As an etymologist, I tend to frame everything through a linguistic lens. It is hard for me to simply take a word at face value because I know that nine times out of ten, the word’s modern-day understanding differs from its original meaning (connotation vs. denotation). And while some may decry that I am committing an etymological fallacy, I would argue that drawing conclusions about various concepts without analyzing semantic shifts is in itself fallacious. Why? Because I believe in the power of root causes; that is, rather than address symptoms of a societal affliction, we should cut the malady off at its point of origin. And what better source is there to understand a concept’s origins than the word(s) that label said concept. Remember, a word is an utterance that represents an idea. Ideas don’t change, but it seems that the words we use to convey said ideas do. My goal here is get you, the reader, to think; I seek to cultivate your mind through my etymological pondering and musings. So without further adieu, let’s talk about the word dollar.
The word dollar comes from the German thaler, a silver coined used as currency throughout Europe for 400 years.
- Thaler is the abbreviation of joachimsthaler, meaning “that which hails from Joachimsthal.”
- Joachimsthal refers to the Bohemian town Joachimsthal (found in present-day Czech Republic), home of the silver mines and where the first coins were minted.
- Thaler comes from thal, which is German for valley; thaler means “from the valley”, referring to the silver Bohemians mined from Joachimsthal.
Given the evidence, I contend that the original dollar was a coin and not paper, rendering a dollar bill oxymoronic. If a dollar is a coin, and a bill is paper, then a dollar bill cannot exist (unless the bill is pure silver.) The etymological inconsistency in the world’s monetary consciousness is the root of what plagues our financial system. Fiat money and the fractional reserve system create more economic chaos than it solves or prevents. While inflation and deflation will still exist with commodity-backed currency, the gold- or silver-backed money yields to natural limitations, preventing bankers from arbitrarily create money. While creating money creates credit which then allows for business and industry to thrive, the financial system seems too reactive to outside pressure. Like a ticking bomb, financial chaos is inevitable. That is why some argue that nations can better regulate their currency when it is backed by silver or gold.
What Is Money
Money is the thing generally accepted as payment. (Lewis, 2017) Societies use it as an exchange for goods and services, and it has many forms. These forms include rice, mackrels, and paper bills. The word itself comes from through the French monie and the Old French monoie meaning “coinage or metal currency” (1300s). Its Latin root is moneta, a place for coining money, from Moneta, a surname for the Roman goddess Juno. The Romans minted coins near her temple on Capitolline Hill.
According to Charles Wheelan, author of Naked Money, today’s money is fiat that has no intrinsic value, but it does have value. That is to say that a 20 dollar bill is worth $20. You can measure this by the goods hat you can buy with that $20. Since our money is not backed by a commodity (such as gold, silver, rice, etc.) then money is backed by what is called the “basket of goods.” This is something that we as a society agree upon, and thus gives money a predictable purchasing power. Most modern-day economists argue that this is preferred to commodity-backed money because its less prone to swings in value, particularly deflation. Deflation is when the value of the dollar increases, thus lowering prices (this is seemingly a good thing, but it can spiral and lead to recessions, like in 2008 with the housing bubble crisis).
According to Wheelan, some argue that the American “dollar” is the worst form of money one might conceive because it has no intrinsic value or inherent scarcity. This is because central banks can create money with one single keystroke; thus, there is no physical limit on the speed or degree to which currency can be debased. At the same time, the “dollar” is a wonderful form of currency because again, it is widely accepted and has predictable purchasing power. And a central bank can control inflation or deflation by altering how much money is available by way of monetary policy (raising and lowering interest rates). For example, when inflation runs rampant (inflation occurs when the value of the dollar decreases, raising prices), central banks can inject money into the economy. When interest rates are lowered, more people borrow money that then allows us to start business and create new things, which allows our society to grow. Thus, through borrowing and lending (the credit system), fiat currencies promote prosperity and stability.
So what’s better? Commodity-backed money or fiat? Is fiat real money based on the etymology of dollar? What are your thoughts?