A brief synopsis of “What has government done with our money” written by Murray N. Rothbard
Quick note: most of my stuff is in quotations, a good chunk is straight out of the book, but in some parts I used my own words, my own words may be entangled in the quotes as well as being unquoted.
Money is a commodity and it’s developed by the process of the free market. The cumulative development of a medium exchange on the free market is the only way money can become established. Money being a commodity differs from other types of commodities because it is demanded mainly as a medium of exchange. “Like all commodities, it has an existing stock, it faces demands by people to buy and hold it. Like all commodities it’s “price” – in terms of other goods – is determined by the interaction of its total supply stock and the total demand by people to buy and hold it. (People ‘buy’ money by selling their goods and services for it, just as they ‘sell’ money when they buy goods and services.)”
“Money does not ‘measure’ prices or values; it is the common denominator for their expression. If a TV set exchanges for three ounces of gold, and an automobile exchanges for sixty ounces of gold – then everyone can see that the automobile is ‘worth’ twenty TV sets on the market. The exchange-ratio is what we call prices. The ‘price of money’ is an array of the infinite number of exchange-ratios for all the various goods and services on the market. For example, suppose a TV set costs three gold ounces, a car sixty ounces, a loaf of bread 1/100th of an ounce, and an hour of Donald Trump’s financial advisement one full ounce. The ‘price of money’ will then be an array of alternative exchanges. One ounce of gold will be “worth” either 1/3 of a TV set, 1/60th of a car, 100 loaves of bread, or one hour of Donald Trump’s services; and so on down the line. The price of money then is the ‘purchasing power’ of the monetary unit – in this case, of the gold ounce. It tells us what that once ounce can purchase in exchange. ‘Supply and demand’ determines the price of money (in a free market), this is an eternally, true law in a free market society.”
“Following the example of David Humes (one of the first economists) we may ask ourselves what would happen if, overnight, some good fairy slipped into our pockets, purses and bank vaults and doubled our supply of money (or gold). Would we become twice as rich? No! What makes us rich is an abundance or goods and what limits that abundance of goods a scarcity of resources: namely land, labor, and capital. Multiplying money (or gold) will not whisk these resources into being. We may feel twice as rich for the moment, but clearly all we are doing is diluting the money supply” The FED does this! Fabricates and prints money and in doing so “dilutes” or devalues the “purchasing power” or our money. As the public rushes out to spend its new found wealth, the prices most likely will double or at least rise until the demand is satisfied. This causes artificial prices.
“Money in short, is not a ‘fixed yard stick’. It is a commodity serving as a medium for exchanges. Flexibility in its value in response to consumer demands is just as important and just as beneficial as any other free pricing on the market.” “All money has and must originate in a useful commodity chosen by the free market as a medium of exchange. The unit of money is simply a unit of weight of the monetary commodity – usually a metal, such as gold, silver or iron. Once there is enough supply of a metal to permit the market to choose it as a money, no increase in supply can improve its monetary function. An increase in stock of that particular metal, gold or silver for example, however, fulfills more non-monetary wants (ornaments, industrial, dental, etc.) served by the actual metal, and therefore is useful.
Inflation (an increase in money substitute not covered by an increase in the metal stock) is never socially useful, but merely benefits one set of people at the expense of another. Inflation (government induced) should be considered a fraudulent invasion on property and should have no place on a free market. Freedom can run a monetary system as superbly as it runs the rest of the economy. There is nothing special about money that requires extensive government dictation.
