Without the separation of state and money, democracy is compromised
In “The Grand Inquisitor” by Dostoevsky, Jesus is confronted and asked to leave the Church.
There’s a profound moment in Dostoevsky’s The Brothers Karamazov known as “The Grand Inquisitor”, where Jesus returns to Earth during the time of the Spanish Inquisition. Instead of being celebrated, He is arrested and confronted by the Grand Inquisitor, a high-ranking official in the Church. In a monologue, the Inquisitor tells Jesus that humanity does not truly want the freedom He offers. People, he argues, are far more willing to surrender their liberty in exchange for security and comfort, allowing the Church to take the burdens of choice and responsibility off their shoulders.
In a gesture of forgiveness, Jesus kisses the Inquisitor, who orders Him to leave and never return. But if Jesus had responded, I’d imagine Him saying something like:
“Freedom is not a burden to be lifted by others, but a light to guide each soul. You speak of security and comfort as if they are ends in themselves, yet they are but chains when given in exchange for truth. The authority you claim to spare humanity from the weight of choice only deepens their slavery, for without freedom, neither love nor faith can exist. I offer not ease, but purpose; not shelter, but the courage to walk through storms.”
This allegory exemplifies the dogmatic tendency of authority to claim it is acting in humanity’s best interests, even as it strips people of the very ideals it was meant to protect.
The failure to separate state and money in today’s liberal democracies reflects the same fallacies expressed by the Grand Inquisitor. The state’s monopoly over money — effectively positioning it as an infallible lender of last resort — is justified on the grounds that it provides security and comfort. Yet, this inevitably comes at the expense of the very liberty that is meant to be the foundational pillar of democracy.
In this piece, I will argue that while free and fair elections are absolutely essential to democracy, they are far from sufficient as the sole check on power for it to thrive — or even to exist at all.
That is to say that if you believe that casting your vote is the entirety of your responsibility as a citizen, and that the electoral process alone ensures elected representatives and institutions are held accountable — you are missing the essence of how a democracy works.
Let’s dive in.
I’ve long been vocal about the risks and consequences of a society built on a centralised economic foundation — one where money is centrally controlled and issued by the government. My critique extends specifically to the inflationary economic system we live under today, which, by its very design, trends toward greater centralisation.
This trend stems from a fundamental contradiction: while productivity gains in an economy are inherently deflationary (prices should fall as goods and services become more efficiently produced), our current system offsets this with monetary debasement. This inflationary mechanism is not optional — it’s necessary to keep the current system stable. As deflationary forces accelerate, particularly with exponential advancements in AI, the need for money expansion grows ever more intense.
The result? An unrelenting consolidation of power into the mechanisms in place to redistribute newly minted money — governments, central banks, and the private banking system. This dynamic is deeply problematic, as it magnifies the influence of a select few while diminishing the agency of the many.
Yet, when I present this argument, a common counterpoint I often hear is:
“We live in a liberal democracy with free and fair elections. If we disagree with a particular policy, we simply vote to voice our opposition. That’s democracy at work!”
At first glance, this seems irrefutable. After all, the power to vote is undoubtedly the cornerstone of a democratic society. But what if the choices presented to voters are shaped not so much by free choice, but by the very structures they are meant to hold accountable? What if control over money subtly distorts incentives, limits options, and nudges people toward decisions that serve the ruling apparatus rather than themselves?
Can a democracy truly function when the autonomy of its citizens — their ability to think, act, and vote independently — is undermined by an economic system engineered to foster dependency on the money issuer, whether that be the state, large private entities, or some combination of both?
What the assumption behind the quoted statement fails to acknowledge the structural flaws inherent in the system it defends, reducing the issue to a simplistic debate over “small” versus “big” government — essentially a choice between centralisation into government or private entities.
But why must we accept any form of centralisation as inevitable?
Are we free to choose if the options are limited to different manifestations of the same centralised control?
These are the questions we must ask before placing blind faith in the electoral process as the sole mechanism to mitigate the consequences of monopoly control over money.
