What the Spaniards had failed to understand is that the value of precious metal is not absolute. Money is worh only what someone else is willing to give you for it. An increase in its supply will not make a society richer, though it may enrich the government that monopolizes the production of money. Other things being equal, monetary expansion will merely make prices higher.
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"In God We Trust" it says on the back of the ten-dollar bill, but the person you are really trusting when you accept one of these in payment is the successor to the man on the front (Alexander Hamilton, the first Secretary of the US Treasury) who at the time of writing happens to be Lloyd Blankfein's predecessor as the chief executive of Goldman Sachs, Henry M. Paulson, Jr. When an American exchanges his goods or his labour for a fistful of dollars, he is essentially trusting "Hank" Paulson (and by implication the Chairman of the Federal Reserve System, Ben Bernanke) not to repeat Spain's error and manufacture so many of these things that they end up being worth no more than the paper they are printed on.
The Ascent of Money, A Financial History of the World, Niall Ferguson, Penguin Books, 2009, pgs 27-29
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