Money

My poor dad was a great man, an educated, hardworking, honest-to-a-fault teacher and public servant. Yet when it came to money, he was a liar. When he talked about work, teaching, and life, he often said statements like, "I'm not interested in money." Or, "I'm not doing it for the money." Or, "Money is not that important." Every time I heard him make such statements, I would shake my head. To me these were lies. One day I asked him, "If you're not interested in money, why do you accept a paycheck? Why do you often say, 'I'm not paid what I'm worth? Why do you look forward to a pay raise?" He had no reply.

Like my dad, many people are uncomfortable with the subject of money. Many people lie or live in denial about the importance of money in their life. It is often said, "Never discuss sex, money, religion, or politics." These subjects are too volatile and primal in nature. That is why most people talk about the weather, sports, what is on TV, or the latest diet fad. These things are superficial—we can live with or without them. We cannot live without money.

Many people subscribe to the saying we discussed in the Introduction of this book, "The love of money is the root of all evil." What they fail to recognize is that, in the context of that saying, money itself is not the root of all evil. Many people believe that money has the power to corrupt, and it can. Many people believe that if kids knew how to make money, they might not want to get a good education, and that too is possible. Yet, living life takes money, and earning money is one of the facts of life. Most people spend most of their waking hours, and hence their lives, working for money. Many divorces and family breakups are caused by arguments about money.

Keeping people ignorant about money is evil because many people do evil things for money, such as work at a job they do not like, work for people they do not respect, marry people they do not love, take what is not theirs, and expect someone else—like their family or the government—to take care of them when they are capable of taking care of themselves.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

The first new rule of money is: Money is knowledge. Today, you do not need money to make money. You simply need knowledge.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

FEW ECONOMIC SUBJECTS ARE more tangled, more confused than money. Wrangles abound over "tight money" vs. "easy money," over the roles of the Federal Reserve System and the Treasury, over various versions of the gold standard, etc. Should the government pump money into the economy or siphon it out? Which branch of the government? Should it encourage credit or restrain it? Should it return to the gold standard? If so, at what rate? These and countless other questions multiply, seemingly without end.

— Murray Rothbard; What Has Government Done to Our Money?

Many people—many economists—usually devoted to the free market stop short at money. Money, they insist, is different; it must be supplied by government and regulated by government. They never think of state control of money as interference in the free market; a free market in money is unthinkable to them.

— Murray Rothbard; What Has Government Done to Our Money?

Now just as in nature there is a great variety of skills and resources, so there is a variety in the marketability of goods. Some goods are more widely demanded than others, some are more divisible into smaller units without loss of value, some more durable over long periods of time, some more transportable over large distances. All of these advantages make for greater marketability. It is clear that in every society, the most marketable goods will be gradually selected as the media for exchange. As they are more and more selected as media, the demand for them increases because of this use, and so they become even more marketable. The result is a reinforcing spiral: more marketability causes wider use as a medium which causes more marketability, etc. Eventually, one or two commodities are used as general media—in almost all exchanges—and these are called money.

— Murray Rothbard; What Has Government Done to Our Money?

Historically, many different goods have been used as media: tobacco in colonial Virginia, sugar in the West Indies, salt in Abyssinia, cattle in ancient Greece, nails in Scotland, copper in ancient Egypt, and grain, beads, tea, cowrie shells, and fishhooks. Through the centuries, two commodities, gold and silver, have emerged as money in the free competition of the market, and have displaced the other commodities. Both are uniquely marketable, are in great demand as ornaments, and excel in the other necessary qualities. In recent times, silver, being relatively more abundant than gold, has been found more useful for smaller exchanges, while gold is more useful for larger transactions. At any rate, the important thing is that whatever the reason, the free market has found gold and silver to be the most efficient moneys.

— Murray Rothbard; What Has Government Done to Our Money?

This process: the cumulative development of a medium of exchange on the free market—is the only way money can become established. Money cannot originate in any other way, neither by everyone suddenly deciding to create money out of useless material, nor by government calling bits of paper “money.” [...] Thus, government is powerless to create money for the economy; it can only be developed by the processes of the free market.

— Murray Rothbard; What Has Government Done to Our Money?

A most important truth about money now emerges from our discussion: money is a commodity. Learning this simple lesson is one of the world’s most important tasks. So often have people talked about money as something much more or less than this. Money is not an abstract unit of account, divorceable from a concrete good; it is not a useless token only good for exchanging; it is not a “claim on society”; it is not a guarantee of a fixed price level. It is simply a commodity. It differs from other commodities in being demanded mainly as a medium of exchange. But aside from this, it is a commodity—and, like all commodities, it has an existing stock, it faces demands by people to buy and hold it, etc. Like all commodities, its “price”—in terms of other goods—is determined by the interaction of its total supply, or stock, and the total demand by people to buy and hold it. (People “buy” money by selling their goods and services for it, just as they “sell” money when they buy goods and services.)

— Murray Rothbard; What Has Government Done to Our Money?

