Originally published in 1976 and republished in 2002, Rothbard’s essay interprets New Deal monetary policy as a movement from national inflation to American financial supremacy. Its structure joins a substantial account of the 1920s to two New Deal phases and an epilogue on the strains of the postwar dollar standard. The organizing distinction is deliberately provocative:
If we wished to use lurid terminology, we might call these a decision for dollar nationalism and dollar imperialism respectively.
The apparent reversal—from Roosevelt’s rejection of international stabilization in 1933 to the construction of Bretton Woods during World War II—conceals, Rothbard argues, a continuity. Both policies subordinated monetary discipline to inflationary discretion; the later settlement additionally placed the United States at the center of international finance. Monetary institutions are therefore treated simultaneously as mechanisms governing credit and as instruments of geopolitical power.
The historical baseline is Rothbard’s ideal of the classical gold standard. Although prewar central banks manipulated currencies, gold redemption and international gold movements constrained their interventions. He distinguishes Britain’s earlier financial predominance, which he regards as market-based, from subsequent efforts to establish politically managed monetary hierarchies.
It was a method of separating money from the State just as enterprise and foreign trade had been so separated.
World War I broke those restraints through inflation, suspended redemption, and exchange controls. The reconstructed gold-exchange standard of the 1920s restored an appearance of international order without restoring its underlying discipline. European currencies rested on sterling reserves, sterling rested on dollars, and dollars supplied the ultimate connection to gold. Rothbard describes this arrangement as a pyramid permitting several layers of credit expansion above a vulnerable base.
Britain’s return at the old $4.86 parity is central to the explanation. In Rothbard’s account, the overvalued pound protected financial prestige while damaging export competitiveness. Unwilling to accept depreciation or the domestic wage reductions required by deflation, Britain sought inflation elsewhere. Montagu Norman’s cooperation with Benjamin Strong at the Federal Reserve Bank of New York supplied American credit expansion in 1924 and 1927. Rothbard connects this cooperation to Morgan banking interests, making personal and institutional networks part of his causal account of the speculative boom and subsequent collapse.
His treatment of price stabilization supplies the conceptual bridge between these monetary arrangements and the New Deal. Stable aggregate prices could conceal expanding credit when productivity would otherwise have lowered prices:
Price stabilization therefore meant the replacement of the classical, laissez-faire gold standard by “managed money,” by inflationary credit expansion stimulated by the central banks.
This argument also challenges the assumption that bankers and conservative businessmen necessarily favor hard money. Rothbard traces competing financial coalitions rather than opposing business as a whole to reformers. Irving Fisher’s stabilization organizations and the Committee for the Nation enlisted industrialists, bankers, and agricultural leaders who expected gains from reflation. Their influence helped secure Roosevelt’s abandonment of gold, devaluation, and efforts to restore earlier price levels. Conversely, economists and bankers associated with Chase, together with Carter Glass and Lewis Douglas, resisted these changes. Rothbard emphasizes that several conservative supporters of early monetary expansion later became prominent opponents of other New Deal policies.
The London Economic Conference of 1933 becomes the decisive episode of “dollar nationalism.” Rothbard reconstructs the differences among the gold bloc’s demand for stable exchanges, Britain’s attempted combination of cheap credit and stabilization, and Roosevelt’s priority of raising domestic prices. The president rejected successive compromises, including a declaration leaving countries considerable discretion over their eventual return to gold. His July “bombshell” message effectively destroyed the conference. For Rothbard, this was a deliberate choice of national monetary freedom over international order, followed by currency blocs and only limited cooperation under the 1936 Tripartite Agreement.
The transition to wartime planning includes a revisionist inquiry into commercial conflict with Germany. Rothbard argues that Schacht’s bilateral clearing arrangements displaced Anglo-American trade and challenged the American “Open Door.” He asks whether hostility to these arrangements contributed to the movement toward war. This remains a proposed causal interpretation, supported by officials’ statements and commercial pressures, rather than a demonstrated comprehensive explanation of the conflict.
The wartime “second New Deal” sought to dismantle both German bilateralism and Britain’s sterling bloc. American leverage through Lend-Lease helped secure commitments against discriminatory trade. Rothbard then contrasts White’s stabilization fund with Keynes’s larger clearing union and proposed “bancor,” explaining Bretton Woods as a negotiated compromise that nevertheless established dollar primacy.
But despite these extensive concessions, there was no “bancor”; the dollar, fixed at $35 per gold ounce was now to be firmly established as the key currency base of a new world monetary order.
The settlement allowed adjustable parities and qualified national autonomy while excluding domestic gold redemption. Its central achievement, in Rothbard’s interpretation, was thus neither laissez-faire nor unconditional exchange stability, but a dollar-centered hierarchy favorable to American exports and financial influence.
The epilogue returns to the opening diagnosis: inflation in the reserve-currency country ultimately undermines the system built upon it. European recovery, American deficits, accumulated foreign dollar claims, the two-tier gold market, and Special Drawing Rights appear as stages in this deterioration. Its forward-looking discussion considers competing successor arrangements rather than narrating a completed resolution. The essay’s enduring relevance lies in its linkage of reserve-currency privilege, monetary discretion, commercial interests, and international power, all evaluated through Rothbard’s explicit preference for commodity money and market discipline.
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