Executive Summary
Before we can determine whether one design is more beneficial to trade than another, we must first understand what trade is. This includes understanding its foundational forms and how money, specifically the design of coins, may improve or hinder those operations. This text begins with a structured, inductive definition of trade. This step is essential, as it frames the reasoning behind why honest money remains vital to a functional market economy.
The Fundamental Nature of Trade
Most modern treatments of trade begin with barter—that is, the direct exchange of goods or services between two parties without the use of money. But this is misleading. Barter is, in fact, a complex trade operation, not a foundational one. It requires the coincidence of mutual needs, subjective valuation, and a mutual agreement on relative worth—all without a shared unit of account.
Worse, barter involves what are technically two interlocking trades—each party must both give and receive something they perceive as equal or favourable. Without a pricing mechanism or standard of value, estimating fair exchange in barter relies on approximations, traditions, and negotiation, often inefficiently.
Instead, the most atomic form of trade is production for personal use—a solitary act, not a social one. It is a transaction one performs with oneself. The individual trades their time, energy, and resources in exchange for the satisfaction of a personal need or want. This is the simplest form of non-monetary trade, and the most direct. If someone grows their food, repairs their shoes, or builds their own home, they have effectively engaged in a trade, one governed by the same cost-benefit logic that governs all market activity.
A personal example may help illustrate this. I learnt to cut my hair many years ago. Previously, to get a haircut, I would need to plan transport, book an appointment, and rely on the skills of another person. The process may take up to 90 minutes and cost $40, with no guarantee that I will be satisfied with the result. Now, with around $200 worth of equipment and some practice, I can cut my hair anytime I choose, always to my satisfaction, in under an hour—including preparation, the cut itself, clean-up, and a shower. This is a clear case of a self-directed trade: time, skill, and capital invested once to meet a recurring need far more efficiently than any external exchange could provide.
The viability of this self-directed transaction depends on whether the individual can produce the required good at a level of quality and efficiency that would not be more easily or affordably met by acquiring it from someone else. Where others can meet the need more effectively, external trade becomes attractive. In that case, the individual produces not for themselves, but for others, to gain something in return.
And it is here, at the transition from production for oneself to production for others, that money begins to take on importance. It is the missing medium that allows specialised production, price signalling, and complex coordination across people, places, and time.
The Nature of Monetary Trade
A monetary trade does retain certain similarities with barter, in that money itself is simply another market product. However, the critical distinction is that money is a common unit of value that can be easily compared with the alternative uses of that money in the marketplace.
This feature enables a higher level of rational decision-making. For example, the buyer of some beef may consider that the money they spend could alternatively be used in other trades. They may determine that another product offers greater value and choose not to proceed with the purchase of the beef. Likewise, the seller, seeing money as a flexible and marketable commodity, is not locked into a direct exchange but can later use that money to acquire any number of goods or services.
Thus, in a monetary exchange, at least one side of the transaction is flexible and fungible, allowing both parties to evaluate not just the immediate trade but a spectrum of potential alternatives. This is what enables monetary systems to scale, support dynamic pricing, and operate across large populations without requiring a mutual coincidence of wants.
Why Coin Design Matters
Once the need for money arises, so too does the importance of what form that money takes. Not all forms of money are equally effective. Some items—due to divisibility, durability, portability, and intrinsic value—are more suitable for monetary operations than others.
In a free market, money evolves as a tool, selected not by decree but by performance. Coins, historically made from precious metals, emerged due to their alignment with these qualities. But their physical characteristics—weight, shape, metal composition, symbols—matter greatly. A poorly designed coin may erode trust, confuse users, or facilitate fraudulent practices such as clipping, debasement, or counterfeiting.
Thus, before we can assess the benefit of one coin design over another, we must begin with trade itself: how it originates, how it scales, and what is needed to support it. Only from this foundational perspective can we explore what money truly is—and what it ought to be.
Money in the Marketplace
In a free market, money is produced and consumed as the market sees fit. It experiences supply and demand fundamentals like any other product. The value of commodity money, or specie, reflects both its monetary and non-monetary desirability. Unlike fiat money, its supply is naturally constrained by the effort, energy, and cost required to produce it. This imposes a kind of automatic discipline—one that does not require technocrats, central bankers, or monthly press releases to enforce. The market itself governs the issuance of such money, resulting in a closer reflection of real-world economic activity. In short, honest money is hard to fake, and that’s precisely why it works; as a regular commodity constrained by the effort and cost of production.
Historically, except for the late 20th century and beyond, coins have been made from precious metals, principally gold and silver. The design of coins, from the electrum pieces first pressed by the Lydians around 700 B.C. to the standardized coinages of the modern industrial world, has developed along with advances in culture, commerce and industry—though not always at the same pace.
From ancient times until just before the 20th century, minting operations were often privately owned. However, private miners rarely had complete control over their product. Monarchs frequently dictated coin standards and took liberties with the content of coins, resulting in debasement and erosion of trust. The quality of coinage often rose and fell according to the morality and discipline of those in power.
