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Money In War Ravaged Iraq

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October 05, 2009 – Comments (10)

This evening I had a "holy sh*t" moment.  It's one of those rare times when I see the movement of liberty in a new way and am completely surprised once again by how far the teachings of Mises and Rothbard have spread.  An essay on money use in Iraq was recently published on the front page of the Mises Institute. The significance for me is that it was written by a Marine officer stationed in Iraq who has some interesting insights into the purpose of money in a society.  I know how popular the concept of individual liberty is among Marines (not to be confused with the State loving warmongers and cockpit cowboys in the Air Force.)  I didn't know that the Austrian School had followers among the boots on the ground in Iraq.  I hardly could have guessed that there would be a young Marine studying money in a war torn society.  Kudos to Captain Edward Gonzalez, and Mises editor Jeffrey Tucker for publishing it.

David in Qatar

Money In War Ravaged Iraq by Edward Gonzalez, Capt USMC 

There has been much ado concerning the Federal Reserve's doubling of the monetary base this past year. Many believe a currency crisis or hyperinflation of the dollar is imminent. Some go as far as to say that this crisis will destroy America.

While I concede that a currency crisis would certainly mean a much lower quality of life for most Americans in the short term, I also have great faith in the individual's ability to take action in uncertain times. Free men operating in a free market do find solutions to even the largest crises.

In 2007 I did a seven-month deployment to Iraq. I was posted in multiple farming and fishing villages in al Anbar province. However, I do not wish to discuss the war or national defense. I want to concentrate on what, in my estimation, was a much more important issue to the people in the villages: money.

These villages were rebuilding from the horrors of the war. A great amount of wealth had been destroyed, not bank accounts, mind you, but real wealth: houses, cars, trucks, fishing boats, and farmland.

In the villages, houses and boats needed to be repaired or rebuilt, roads needed attention, and parents wanted to get their children back in school. In order to do all these wonderful things, a medium of exchange was needed. Unfortunately, or fortunately, depending onhow you look at it, the villagers did not put much faith in the paper money printed by the government in Baghdad.

As this was an agrarian society the villagers turned to a time-tested medium of exchange: livestock. In the villages all households had some sheep, and the more affluent houses had very large herds. Goods were exchanged, debts repaid, and business contracts agreed upon all using sheep as money.

The al Anbar Province is a desert environment and good farmland is only available 500 to 1000 meters off the Euphrates River. The villages where I served are located in the palm groves of the Euphrates River just south of the Haditha Dam.

The river water, while great for crops and livestock, was not ideal for human consumption, and therefore clean drinking water became a very valuable commodity. The bottled water brought in from the larger cities was one of the most sought-after commodities in the village, and I soon noticed villagers pricing items in not only sheep, but bottles of drinking water as well.

Then there was the standard wartime medium of exchange: cigarettes. The villagers smoked cigarettes every evening with chai tea. They were bought in the cities and brought back by the truck load. As a result they were not as valuable as sheep or bottled water; however they served as small change for the villagers.

These three moneys all circulated in the villages free of any government mandate or oversight. The exchange rate also fluctuated free of mandate. Sheep were the most stable commodity as they were held and bred in the villages.

Bottled water and cigarettes were transported in from the cities. This transport was subject to logistical difficulties, and therefore their value fluctuated. Farmers and fisherman also drank much more water in the summer months, which had a great effect on its value. As individuals built up more savings in the form of bottled water and cigarettes, the values of these currencies became more stable but were still subject to greater fluctuations than were sheep.

With these three free market currencies, I watched village markets grow, farmers increase productivity, fisherman save capital in order to improve or build new boats, and young couples commission houses to be built with borrowed money. All this progress was made possible through the real savings of valuable commodities.

So, for those who are deeply worried about a currency crisis in the United States, I bear a positive message. When a currency fails, as long as there is no outside coercion implemented, individuals will act and find sound money in what is around them. Gold and silver will certainly be prime candidates, but even in small towns with limited access to these precious metals, there is an infinite supply of sound money available.

Depending on the situation and location of the community, a form of sound money might spring from anywhere.

Edward Gonzalez served on active duty in the United States Marine Corps from 2004 through 2008. He is currently a captain in the Reserves and works as an elementary school director in California. The statements in this article are the personal opinions of the author and are not endorsed by the United States Marine Corps. Send him mail. See Edward Gonzalez's article archives. Comment on the blog.

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10 Comments – Post Your Own

#1) On October 05, 2009 at 2:01 PM, davejh23 (< 20) wrote:

I think this might apply better to more agricultural communities than to most communities in the US:

"When a currency fails, as long as there is no outside coercion implemented, individuals will act and find sound money in what is around them."

Relatively few will have physical gold and silver to trade...and to many, it might be considered worthless in this kind of situation.  I know I wouldn't take gold in exchange for food or water.  Useful physical goods might be traded, but I can't think of any standard "currency" that might be used in my own community.

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#2) On October 05, 2009 at 2:41 PM, leohaas (37.60) wrote:

Very much true.

For a collapsed society, like Iraq, the Confederacy after 1863, and no doubt Afghanistan.

But this kind of trade-based society cannot ever become sophisticated like modern society. Who in the US would go to work and accept being paid in sheep, bottles of water, and cigarettes? Anybody but a farmer's hand in an Amish village? (Oops, there go the cigarettes as currency).

