Economics, Liberty, and Peace

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What Has Government Done to Our Money?
Murray N. Rothbard

II.
Money in a Free Society

6. The Shape of Money

If the size or the name of the money-unit makes little economic difference; neither does the shape of the monetary metal. Since the commodity is the money, it follows that the entire stock of the metal, so long as it is available to man, constitutes the world's stock of money. It makes no real difference what shape any of the metal is at any time. If iron is the money, then all the iron is money, whether it is in the form of bars, chunks, or embodied in specialized machinery. [6] Gold has been traded as money in the raw form of nuggets, as gold dust in sacks, and even as jewelry. It should not be surprising that gold, or other moneys, can be traded in many forms, since their important feature is their weight.

It is true, however, that some shapes are often more convenient than others. In recent centuries, gold and silver have been broken down into coins, for smaller, day-to-day transactions, and into larger bars for bigger transactions. Other gold is transformed into jewelry and other ornaments. Now, any kind of transformation from one shape to another costs time, effort, and other resources. Doing this work will be a business like any other, and prices for this service will be set in the usual manner. Most people agree that it is legitimate for jewelers to make ornaments out of raw gold, but they often deny that the same applies to the manufacture of coins. Yet, on the free market, coinage is essentially a business like any other.

Many people believed, in the days of the gold standard, that coins were somehow more "really" money than plain, uncoined gold "bullion" (bars, ingots, or any other shape). It is true that 33 coins commanded a premium over bullion, but this was not caused by any mysterious virtue in the coins; it stemmed from the fact that it cost more to manufacture coins from bullion than to remelt coins back into bullion. Because of this difference, coins were more valuable on the market.

[6] Iron hoes have been used extensively as money, both in Asia and Africa.

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