Book Review: What Has Government Done to Our Money and The Case for a 100 Percent Gold Dollar

On 25 June 2009 I was invited to the Cafe Libertalia to speak at a book club where I was given the latitude to choose the book for discussion. I picked What Has Government Done To Our Money And The Case For A 100% Gold Dollar by Murray Rothbard. This book is an easy to read foundation for the student of the Austrian school of economics. Therefore, I think everyone should get and read a copy.

What Has Government Done To Our Money is 119 pages while The Case For A 100% Gold Dollar is 61 pages. It is printed on archival quality acid-free paper and has a sleek cover. This book makes a great addition to any library.

WHAT HAS GOVERNMENT DONE TO OUR MONEY

This is a well done objective monetary history. It discusses how money developed, the rise of fractional reserve banking and the constant meddling by government in money and currency. A key reason governments meddle in the money and currency markets is because it is a source of funding.

The reader learns some some basics of history, government and economics such as the development of monetary names, benefits of money, a short discussion on legal tender application and an entire part on The Monetary Breakdown of the West.

THE CASE FOR A 100% GOLD DOLLAR

This is a persuasive essay on why a 100% gold Dollar should be adopted. This essay originally appeared in the out of print and hard to find In Search Of A Monetary Constitution by Leland Yeager and published in 1962 by the Harvard University Press. While the arguments Rothbard makes are sound; I do not really agree because of advances in information technology and monetary evolution over the past 47 years.

Four and a half decades ago there was no Fandango, online check-in for airplane flights, etc. So likewise there have been advances made in monetary application and I am of the opinion that private digital commodity currencies, like GoldMoney, provide the most efficient solution to the monetary chaos the world has found itself in.

WHO THIS BOOK IS FOR

What Has Government Done To Our Money And The Case For A 100% Gold Dollar by Murray Rothbard is a quick and easy read divided into two main portions. I think the objective presentation of monetary history is a good read for anybody. The persuasive essay is a good read for anyone who wants to stimulate their analytical capacities; but keep in mind the essay is obsolete. Therefore, I think everyone should get and read a copy of this book.

You can get a free digital copy from the Mises Institute or purchase a physical copy from Amazon.

Comments

[Mad Hedge F...:]

Noted international monetary economist Judy Shelton believes the US should return to at least a partial gold standard to help damp volatility in the $4.4 trillion a day foreign exchange market to hasten an economic recovery. The current “dirty float” system, where a free market is subject to occasional coordinated central bank intervention that emerged after the collapse of the original Bretton Woods agreement in 1973, is not working. The US currently holds 260 million ounces of the yellow metal, which for some arcane government accounting reason is still carried on its books at the old fixed rate of $42 an ounce. At today’s prices the holdings are worth no less than $231 billion. Such a system would make it easier for governments to manage interest rates and control inflation. The highlight of the evening came when she passed around a ten ounce gold bar worth $9,000 and a one billion deutschmark Weimar Republic bank note, both of which were miraculously returned to her. In the meantime, the recent bounce in global stock markets raise the risk that we have put in a medium term double top in the chart for the barbaric relic.

Jun 28 03:45 PM

[Living4Divi...:]

Back in 1967, Alan Greenspan summed it up when he said:

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. … This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process… It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard."

Unfortunately, the political will for a Gold standard is currently lacking. Fiat money is just too tempting for the spendthrift governments of the world.

Jul 03 04:53 AM

[Gold Barron:]

Young Chuck in Montana bought a horse from a farmer for $100. The farmer agreed to deliver the horse the next day. The next day he drove up and said, 'Sorry son, but I have some bad news, the horse died.'


Chuck replied, 'Well, then just give me my money back.'The farmer said, 'Can't do that. I went and spent it already.' Chuck said, 'Ok, then, just bring me the dead horse.'


The farmer asked, 'What ya gonna do with him? Chuck said, 'I'm going to raffle him off.' The farmer said, 'You can't raffle off a dead horse!' Chuck said, 'Sure I can, Watch me. I just won't tell any body he's dead.'


A month later, the farmer met up with Chuck and asked, 'What happened with that dead horse?' Chuck said, 'I raffled him off. I sold 500 tickets at two dollars a piece and made a profit of $898.' The farmer said, 'Didn't anyone complain?' Chuck said, 'Just the guy who won. So I gave him his two dollars back.'

Chuck grew up and works now for the government. He was the one who figured out how to 'bail us out'.

Jul 03 05:35 AM

[Dr. O:]

The reasons the US is not in a full blown currency crisis seem to include the following:

1) Other major currencies are similarly flawed
2) Exchange rates are controlled by mutual agreement between governments
3) There is no current suitable replacement for the US Dollar

However, as the US Government concurrently spends us into an amount of debt we cannot hope to repay, while at the same time choking off the private sector, the US Dollar will inevitably lose value versus currencies backed by less foolish governments.

