A dollar-based Free Banking system: The way to nominal stability in Argentina

Inflation is skyrocketing in Argentina and the country seems unable to ever maintaining any form of nominal stability. In my view the problem with lack of nominal stability in Argentina is, however, not fundamentally monetary – it is rather a constitutional problem. Hence, it seems like the country’s politicians are able to make the decisions that are necessary to maintain monetary stability.

So even though I am quite critical about different suggestions for dollarization in different countries I for some time have thought that in the case of Argentina there is no reason to try to come up with an “optimal” monetary regime. In many ways Argentina is economically-politically a failed state. Hence,  simply getting rid of the Argentine peso might be the least horrible solution.

Nicolas Cachanosky and Adrian O. Ravier in a new very interesting paper – A Proposal of Monetary Reform for Argentina: Flexible Dollarization and Free Banking - has an interesting proposal for dollarization in Argentina.

Here is the abstract:

Argentina’s economy and monetary institutions are, once again, experiencing a serious crisis. In this document, we propose a monetary reform for Argentina that consists of flexible dollarization plus a free banking regime. By flexible dollarization, we mean that the peso should be replaced with the U.S. dollar as a first step, but the market should have the freedom to interact with any selected currency. Therefore, the country does not become attached the U.S. dollar; on the contrary, it becomes a free currency country. By free banking, we mean giving financial institutions permission to issue their own banknotes convertible into U.S. dollars or any other currency or commodity of their choice.

It should be noted that the problems of the Argentine economy go beyond those of monetary policy. This proposal should not be understood as a sufficient reform to fix the Argentinean economy but as a necessary one. This proposal should also not be understood as a monetary panacea but as a monetary framework that is still superior to one provided by the Argentine central bank BCRA and Argentine policy makers to their country.

There is only major problem with the suggestion – Argentine policy makers seem unable to make sensible decisions. That said, ideas matter. In fact they matter a lot so hopefully one day some visionary Argentine reformist government will pick-up Cachanosky-Ravier monetary reform plan.

HT Anthony Evans

George Selgin on Free Banking and NGDP targeting

I should really be sleeping but George Selign just put out a blog post on Free Banking and NGDP Targeting.

This is how George kicks off:

“Kurt’s recent post on NGDP targeting just happens to come right on time to introduce one I’d been contemplating concerning the connection between such targeting and free banking. While many readers may suppose the two things to represent entirely distinct, if not antagonistic, approaches to monetary reform, I have always regarded them as complementary. Yet I also agree with Kurt in regarding NGDP targeting as “a form of central economic planning.”

Am I contradicting myself? Much as I’d like to quote Walt Whitman, I don’t think I am. Instead, I think that it is those who would insist on the incompatibility of free banking and NGDP targeting whose reasoning is faulty. They fall victim, I believe, to a category error, namely, that of conflating banking regimes with base money regimes.”

Read the rest here.

Bedtime for me…

PS please read this as well.

Kurt Schuler endorses NGDP targeting

Long time free banking advocate Kurt Schuler has a new piece at freebanking.org in which he endorses NGDP targeting.

This is Kurt:

Given that I do not expect to see free banking in the immediate future, I would like to see one, or preferably more, central banks that now target inflation try targeting nominal GDP targeting instead. Targeting nominal GDP has some prospective advantages over inflation targeting. One is that nominal GDP targeting allows what seems to be a more appropriate behavior for prices over the business cycle, allowing “good” (productivity- rather than money supply-driven) deflation during the boom and “good” inflation during the bust.

I agree very much with Kurt on this and it is in fact one of the key reasons why I support NGDP targeting. Central banks should indeed allow ‘good deflation’ as well as ‘good inflation’. Hence, to the extent the present drop in inflation in for example the US reflects a positive supply shock the Federal Reserve should not react to that by easing monetary policy. I have discussed that topic in among others this recent post.

Back to Kurt:

Another is that inflation targeting as it has been both most widely proposed and as it has always been adopted has been a “bygones are bygones” version, with no later compensation for past misses of the target. During the Great Recession, many central banks undershot their targets, even allowing deflation to occur. They never corrected their mistakes. Nominal GDP targeting in the form that Scott Sumner and others have advocated it requires the central bank to undo its past mistakes.