Below, we’ll explore why the electoral reality looks more like this when the state and money are entangled.
The building blocks of a democracy
To understand why voting alone is insufficient as a safeguard against centralisation, let’s begin by examining the building blocks of a democracy. Imagine these foundations as a pyramid:
A thriving democracy is not merely about elections.
Free Thought (Base)
The ability to think independently without self-censorship or undue influence from mechanisms of manufactured consent. This includes the ability to question norms instilled during upbringing, even when those norms are deeply rooted and may be socially unacceptable. This is the true foundation of democracy, as free speech cannot exist if individuals are systematically discouraged to form and nurture independent, critical thinking.
Free Speech (2st Layer)
The ability to express those independent thoughts and dissenting opinions openly, without fear of reprisal or coercion. This doesn’t mean freedom from consequences for expressing those opinions — actions and ideas naturally carry responses — but it does mean that individuals should not face threats, violence, or suppression from authority for voicing their views.
Civil Society (3rd Layer)
Organised groups, institutions, and networks that operate independently of the state to hold power in check and foster community participation.
Separation of Powers (4th Layer)
A system of checks and balances that prevents any single branch of government from becoming too powerful.
Elections (Apex)
The mechanism through which citizens choose their representatives, ostensibly ensuring that power reflects the will of the people.
Without a robust foundation — free thought, free speech, an active civil society, and a genuine separation of powers — the integrity of elections becomes severely compromised. In the worst-case scenario, these foundational layers collapse entirely, reducing elections to little more than performance theater. This is exemplified in dictatorships, where incumbents routinely “win” overwhelming victories, rendering the process a facade rather than a true expression of the people’s will.
Put simply, without the foundational building blocks of the democratic pyramid that support its apex, elections are worthless, and democracy non-existent.
So, how exactly could democracy become compromised even if the integrity of the electoral process remains intact?
The answer lies in the gradual erosion of the aforementioned foundational building blocks. When these underlying pillars — such as free thought, free speech, civil society, and the separation of powers — are undermined, democracy itself is at risk, even if elections appear “free and fair” on the surface.
Civil Society
Civil society plays an instrumental role in ensuring that elected officials remain accountable. It fosters a diversity of thought and provides independent platforms to scrutinise, challenge, and hold power to account. But when civil society is weakened, this diversity and independence begin to erode, creating a fertile ground for authoritarian tendencies to grow unchecked.
For example, a civil society overly reliant on state funding risks losing the arm’s-length distance required to operate independently. When the government becomes a primary source of financial support for these institutions, it gains undue influence over their agendas and priorities. The supposed role as watchdogs of democracy are transformed into lapdogs, undermining their ability to act as checks on those elected to represent the people.
Separation of Powers: State and Church
When it comes to the separation of powers — particularly the separation of state and money, which is the focus of this article — there are clear historical parallels to consider. Most people today would agree that the separation of state and church was a fundamental step forward for democracy. Without this division, religious institutions wielding state power could impose their normative views on society, discriminating against minority faiths and outcasting non-believers.
The danger of this fusion was that it concentrated moral and institutional authority in a single entity, stifling dissent and diversity. By separating church and state, societies created an environment where pluralism could thrive, ensuring equal treatment regardless of belief.
Separation of Powers: State and Money
Similarly, without the separation of state and money, we face an equally dangerous moral hazard. In this arrangement, elected officials gain access to a powerful lever — the ability to control the money supply — that allows them to borrow from the future to fund present-day consumption.
Some will argue that central banks operate “independently” of elected governments, supposedly mitigating this risk. However, this independence is more theoretical than practical. While governments may not directly dictate central bank policies, they influence them indirectly. When governments are fiscally irresponsible and run budget deficits which causes higher debt levels, it falls to the central bank to eventually bridge the gap — by printing money.
One might argue that governments, entrusted by the electorate through free and fair elections, have earned the right to control this lever. However, this view fails to acknowledge the profound dependency that governments can engineer through monetary control — which invalidates that argument on ethical grounds.
