In September 2019, I’ve decided to carve out my own path of financial education outside of the popular narrative. And in saying financial education, what I mean is to be an active student by learning a set of focused topics much like a curriculum. What I hope to accomplish is to learn sound business and investment practices with a strong foundation in macro economics and the history of money. Naturally, I spent hours and hours on Google and YouTube trying to get helpful insights on investing. It’s funny how the information age has taken us to this whirlwind of fake news and misinformation so I became very cautious in picking out my sources. Since launching this blog in 2018, I've learned quickly that the first pages of my Google search isn't necessarily the best information. In fact, the top results are mostly paid ads and those who are skilled in optimizing their SEO's. So for my studies, I’ve decided not to wholly rely on Google and instead resort to the age-old practice of picking up a book and read. My journey so far has taken me to learn about the history of money and basic understanding of economics. I must say that Murray Rothbard’s books came heavily recommended by a few authors and experts that I follow in the industry.

Click here to read about my not-so-book-review of “Economics in One Lesson” by Henry Hazlitt.

This 112-page book by Murray Rothbard makes learning about economics exciting though there’s nothing thrilling in reading about the effects of government meddling of the free-market money. “What Has Government Done to Our Money” is a surprisingly easy-to-understand, well-written and succinct introduction book to economics. Rothbard is innately talented in simplifying complex economic issues in his writings detailing specifically on the government’s legalized counterfeiting of money.

So to answer the title question “What Has Government Done to Our Money?”, here's how I understood it!

For the Americans, the government has taken the US dollars off the gold standard making it a pure fiat currency without any backing. Historically, the real money were gold and silver while the dollar was a note from the Federal Reserve representing the gold and silver on their reserve. Each dollar bill were redeemable by gold upon presenting to the bank. Now that the dollar is off the gold standard, the government is able to legally conterfeit by printing more dollars without any gold backings and has continually done so especially with the high increase in expenditures. Because of the amount of currency in circulation, the government devalued the US dollars resulting in the loss of purchasing power for its citizens. When the government adds currency in circulation, the first people to use these currencies, mostly bankers, has the highest purchasing power before it enters the market. The regular consumers will then feel the illusion of wealth with the increase of currency in circulation but has really lost its net purchasing power. This could lead to a lower standard of living. Furthermore, “new money” tend to stay in specific industries creating a bubble. As we have seen in 2008, these bubbles busts affecting millions of Americans financially. New money also makes the wealthy wealthier while the middle class diminishes.

My thoughts…

Before reading this book, I have to point out that Rothbard is an American heterodox economist of the Austrian school of thought in economics. Consider also reading from the Keynesian school of thought as well as the Modern Monetary Theory to get a balanced view of economics.

“What Has Government Done to Our money” is an unusual page-turner book in economics! Much like reading an exciting fictional novel, each page is interesting and kept me up a few nights because I couldn’t put it down. Or maybe I’m just really nerdy about all this stuff! Needless to say, I really enjoyed reading this. Just look at the number of underlines (I know, I need a highlighter) and notes I’ve written as pictured below. Though complex in nature, Rothbard is innately talented in simplifying these issues. He started the book by laying the foundational knowledge of “exchange” being the bloodline of the economy then went on to explain how money is selected in the free market. He finished the book by detailing the modern history of money in 9 phases starting from the classical gold standard (golden age) all the way to the US going off the gold standard while inflating its currency supply. He then made a recommendation of bringing back the monetary system to the gold standard to prevent further economic catastrophe.

One of my biggest takeaways is that money is a commodity. Like all other commodities, it has a price that fluctuates with its supply and demand. The price of money represents its purchasing power. Throughout the book, Rothbard explains the effects Gresham’s Law and the 3 checks on banks. Furthermore, I’ve learned that inflation is a form of taxation. Instead of the government directly taxing its people for the expenditures, the government prints money to avoid conflict and opposition from the citizens. Inflation results in a net loss of purchasing power. Lastly, I’ve learned that the current banking system is inherently insolvent. The fractional reserve bank is a pyramid scheme in which central banks are allowed to create more currency from their reserves. In the case of bank runs with the fractional reserve system, banks just don’t have enough reserves to pay everyone's deposits thus proving insolvent. The Federal Reserve or Central Banks serves as the last resort in bailing out failing banks as we have seen in the 2008 financial crisis through quantitative easing.

First published in 1963, “What Has Government Done to Our Money” is just as relevant today. The government hasn’t stopped inflating our currency supply with the multiple QE's and the rapidly growing national debt. As a result, economic booms and busts are more prevalent and have bigger impact to everyone especially the diminishing middle class. Ron Paul, the former Republican nominee for president, recommended this book saying that something “every American” should read. I couldn’t agree more! “What Has Government Done to Our Money” is an excellent resource to gain better understanding of our current financial and economic situation by exploring its history.