Note here that Kurt comes out in favour of the Market Monetarist explanation of the Great Recession. It was the Federal Reserve and other central  banks’ failure to keep NGDP ‘on track’ – and even their failure to just hit their inflation targets – that caused the crisis.

And I think it is notable that Kurt notes that “(i)f it (the central bank) undershot last year’s target, it has to increase the growth rate of the monetary base, other things being equal, to meet this year’s target, which is last year’s target plus several percentage points.” 

That of course indirectly support for monetary easing to get the NGDP level back on track. I am sure that will enrage some Austrian School readers of freebanking.org in the same way as they recently got very upset by George Selgin apparent defense of quantitative easing in 2008/9. See for example Joe Salerno’s angry response to George Selgin here. See George’s reply to Joe (and Pete Boettke) here.

I am, however, not at all surprised by Kurt’s views on this issues – I knew them already – but I am happy to once again be reminded that Free Banking thinkers like Kurt and George and Market Monetarists think very alike. In fact I personally have a hard time disagreeing with anything Kurt and George has to say about monetary theory. And I would also note that Kurt has been an advocate of the market based approach to monetary policy analysis advocated particularly by Manley Johnson and Bob Keleher in their book “Monetary Policy, A Market Price Approach”. The Johnson-Keleher view of markets and money of course comes very close to being Market Monetarism. For more on this topic see Kurt on Keleher here.

However, I would also use this occasion to stress that Market Monetarists should learn from people like George and Kurt and we should particularly listen to their more cautious approach to central banks as hugely imperfect institutions. This is Kurt:

With nominal GDP targeting it may well also happen that there will be flaws that only become apparent through experience. My reason for thinking that flaws are likely is that, like inflation targeting, nominal GDP targeting is an imposed monetary arrangement. It is not a fully competitive one that that people are at liberty to cease using at will, individually, the way they can cease buying Coca-Coca and start buying Pepsi or apple juice instead. Nominal GDP targeting when carried out by a central bank, which has monopoly powers, is a form of central economic planning subject to the same criticisms that apply to all forms of central planning. In particular, it does not allow for the occurrence of the type of discovery of knowledge that comes from being able to replace one arrangement with another through competition.

I agree with Kurt here. Even if NGDP targeting is preferable to other “targets” central banks are still to a large extent very flared institutions. Therefore, it is in my opinion not enough just to advocate NGDP targeting – or even worse just advocating monetary easing in the present situation – we also need to fundamentally reform of monetary institutions.

Finally, advocating NGDP targeting is not just a plain argument for more monetary easing – not even in the present situation. Hence, it is for example notable that the recent drop in inflation in for example the US to a very large extent seems to have been caused by a positive supply shock. This has caused some to call for the fed to step up monetary easing. However, to the extent that what we are seeing is a positive supply this of course is “good deflation”. So yes, there are numerous reasons to argue for a continued expansion of the US money base, but lower inflation is not necessarily such reason.

Larry White on Bernard Lietaer’s new book

Larry White has a very insightful review of Bernard Lietaer and Jacqui Dunne’s new book “Rethinking Money: How New Currencies Turn Scarcity Into Prosperity“. As Larry writes in a Facebook update “I wanted to like the book more”. I have the exact same feeling about much of Lietaer’s work.

Bernard Lietaer of course is a pioneer in the “local currency” movement. Fundamentally local currencies (or parallel currencies) have a lot in common with free banking and it is of course why Larry and myself would like to like the work of people like Bernard Lietaer. However, the problem with the local currency crowd in my view is that it’s leading proponents base their arguments for “local currencies” on seriously flawed economic arguments. In fact I would rather say that they tend to have anti-economic arguments. As Larry notes in his review:

“In Rethinking Money, economist Bernard Lietaer and journalist Jacqui Dunne offer interesting accounts of community currency projects more or less like Berkshares around the world. But they admire them for rather different reasons. The dominant monetary system is problematic, in their view, because it “perpetuates scarcity and breeds competition,” stifles cooperation, makes life stressful, concentrates wealth at the top, causes financial instability, and threatens the environment. It does so chiefly because the need to pay interest is “structurally embedded” in the system.