Here’s why: When governments print money, they introduce monetary inflation — a hidden tax that erodes the value of people’s earnings and savings. This mechanism enables governments to extract wealth from their citizens without direct taxation, redistributing it back into the system at their discretion. At first glance, this might seem like a debate over policy preferences — whether one favours “small” or “big” government, or one public program over another. But the issue is far more insidious: monetary debasement inherently fosters dependency. As purchasing power declines (or is suppressed from going up), individual autonomy is eroded, resulting in increased reliance by citizens on the government for support.
Monetary debasement (red arrow) distorts price signals, regardless of whether it causes prices to rise (price inflation) or “only” suppresses them from falling.
Over time, what may appear to only be a matter of voter preference reveals itself as a systemic flaw when the state — or anyone — holds monopoly power over money creation. Through currency debasement, the issuing entity can effectively engineer citizens’ dependency on them, eroding their options until they are left with little choice but to vote for a large — or even larger — government.
But the consequences don’t stop there. The act of printing money reprograms far more than the relationship between the state and its citizens — it distorts the entire web of relationships within the economy; between individuals, between businesses, and between individuals and businesses. When price signals are distorted, people and businesses make decisions based on flawed information. It’s essentially like putting a blindfold over people’s eyes.
Money essentially serves as the circulatory system of human organisation, meaning that manipulating it disrupts every block of the pyramid. This distortion then spreads like a virus, infecting the entire structure — all the way down to free thought. For example, if the objective is to make people care less about one another and become more compliant with a central entity, what more effective method exists than manufacture conditions that devalue the future? This is precisely what monetary debasement achieves.
The obvious question then becomes: How can the integrity of democracy and the purpose of elections remain intact when the state has the power to engineer citizens’ dependency on it — whether through fiscally irresponsible policies or deliberate intent —while also distorting the economic reality reflected in price signals, thereby undermining voters’ ability to make informed decisions about their relationship not only with the state but with all participants in society?
The simple answer is — it can’t. A citizen whose wealth is continuously extracted through monetary debasement by fiscally unaccountable governments, and whose dependency on the government is deliberately engineered, can never be considered truly free to choose. A citizen effectively blindfolded as to the economic reality of their surroundings is incapable of making informed decisions.
The perverse reality is that the hidden tax of monetary debasement fosters the greatest dependency of the people on the government, not when it succeeds, but precisely when it fails to serve them. The more fiscally irresponsible the government is, the greater its influence over its citizens grows. (What could possible go wrong?).
One might argue, again, that democracy will eventually self-correct through the election of a new government once the fiscal issues of a set of policies becomes too obvious to ignore. This assumption is flawed on two critical fronts.
First, the effects of monetary debasement is rarely “obvious” because it distorts incentive structures in ways that are subtle and difficult to fully perceive. Its impact is often masked by misdirected blame and complexity. Over time, it nudges society onto a completely different trajectory, one that is nearly impossible to trace back to its origins, leaving citizens and policymakers unaware of when or how the deviation began.
Second, the damage caused by inflation is notoriously difficult to undo. Any incoming administration inherits the economic reality shaped by its predecessors, including the financial well-being of its citizens. Even a well-intentioned government, fully aware of the harm inflicted by prior policies, is constrained by these inherited realities.
This means that even if we could trace the why, when, and where we deviated from our path — which we can‘t — the economic reality of that time would no longer be relevant, as the conditions have since changed.
Therefore, the argument that voting alone is the “arm” or “lever” through which citizens exercise their power — and by extension ensure the government serves the will of its people — fails to grasp how the manipulation of money alters the very nature of choice itself. By reprogramming the spectrum of options available into ever-narrowing fractions, the future is not shaped by the ever-evolving needs and preferences of a diverse populace but by the ever-concentrated interests of those in power.
