Let’s say we have a gold standard. There are 100 ounces of gold in circulation. You have 50 ounces of gold, thus, 50% of the gold stock. Everyone else shares the other half.

I discover a vein of gold and mine 50 ounces of gold and put it into circulation. Now, you and I each have one-third of the gold stock, and everyone else shares the other third.

You haven’t lost an ounce of gold – but now I have as much purchasing power as you do. Have you lost anything? Yes – you have lost total purchasing power, you now have only one-third instead of one-half. But you still have as much gold as you did.

Let’s say you then start to engage in lending – usury. You loan your gold, at interest – compounding interest – to the people who need it, those other people who have one-third of the gold stock.

They engage in labor, and have to pay you back more gold than you lent to them. You haven’t engaged in any work – you haven’t even taken a risk, because if they default, you can claim their collateral.

And the money supply hasn’t grown, either.

You aren’t working for your bread, you are extracting rent on the monetary supply.

Then again, why use gold as money? Why not use copper? Or paper notes?

Now let’s say you open a bank, and everyone stores their gold at your bank, in the safe, so it can’t get stolen. You issue them a ticket for one ounce of gold. Everyone just swaps the paper tickets instead of going to your bank to actually get the gold.

So you get the bright idea – how about you issue more tickets than you have for gold? You know only a handful of people at any one time are actually going to get their gold.

Well, then there is a run on the bank.

So the government steps in and guarantees all bank deposits – the Federal Deposit Insurance Company. You pay a small fee for this insurance.

Now you can print as many tickets as you want, knowing that there is a run on the bank, you’re insured by the government. And there are no more runs on the bank, because everyone knows the government has guaranteed their deposits.

So – I work, because I’m digging gold out of the ground. Everyone else works, making goods and providing services.

But you’re just a parasite, extracting economic rents.

Come to think of it – why gold at all? Instead, I could grow cotton bushes and not just make paper gold tickets, but also t-shirts and bluejeans.

So, then, you have a great idea. You open cotton accounts. Now I can store my cotton at your bank, and instead you issue a paper ticket. Then you realize you can print as many paper tickets as you want …