This file is a single-author monetary-policy essay by Murray N. Rothbard, originally a chapter-length intervention in Austrian monetary theory. Its scope is both diagnostic and programmatic: it explains post-1930s inflation as the predictable result of fiat paper money, critiques rival “denationalization” and commodity-basket proposals, and argues for redefining the dollar as a redeemable fixed weight of gold.
Rothbard’s opening move is to treat chronic inflation not as a technical accident but as an institutional consequence of state monopoly over money. Fiat currency matters because it gives governments a costless power of issue, protected by legal tender laws and counterfeiting prohibitions.
It is my contention that if any person or organization ever obtains the monopoly right to create money, that person or organization will tend to use this right to the hilt.
From that premise follows the essay’s central thesis: reform cannot consist in better management of paper money, but must remove money production from political control.
They have come to the conclusion that only radical measures can remedy the problem, in essence the problem of the inherent tendency of government to inflate a money supply that it monopolizes and creates. That remedy is no less than the strict separation of money and its supply from the state.
The essay’s first major polemical target is Hayek’s proposal for competing private paper currencies. Rothbard accepts the libertarian permission to issue notes, but denies that newly named tickets could become money merely by being offered. His conceptual pivot is Mises’s regression theorem: money must grow out of a commodity already valued before its monetary use.
Money has to originate as a valuable nonmonetary commodity.
This is why Rothbard thinks Hayek’s “ducat” scheme is not radical enough. It leaves the existing dollar in place and imagines competition from names with no monetary history. Because people calculate in inherited currency names, the path to denationalization is not to print rival private labels but to transform the existing unit itself.
Only privatization of the dollar can end the government's inflationary dominance of the nation's money supply.
Rothbard next rejects the “commodity dollar,” a basket standard associated with Fisher, Graham, and some Hayekian proposals. His criticism is methodological and institutional: baskets are imposed constructs, invite government adjustment, and presuppose that policy should stabilize an aggregate “price level.” Rothbard denies that such an aggregate is a real object of economic control.
There is, for one thing, no such unitary entity as “the price level” which could be kept constant.
The case for gold then rests on history, marketability, durability, divisibility, recognizability, and the existing monetary role of gold reserves. But Rothbard insists that a gold dollar cannot be symbolic. It must restore the dollar as a claim to a definite weight, not merely assign gold an accounting price.
To be real, the definition of the dollar as a unit of weight of gold must imply that the dollar is interchangeable and therefore redeemable by its issuer in that weight, that the dollar is a demand claim for that weight in gold.
A central conceptual move is Rothbard’s answer to the charge that a gold standard “fixes” the price of gold. He argues that dollars and gold would not be two commodities with an administratively controlled exchange rate; the dollar would be a unit of gold, as an inch is a unit of length.
In short, the very description of a gold standard as “fixing the price of gold” is a grave misinterpretation.
The final sections turn from theory to transition. Rothbard dismisses a return to $35 per ounce as arbitrary and obsolete, rejects pseudo-gold standards such as Bretton Woods, and treats the classical gold standard as superior but insufficient because it preserves central banking and fractional pyramiding.
A classical gold standard would be infinitely superior to either the current or the Bretton Woods system.
His preferred reforms use the government’s own gold stock to liquidate the monetary system it created. One option would redefine the dollar so Federal Reserve gold could redeem Federal Reserve notes and deposits one-for-one; a more radical option would define it to cover all demand liabilities, producing a 100 percent gold reserve system. The essay thus combines Austrian monetary theory, anti-central-bank politics, and a concrete redemption mechanics. Its relevance lies in showing why, for Rothbard, “sound money” is not merely low inflation but the abolition of discretionary state money.
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