Inflation is an increase in the price of a basket of goods and services that is representative of the economy as a whole. In short it’s the upward movement in the average level of prices; because of this it is intricately linked to money. Inflation in the economic sense, think of a grocery man selling a bunch of fresh produce, and paper money printed by the government. In a year where there may be a scarce drought and produce is scarce, we’d expect to see the price of oranges (produce) rise. Conversely if there’s bountiful harvest one year, we’d expect to see prices fall in order to clear their inventory, which is deflation. Inflation by changing the amount of money in the monetary system is when the government decides to print a lot of money (which ends up in the hands of special interest groups initially and trickles slowly and unevenly into the system hacking away at the “purchasing power” of the dollar); which relative to the produce this inflation is caused by the amount of dollars rising (being injected into the system) relative to the amount of goods and services. You can still have high levels of inflation even during a recession as a result of the government intervention (trying to boost the economy).
“On a free market, money can be acquired by producing and serving goods and services people want or by mining. But if the government can find ways to engage in counterfeiting – the creation of new money out of thin air – it can quickly produce its own money without taking the trouble to sell services or mining. This as I’ve states isn’t beneficial to anyone accept certain people, or groups/ companies. It’s just another way for our budget to grow resulting in what already is a catastrophic National Debt. Our future generations are set up for a disaster, for failure and that is immoral! Inflation is a powerful and subtle means for government acquisition of the public’s resources, a painless and all the more dangerous form of taxation. “
When the FED creates new money for say a Bailout, or to give to Georgia (the country) or “freedom fighters” in some middle east country (like in the 80’s) not saying that is how it went down, just an example; this injection of new money “works its way, step by step, throughout the economic system. As the new money spreads – it bids prices up (artificially). As I’ve said already, money only can dilute the effectiveness of the dollar. But this dilution take time and is therefore uneven; in the mean time some people gain, and some people lose. (The cases of the many bailouts in American history, the bankers were on the rewarding end of the stick, which the middle and lower class came crumbling down.)
“Inflation also penalizes thrift and encourages debt, for any sum of money loaned will be repaid in dollars of lower purchasing power that when originally received. The incentive, then, is to borrow and repay later rather than save and lend. Inflation therefore lowers the general standard of living in the very course of creating a flashy atmosphere of prosperity.”
“Central Banking – the Federal Reserve System created in 1913 owned jointly by private bankers but is directed by government appointed officials and serve s arms of the government. Where they are privately owned as in the original Bank of England or the Second Bank of the U.S, their prospective profits add to the usual government desire for inflation. A Central Bank attains its commanding position from its governmentally granted monopoly of the note issue. Invariably, private banks are prohibited from issuing notes, and the privilege is reserved to the Central Bank; the private banks can only great deposit.”
“Government meddling with money has not only brought untold tyranny into the world; it has also brought chaos and not order. It has fragmented the peaceful, productive world market and shattered it into a thousand pieces, with trade and investment hobbles and hampered by myriad restrictions, controls, artificial rates, currency breakdowns etc. “
What is there to prevent the government from creating money at its own desired pace and thereby benefitting itself and its favored citizens?
I say get rid of the Federal Reserve! Get back on the gold standard where the “dollar” was just a representation of the amount (in weight) of gold you owned. Government has ruined and over-run our society in EVERY FACET OF OUR LIVES. A massive national debt has our children and future generations set up for failure, and that is just morally wrong! Our personal freedoms and liberties are vanishing the more we look around; whether it’s the Patriot Act which hits a number of unconstitutional things, or the “real Id” which is the National ID they are trying to impose on us; which will in no-way make us safer from terrorists. We have military bases all over the world milking away at our national budget and therefore tacking more dollars on our national debt that we are already neck deep in.
How do you think those countries feels about the ALL powerful U.S occupying them? I’ll tell YOU how they feel by asking you this questions: How would you like it if, South Korea, Japan, Israel, South Africa or anyone came and took over a couple city blocks in your neighborhood where you live, or where ever you work!? We need to get back on a foreign policy promotes peace and diplomacy! And our government needs to yet again draw the line between National Security and National Defense.
Hope someone got something out of this brief over view of the book. I highly recommend reading it, it’s really short. you can find it at Mises.org along with a plethora of many other good books!
Also a great video I just found to go along with this is at