Ultimately the value of the US Dollar is worth no more than "the faith and credit of the US Government." As that "promise" continues to become less meaningful relative to other fiat currencies like the Yuan, the Aussie, the Loonie, the Yen, or the Swiss Franc, the relative value of the US Dollar will continue to decline, pushing up prices and interest rates, and lowering our standard of living.

Precious metals like gold, silver, and platinum seem increasingly appealing as a means of preservation of wealth. I speculate that the current financial crisis, which has an element of deflation to it in terms of wealth destruction and falling home prices, provides a good time to get into the precious metals, which, without the current whiff of deflation, would likely be double their current prices.

Our next best hope is a backlash against the current populists that control the Executive and the Congressional Branches of Government such that fiscal realists are elected in 2010 and 2012.

I would anticipate that the perception that we were doomed to "more of the same" in the US Congress in 2010 would precipitate another leg down for the US Dollar, the stock market, and the bond market, as investors flee all US Dollar based assets.

Jul 03 06:58 AM

[Marli:]

I was right. The current financial crisis seemed to have sparked a renewal of interest in Austrian economics, which is a good thing.

Jul 03 08:28 AM

[Stockpickin...:]

very nice! I am going to download it.

Jul 03 08:51 AM

[Living4Divi...:]

> 2) Exchange rates are controlled by mutual agreement
> between governments

This is not true


On Jul 03 06:58 AM Dr. O wrote:

> The reasons the US is not in a full blown currency crisis seem to
> include the following:
>
> 1) Other major currencies are similarly flawed
> 2) Exchange rates are controlled by mutual agreement between governments
>
> 3) There is no current suitable replacement for the US Dollar
>
> However, as the US Government concurrently spends us into an amount
> of debt we cannot hope to repay, while at the same time choking off
> the private sector, the US Dollar will inevitably lose value versus
> currencies backed by less foolish governments.
>
> Ultimately the value of the US Dollar is worth no more than "the
> faith and credit of the US Government." As that "promise" continues
> to become less meaningful relative to other fiat currencies like
> the Yuan, the Aussie, the Loonie, the Yen, or the Swiss Franc, the
> relative value of the US Dollar will continue to decline, pushing
> up prices and interest rates, and lowering our standard of living.
>
>
> Precious metals like gold, silver, and platinum seem increasingly
> appealing as a means of preservation of wealth. I speculate that
> the current financial crisis, which has an element of deflation to
> it in terms of wealth destruction and falling home prices, provides
> a good time to get into the precious metals, which, without the current
> whiff of deflation, would likely be double their current prices.
>
>
> Our next best hope is a backlash against the current populists that
> control the Executive and the Congressional Branches of Government
> such that fiscal realists are elected in 2010 and 2012.
>
> I would anticipate that the perception that we were doomed to "more
> of the same" in the US Congress in 2010 would precipitate another
> leg down for the US Dollar, the stock market, and the bond market,
> as investors flee all US Dollar based assets.

Jul 03 11:02 AM

[kohalakid:]

I'd argee. Statement #2 is not true.


On Jul 03 11:02 AM Living4Dividends wrote:

> > 2) Exchange rates are controlled by mutual agreement

Jul 03 02:12 PM

[kohalakid:]

Hmmmm.

That should be "I agree" in my last post.

The coffee hasn't kicked in yet.

Jul 03 02:13 PM

[Paul H. M.:]

The dollar is okay, we still have the most food. So the world will need dollars to feed their people.

Jul 03 03:40 PM

[Market Sniper:]

Rothbard has done more damage than any wing of the Austrian School to the case for a return to the gold standard with the foolish arguement for 100% backing. The British Gold Standard stood the test of time for over a century with an average of 19% backing. With absolutely unrestricted convertability to specie, 100% backing is not only foolish, it is dangerous. Such a situation led to numerous liquidity crises in the United States, the last of which, the Panic of 1907, led to the abomination known today as the Federal Reserve System. The mere FACT that you can convert to gold on demand requires prudent fiscal and monetary policies be pursued. No need for 100% backing.

Jul 04 12:07 AM

[TradingHelp...:]

Another thread and article that helps me greatly. Thank you. I am seeing lot's of quality answers and solutions from SA contributors and commentators, this thread included.

I fear the challenge isn't finding robust answers. The problem is the government box-tickers don't seem to understand the question - how do we secure financial stability?

The more the economic teeters on the brink, the more the government takes control of every element of our lives. If the bureaucrats weren't so stupid you could almost come up with a conspiracy theory that this was some grand and weird plan to keep the man on the street in his place.

Jul 04 05:53 AM

[Vienna:]

To our last discusson please refer to the link.

seekingalpha.com/artic...

