Sunday, March 10, 2013

monetary policy, gold buggery, and old fudyyduddyism

The US has a long history full of monetary cranks. When I was young, I ignored the subject as simply uncool. Later, I studied economics and hung out with libertarians, so I inevitably heard some Ron Paul-style anti-fed rabble rousing, but I found Milton Friedman's monetarist take on things more appealing than Murray Rothbard's gold backed money pleas. I've gotten more friendly with the idea that the Fed might exert an unfortunate influence on government borrowing, but hey, there were government bonds long before there was a federal reserve, and I'd bet a lot of money that there will be government bonds as long as there are governments. I always found political influence over monetary policy suspicious, but I don't like bad arguments against fractional reserve banking much better. I like the "free banking" ideas of George Selgin and Larry White, based on some work by Friedrich Hayek with an eye toward various systems used before 1900 in various places, but those are a dead letter so far as the government goes. Now bitcoin is interesting.
When I began writing this post, I had the feeling that my ideas about money had finally gelled, and that I would need to both eat some crow and try to figure out whether I had just become old and uncool enough to get mad about monetary policy. But the moment has already passed. We could end the Fed, and if that's all we did, nothing would change. If the US adopted a gold standard, well, they had one before, that didn't stop them from de-ing the currency or abandoning it again if they feel like it. Take monetary policy out from under political control and they will still borrow and spend. Our monetary setup is stupid, and could (technically speaking) be improved easily, but there is little political possibility of that happening.
Government debt is another issue where I am an old fuddyduddy, but I have no credibility there. I thought we were on the brink of disaster in the '80s, but I was just wrong. Is there a limit to how much they can borrow? What happens when they hit that limit? I don't know.

No comments: