1. Lecture 3: Rothbard on Money
Money and Banking - Dr. D. Foster

2. Money and Banking - Dr. D. Foster
Rothbard on Money
Money is different than coal …
What is true if the supply of coal rises?
What is true if the supply of money rises?
Is there a right amount of money?
What if the money supply doubled?
Are there economic interests “agitating” for a decline in the money supply?
Is it wasteful to mine for gold and silver?
What is the significance of a commodity as money?
Money and Banking - Dr. D. Foster

3. Money and Banking - Dr. D. Foster
Rothbard on Money
What about counterfeiting money?
Harms those with “real” money.
Hard to do with commodity like gold.
Easy to do with paper/fiat money.
And, if the government has a monopoly?
What has the government done to our money?
We’ve forgotten that the name meant a weight.
Gov’t force through “legal tender” laws.
Now, gov’t can finance spending without raising taxes or borrowing funds!
Money and Banking - Dr. D. Foster

4. Money and Banking - Dr. D. Foster
The gold standard ends:
the end of order
the end of truth
The gold standard and wartime.
Suspensions to keep banks afloat & gov’t financing going.
Wartime inflation only occurs in paper, not in gold!!
For U.S. – Revolutionary War, War of 1812, Civil War.
Gold coins and paper circulated until 1933.
This provided some limit on arbitrary money creation.
Gold contracts (or, clauses) thwart government.
Specify payment in $ equivalent of some amount of gold.
FDR cancels all gold clauses; the case of the Halle Building.
Money and Banking - Dr. D. Foster

5. Violators will be prosecuted!

6. For Your Consideration: Do We Need a National Currency?
Dollarization - Use another country’s currency as your medium of exchange.
$ - Ecuador, El Salvador, Timor, British Virgin Islands, Panama
€ - Vatican City, Monaco, Andorra
Currency board - the national currency is backed by an equal amount of a foreign currency.
$ - Hong Kong, Bermuda, East Caribbean $
€ - Bulgaria, Estonia, Lithuania
Currency union - A group of countries adopt a common currency. Euro/West Africa/Caribbean 6

7. Economic Community of West African States & the “Eco”
15 countries; 350 million people; 2020?
Among the ten criteria for joining:
Annual single-digit inflation rate.
Fiscal deficit < 4% of GDP.
External reserves > 3 months imports.
Central bank deficit-financing < 10% of tax revenues
Tax revenue > 20% of GDP.
Public investment > 20% of tax revenue.
Stable real exchange rates.
Positive real interest rate. 7

8. Lecture 3: Rothbard on Money
Money and Banking - Dr. D. Foster