Murray Rothbard would have been delighted by the publication of a Persian translation of What Has Government Done to Our Money? Economic truth isn’t confined to the speakers of one language. It is timelessly true. Wherever and whenever money exists, the laws of money apply. These laws will make or break a country’s economy, so it is essential for the educated public in Iran to be aware of them.

What are these laws? The free market position that Mises and his greatest successor Murray Rothbard laid out regards money as a good like any other, one whose creation and management should be handled by the market economy. There should be no policy at all. That’s the free market answer.

Most economists are happy to have the market for shoes, watches, and computers managed by the market, but they draw the line on money. They believe that in this sector, we need socialist-style money management.

This is where the Austrians are different. Carl Menger broke new ground in 1871 by explaining the origin of money. It was not created by the state or by some sort of social compact. It emerged from within the structures of the market economy. Barter is suitable for a primitive level of development, but once societies and economies grow more complex, traders find a need for a good that they can purchase and hold to trade for other goods and services at a later time. This good is the most highly valued good in society, also called money. Rothbard, like Mises, shows that this was no accident. Money had to emerge in this way.

Money makes possible the emergence of cardinal numbers that permit calculation of profits and losses over time. This is the essence of what it means to economize. But unlike all other commodities, an increase in the stock of money confers no social benefit, since money’s main function is to facilitate the exchange of other goods and services. Indeed, increasing the stock of money through a central bank like the Fed in the United States has horrific consequences, and Rothbard provides the clearest explanation available of inflation.

Experience suggests that the best money commodity is one that is divisible, qualitatively uniform, has a high value per unit of weight, is portable, and cannot be manufactured without end. Precious metals, then, have served this function quite well. One precious metal rose above the others in being the most suitable, and that is gold. Now, there is nothing magical or mystical about gold that made it money. It just happened to conform mostly closely to the features that make for excellent money.

That’s why the quality of money in society is so critical to a well-functioning economy. And how do we ensure quality? It is the same with money and banking as it is with computers and cell phones. We need the market to be in charge. We need free entry and exit, rivalrous competition, consumer sovereignty, and no special privileges. Our current monetary system has none of those features, so we shouldn’t be surprised to see the quality of our money slipping day by day.

In such a free-market system, money would be convertible domestically and internationally. Demand deposits would have 100% reserves, while the reserve ratios for time deposits would be subject to the economic prudence of bankers and the watchful eye of the consuming public.

It is, however, the historical dimension of Rothbard’s work that makes it so persuasive. Starting with the 19th-century classical gold standard, he ends with the likely emergence of a European Currency Unit and an eventual world fiat money. Especially notable are his explanations of the Bretton Woods system and the closing of the gold window in the early 1970s.


Introduction to the Persian Edition of Murray Rothbard’s What Has Government Done to Our Money?

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