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Hello and welcome to another episode of the minor issues podcast. I'm Mark Thornton coming to you from the Mises Institute

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Please like share and subscribe. Thank you

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The Mises Institute is currently in a campaign to distribute free copies of Rockards

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What has government done to our money? You can order free copies

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from the front page of our website

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Mises.org in

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What has government done to our money?

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Murray Rothbard changes your whole view of the world not just money

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And he does so by opening our eyes and clarifying the mysteries of money banking and the role of government

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He uses common sense of old-school theory in American history

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It changed my mind. I've been using it teaching economics classes or as extra credit assignments

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And some students say it's the best part of the class

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We can never get to any type of libertarian society without returning to sound money

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Even if you are already opposed to government control and meddling in money and banking and the economy

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It can really clarify the reasons why it is so necessary beyond all the

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obvious evil and inefficient results

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People who fear a lack of government oversight of money and banking will find that they have a new

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strengthened backbone against the prevailing winds of

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statism and socialism

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Rothbard does this by drawing a theoretical distinction

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Be between society on the one hand and government on the other he then asked the reader

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Who may consider it common sense?

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the relevant questions

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While they might seem to be just common sense the questions are actually the critical

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Theoretical questions that economists must ask and answer

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The reader of course is free to disagree, but Rothbard's conclusions are

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Unassailable he begins with free exchange or making trades as the basis of society

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With all such interactions making

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Individuals better off or what Rothbard calls the life blood of

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civilization itself

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Rothbard shows how mutual benefits materialize with simple barter transactions and how money

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facilitates

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exchange

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Establishing the mechanism and rationale for money to develop in the free market

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From a simple commodity where government plays no role at all

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Some primitive societies developed money on the basis of things like grain or salt

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But later metals proved to be better money

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this simple

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natural selection process

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facilitated the transformation of primitive humanity into a culture and

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developed and integrated

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Society based on an increasingly

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intricate specialization and division of labor

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Rothbard demystifies issues related to the size shape and overall quantity of money

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Including various types of changes of the supply and demand for money

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Such as the bogus problem of hoarding too much money

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Say a devious cult in society decided to hoard their money

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This would increase the purchasing power of all our money units

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People willing to part with some of their money would find that everything would be on sale

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Meanwhile, the cult would live an impoverished lifestyle

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Rothbard also refutes the canards that the purchasing power of money must be perfectly stable or that only one type of money

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Can be allowed to circulate

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These myths emanate from people trying to impose an engineering mindset on the workings of

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the economy

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However, the biological analogy is

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Superior as the economy is really a naturally

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self-regulating phenomenon

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Attempting to re-engineer the economy can lead to chaos or crisis and at a minimum

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unintended consequences

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Now this section ends with a long chapter on money warehouses or banking and this is where many

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Issues and questions develop such as inflation of the money supply

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However, most importantly, we must remember that banking is a critical component of capitalism

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In that money can now be exchanged and transferred to a at a whole new level

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warehouse banks issue warehouse receipts or deposits for the money

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Which can be exchanged?

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Directly we can write checks wire money or use debit cards, but what if these warehouse?

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Issue more receipts either by printing and lending them counterfeiting or by lending the true owners money

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With or without their consent

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fractional reserve banking

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Rothbard shows that in a free society there are natural checks and balances

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Defeat or at least limit a bank's ability to inflate their balance sheet

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Also, the legal system in a free society might deem such banking practices as fraud and therefore illegal

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thereby a free society limited such shenanigans through both competition and law

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Quoting Rothbard in some

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Freedom can run a monetary system as superbly as it runs the rest of the economy

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Contrary to many writers. There is nothing special about money that requires

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extensive

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governmental dictation

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Here too free men will best and most smoothly supply all their economic wants

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For money as with all other activities of man quote liberty is the mother not the daughter of order

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in other words

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Liberty creates order order is not the source of liberty

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the next session

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deals with

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Government meddling with money providing a theoretical vantage point for observing actual history

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The key feature of this section is that government acquires resources by force

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But inflation is a more obscure and supposedly less painful means to that end

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The economics effects of inflation are brilliantly described by Rothbard and are well worth

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contemplating the counterfeiters are the obvious

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beneficiaries along with whomever they share or spend the money this will cause prices to rise and

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Dilute the purchasing power of money units possessed by anyone not tied to the scheme

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there are winners and losers from inflation, but inflation is a

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negative sum gained in that it has other disastrous effects and

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Reading groups should discuss the types of effects that Rothbard describes in terms of current affairs or

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historical

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remembrances

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the inflationary process also causes the business cycle and

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Interested readers should follow up with Rothbard's teeny pamphlet titled

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Economic depressions their cause and cure which I will link to

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But while the inflationary process can be cyclical it can also be terminal

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Leading to a crack-up boom and in hyperinflation, which can have disastrous

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economic and ideological effects on society

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However, there is always hope if not downright optimism for rational reform

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And the rest of this section describes all the general problems government can cause with respect to money and banking

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Generating chaos where there was order and maximum prosperity and before

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Transitioning to the final section it is important that we highlight some of Rothbard's key points

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Money is a market phenomenon that requires no government for optimal provision

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To government intervention harms the usefulness of money and sends negative economic shockwaves

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throughout society and

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three

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status and

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Socialists seek control over money to benefit themselves and to exploit us

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The final section recaps the monetary breakdown of the West from the classical

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gold standard period in the late 19th century to the beginning of

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full fiat monetary system in the early 1970s

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The reason the classical gold standard failed was not internal contradictions, but rather that classical

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meant that it increasingly relied on the trust in governments central banks

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Government currencies and all of their promises all of which unraveled in World War one

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the system

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continued to unravel and fits and starts until the final break with gold in

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1971 this begins the current age of inflation

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The historical phases that Rothbard describes

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illustrate the abject failure of government solutions

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Knowing all this history is vital for our reform efforts. We cannot trust governments

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True monetary reform can only be achieved by what Rothbard deems

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quote a return to a free market commodity money such as gold and by

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Removing government totally from the monetary scene on quote

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Thank you

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Please share and subscribe to the minor issues podcast and

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As a reminder the Mises Institute is currently in a campaign to distribute copies of Rothbard's

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What has government done to our money?

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You can order free copies of this great pamphlet from the front page of Mises dot or