On Jul 04 12:07 AM Market Sniper wrote:

> Rothbard has done more damage than any wing of the Austrian School
> to the case for a return to the gold standard with the foolish arguement
> for 100% backing. The British Gold Standard stood the test of time
> for over a century with an average of 19% backing. With absolutely
> unrestricted convertability to specie, 100% backing is not only foolish,
> it is dangerous. Such a situation led to numerous liquidity crises
> in the United States, the last of which, the Panic of 1907, led to
> the abomination known today as the Federal Reserve System. The mere
> FACT that you can convert to gold on demand requires prudent fiscal
> and monetary policies be pursued. No need for 100% backing.

Jul 04 06:51 AM

[lefty2guns:]

I have read Rothbard's book and it is suprising to me that despite all that is going on in the financial markets today, a Keynesian/Monetarist approach always seems to be the solution. Rothbard's ideas on money may not be able to be implemented nor the ideal solution, but the Austrian philosophy and understanding of the subject is dead on. The FED has devalued the U.S. dollar to almost nothing since they took charge of it. The amount of chaos that government and centeral bank policies create are just devastating for the stability of our country and put the future of capitalism in peril. What is being discussed in the mainstream media and coming out of Washington is horrific. I would only hope that the monetary policy becomes revisited in a postive manner.

Jul 04 12:21 PM

[Paul H. M.:]

You're saying you can buy "nothing" with the dollar?

That's funny, I can now buy more property this year with the same dollar than I could a few years ago. My dollar is more valuable than its been in a long time.


On Jul 04 12:21 PM lefty2guns wrote:

> I have read Rothbard's book and it is suprising to me that despite
> all that is going on in the financial markets today, a Keynesian/Monetarist
> approach always seems to be the solution. Rothbard's ideas on money
> may not be able to be implemented nor the ideal solution, but the
> Austrian philosophy and understanding of the subject is dead on.
> The FED has devalued the U.S. dollar to almost nothing since they
> took charge of it. The amount of chaos that government and centeral
> bank policies create are just devastating for the stability of our
> country and put the future of capitalism in peril. What is being
> discussed in the mainstream media and coming out of Washington is
> horrific. I would only hope that the monetary policy becomes revisited
> in a postive manner.

Jul 04 02:23 PM

[lefty2guns:]

"You're saying you can buy "nothing" with the dollar?"

You will always be able to purchase something as long as there is trust in the U.S. government.

"My dollar is more valuable than its been in a long time."

What period are you referring to? Since 2002, the dollar has depreciated approximately 30%.

What I meant to say was, that since 1913 when the Federal Reserve took charge that the dollar has depreciated approximately 97%.

Inflation is harmful and it is a hidden tax on people with fixed incomes. The policies that the FED have taken depriciate savings and cause a great deal of volatility in the financial markets and socially as well.

Jul 04 06:17 PM

[Augusto Solar:]

Tying dollar to gold in any form would only result in complete loss of currency control, granting ability to countries like China to further manipulate their currencies to undermine American competitiveness and would result in significant increase in unemployment.

For example what blind trust in gold standard does to a country, see the decline of British Empire 1920s, resulting from inability to lower prices to competitive levels due to the gold standard and United States turning stock market crash into Great Depression in 1929-1932 due to inability to stop asset deflation spiral, again thanks to the gold standard.

I understand why people like gold. There is no one stopping you from converting all your dollars to gold. But I am against making American economy a slave of fixed international currency, which is what gold is.

Jul 04 11:22 PM

[spontsymm:]

Watch how fast the political will to tax the rich comes back when we can't just print our way out of liabilities without hyper inflation as the result. As a 30 something saddled with a student debt that looks steeper every year, as globalization depresses my wages vs. buying power year over year, it will be a good day indeed to rein in the fiat nightmare that this has all become. Justice may return someday to the way we keep score in this world, maybe a new world reserve currency to protect savers from governments and private sector manipulators, but for the foreseeable future I see no pathway that the fiat alchemists can't and ultimately won't exploit to ensure their own re elections and/or enrichment. Reinstatement of Glass Steagall is another spoke missing in the proverbial wheel. Our country was founded on the separation of powers, this thought should also apply for the lenders who are currently in bed with the speculators. Too bad Glass Steagall flies in the face of lazy fair dogma. Strange isn't it that lazy fair dogma ultimately ends up being an advocate for financial incest. Market fundamentalists are just as guilty of worshiping false idols as any other sinner. Markets are alive, chaotic, and therefore not scientific in that sense. We need to abandon our false religion of financial engineering anarchy, and once again apply our god given reason to the problems at hand, only then can just capitalism exist. Laws like Glass Steagall were well designed to bring stability to financial markets by ensuring the lenders kept a skin in the game. The well crafted law also helped to prevent financial oligarchy by suppressing excess speculation, especially the fraudulent type. Less voodoo religions, more god given reason.

Jul 05 12:27 PM