Look, I am not saying it cannot work. Clearly, the whole world used this system at some point in history. And it works in today's Iraq. Because we bombed the country back into the Middle Ages! For no reason other than we let us con into war by Cheney and his ilk.

I sincerely hope the US never regresses to this. It would mean that society as we know it has collapsed. That the government no longer exists. That gangs rule the country. That a bunker filled with water, canned food, gold, silver, guns, and plenty of ammo is our only alternative to dying an agonizing death. A bit lke current-day Afghanistan after we pull out...

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#3) On October 05, 2009 at 2:50 PM, angusthermopylae (40.24) wrote:

Excellent article, David.  I hope that it goes to show a lot of people out there that Marines, while deadly and powerful as a group, are not just a bunch of hired thugs for the government--these people think, and apply that thinking to all kinds of different situations...for their own benefit and to the benefit of others.

As for davejh23's concern, I believe the point is that there wouldn't need to be a standard currency in an extremis situation--people will find a medium of exchange that works for them.

Probably, it's only in larger, disparate groups where a standard currency is needed--farmers in Georgia need to trade with  factory workers in New Jersey...the needs of each preclude a local currency from translating well.

(I'm sure that's part of some economic theory somewhere....)

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#4) On October 05, 2009 at 2:52 PM, catoismymotor (35.95) wrote:

+ 1 Rec

Leohaas and davejh23 offer some intersting takes on this subject. I thank them for their input.

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#5) On October 05, 2009 at 3:28 PM, lquadland10 (< 20) wrote:

Thank you for serving. I agree there is always a way. I like the barter system myself. Very positive and up lifting. Do you remember the silver certificate dollar that Kennedy did? Executive order 11110? I wonder if in some form of that could be brought back.

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#6) On October 05, 2009 at 3:58 PM, whereaminow (61.23) wrote:

I have some thoughts to add of course (did you really think I wouldn't haha).

First, my fellow Air Force vets, I'm just playin with you.  You know who I like to take things to the extreme :)  I like you guys. Only the Navy is worthless.

Second, this isn't a story about America so I don't want to get into hypotheticals about what may happen there if things went very bad.  I'll just assume that free peoplel would figure it out, and enslaved people would be in for some violence. 

Third, this is yet another example that voluntary exchange is transacted because the two parties percieve a benefit from it. This is Mises' Human Action in a microcosm.  Capitalism is a term coined by Marx to describe what he saw around him.  It is not a term ever proposed by free market economists.  What we view of Capitalism, if there is such a thing, is this very elemental truth of society.  People will interact and exchange freely to make their lives better.  That is not something to be regulated or managed or controlled.  It's certainly not something to eliminate and replace with enermous ghastly immoral and wasteful social bureaucracies.

If Capitalism is anything, it's the naturaly condition that arises when people are allowed the freedom to exchange.  I don't know where this society in Iraq is headed.  I am fairly certain that the State will come to dominate their lives, for better or worse.  I only know that they are now better off for being free from State control then they were before.  I know that they improved their world through voluntary exchange.  Where that could lead them if they could continue upon that path without outside coercion or internal bickering is the great unknown.

Does this justify the price that was paid in blood? Not for me.  Every single life is precious.  The worst aspect of war is that we will never know how many great ideas, great minds, great talents were lost.  If in one war 50,000 die and in another 5,000,000 die no one can truly know the impact of those deaths.  No one can measure the impact upon the future, statistically or otherwise. We don't know in those groups what we will be missing.  We don't know how the effects of those deaths will impact family members that could have achieved greatness, or people that would have come in contact with the now-deceased and been inspired to greatness.

In war, we lose what we will never know.  That's the true horror.  It can't be replaced.  Not with money.  Not with Capitalism. Not with anything. 

"It's a heck of thing: killing a man. You take away all that he has; all that he'll ever be." - William Munny, Unforgiven 

David in Qatar

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#7) On October 05, 2009 at 4:07 PM, ChrisGraley (30.30) wrote:

The US will see prosperity after all!

 

 

We are full of sheep!

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#8) On October 05, 2009 at 4:11 PM, phyrne (39.55) wrote:

for many people in poor countries to have a happy family life they need the basics plus community stability identity loyalty education to understand they can appriciate these things without the fear of losing them.this produces humaness .many dont value future because for them it may not exist  .so  useful things to thier lifes are valued and that is the currency of most of the worlds population and our risk is not to understand that or worse let someone take advantage   .thankyou to you guys for trying to give this back to them.iraq  invaded iran with boy soldiers for about 14 years around the 80s?and that was a horrific unhumane war so i hope a peaceful leader for the country can be found soon and you can all come home                   

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#9) On October 05, 2009 at 7:18 PM, chk999 (99.98) wrote:

New Zealand is the Switzerland of the sheep standard. There is no way they will do baaadly.

Ouch! You didn't have to use the cricket bat!

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#10) On October 11, 2009 at 12:23 PM, tfirst (35.96) wrote:

Just another example of the importance of the Federal Reserve. How could we ever survive without them inflating the currency and then skimming the value off the top before inflation deteriorates the buying power of the masses? Could we even determine the value our own goods without their control?

and now the secret to sucess in life....It's not what you are, it's what they think you are. Keep the slaves too busy to realize they are slaves. Most of the wars and politics are just distractions to obscure the real money that is changing hands.....Oh...have a nice day!

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