A Gold Standard for Russia?

This brief economic commentary by Murray N. Rothbard examines Soviet monetary reform through a 1989 exchange between a Gosbank representative and Federal Reserve governor Wayne Angell. Its scope is narrow but pointed: from the problem of the collapsing ruble, Rothbard develops a broader argument against fiat money and for gold convertibility as the foundation of credible market reform.

Rothbard opens by framing late-Soviet “desocialization” as an implicit repudiation of Marxist expertise. The Soviets, he argues, sought practical capitalist advice because lived experience had discredited socialist theory. The essay then turns to Angell’s surprising recommendation that Russia should restore a genuine gold standard immediately, not after gradual reforms.

As Angell stated, "the first thing your government should do is define your monetary unit of account, the ruble, in terms of a fixed weight of gold and make it convertible at that weight to Soviet citizens, as well as to the rest of the world."

For Rothbard, this advice matters because it reverses the usual reform sequence. Monetary credibility is not the final reward of liberalization but its precondition. The ruble has been ruined by inflation, depreciation, and official overvaluation; therefore, ordinary convertibility into dollars or marks cannot by itself make it trusted. Gold functions in the argument as a public test of restraint, tying money to something the state cannot manufacture at will.

"It is my belief," Angell continued, "that without an honest money, Soviet citizens cannot be expected to respond to the reforms," whereas a "gold-backed ruble would be seen as an honest money at home and would immediately trade as a convertible currency internationally."

The central conceptual move is the identification of “honest money” with convertibility into a fixed weight of gold. Rothbard presents inflation not merely as a technical monetary disorder but as a breakdown of social trust. A gold-backed ruble would increase demand for rubles, reduce the pressure created by the “ruble overhang,” and give workers and producers a reason to exchange goods and labor for money they expect to retain value.

Without gold, however, Angell warned that the Soviet reform program might well collapse under the blows of rampant inflation and a progressively disintegrating ruble.

The essay’s sharpest turn comes when the Gosbank official asks why, if gold is so necessary, Western countries have not restored it. Rothbard interprets Angell’s answer as an inadvertent confession. Western currencies still command trust because they retain inherited prestige from earlier gold convertibility; the ruble lacks that residual legitimacy. Thus the West can continue using fiat money only because its public has not yet lost confidence.

He is saying that the United States and other Western governments have been able to get away with imposing what he concedes to be dishonest money because of the remnants of association these currencies have had with gold.

Rothbard’s conclusion broadens the Russian case into a general indictment of modern monetary regimes. If gold is necessary for the ruble because paper credibility has been destroyed, then the same logic applies to inflationary Third World currencies and, eventually, to the West itself. The relevance of the essay lies in this extension: post-socialist reform becomes a mirror in which fiat-money economies can see their own vulnerability. Gold is not treated as nostalgia but as a discipline against political manipulation, and Russia’s crisis becomes evidence for Rothbard’s wider claim that stable markets require money beyond the discretionary reach of the state.