Comments (12)

• Daniel P. McCall

  Rothbard backed gold because people historically used it. I doubt seriously that Rothbard would have found fault with another superior medium, it's just that there are none historically.

  It's a quibble. Rothbard's support for gold as a medium of exchange isn't a weakness in his theory of sound money, it's just the most widely used fungible commodity history has seen. Sophists might overplay Rothbard's endorsement, but it is sound.

  Published: March 6, 2007 12:36 AM

• Amsterdamsky

  Platinum or a mix of precious reserve metals would be better as Platinum can immediately be put to industrial use and has more than ornamental value.

  Published: March 6, 2007 5:20 AM

• Ben

  The entire phenomenon of a free market currency is underpinned by the notion that no one person dictates what the most highly marketable exchange commodity will become; Rothbard merely concluded that the most logical choice would probably be some gold-backed standard. It could be frogs for all we know, but it'd be extremely unlikely.

  Published: March 6, 2007 5:46 AM

• Nick Bradley

  Amsterdamsky,
  

  
  The industrial uses of platinum would make it less stable as a medium of exchange. If the industry that uses it, such as fuel cells, expands the price will go up. If it contracts, it will go down.
  

  
  That would make the price of platinum somewhat erratic and a poor medium of exchange.

  Published: March 6, 2007 6:05 AM

• Angelo

  I don't see a criticism. The author poses one issue of Rothbard's he objects to, but he doesn't say how he arrives at it or what exactly it is about a market money that Rothbard doesn't address when he talks about such a thing throughout the book.

  Published: March 6, 2007 7:33 AM

• jeffrey

  I've heard this line for years, and I don't see much to it. The point is fairly plain, that gold has always and everywhere been sound money in all developed economies, so it only makes sense that it would be the basis of radical reform. And yet, I've heard JG Huelsmann argue that gold is a distraction in the argument. Too much emphasis on it makes gold itself the point of discussion rather than sound money or free market money, whatever it might be. I've sensed that he regrets the extent of the emphasis on gold in both Mises and Rothbard. He further seems to argue that if we only had a free market, we could let the market generate sound money without having to preordain some conclusion. MNR seems to make a strong argument against that style of reasoning, one I've never heard JGH address.

  In any case, I guess my commentary here is sound circuitous so I'll stop.

  One piece of good news for everyone. The International Monetary Fund just ordered a bunch of copies of JH de Soto's book on credit cycles!
  

  Published: March 6, 2007 7:34 AM

• David White

  Here's a short, funky video that's right on the money:

  http://bullnotbull.blogspot.com/2007/03/jones-on-money-gold-and-silver.html

  And here's where money is heading:

  http://www.cipe.org/publications/ert/e32/e32_2.pdf

  Published: March 6, 2007 7:41 AM

• Dan Coleman

  Says Rothbard in the book:

  "Historically, many different goods have been used as media: tobacco in colonial Virginia, sugar in the West Indies, salt in Abyssinia, cattle in ancient Greece, nails in Scotland, copper in ancient Egypt, and grain, beads, tea, cowrie shells, and fishhooks. Through the centuries, two commodities, gold and silver, have emerged as money in the free competition of the market, and have displaced the other commodities. Both are uniquely marketable, are in great demand as ornaments, and excel in the other necessary qualities. In recent times, silver, being relatively more abundant than gold, has been found more useful for smaller exchanges, while gold is more useful for larger transactions. At any rate, the important thing is that whatever the reason, the free market has found gold and silver to be the most efficient moneys."

  This to me seems to explain away the 'difficulty.' Rothbard frames his argument around a basic assumption that gold has been chosen by the market. Presumably, he wouldn't be opposed to another medium or media being selected insofar as there was no coercion involved. The 'gold fixation' was Rothbard's way of connecting theory to practice -- i.e. answering the question "how would that work?"

  It seems to me like the author needed something to criticize, and he unfortunately took a fairly shallow and obtuse route.

  Published: March 6, 2007 8:39 AM

• jdavidb

  Rothbard didn't argue that we should force everybody to use gold. He argued that we should be free, and then the market would select what it wanted. He asserted that that would most likely be gold, based on history. In fact, he asserted it would most likely be gold AND silver, and he made it clear in his book that when he said "gold," he wasn't implying any loss of generality, and meant all the same for silver. And presumably whatever else comes up that the market decides serves the same purpose. It could be butter or cigarettes, but that isn't likely.

  Likewise, about paper currency, Rothbard didn't say he wanted to make it illegal to issue paper currency. He simply wanted to expose the true worth of the currency by making it legal for everybody to issue it.

  What Rothbard argued for was freedom.

  Published: March 6, 2007 9:36 AM

• Dennis

  Echoing several other comments above, Rothbard emphasized that gold is money because until the classical and gold exchange standards were deliberately destroyed by the governments of the world, gold (and to a lesser extent silver) was chosen by the market as money.

  In his writings, Rothbard describes several physical characteristics of the precious metals that led the market to choose them as money. Just as certain properties make lumber and masonry materials reasonable choices for use in construction, so also do certain properties of the precious metals make them well-suited for use as the generally accepted medium of exchange.

  Gold and the precious metals in general were not chosen by the market as money due to some fetish or irrational devotion to a “barbarous relic”, but because of their physical characteristics. And as has been pointed out above, if the market were to determine that some other commodity would function better as money, then gold would be replaced.
  

  Published: March 6, 2007 11:42 AM

• Adam

  Wow, thanks for the link and for the responses!

  The 'gold fixation' was Rothbard's way of connecting theory to practice -- i.e. answering the question "how would that work?"

  I understand that; and in detailing how it had worked in the past, I had little complaint. By the end, however, it seemed to me that he was spending more energy arguing for a return to gold than for bringing an end to the government monopoly on money. Not that I dispute the validity of that particular argument, either--I just preferred the sections dealing with the merits of free market money.

  As someone said earlier, I merely felt that there wasn't any need to put too much stock in one particular possible outcome of allowing the market to once again choose the medium of exchange.

  Anyway, it's really besides the point. The book is wonderful and has inspired me to seek out more literature on the history of currency.

  Published: March 6, 2007 8:31 PM

• Peter

  As someone said earlier, I merely felt that there wasn't any need to put too much stock in one particular possible outcome of allowing the market to once again choose the medium of exchange.

  Allowing the market to once again choose the medium of exchange requires first going back to a barter economy, with a great deal of pain and destruction in the process. Rothbard's planned return to gold, the money of the fairly recent past, would be a lot less painful and not require a virtual return to the stone age to achieve.

  Published: March 6, 2007 10:55 PM