…Today’s government-dominated monetary and financial systems do of course exhibit instability. But the book’s other indictments of them are more dubious. Any monetary system “perpetuates” (does not abolish) “scarcity,” as economists use the term, and so too does any barter system. Scarcity, meaning that we do not have enough time and resources to accomplish all of our imaginable goals, is an ineluctable feature of human life. Competition is not a problem: Indeed, to bring about greater prosperity we need more competition, not less, and especially so in money and banking. Freer competition promotes rather than stifles greater social cooperation. Free-market banking and money-issue would end the government’s monopoly on basic money and its control over the interbank transfer system. It would end both special privileges for commercial banks and special restrictions on their activities. Greater efficiency, stability, and prosperity would follow. But to think that “monetary scarcity can be a thing of the past” is to engage in wishful thinking.”

I completely agree with Larry’s comments – Lietaer and other “local currency” proponets’ analysis is flawed. That is too bad as I strongly believe that we can learn a lot from the experience with “local currencies”. In fact I believe that “local currencies” can help us remove monetary disequilibrium. However, the general anti-capitalist and “localist” (or rather protectionist) perspective of people like Bernard Lietaer is entirely wrong.

One of the key problems in the local currency literature is that it seems to be completely unaffected by the research on Free Banking. As Larry correctly notes:

They unfortunately never mention F.A. Hayek’s unconventional work The Denationalization of Money, nor any of the literature of the last 30 years concerning non-fiat, redeemability-based free banking.

In reviewing Georgina M. Gómez’s boo Argentina’s Parallel Currency about Argentina’s experience with parallel currencies I made a similar comment:

What strikes me when I read Dr. Gómez’s book is the near total lack of references to Free Banking theory and to monetary theory in general. For example there is no reference to Selgin, White, Horwitz and other Free Banking theorists. There is no references to Leland Yeager’s views on monetary disequilibrium either. That is too bad because I think theorists such as Selgin and Yeager would make it much easier for Gómez to explain and understand the emergence of CCS if she had utilized monetary disequilibrium theory and Free Banking theory.

As I noted – I strongly believe that we can learn a lot about monetary issues and particularly about the feasability of Free Banking by studying local/parallel currencies, but we need to do it from the perspective of Larry White rather than from the perspective of Bernard Lietaer – competition in money and finance is good and is a source of stability rather than instability.

See some of my earlier posts on local currencies here:

Free Banking theorists should study Argentina’s experience with parallel currencies

Time to try WIR in Greece or Ireland? (I know you are puzzled)

PS for a Free Banking critique of local currency thinking see George Selgin’s piece “The Folly that is “Local” Currency”

Wrap-up: My Free Banking related posts

Over at freebanking.org Kurt Schuler has been asking his readers for references to blogs on Free Banking. I know Kurt is a reader of my blog so he obviously knows that I from time to time write about Free Banking and Free Banking related issues. However, I thought this would be a good oppurtunity to make a list of some my Free Banking related blog posts.  You will find the list below.

There is no doubt that I think it is highly relevant to continue to discuss Free Banking – both on its own term and why it might be a alternative to central banking and as a way to in general understand monetary matters better. I would, however, hope that we in the future will see more forward-looking research on Free Banking than we have seen in the past. Hence, in the past a lot of the research on Free Banking has been focused historical examples of Free Banking, but there has been much less research done on how Free Banking systems could develop in the further. What reforms are for example necessary to promote Free Banking in the future?

My posts on especially monetary reform in Africa has to some extent been an attempt to start a debate about the possibility of monetary reform in Africa to promote Free Banking solutions. In my view with the right reforms we could see Free Banking solutions develop fast in Africa. What we need now is research to help policy makers to pass the right reforms. The expirience for example M-pesa in Kenya in my view clearly shows that African will be very happy to embrace free money as an alternative to monopolized money.

