Reply To: Jeff, help me understand how inflation is theft…


In a libertarian society, private property rights are given the sanction of law. As a crime against private property rights, theft can occur as either the use or threat of violence or as fraud. Fraud occurs when a person substitutes something in the place of what he has agreed to exchange with another person. A counterfeit good is used to commit fraud. So, counterfeiting is illegal because it is implicit theft. Fraud, and thus implicit theft, would also occur if a person produced a counterfeit title of ownership to property and then traded it to someone else as genuine.

As you say, in a libertarian society people will choose what good they prefer as money. Whatever they choose, however, the production of that good will be regulated by profit, which in turn is generated by voluntary exchange of private property, just like that of any other good. Furthermore, money can be counterfeited in the same manner as any other good., The classic case is debasement of precious-metal coins passed off as full-valued. People could also choose to use titles of ownership to money as a medium of exchange. Bank notes or checking account deposits, for example. If these money substitutes are legally titles of ownership to money itself, then, they could be counterfeited by producing bank notes or checking account balances for which the issuer holds no corresponding money (i.e., fiduciary media).

In a libertarian society, entrepreneurs are free to try issuing fiat money in competition with other entrepreneurs producing commodity money and short-term loans as money substitutes in competition with other entrepreneurs producing money certificates. Success in the first case seems hopeless and in the second case extremely problematic. But those are questions of economic analysis and not private property rights.

To the extent that fiat money and fiduciary media are sustained in the market by legal privileges (i.e., legalized aggression against private property rights), then their issue entails unjust income and wealth redistribution. The legal privileges are the source of the theft.