This is simply wrong. "Bad coins" are used as money, and good coins hoarded even absent legal tender laws. In WW2 prison camps, the worst cigarettes were traded and the best were hoarded. In early America, tobacco was used and the same thing happened; the poorest quality plants were traded as money.
He is very wrong to assume that legal tender laws are the cause of this process, and he's missing the bigger point, known to anyone who studies those ancient hoards of metal coins. They were tokens, and the metals were used because they did not rust; they were durable. They had no way to create durable paper, as we do today, so they used metal.
Ancient coins were created without any concern for their weight (except in rare cases, designed to fight counterfeiting), and their weight varied so much that the metals in them could not possibly have been the basis for their value. Some of them were as much as 90% pure, and others contained almost no precious metal, even though they circulated at the same time. Most were not stamped with a face value, only the name of the king or bank that created them. Their value was not based on the metals in the coins.
Hülsmann claims that "A central bank cannot go bankrupt." This is correct, but only because it doesn't need any assets, per se, to begin operations. The central stores, acting as banks in prison camps started with nothing. They issued paper from thin air to purchase goods -- with the promise to exchange them for paper in the future. This was the method used to to buy things for the store; to stock the shelves. Banks can legitimately start with nothing. They are brokers; they don't need any assets to operate in a free market.
