“Money is Money, and Paper is Paper. All the invention of man cannot make them otherwise.”
With those words, Thomas Paine went after what he saw as one of the greatest scams in history: governments claiming that paper is money.
Through a series of devastating critiques, Paine delivered one of the most brutal takedowns of paper money ever written, systematically exposing every aspect of this fundamental fraud.
PROPERTIES OF MONEY
Paine started with a simple truth that cuts through centuries of propaganda.
“Gold and silver are the emissions of nature: paper is the emission of art.”
He then explained the key properties of money. First, real money’s value must come from a source outside of human control, making it stable and trustworthy.
“The value of gold and silver is ascertained by the quantity which nature has made in the earth. We cannot make that quantity more or less than it is, and therefore the value being dependent upon the quantity, depends not on man.
Man has no share in making gold or silver; all that his labours and ingenuity can accomplish is, to collect it from the mine, refine it for use and give it an impression, or stamp it into coin.”
Next, its value must be intrinsic. Even a government stamp on a coin doesn’t create value – only convenience.
“Its being stamped into coin adds considerably to its convenience but nothing to its value. It has then no more value than it had before. Its value is not in the impression but in itself. Take away the impression and still the same value remains.”
Finally, money has to be lasting and durable:
“Alter it as you will, or expose it to any misfortune that can happen, still the value is not diminished. It has a capacity to resist the accidents that destroy other things.”
WHY PAPER FAILS
Paine couldn’t be more clear. All those properties are required for something to be money.
“Nothing which has not all those properties, can be fit for the purpose of money.”
Paper has none of those qualities, which is why it fails as money.
“PAPER, considered as a material whereof to make money, has none of the requisite qualities in it. It is too plentiful, and too easily come at. It can be had anywhere, and for a trifle.”
Because of this foundation, Paine held that it was pure fantasy to call paper money, or use it as such.
“The alchemist may cease his labours, and the hunter after the philosopher’s stone go to rest, if paper can be metamorphosed into gold and silver, or made to answer the same purpose in all cases.”
THE EVILS OF PAPER MONEY
Paine also described some of the litany of evils that arise in a paper money system. First, it’s just an illusion – it looks real but has no substance. In reality, it’s a scam.
“BUT when an Assembly undertake to issue paper as money, the whole system of safety and certainty is overturned, and property set afloat. It is like putting an apparition in the place of a man; it vanishes with looking at it, and nothing remains but the air.”
Second, it turns everyone into speculators and gamblers.
“It turns the whole country into stock-jobbers. The precariousness of its value and the uncertainty of its fate continually operate, night and day, to produce this destructive effect.”
Lacking real value, paper becomes a tool for faction and manipulation – eating away at the morals of the people.
“Having no real value in itself it depends for support upon accident, caprice and party, and as it is the interest of some to depreciate and of others to raise its value, there is a continual invention going on that destroys the morals of the country.”
That same uncertainty breeds constant deceit, tearing apart justice and destroying the fabric of the society itself.
“Its uncertain and fluctuating value is continually awakening or creating new schemes of deceit. Every principle of justice is put to the rack, and the bond of society dissolved: The suppression, therefore, of paper money might very properly have been put into the Act for preventing vice and immorality.”
And it just keeps getting worse.
One of the most immoral things that happens in this kind of situation is there always ends up being powerful people demanding more and more money printing. It’s the scammers playbook they still use today.
“There are a set of men who go about making purchases upon credit, and buying estates they have not wherewithal to pay for; and having done this, their next step is to fill the news-papers with paragraphs of the scarcity of money and the necessity of a paper-emission, then to have a legal tender under the pretense of supporting its credit, and when out, to depreciate it as fast as they can, get a deal of it for a little price, and cheat their creditors; and this is the concise history of Paper-money schemes.”
For the rest of us, though, the whole system is smoke and mirrors.
“Paper-money is like dram-drinking, it relieves for a moment by deceitful sensation, but gradually diminishes the natural heat, and leaves the body worse than it found it.”
And in the end, it’s all just a big bubble.
“It is a bubble and the attempt vanity.”
THE BUBBLE ECONOMY
What happens in a paper money bubble? Paine and the rest of the founding generation called it depreciation – what most people call inflation today. The more money they print, the less purchasing power it has, which is represented by an increase in prices for products and services.
“This gives the appearance of things being dear when they are not so in fact, for in the same proportion that any kind of money falls in value articles rise in price.”
Paine explained how that played out during the War for Independence, which also birthed the phrase, “not worth a Continental” due to the Continental dollars that quickly lost their value.
“The paper money, though issued from Congress under the name of dollars, did not come from that body always at that value. Those which were issued the first year, were equal to gold and silver. The second year less, the third still less, and so on, for nearly the space of five years.”
The situation got pretty dire for many Americans. Paine described an example of how he experienced it first-hand.
“Paper money in America fell so much in value from this excessive quantity of it, that in the year 1781 I gave three hundred Paper dollars for one pair of worsted stockings. What I write you upon the subject is experience, and not merely opinion.”
To make matters worse, paper money depreciation doesn’t just cause price inflation, it also creates an endless cycle – a negative feedback loop that drives out real money – what’s known as Gresham’s Law today.
“The natural effect of encreasing and continuing to increase paper currencies is that of banishing the real money. The shadow takes place of the substance till the country is left with only shadows in its hands.”
In other words, it’s all just smoke and mirrors. Eventually, it leads to bankruptcy:
“Every new emission, until the delusion bursts, will appear to the nation an increase of wealth. Every merchant’s coffers will appear a treasury, and he will swell with paper riches till he becomes a bankrupt.”
THE FINAL VERDICT
Here’s the twist. Paine wasn’t against paper itself. In fact, he argued that it could be quite useful, when done properly.
“The only proper use for paper, in the room of money, is to write promissory notes and obligations of payment in specie upon. A piece of paper, thus written and signed, is worth the sum it is given for. The value, therefore, of such a note, is not in the note itself, for that is but paper and promise, but in the man who is obliged to redeem it with gold or silver.”
Paine’s greatest issue was that paper money only survives with the threat of government violence – through tender laws.
“IF any thing had, or could have, a value equal to gold and silver, it would require no tender-law; and if it had not that value it ought not to have such a law; and, therefore, all tender laws are tyrannical and unjust, and calculated to support fraud and oppression.”
In his view, people who support such laws are criminals, or maybe they’re delusional because they appear to believe “a nation cannot be exhausted while there is paper and ink enough to print paper money.”
In a republic – or in any free society, however – government should never have that power. It’s total tyranny.
“AS to the assumed authority of any Assembly in making paper money, or paper of any kind, a legal tender, or in other language, a compulsive payment, it is a most presumptuous attempt at arbitrary power. There can be no such power in a Republican government: The people have no freedom, and property no security where this practice can be acted.”
This flips the entire reason to have a government in the first place.
“Tender-laws, of any kind, operate to destroy morality, and to dissolve, by the pretence of law, what ought to be the principle of law to support, reciprocal justice between man and man”
For Paine – politicians who violate this foundational principle by pursuing paper as money anyway – deserve the ultimate punishment.
“And the punishment of a member who should move for such a law ought to be DEATH.”
Thomas Paine’s final verdict?
No matter the excuse, no matter the scheme, no matter the reason given: paper money always ends the same way.
“The evils of paper-money have no end.”
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