Specie Money and Economic Reflection
Before the 20th century, most money in circulation was in the form of specie. Specie money, made from gold or silver, increased in supply only through the increased mining and refining of these metals—a process inherently tied to real economic output. Thus, increases in the money supply reflected increases in economic activity.
This link between monetary supply and productive effort meant that the value of money remained relatively stable. New money was created only when it was worth the effort. Its value was anchored to real-world resource constraints.
Fiat money breaks this link.
The Fiat Breakaway
Fiat currency, by contrast, is not constrained by any natural resource limit. The cost of production is near zero. A $100 bill may be created as easily as a $1 bill. In the digital age, this distinction becomes even more profound: creating a billion dollars in central bank reserves is merely an act of data entry.
All other things being equal, and given sufficient time, the value of money in the marketplace always settles to a small percentage above the production cost of its most efficient producer. For specie, this is constrained by the energy and effort required to mine and mint. For fiat, the lower limit is virtually zero—the cost of typing zeroes into a ledger.
It is therefore unsurprising that fiat currencies tend to lose value over time. Over the 20th century, the U.S. dollar lost approximately 95% of its purchasing power. Despite innovations and technological growth, fiat money failed to retain its role as a reliable store of value.
A History of Fiat Collapse and the Global Experiment
While the construction of coins has altered many times throughout history, the essential nature of money as a representation of stored value—anchored to production—remained constant until the early 20th century. Whenever a society severed money from this productive foundation, it brought about eventual economic instability.
The historical record of fiat collapse is not hypothetical; it is observed. China experienced nine separate instances of paper money failure. Germany’s Weimar hyperinflation in the 1920s destroyed the middle class’s wealth. In recent times, Mexico, Chile, and Argentina have all experienced collapses due to excessive monetary issuance that is unmoored from real economic output.
Venezuela, in the 2010s, is perhaps the most explicit modern warning. Inflation reached over 1,000,000% in 2018. The local currency became so worthless that even weighing banknotes by the kilo was not unheard of. Goods were priced in foreign currency; the populace turned to barter and black markets for survival.
More recently, Zimbabwe abandoned its dollar after its collapse in 2009. Attempts to reintroduce a national currency, including the launch of the “ZiG” (Zimbabwe Gold) in 2024, were met with swift depreciation. By early 2025, inflation had surged to over 85%, once again demonstrating that no official stamp can override the market’s rejection of artificially created value.
Even developed economies are not immune. During the COVID-19 pandemic, unprecedented monetary expansion occurred globally. Between 2020 and 2022, the U.S. Federal Reserve increased the money supply (M2) by over 40%. Inflation soon followed, reaching levels not seen in decades. Central banks, once viewed as steady institutions, have become politicised and reactive. The long-term consequences of this expansion are still unfolding.
A Global Monetary Experiment
Unlike in the past, when a failing fiat currency could be replaced by foreign specie, bullion, or reliable alternatives, today’s global system is almost entirely fiat-based. There is no longer an anchor.
When the United States severed gold convertibility in 1971, the international reserve currency ceased to have a specie backing. Since then, the world has been subjected to a global and unprecedented monetary experiment. Every major currency now floats unbacked by commodities at any level. And in over 100 years of fiat history, no unbacked currency has survived without either catastrophic inflation or eventual replacement.
This implies to me that we are living through the tail end of a system with no precedent for durability. As Mark Twain once said, “History never repeats, but it does rhyme.” If historical performance is any guide, the window for this global fiat system may close by 2030.
Signs of Stress
Already, many economies are showing signs of monetary stress. The U.S. debt-to-GDP ratio exceeds 120%, with no credible path to reduction. The Bank of Japan owns a majority share of its national bond market. Central banks from Canada to New Zealand are experiencing crises. Even in Australia, housing prices, real wages, and monetary policy all appear disconnected from productive reality.
It is in this context that the humble coin, or any representation of honest money, becomes once again worthy of attention. Honest money—money backed by value, governed by supply and demand, and understood as a product of effort—may once again be necessary if we are to maintain long-term economic stability and restore the foundations of productive trade.
Looking Ahead: What Comes Next
This essay is the first in a series examining the principles and practices of honest money, with particular focus on historical and modern coinage. Future entries will explore:
- Specie coinage traditions in the UK and US, and the design features that promoted trust and usability (such as milling, consistent weights and measures, and reliable mint markings).
- The historical role of internationally accepted trade coins, including those based on the Joachimsthaler, and the practical success of their standardised metallic content.
- How the abstraction of money into terms like “dollar” or “pound” has enabled progressive debasement over time, by detaching currency from its defined metallic value.
- Why reintroducing currency definitions in terms of actual grams of metal—not symbolic names—could provide the transparency and resistance to debasement that fiat systems fundamentally lack.
These topics will build on the foundational idea explored here: that trade begins with individual production, scales through market interaction, and ultimately depends on money that reflects—not undermines—real economic effort.