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1691. Law, Legislation, and the Gold Standard

Author:
George Selgin
Publication Date:
07-2015
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
More than a half century ago, in October 1961, Milton Friedman’s “Real and Pseudo Gold Standards” appeared in the Journal of Law and Economics. In that article, Friedman argued that versions of the gold standard erected after 1914, if not some earlier ones, were “pseudo” gold standards, differing from “real” ones in dispensing with actual gold coins and allowing monetary authorities to sterilize international gold movements, instead of letting those movements automatically regulate national money stocks. Such pseudo gold standards, Friedman argued, amounted to particularly dangerous instances of government price-fixing, and as such ought to be anathema to believers in free markets.

1692. Fix What Broke: Building an Orderly and Ethical International Monetary System

Author:
Judy Shelton
Publication Date:
07-2015
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
It has been more than six years since the global economy was put through the financial wringer and left hung out to dry. According to former Federal Reserve chairman Ben Bernanke, who presided over the debacle: “September and October of 2008 was the worst financial crisis in global history, including the Great Depression” (da Costa 2014). Given that Bernanke is a scholar on the global economic collapse of the 1930s, his assessment is particularly sobering. After all, a horrifying world war followed in its aftermath.

1693. Transitioning Standards of Value in Fixed-Value Monetary Systems

Author:
Nathan Lewis
Publication Date:
07-2015
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Historically, there have been two basic frameworks by which a government organizes its monetary affairs. One of these—the Soft Money approach—we are quite familiar with today: a process by which a committee of government bureaucrats manages a floating fiat currency of some sort, on a day-to-day and ad hoc basis. The other format—the Hard Money approach—is typified by the Rule of Law, which is some definite and unchanging framework by which the currency is managed. Consequently, there is no need or role for a day-to-day human discretionary element, except perhaps in some of the particulars of the system’s execution.

1694. A Private Committee for Monetary Reform: Process and Substance

Author:
Gerald O'Driscoll Jr.
Publication Date:
07-2015
Content Type:
Journal Article
Abstract:
In this article, I propose establishing a private Committee for Monetary Reform (CMR), outline a process for advancing fundamental reform, and suggest what the substance of that reform might look like. Obviously, I cannot provide the exact details of the reform, or there would no point in having a process; the outcome would be preordained. The choice of a process is important, however, because the process will affect the outcome. I first discuss how the process could work by drawing on the experience of the Shadow Open Market Committee (SOMC) founded in 1973 by Karl Brunner and Allan Meltzer. Second,I briefly review the case for monetary reform. Third, I propose some guiding principles for monetary reform. Fourth, I discuss the process in more detail.

1695. The Bitcoin Revolution

Author:
Bennett T. McCallum
Publication Date:
07-2015
Content Type:
Journal Article
Abstract:
The likelihood of the Bitcoin system replacing the Federal Reserve as the main provider of money in the United States and the desirability of such a transformation are the topics of this article. With respect to the first of these topics, one needs to consider how far the so-called Bitcoin Revolution has progressed by estimating the average volume of transactions conducted per time period by means of Bitcoin payments, and then compare recent values of that magnitude with the total volume per period of dollar payments in the United States.

1696. Bitcoin Will Bite the Dust

Author:
Kevin Dowd and Martin Hutchinson
Publication Date:
07-2015
Content Type:
Journal Article
Abstract:
Bitcoin is the most radical innovation in the monetary space for a very long time. It is an entirely private monetary system that runs itself and does not depend on trust in any central authority to honor its promises. Instead, it relies on trust in the Bitcoin community or network that verifies transactions and maintains the integrity of the system. This system of distributed trust creates bitcoins and produces an automatic, tamper-proof bitcoin money supply process. As such, it avoids the dangers of discretionary monetary policy—namely, quantitative easing, manipulated interest rates, and the need to rely on wise men or women to withstand political pressure or successfully forecast the future. Indeed, under Bitcoin there is no monetary policy at all. There is just an automatic monetary rule dictated by the Bitcoin protocol designed in 2009 by an anonymous programmer using the alias Satoshi Nakamoto.

1697. The Market for Cryptocurrencies

Author:
Lawrence H. White
Publication Date:
07-2015
Content Type:
Journal Article
Abstract:
Cryptocurrencies like Bitcoin are transferable digital assets, secured by cryptography. To date, all of them have been created by private individuals, organizations, or firms. Unlike bank account balances, they are not anyone’s liability. They are not redeemable for any government fiat money such as Federal Reserve Notes or for any commodity money such as silver or gold coins. The cryptocurrency market is thus a market of competing private irredeemable monies (or would-be monies). Friedrich A. Hayek (1978a) and other economists over the last 40 years could only imagine how market competition among issuers of private irredeemable monies would work. Today we have an actual market to study. In what follows I will discuss the main economic features of the market. I also discuss whether the market is purely a bubble.

1698. The Swiss Experiment: From the Lower Bound to Flexible Exchange Rates

Author:
Peter Bernholz
Publication Date:
07-2015
Content Type:
Journal Article
Abstract:
On January 15, 2015, to the perfect surprise of markets, business firms and politicians, the directorate of the Swiss National Bank decided to abolish the lower bound for the euro of CHF 1.20, which had been introduced on September 6, 2011.1 Obviously, the SNB had limited the number of people involved so that no leaks to the outside world occurred. In fact, a short time before the decision the Bank had still insisted that it would stick to the lower bound. Thus, the old truth had been confirmed that if a change of a foreign exchange regime is planned, central banks are obliged to lie.

1699. Current Evidence on the Resource Costs of Irredeemable Paper Money

Author:
Tyler Watts and Lukas Snyder
Publication Date:
07-2015
Content Type:
Journal Article
Abstract:
In 1986, Milton Friedman published a brief article in the Journal of Political Economy suggesting the possibility that real resource costs associated with the production and use of money could be greater under the current fiat money regime than under the commodity money regimes that preceded it. His article, and the broader implication about the resource costs of paper money, however, received scant attention. For by 1986, the Fed’s disinflationary policies had come to full fruition, inaugurating the Great Moderation that ushered in two decades of low inflation, low unemployment, and strong real growth in the U.S. economy.

1700. The New Counter-Insurgency Era in Critical Perspective

Author:
Celeste Ward Gventer, David Martin Jones, and M.I.R. Smith
Publication Date:
07-2015
Content Type:
Journal Article
Abstract:
The New Counter-Insurgency Era in Critical Perspective pulls together contributions from a range of authors with academic, policy, and military perspectives. Developed in the wake of the American-led invasion of Iraq, the current counterinsurgency (COIN) narrative— commonly referred to as “population centric” or “hearts-andminds”—identifies civilians as the center of gravity in winning insurgencies. Under this rubric, counterinsurgency experts have advocated redressing popular grievances, providing public goods and services, representative governance, and limited use of force. Such actions, these experts claim, will woo civilians away from supporting insurgents and inspire loyalty to the incumbent regime. Scholars, military handbooks, and media reports have all articulated this paradigm. The book’s editors state that “it was the largely uncritical acceptance of this COIN narrative that forms the background to this edited volume.”