The establishment of money conveys another great benefit. Since all exchanges are made in money, all the exchange-ratios are expressed in money, and so people can now compare the market worth of each good to that of every other good. If a TV set exchanges for three ounces of gold, and an automobile exchanges for sixty ounces of gold, then everyone can see that one automobile is “worth” twenty TV sets on the market. These exchange-ratios are prices, and the money-commodity serves as a common denominator for all prices. Only the establishment of money-prices on the market allows the development of a civilized economy, for only they permit businessmen to calculate economically. Businessmen can now judge how well they are satisfying consumer demands by seeing how the selling-prices of their products compare with the prices they have to pay productive factors (their “costs”). Since all these prices are expressed in terms of money, the businessmen can determine whether they are making profits or losses. Such calculations guide businessmen, laborers, and landowners in their search for monetary income on the market. Only such calculations can allocate resources to their most productive uses—to those uses that will most satisfy the demands of consumers.

— Murray Rothbard; What Has Government Done to Our Money?

If the size or the name of the money-unit makes little economic difference; neither does the shape of the monetary metal. Since the commodity is the money, it follows that the entire stock of the metal, so long as it is available to man, constitutes the world’s stock of money. It makes no real difference what shape any of the metal is at any time. If iron is the money, then all the iron is money, whether it is in the form of bars, chunks, or embodied in specialized machinery. Gold has been traded as money in the raw form of nuggets, as gold dust in sacks, and even as jewelry. It should not be surprising that gold, or other moneys, can be traded in many forms, since their important feature is their weight.

— Murray Rothbard; What Has Government Done to Our Money?

Thus, suppose that a television set costs three gold ounces, an auto sixty ounces, a loaf of bread 1/100 of an ounce, and an hour of Mr. Jones’s legal services one ounce. The “price of money” will then be an array of alternative exchanges. One ounce of gold will be “worth” either 1/3 of a television set, 1/60 of an auto, 100 loaves of bread, or one hour of Jones’s legal service. And so on down the line. The price of money, then, is the “purchasing power” of the monetary unit—in this case, of the gold ounce. It tells what that ounce can purchase in exchange, just as the money-price of a television set tells how much money a television set can bring in exchange.

What determines the price of money? The same forces that determine all prices on the market—that venerable but eternally true law: “supply and demand.”

— Murray Rothbard; What Has Government Done to Our Money?

People will almost always say, if asked, that they want as much money as they can get! But what they really want is not more units of money—more gold ounces or “dollars”—but more effective units, i.e., greater command of goods and services bought by money. We have seen that society cannot satisfy its demand for more money by increasing its supply—for an increased supply will simply dilute the effectiveness of each ounce, and the money will be no more really plentiful than before. People’s standard of living (except in the nonmonetary uses of gold) cannot increase by mining more gold. If people want more effective gold ounces in their cash balances, they can get them only through a fall in prices and a rise in the effectiveness of each ounce.

— Murray Rothbard; What Has Government Done to Our Money?

What have we learned about money in a free society? We have learned that all money has originated, and must originate, in a useful commodity chosen by the free market as a medium of exchange. The unit of money is simply a unit of weight of the monetary commodity—usually a metal, such as gold or silver. Under freedom, the commodities chosen as money, their shape and form, are left to the voluntary decisions of free individuals. Private coinage, therefore, is just as legitimate and worthwhile as any business activity. The “price” of money is its purchasing power in terms of all goods in the economy, and this is determined by its supply, and by every individual’s demand for money. Any attempt by government to fix the price will interfere with the satisfaction of people’s demands for money. If people find it more convenient to use more than one metal as money, the exchange rate between them on the market will be determined by the relative demands and supplies, and will tend to equal the ratios of their respective purchasing power. Once there is enough supply of a metal to permit the market to choose it as money, no increase in supply can improve its monetary function. An increase in money supply will then merely dilute the effectiveness of each ounce of money without helping the economy. An increased stock of gold or silver, however, fulfills more nonmonetary wants (ornament, industrial purposes, etc.) served by the metal, and is therefore socially useful. Inflation (an increase in money substitutes not covered by an increase in the metal stock) is never socially useful, but merely benefits one set of people at the expense of another. Inflation, being a fraudulent invasion of property, could not take place on the free market.

In sum, freedom can run a monetary system as superbly as it runs the rest of the economy. Contrary to many writers, there is nothing special about money that requires extensive governmental dictation. Here, too, free men will best and most smoothly supply all their economic wants. For money as for all other activities of man, “liberty is the mother, not the daughter, of order.”

— Murray Rothbard; What Has Government Done to Our Money?

When money was commodity money, especially gold and silver coins, it was pretty easy to know when you were being robbed. In early Roman times, con men would try to trick people by shaving the edges of coins. That is why most Roman coins are irregular and oddly shaped. And that is why many modern coins have grooves on the edge of the coin. If you receive a U.S. quarter whose edges are smooth and irregularly shaped, you would immediately know that someone had filed some metal from the coin and that the coin is worthless. Someone had stolen your money. When it comes to money people are smart—but only if they can see, touch, and feel it.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

In short, money with strings is worth less than money without strings - sometimes a lot less.

— Thomas Sowell; Dismantling America

Today, money is no longer a tangible object like chickens, gold, or silver. Today, modern money is simply an idea backed by the faith and trust of a government. The more trustworthy the country, the more valuable the money, and vice versa. This evolution of money from a tangible object into an idea is one reason why the subject of money is so confusing. It is difficult to understand something we can no longer see, touch, or feel.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

In theory, if everyone paid off his or her debt, modern money would disappear.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich