An interesting paragraph that I think is very relevant to emphasize is in the middle of the essay. Rothbard explains how with bank credit expansion, or the creation of money not entirely backed by a commodity such as gold, it causes increased investment in the capitol goods industry which drives up wages for workers in those industries. When the workers receive their increased pay and begin consumption they then bid up prices in their own country causing the cost of living in their country to rise. This makes it more expensive to purchase goods from their home country and it causes an imbalance between imports and exports. The resulting trade deficits result in real money being driven out of the country as other countries try to redeem their paper money for gold.
The interesting point to make is that not only has this exact pattern played out in our country, but it has been made worse by the fact that our currency is currently being used as the standard for central banks worldwide. So essentially instead of other countries redeeming the paper money immediately for gold (which would result in a depression much earlier), they are almost forced to hold onto the money in their banks. This status has allowed us to inflate our currency almost perpetually at the expense of the rest of the world.
It is also time to get out of our heads the idea that we are exporting jobs and importing goods because our economy is so much better than other countries. We do it for exactly the reasons that Rothbard explains in this essay written decades ago -- because we have inflated our currency so much in the last 30 years.
Here is the paragraph I was referring to:
The banks, then, happily begin to expand credit, for the more they expand credit the greater will be their profits. This results in the expansion of the money supply within a country, say England. As the supply of paper and bank money in England increases, the money incomes and expenditures of Englishmen rise, and the increased money bids up prices of English goods. The result is inflation and a boom within the country. But this inflationary boom, while it proceeds on its merry way, sows the seeds of its own demise. For as English money supply and incomes increase, Englishmen proceed to purchase more goods from abroad. Furthermore, as English prices go up, English goods begin to lose their competitiveness with the products of other countries which have not inflated, or have been inflating to a lesser degree. Englishmen begin to buy less at home and more abroad, while foreigners buy less in England and more at home; the result is a deficit in the English balance of payments, with English exports falling sharply behind imports. But if imports exceed exports, this means that money must flow out of England to foreign countries. And what money will this be? Surely not English bank notes or deposits, for Frenchmen or Germans or Italians have little or no interest in keeping their funds locked up in English banks. These foreigners will therefore take their bank notes and deposits and present them to the English banks for redemption in gold--and gold will be the type of money that will tend to flow persistently out of the country as the English inflation proceeds on its way. But this means that English bank credit money will be, more and more, pyramiding on top of a dwindling gold base in the English bank vaults. As the boom proceeds, our hypothetical bank will expand its warehouse receipts issued from, say 2500 ounces to 4000 ounces, while its gold base dwindles to, say, 800. As this process intensifies, the banks will eventually become frightened. For the banks, after all, are obligated to redeem their liabilities in cash, and their cash is flowing out rapidly as their liabilities pile up. Hence, the banks will eventually lose their nerve, stop their credit expansion, and in order to save themselves, contract their bank loans outstanding. Often, this retreat is precipitated by bankrupting runs on the banks touched off by the public, who had also been getting increasingly nervous about the ever more shaky condition of the nation's banks.
The bank contraction reverses the economic picture; contraction and bust follow boom. The banks pull in their horns, and businesses suffer as the pressure mounts for debt repayment and contraction. The fall in the supply of bank money, in turn, leads to a general fall in English prices. As money supply and incomes fall, and English prices collapse, English goods become relatively more attractive in terms of foreign products, and the balance of payments reverses itself, with exports exceeding imports. As gold flows into the country, and as bank money contracts on top of an expanding gold base, the condition of the banks becomes much sounder.
