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Studienbanner_klein Studien von Zeitfragen
39. Jahrgang InternetAusgabe 2005

Science of Money


The Lost Science of Money


By Stephen Zarlenga (*)

Introductory Remarks to a Speech held at the US Treasury December 4, 2003



I thank the US Treasury for inviting me. It’s a great honor and opportunity to bring the research results of the American Monetary Institute to your attention, which are relevant to the developing fiscal crises faced by several states. Part of our 501c3 mission statement is to do just that.

The fiscal problem has its roots in the structure and control of our monetary system and I intend to show how that structure has ultimately been based on a false or inadequate concept of the nature of money.


Lost SciencePerhaps the chief failure of economics is its inability, from Adam Smith to the present to define or discover a concept of money consistent with logic and history. Economists rarely define money, assuming an understanding of it.

It’s still being argued whether the nature of money is a concrete power, embodied in a commodity like gold; or whether it’s a credit/debit issued by private banks. Does its value come from the material of which it’s made? Or is it, as we have concluded, an abstract social power - an institution of the law, having value because its accepted in exchanges due to the sponsorship of government?

The correct answer leads to conclusions on the proper monetary role of government; whether the power to create and control money should be lodged, as at present in a somewhat ambiguous private issuer - the Federal Reserve System and its member banks - or should be wholly reconstituted within government. An accurate concept of money will light the way to solving the present fiscal crisis.


We have two basic approaches to understanding money: A theoretical method based on logic; and an empirical approach based on experience or history. Practitioners of the two methods arrive at very different conclusions. Theoreticians usually support private commodity money and private credit money. Historians normally want a much larger role for government.

Alexander Del Mar the great monetary historian wrote »As a rule political economists...do not take the trouble to study the history of money; it is much easier to imagine it and to deduce the principles of this imaginary knowledge.«

Today we’ll examine some historical cases where important principles clearly stand out.

Lets start with ARISTOTLE (384-322 BC) who gave the culmination of Greek thought and experiment on money around 330 BC:

“All goods must therefore be measured by some one thing...now this unit is in truth, demand, which holds all things together...but money has become by convention a sort of representative of demand; and this is why it has the name nomisma - because it exists not by nature, but by law (which in Greek was nomos) and it is in our power to change it and make it useless.” (See The Lost Science of Money, (LSM, Ch. 1) (XXX ARISTOTLE SLIDE)

So Aristotle calls money a creature of the law. Not a commodity from nature but an abstract social institution. Its essence is not tangible wealth in itself, but a power to obtain wealth.

THIS IS REGARDED AS A SUPREMELY IMPORTANT DISTINCTION - BETWEEN MONEY and wealth. If you are always trading in “things” it’s just an advanced form of barter.

PLATO Agreed With Aristotle and advocated fiat money for his Republic:

“The law enjoins that no private individual shall possess or hoard gold or silver bullion, but have money only fit for domestic use. ...wherefore our citizens should have a money current among themselves but not acceptable to the rest of mankind....”(Laws) “Then they will need a market place, and a money-token for purposes of exchange.”(Republic)

So both Aristotle and Plato noted the paramount principle - that the nature of money is a fiat of the law, an invention or creation of mankind. This principle, part of a lost science of money, must now be relearned in the 3rd Millennium in order to achieve the monetary reforms needed to move back from the brink of nuclear disaster, to move away from a future dominated by fraud and ugliness, toward a world of justice and beauty.

Significantly, the term “nomisma” is seldom found in early Greek texts. It’s in Herodotus in the 400s BC, but not again until Aristotle, over a hundred years later. This concept of money was probably suppressed in an ongoing struggle between oligarchic forces – a kind of “old Boy Network” relying on personal relations, arrayed against public money, and the developing, more democratic, public sphere of the Greek Polis, which introduced and controlled the nomisma payment mechanism. (LSM, Ch. 1)

This “private vs. public” battle for the control of the money power is part of a great ongoing social battle recurring throughout history to this day. This factor shapes the most important outcomes determining how well a money system works. A good system functions fairly; helping the society create values for living. A bad one obstructs the creation of values; places special privileges in the hands of some to the disadvantage of others, and promotes unfair concentrations of wealth and power, and disharmony and social strife.

Full text of Speech can be read here

Stephen Zarlenga, director of the American Monetary Institute, is a leading voice in the field of monetary history, theory and reform. Stephen draws on 35 years of experience in the world of finance, securities, insurance, mutual funds, real estate, and futures trading. He has published 20 books on money, banking, politics and philosophy. Stephen calls into question and challenges the basis, and Achilles’ heel, of American Capitalism: the private control and resulting misdirection of the nation’s monetary system.

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