This file is a short polemical economic essay, apparently a chapter or column-length section from Making Economic Sense. Its scope is narrow but politically charged: Rothbard interprets twentieth-century international monetary reform as a Keynesian campaign to abolish gold, weaken currency competition, and move step by step toward a single world fiat currency issued by a world central bank.
Rothbard’s thesis is stated through the metaphor of a “Dream”: Keynesians want monetary institutions freed from every external restraint on state spending and inflation. Gold, floating exchange rates, and depreciating national currencies all appear in the essay as checks on political monetary expansion. The target is not simply Keynesian theory but the institutional ambition Rothbard sees behind it.
They have long dreamed of a world without gold, a world rid of any restrictions upon their desire to spend and spend, inflate and inflate, elect and elect.
The essay then reconstructs the postwar monetary order as an incomplete realization of this ambition. Keynes’s “bancor,” White’s “unita,” and later proposals such as the Economist’s “phoenix” are treated as variations on the same fiat project. Bretton Woods, in Rothbard’s account, was only a compromise: the United States and its advisers could not overcome national sovereignty enough to impose a true world currency and world central bank. Instead they accepted a dollar-gold standard, “jerry-built” and ultimately unstable.
Fiat money by any name smells as sour.
Rothbard’s structure is historical but argumentative rather than neutral. He moves from the failed Keynesian ideal at Bretton Woods, through SDRs and named reform plans, to the collapse of Bretton Woods in 1971 and then to the managed-exchange-rate diplomacy of the 1980s. His central conceptual move is to interpret exchange-rate management not as technical stabilization but as political price-fixing. Central banks, he argues, cannot know the correct exchange rate any more than planners can know a “just price.”
Indeed, the concept of a just exchange-rate for the dollar is just as inane as the notion of the “just price” for a particular good.
The coming European Community of 1992 gives the essay its immediate relevance. Rothbard sees European monetary union not primarily as regional integration but as a transitional device: a European central bank would make coordination among Europe, the United States, and Japan easier, and thus bring the world closer to a global fiat regime. In this respect the essay is an Austrian-libertarian critique of monetary integration before the euro, warning that regional central banking may become the institutional bridge to world central banking.
This would not only mean an international economic government for Europe, it would also mean that it would become relatively easy for the post-1992 European Central Bank to become coordinated with the Central Banks of the United States and Japan, and to segue without too much trouble to the long-cherished goal of the World Central Bank and world currency unit.
Rothbard also frames the issue as one of sovereignty and national monetary culture. Inflation-prone governments such as Italy and France are said to favor European-wide inflation, while West Germany’s hard-money instincts should make it resistant. Britain appears as the chief obstruction, both because of sovereignty concerns and because of its hard-money and monetarist influences.
Only Great Britain, happily, has been throwing a monkey-wrench into these Keynesian proceedings.
The conclusion narrows the essay’s alarm into a prediction and a warning. Rothbard concedes that the project may fail because of British resistance and ordinary conflicts among sovereign states. But he wants “principled opposition” as well, because he interprets the world-currency project as the removal of the last competitive and institutional barriers to inflation.
For what the Keynesians want is no less than an internationally coordinated and controlled world-wide, paper-money inflation, a fine-tuned inflation that would proceed unchecked upon its merry way until, whoops!, it landed the entire world smack into the middle of the untold horrors of global runaway hyperinflation.
The essay’s relevance lies less in empirical nuance than in its compact statement of Rothbard’s monetary political economy: gold and currency competition discipline governments; central banks enable inflation; international coordination magnifies rather than solves the problem; and monetary unification is inseparable from political centralization. Its rhetoric is sharp and partisan, but its conceptual core is clear: a world fiat currency would not be neutral modernization, but the culmination of a long struggle to free inflationary states from market and metallic constraints.
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