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What has government done to our money?
Murray Rothbard changes your whole view of the world not just money
And he does so by opening our eyes and clarifying the mysteries of money banking and the role of government
He uses common sense of old-school theory in American history
It changed my mind. I've been using it teaching economics classes or as extra credit assignments
And some students say it's the best part of the class
We can never get to any type of libertarian society without returning to sound money
Even if you are already opposed to government control and meddling in money and banking and the economy
It can really clarify the reasons why it is so necessary beyond all the
obvious evil and inefficient results
People who fear a lack of government oversight of money and banking will find that they have a new
strengthened backbone against the prevailing winds of
statism and socialism
Rothbard does this by drawing a theoretical distinction
Be between society on the one hand and government on the other he then asked the reader
Who may consider it common sense?
the relevant questions
While they might seem to be just common sense the questions are actually the critical
Theoretical questions that economists must ask and answer
The reader of course is free to disagree, but Rothbard's conclusions are
Unassailable he begins with free exchange or making trades as the basis of society
With all such interactions making
Individuals better off or what Rothbard calls the life blood of
civilization itself
Rothbard shows how mutual benefits materialize with simple barter transactions and how money
facilitates
exchange
Establishing the mechanism and rationale for money to develop in the free market
From a simple commodity where government plays no role at all
Some primitive societies developed money on the basis of things like grain or salt
But later metals proved to be better money
this simple
natural selection process
facilitated the transformation of primitive humanity into a culture and
developed and integrated
Society based on an increasingly
intricate specialization and division of labor
Rothbard demystifies issues related to the size shape and overall quantity of money
Including various types of changes of the supply and demand for money
Such as the bogus problem of hoarding too much money
Say a devious cult in society decided to hoard their money
This would increase the purchasing power of all our money units
People willing to part with some of their money would find that everything would be on sale
Meanwhile, the cult would live an impoverished lifestyle
Rothbard also refutes the canards that the purchasing power of money must be perfectly stable or that only one type of money
Can be allowed to circulate
These myths emanate from people trying to impose an engineering mindset on the workings of
the economy
However, the biological analogy is
Superior as the economy is really a naturally
self-regulating phenomenon
Attempting to re-engineer the economy can lead to chaos or crisis and at a minimum
unintended consequences
Now this section ends with a long chapter on money warehouses or banking and this is where many
Issues and questions develop such as inflation of the money supply
However, most importantly, we must remember that banking is a critical component of capitalism
In that money can now be exchanged and transferred to a at a whole new level
warehouse banks issue warehouse receipts or deposits for the money
Which can be exchanged?
Directly we can write checks wire money or use debit cards, but what if these warehouse?
Issue more receipts either by printing and lending them counterfeiting or by lending the true owners money
With or without their consent
fractional reserve banking
Rothbard shows that in a free society there are natural checks and balances
Defeat or at least limit a bank's ability to inflate their balance sheet
Also, the legal system in a free society might deem such banking practices as fraud and therefore illegal
thereby a free society limited such shenanigans through both competition and law
Quoting Rothbard in some
Freedom can run a monetary system as superbly as it runs the rest of the economy
Contrary to many writers. There is nothing special about money that requires
extensive
governmental dictation
Here too free men will best and most smoothly supply all their economic wants
For money as with all other activities of man quote liberty is the mother not the daughter of order
in other words
Liberty creates order order is not the source of liberty
the next session
deals with
Government meddling with money providing a theoretical vantage point for observing actual history
The key feature of this section is that government acquires resources by force
But inflation is a more obscure and supposedly less painful means to that end
The economics effects of inflation are brilliantly described by Rothbard and are well worth
contemplating the counterfeiters are the obvious
beneficiaries along with whomever they share or spend the money this will cause prices to rise and
Dilute the purchasing power of money units possessed by anyone not tied to the scheme
there are winners and losers from inflation, but inflation is a
negative sum gained in that it has other disastrous effects and
Reading groups should discuss the types of effects that Rothbard describes in terms of current affairs or
historical
remembrances
the inflationary process also causes the business cycle and
Interested readers should follow up with Rothbard's teeny pamphlet titled
Economic depressions their cause and cure which I will link to
But while the inflationary process can be cyclical it can also be terminal
Leading to a crack-up boom and in hyperinflation, which can have disastrous
economic and ideological effects on society
However, there is always hope if not downright optimism for rational reform
And the rest of this section describes all the general problems government can cause with respect to money and banking
Generating chaos where there was order and maximum prosperity and before
Transitioning to the final section it is important that we highlight some of Rothbard's key points
Money is a market phenomenon that requires no government for optimal provision
To government intervention harms the usefulness of money and sends negative economic shockwaves
throughout society and
three
status and
Socialists seek control over money to benefit themselves and to exploit us
The final section recaps the monetary breakdown of the West from the classical
gold standard period in the late 19th century to the beginning of
full fiat monetary system in the early 1970s
The reason the classical gold standard failed was not internal contradictions, but rather that classical
meant that it increasingly relied on the trust in governments central banks
Government currencies and all of their promises all of which unraveled in World War one
the system
continued to unravel and fits and starts until the final break with gold in
1971 this begins the current age of inflation
The historical phases that Rothbard describes
illustrate the abject failure of government solutions
Knowing all this history is vital for our reform efforts. We cannot trust governments
True monetary reform can only be achieved by what Rothbard deems
quote a return to a free market commodity money such as gold and by
Removing government totally from the monetary scene on quote
Thank you
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As a reminder the Mises Institute is currently in a campaign to distribute copies of Rothbard's
What has government done to our money?
You can order free copies of this great pamphlet from the front page of Mises dot or