Example
Political pragmatism today revolves almost entirely around determining the extent to which the future should be sacrificed for short-term relief — and deciding who will benefit from it at the expense of others — since halting monetary debasement is no longer even considered an option. This creates a scenario where both the incoming government and the citizens may very well grasp the long-term consequences of continuing the money printing to maintain short-term economic stability— yet vote to pursue those policies anyway, driven by fear and desperation. Voting under such manufactured conditions is deeply problematic.
To put this in practical terms, consider a citizen living paycheck to paycheck, struggling to pay rent or feed their children. Their immediate survival takes precedence over long-term considerations. Faced with this reality, they are far more likely to choose short-term relief — even if it comes at the expense of long-term economic and societal health. When survival itself is uncertain, the promise of short-term aid becomes irresistible, and the ability to vote for meaningful change is eroded by the urgency of immediate need.
Imagine being in that situation yourself. The incumbent government promises you a $2,000 tax cut or stimulus check if you vote for them in the next election. Would you care if that check was funded through inflation? Maybe you would — but only as a second-order concern. Your immediate needs would likely outweigh any abstract worry about the broader economic impact. That’s precisely the dynamic that undermines democracy.
What I’m striving to convey is that there is nothing democratic about keeping the state and money intertwined. On the contrary, it is inherently undemocratic, as their entanglement creates a clear and dangerous conflict of interest — one that not only cannot be resolved through elections but actively undermines them. When the state acts as both judge and jury in its own case, accountability is removed, enabling it to create problems that it then positions itself to solve.
Democracy cannot function effectively when the state and money are intertwined because the state’s control over money subverts the foundational principles of voter autonomy and accountability. Voting alone cannot mitigate the systemic flaws introduced by this entanglement, as the distortions it creates fundamentally alter the incentives and choices available to voters.
It’s inherently undemocratic for state and money to be intertwined as it creates a conflict of interest. In this case, the state acts as both judge and jury.
Cascading consequences
The core idea here is that the ability to print money rewires the very structures of democracy by altering how individuals, businesses, and institutions interact in ways that are inherently unethical.
It centralises authority in ways that undermine the foundational principles of free thought, free speech, civil society, and the separation of powers. The dependency engineered by money printing, ensures it continues.
It becomes a self-fulfilling prophecy: money printing justifies further money printing, leading to even more printing as the downstream consequences — rising inequality, social unrest, and economic instability — become unavoidable. Each round of intervention exacerbates the very problems it seeks to address, distorting democracy and compromising elections by eroding voter autonomy and access to sound information, even if the integrity of the voting mechanism itself remains intact.
Therefore, if we aim to save democracy from the creeping forces of authoritarianism, the single most important step is to get started with the divorce papers between state and money. This “divorce” would also sever the unhealthy dependency between big private entities and citizens. After all, one of the primary reasons these entities have grown so big and powerful is their role as intermediaries in redistributing money — a role made possible by the current system.
A government held accountable to the people
Divorcing state and money is not the end of government by any stretch of the imagination. It would simply mean forcing governments to stay on budget and prioritise. It would discourage leaders from making empty promises they can’t keep — or from funding those promises through inflation, which sacrifices the future for the present. This shift would profoundly strengthen our democratic institutions by introducing a level of accountability that has been virtually nonexistent.
But if neither governments nor the private banking system control money or issue it at their discretion, who does control it?
The simple answer is: nobody — or everybody, whatever you prefer. With a fixed-supply money (aka “sound money”) that cannot be manipulated, money becomes neutral. In the short term, its value would fluctuate naturally, reflecting the genuine preferences of individuals in aggregate to either save or spend— unlike the imposed preferences of governments or banks, which are influenced by the conflict of interest outlined.
Over the long term, the purchasing power of neutral money would steadily appreciate, as productivity gains in the economy are distributed to all participants in the form of lower prices. The result is a system where economic growth benefits everyone, fostering a fair and transparent foundation for both governments and individuals alike.
With this separation realised, governments would return to their true purpose in a democracy: serving the people.
Why Blind Faith in Free and Fair Elections Won’t Save Democracy was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.