Woodrow Wilson Pleads the Fifth

What Has Government Done With Our Money, asks Murray Rothbard, and sets out to examine exactly that--the history of currency in general, and government-produced currency in particular.

He makes a good case for opening up currency to the free market, but I think that his clear fixation with gold is a real flaw in the work. There is no denying the historical significance of gold as the means of exchange; it is even quite plausible to argue that it might one day take that role up again, somewhere. Yet Rothbard's argument for gold-backed currency seems entirely erroneous to what I would view as the more important analysis of free market currency. After all, whether or not gold could work again can only be determined by one of two methods: either some government has to adopt the gold standard, or a free monetary market could consist of currencies that are backed by gold.

In the case of the former, it seems pointless. After all, it would still be a government monopoly, one in which there would be no way to hold the currency accountable to any standard--even those devised by the government itself.

Gold versus green aside, the book is a fantastic read. After reading it, I ask myself: why do we need to print new currency at all? How does inflation add anything positive, after causing devaluation? It seems to me that inflation is merely a symptom of monopoly; the government can get away with printing money to pay off its debts because it has no competitors. Sure, there are foreign currencies, but they aren't exactly easily accessible to your typical American.

More and more I think that the best policy would be to allow banks to establish their own competing currencies. There's no reason why we should have to "privatize" the dollar--the government could still issue its own currency. It could even make it mandatory for taxes to be paid in that currency. But in terms of what currency people use for their savings or even for day to day purchases, the dollar should be made vulnerable to the competitive pressures of any other commodity. That way, if inflation gets out of control, people can simply choose to exchange their money for the currencies provided by banks that aren't so dishonest as to devalue the holdings of their clients for their own profit.

Not do something at the expense of another for one's own profit, you ask? Isn't that the very hallmark of free market capitalism??

No, competition is. In a competitive environment, a bank could never get away with what the government does without going out of business. The fact that we have come to accept inflation as a way of life is merely a testament to the fact that our expectations are shaped by the existence of a government monopoly for well over a century now.