Friedrich August von Hayek, “Warenwährung” (1943)

This file is a single chapter-style monetary essay. Its scope is a post-gold-standard design problem: how can an international monetary order keep the automatic, predictable virtues of gold without its material defects or the discretionary hazards of nationally managed money?

Die Goldwährung, wie wir sie kannten, hatte zweifellos ihre großen Mängel.

English translation: The gold standard, as we knew it, undoubtedly had its great defects.

Hayek’s opening concession is strategic. He does not defend gold as ideal, but separates its institutional advantages from its mythology: it functioned internationally without subjecting every national policy to a world authority; it made monetary action rule-bound and foreseeable; and its supply mechanism at least tended to move in the right direction. Against both uncoordinated national policies and overambitious global planning, he prefers an imperfect rule known in advance to a more “rational” policy administered unpredictably.

Es muß bemerkt werden, daß keiner der Gründe für die Goldwährung direkt mit irgend einer dem Gold innewohnenden Eigenschaft zusammenhängt.

English translation: It must be noted that none of the reasons in favor of the gold standard is directly connected with any property inherent in gold itself.

The first conceptual move is to demystify gold. Its special role came from a “Nimbus,” a social prejudice strong enough to support international money before explicit cooperation was possible. Because that belief has been weakened, and even replaced by anti-gold prejudice, Hayek thinks rational substitutes can now be considered. The defect to be overcome is not chiefly erratic gold discoveries, but delayed adjustment.

Der ernste Einwand gegen das Gold ist vielmehr die Langsamkeit, mit der sich sein Angebot echten Nachfrageänderungen anpaßt.

English translation: The serious objection against gold is rather the slowness with which its supply adjusts itself to genuine changes in demand.

This delay makes liquidity paradoxical. When individuals want larger cash reserves, society does not obtain more useful resources; it channels effort into a metal with little nonmonetary use. The new gold arrives after the need has passed, leaving stocks that can support later overexpansion. Hayek’s alternative must therefore turn private hoarding into the accumulation of genuinely useful reserves.

He finds that possibility in the independently developed proposals of Benjamin Graham and Frank D. Graham. Money would be issued only against warehouse receipts for a fixed bundle of storable raw materials, and redeemable in the same unit. The plan fixes only the aggregate price of the bundle, while leaving relative prices free.

Der Grundgedanke ist der, daß Geld nur in Austausch gegen eine festgesetzte Kombination von Lagerscheinen für eine Anzahl lagerfähiger Rohwaren ausgegeben werden und in derselben Wareneinheit einlösbar sein soll.

English translation: The basic idea is that money should be issued only in exchange for a fixed combination of warehouse receipts for a number of storable raw commodities, and should be redeemable in the same commodity unit.

The scheme resembles index-money in its aim but differs in mechanism: no authority has to infer a price level and alter money at discretion; it simply buys and sells the defined commodity unit. Hence a rise in the demand for cash would accumulate wheat, metals, fibers, oilseeds, rubber, and other useful materials rather than gold.

Das Horten von Geld würde, anstatt zur Vergeudung von Produktionsmitteln zu führen, wie ein Auftrag wirken, Rohmaterialienvorräte auf Rechnung des Hortenden anzulegen.

English translation: The hoarding of money, instead of leading to a waste of productive resources, would act as an order to lay up stocks of raw materials on the hoarder's account.

The cyclical argument follows directly. In depression, the currency authority’s purchases replace the missing industrial demand for the bundle and sustain raw-material producers. In recovery, as idle cash returns to circulation, stored commodities are released and money is withdrawn, restraining both commodity-price spikes and excessive expansion of primary production. Hayek denies that this is inflationary in the dangerous sense, because every expansion is matched by inventories and is reversed when those inventories are sold.

For the proposal to avoid new instability, Hayek insists that it be international, or adopted by major states on the same principle. He treats commodity selection, storage costs, quality differences, delivery contracts, and even a transitional link to gold as technical problems, not decisive objections. Nor need the state handle the goods itself: private brokers could assemble receipts and manage storage, while the monetary authority follows a standing rule.

In dieser Hinsicht würde die Tätigkeit der Währungsbehörde ebenso mechanisch sein wie der Kauf und Verkauf von Gold unter der Goldwährung.

English translation: In this respect the activity of the monetary authority would be just as mechanical as the buying and selling of gold under the gold standard.

The essay’s final significance lies in this constitutional monetary ideal. Hayek wants commodity stabilization and money creation removed from ad hoc political bargaining and subordinated to an impersonal, predictable rule. His claim is that a commodity-reserve currency preserves the rational case for gold—internationality, automaticity, foreseeability—while avoiding gold’s waste and sluggish supply. It is therefore a proposal for rebuilding liberal international monetary relations in a world where neither gold worship nor discretionary national management can be trusted.