Among the circumstances that allowed the state to appropriate the monetary system of society, let us not forget the absence of an adequate theory of money. Economics is a relatively young science. By the time human economic activity became the subject of serious scientific inquiry, extensive economic and financial practices already existed—relevant to our topic, the semi-legal practice of fractional reserve banking and the first central banks. All of this seemed self-evident, and it took considerable time before anyone realized that perhaps one could have gotten along without it. Nevertheless, concern for the common good compelled the best sons of various fatherlands to put order in the financial system. In particular, to tie state banknotes to gold—an idea in itself quite sound. Robert Peel was the author of the law about the Bank of England, which tied the issuance of state banknotes to the gold reserves of the state bank. True, the theory of that time (1844) considered only cash—banknotes—as money. Later it turned out that deposits also need to be counted. This is especially obvious today, when 80% of all money is just entries in bank ledgers. In general, nothing came of Peel’s idea—sort of like a gold standard, but still—inflation and crises.
An adequate theory of money appeared only in the first half of the 20th century, when the appropriation of the monetary system by the state was already coming to an end.