What Has Government Done to Our Money?

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What Has Government Done to Our Money?
What has the government done to our money.jpg
Author Murray N. Rothbard
Country United States
Language English
Genre Economics
Publisher Ludwig Von Mises Institute
Publication date
Media type Hardback
ISBN 978-0-945466-44-4
OCLC 62395471

What Has Government Done to Our Money? is a 1963 book by Murray N. Rothbard that details the history of money, from early barter systems, to the gold standard, to present day systems of paper money.


How money developed[edit]

Rothbard explains how money was originally developed, and why gold was chosen as the preferred commodity to use as money.[1]

The gold standard[edit]

The essay, "What Has Government Done to Our Money?" was written by Rothbard as an objective historical account with a provocative title. In contrast, "The Case for a 100 Percent Gold Dollar" was an essay with an ethical agenda. Both essays are normally found together in one binding.

In "The Case for a 100 Percent Gold Dollar", Rothbard explains how having a currency permanently fixed by law at a certain weight in gold, and always redeemable in gold, greatly incentivizes governments and banks to be much more ethical, civil, and honest in their lending methods, accounting methods, and in their honorable pursuits of other profits related to managing and supplying money to society.

He shows how any money, backed by gold or not, is a commodity. He argues any commodity could become a money and that every paper money that exists today started as a receipt for a fixed weight or portion of some commodity, usually a precious metal. When a commodity becomes a money, it gains new properties unique to being a money. For example, unlike every other commodity, money becomes less useful during the time its supply is expanded, roughly to the degree to which it is expanded, all other things being equal. To illustrate: If the Monee Tree dropped five new Moneez into the economy tomorrow, the effect would be zero. But, if the Monee Tree dropped one thousand trillion Moneez into the economy tomorrow, the effect would be chaotic because no-one would know how to calculate prices with all the new Moneez flying around relative to the number of Moneez going around the day before. A money would become very useless if its supply rate expanded to such a degree. But, once the expansion of the supply is complete, prices settle back into position and things become accurately calculable again.

For example, if you increase the supply of pears (a commodity like wheat or corn), all other things being equal, this helps society by making more pears available at a cheaper price. Since it takes less money to get the same amount of pears, folks either enjoy more pears, eat the same amount of pears but also buy other things they could not have previously bought, eat the same amount of pears and then save the unspent money to consume something else in the future, continue eating no pears but enjoy an increased income due to a decrease in the amount of money previously reserved for pear consumption throughout the rest of society, or some combination of the four alternatives.

To continue in this illustration: Supplying more money does not make all people better off in the same way that supplying more pears does. When new money is supplied, it does not enter the economy at all points and in all places at once. It is often guided into specific markets sometimes unintentionally or intentionally incentivized by government legislation. Sometimes, new money from the government can be intentionally marketed to specific economic areas by banks. Sometimes government tries to guide new money into the most general dispersion as possible. But, new money always enters into specific areas, and this causes prices in those areas of the economy to rise faster than other prices of other things in the economy. If it entered into all areas of the economy at once, then a commensurate share of it would always appear under your pillow whenever it was created, and clearly, if everyone had twice the money than they did the day before, prices would also merely be doubled and the extra money would be of no real consequence.

So, while money is a commodity whose price is affected by supply and demand, it does not become more beneficial to society if its supply is increased. Increasing the supply of money only confuses society's ability to calculate relative costs during the time of monetary expansion precisely because it is not injected into all areas of the economy at once.

With this point made, Rothbard is then able to show how supplying more money merely compels the market to revalue the goods and services at the specific points where the money is being spent. While those prices are adjusting, those prices go up, and they go up faster relative to all the other prices in the economy that are not going up. This situation (where prices go up faster relative to all other areas in an economy) is deceitfully indicative to investors as normal and healthy opportunities for investment. This can cause investments of money to leave other areas of the economy where it once was perhaps more accurately dedicated and enter the now seemingly more profitable and seemingly more expanding market.

Once this activity reaches some unknown particular point, or rate, of growth, the activity is called a boom. Booms create undue waste. Normally, economies are very conservative and prudent in their resource use, but "injecting" money into them, always at specific intended or unintended points, disrupts them and causes undue waste and subsequent periods of readjustment called recessions.

Leaving the gold standard[edit]

Rothbard states that many European governments went bankrupt due to World War I, and how they left the gold standard in order to try to solve their financial issues. He also argues that this strategy was partially responsible for World War II, and led to economic problems throughout the world.


  1. ^ What Has Government Done to Our Money? Chapter 1

External links[edit]