Anatomy of Money and the State

Thoughts on Rothbard's classic "What Has Government Done to Our Money?"

A couple of weeks ago, a slim brown paper-wrapped package arrived in my rural postbox. Clearly, a small paperback had been sent to me unsolicited by the Mises Institute. Title? “What Has Government Done to Our Money?” by the genius Austrian school economist Murray N. Rothbard. You can download a PDF of the book here, or merely fill out a form (Domestic US here, International here), and the Mises will ship you a free copy.

Those who follow this substack closely may remember that in the context of the recent Argentine Presidential election, when Dr. Javier Milei of Argentina was selected, I wrote an essay debunking the approved narratives about Milei which were being promoted by the US Deep State and its Media shills, and in so doing took a dive into Rothbard’s classical work “Anatomy of the State” (also available for free from the Mises) as part of my efforts to understand the logical foundation of the “anarcho-capitalist” movement. The reason for this was that Milei is a self-described anarcho-capitalist academic economist. You can find that essay here.

In the good old US of A, the feckless congressional stooges which we repeatedly re-elect have, over decades, run up such a deficit that we have now crossed the “event horizon” (black hole metaphor) and it looks like the only way that the debt can be serviced is to inflate it away. Or hyper-inflate it. Or just convert it into a new Fiat currency at a devalued rate - let us call it Central Bank Digital Currency for the sake of this discussion.

Across Europe, under the EU, and in the UK, whether an individual government is “left” or “right,” every single one is so indebted to Brussels, big banks, and major bondholders that it has no policy flexibility. Basically, the bond markets tell the European and UK governments what policies they are allowed to follow.

Indeed, as Rothbard presciently rhetorically asked when the first edition of this book was published in 1963 (it has been repeatedly updated since then, including in 2024), “What has the Government done to our Money?”

For a bit more context: Over about 16 years of “higher education,” I took way too many classes in college and university, but not one single economics course. Depending on your point of view, I approach modern economic theory as either illiterate or unbiased. Or a bit of both. All I have to fall back on is my time in the school of hard knocks, having begun working for wages at age 13 and basically never stopping. There are no silver spoons here. Middle-class, politically conservative parents (Goldwater/Nixon supporters) who believed that I needed to understand the importance and value of work. Their only “liberalism” was in administering that wisdom and the occasional wooden paddle ad libidum. This is one of many common experiences that I share with my high school sweetheart, bride, and lifetime companion.

Please forgive the transgression.

Getting back on topic, I read and attempt to comprehend comments and essays from important economists, but it all sounds like insider babble to me—Keynesian stimulation, supply-side Laffer curve, Modern Monetary Theory (MMT), and it goes on and on. The first lesson in economics that really took for me was the movie “The Big Short,” made all the more real by having lived through that and lost my shirt in North Georgia real estate. Jill and I have watched that film at least four times already. It demonstrates so many concepts at the core of current reality. Including one way that reporting has been corrupted - the rise of access journalism.

Then I read “The Anatomy of the State.” In that book, Rothbard starts with first principles, such as the two ways that wealth is accumulated—basically through either labor or theft—and builds up a comprehensive theory describing the nature of the modern nation-state—essentially an upsized, more bureaucratic version of the political structures and oppressive tactics that thieving local warlords favor.

If you start from the premise that productive labor or theft are the two options for accumulating wealth, then it is clear that the modern administrative nation-state prefers theft. And that the primary function of the legal/judicial system of the administrative nation-state is to support and legitimize the nation-state. Suffice to say, perhaps due to my naivety, perhaps not, I am convinced that if the clarity of thought and logic of Murray Rothbard is central to the foundation of the Austrian School of Economics, then I was remiss in not taking upper-division training from Austrian School economists.

Here is the Mises Institute brief summary of that book;

This gives a succinct account of Rothbard’s view of the state. Following Franz Oppenheimer and Albert Jay Nock, Rothbard regards the state as a predatory entity. It does not produce anything but rather steals resources from those engaged in production. In applying this view to American history, Rothbard makes use of the work of John C. Calhoun.

How can an organization of this type sustain itself? It must engage in propaganda to induce popular support for its policies. Court intellectuals play a key role here, and Rothbard cites as an example of ideological mystification the work of the influential legal theorist Charles Black, Jr., on the way the Supreme Court has become a revered institution.

Long ago, when I was attending Medical School in Chicago (Northwestern), I visited the Chicago “Museum of Science and Technology” and was fascinated by a (Milton Friedman/Chicago School of Economics influenced) presentation that sought to demystify the nature of money. Completely baffled me, probably because it was designed to justify fiat currency (essentially money divorced from any underpinning item of physical value). The case was made that money was a mysterious ephemeral which people just accepted because it was more convenient than trying to live and transact business by barter. Or at least that is what I took away from the exhibit.

And then along comes Rothbard in this book about money and the State, which is really just a 134-page, easily read pamphlet. Once again, he builds up his logical argument about the nature of money and the role of the State in exploiting monetary systems for its own ends via theft from citizens. And as before in “Anatomy of the State,” he does this step by step, brick by brick, starting from first principles.

Once again, here is the book summary provided by the Mises for “What Has Government Done to Our Money?”;

Innumerable economists, investors, commentators, and authors have learned from this book through the decades. It remains the best book in print on the topic, a real manifesto of sound money.

Rothbard boils down the Austrian theory to its essentials. The book also made huge theoretical advances. Rothbard was the first to prove that the government, and only the government, can destroy money on a mass scale, and he showed exactly how they go about this dirty deed. But just as importantly, it is beautifully written. He tells a thrilling story because he loves the subject so much.

The passion that Murray feels for the topic comes through in the prose and transfers to the reader. Readers become excited about the subject, and tell others. Students tell professors. Some, like the great Ron Paul of Texas, have even run for political office after having read it.

Rothbard shows precisely how banks create money out of thin air and how the central bank, backed by government power, allows them to get away with it. He shows how exchange rates and interest rates would work in a true free market. When it comes to describing the end of the gold standard, he is not content to describe the big trends. He names names and ferrets out all the interest groups involved.

Since Rothbard's death, scholars have worked to assess his legacy, and many of them agree that this little book is one of his most important. Though it has sometimes been inauspiciously packaged and is surprisingly short, its argument took huge strides toward explaining that it is impossible to understand public affairs in our time without understanding money and its destruction.

Precisely. And these days I am all about trying to understand public affairs in our time. I said my piece about the jab, the corruption of the FDA, CDC, NIH, and the twisted ethics of all of this what seems to me like years ago. I read the latest buzz on “X” from my former colleagues (often now my detractors), and it all seems so stale. So outdated. They seem to be recycling issues which I covered so long ago. To my jaded eyes, the “medical freedom movement” seems to have become a playground for grifters and self-promoters.

Freedom, freedom of speech, freedom of thought, the rise of social Marxism (woke-ism), socialism, fascism, the rise of globalism, censorship, propaganda, targeted and promoted defamation, Fifth-generation warfare, PsyWar, media-promoted fearporn, and weaponized fear of infectious disease as a tactic for controlling populations. Those things matter most to me in the present.

Rothbard repeatedly teaches that bad money drives out good money and explains why. From my perch, something similar has happened to the “medical freedom” movement, and I want nothing to do with it. Now, once again, thank you for tolerating that aside and allowing me to return to the topic.

Rothbard's fundamental skepticism of the state's nature and belief in truly free market economics are at the center of his argument in favor of money based on a tangible, divisible commodity rather than ephemeral fiat currency. As he does in “Anatomy of the State,” Rothbard builds his logic from first principles, beginning with a discussion of the strengths, pitfalls, and historical progression of economic systems from barter to the present. In the final updates and then postscript chapters, the book brings us all the way to the present and the logical underpinnings of Central Bank Digital Currency (CBDC).

In so doing, he demonstrates the simple and compelling benefits of basing units of exchange on divisible metals that are not consumed in transactions. That when freely traded “currencies” of sovereign nation-states are based on either gold or silver (or both), and the free market is allowed to determine the exchange value of goods and services (rather than “monetary policy” determined and enforced by the State and/or its surrogate central bank), then the elegant simplicity of such an arrangement avoids all of the evils and ills which have plagued modern currencies since abandoning this system. In a stepwise, historical progression of examples, Rothbard eviscerates the many arguments made in favor of current, non-metal-based (fiat currency) monitory theories and systems.

In the interests of being fair and balanced, I am frustrated by the lack of discussion of energy as the ultimate divisible commodity/currency, but the realization that economics all boils down to energy transactions and transfers seems to be a more recent epiphany.

But what really rocked my world as I completed the book was Rothbard’s insights into inflation and how modern nation-states repeatedly use inflation to fund both war and their welfare programs. And how this destroys the savings and assets of individuals and nations. Inflation is a weaponized, intentional, occult and addictive form of taxation (which is theft). Beyond these simple and self-evident truths lies the central problem of inflation as a method of taxation- imbalances in rates between nation-states, which differences, in turn, drive trade imbalances and diplomatic and eventually military conflict.

After building up these arguments brick by brick, Rothbard then springs the final reveal.

That reveal involves the ultimate desire of independent (predatory) nation-states supported by their own central banks to enable synchronized inflation as a method of taxation while finding a way to maintain the advantages of fiat currency (which allows the nation-state to completely control the economic reality of its citizens to the benefit of the State). But how can they find a way to do this while avoiding the problem of asynchronous inflation rates in other trading partners? Which problem drains treasuries and drives trade imbalances.

What is the proposed answer, you may ask? The golden bullet solution? The one ring to rule them all?

I hope you can guess the answer by now: Central Bank Digital Currency (CBDC), managed by the Bank of International Settlements. So many are focused on the implications of universal digital ID, vaccine cards, and Social credit systems. But they all miss the big picture. CBDC is all about taxation and enabling the most insidious tax of all - inflation.

And now, I understand Dr. Javier Milei's motto at a deeper level: “Freedom, Damnit.” He is not just talking about personal freedom, freedom of speech, or freedom of thought.

He is talking about economic freedom, which can only come by separating predatory, thieving administrative nation-states from their ability to control money.

Just read the damn book.

You can get it for free at the links I provided above.

And move beyond your preconceived, 19th-century notions of the meaning of anarchy. From my perch, I see Anarcho-capitalism, the logic of the Austrian school of economics, the logic of a truly decentralized peer-to-peer market set free from predation and theft by the nation-state, as the most interesting intellectual movement in my lifetime. Truly revolutionary. I believe trying to understand the underlying concepts is well worth your time.

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