Concluding, my blog is not primarily about Free Banking, but certainly I think that Free Banking is a valid alternative to central banking that needs to be discussed much more seriously and I think that there is a real opportunity that we could Free Banking develop as a serious alternative central banking – particularly in Africa.

Earlier Free Banking related posts:

Selgin interview on Free Banking

Free Banking theorists should study Argentina’s experience with parallel currencies

M-pesa – Free Banking in Africa?

NGDP level targeting – the true Free Market alternative (we try again)

NGDP level targeting – the true Free Market alternative

When central banking becomes central planning

“Good E-money” can solve Zimbabwe’s ‘coin problem’

The (mobile) market just solved Zimbabwe’s “coin problem”

Forget about East African Monetary Union – let the M-pesa do the job

Time to try WIR in Greece or Ireland? (I know you are puzzled)

The spike in Kenyan inflation and why it might offer a (partial) solution to the euro crisis

Atlas Sound Money Project Interview with George Selgin

Counterfeiting, nazis and monetary separation

L Street – Selgin’s prescription for Money Market reform

George Selgin outlines strategy for the privatisation of the money supply

http://marketmonetarist.com/2012/01/13/dont-forget-the-market-in-market-monetarism/

Scott Sumner and the Case against Currency Monopoly…or how to privatize the Fed

Selgin just punched the 100-percent wasp’s nest again

Selgin on Quasi-Commodity Money (Part 1)

Selgin interview on Free Banking

I just came across this excellent interview with George Selgin on Free Banking. I find it hard to disagree with George on this issue.

Friedman, Schuler and Hanke on exchange rates – a minor and friendly disagreement

Before Arthur Laffer got me very upset on Monday I had read an excellent piece by Kurt Schuler on Freebanking.org about Milton Friedman’s position on floating exchange rates versus fixed exchange rates.

Kurt kindly refers to my post on differences between the Swedish and Danish exchange regimes in which I argue that even though Milton Friedman as a general rule prefered floating exchange rates to fixed exchange rates he did not argue that floating exchange rates was always preferable to pegged exchange rates.

Kurt’s comments at length on the same topic and forcefully makes the case that Friedman is not the floating exchange rate proponent that he is sometimes made up to be. Kurt also notes that Steve Hanke a couple of years ago made a similar point. By complete coincidence Steve had actually a couple of days ago sent me his article on the topic (not knowing that I actually had just read it recently and wanted to do a post on it).

Both Kurt and Steve are proponents of currency boards – and I certainly think currency boards under some circumstances have some merit – so it is not surprising they both stress Friedman’s “open-mindeness” on fixed exchange rates. And there is absolutely nothing wrong in arguing that Friedman was pragmatic on the exchange rate issue rather than dogmatic. That said, I think that both Kurt and Steve “overdo” it a bit.

I certainly think that Friedman’s first choice on exchange rate regime was floating exchange rates. In fact I think he even preffered “dirty floats” and “managed floats” to pegged exchange rates. When I recently reread his memories (“Two Lucky People”) I noted how often he writes about how he advised governments and central bank officials around the world to implement a floating exchange rate regime.

In “Two Lucky People” (page 221) Friedman quotes from his book “Money Mischief”:

“…making me far more skeptical that a system of freely floating exchange rates is politically feasible. Central banks will meddle – always, of corse, with the best of intentions. Nevertheless, even dirty floating exchange rates seem to me preferable to pegged rates, though not necessarily to a unified currency”

I think this quote pretty well illustrates Friedman’s general position: Floating exchange rates is the first choice, but under some circumstances pegged exchange rates or currency unions (an “unified currency”) is preferable.

On this issue I find myself closer to Friedman than to Kurt’s and Steve’s view. Kurt and Steve are both long time advocates of currency boards and hence tend to believe that fixed exchange rates regimes are preferable to floating exchange rates. To me this is not a theoretical discussion, but rather an empirical and practical position.

Finally, lately I have lashed out at some US free market oriented economists who I think have been intellectually dishonest for partisan reasons. Kurt and Steve are certainly not examples of this and contrary to many of the “partisan economists” Kurt and Steve have great knowledge of monetary theory and history. In that regard I am happy to recommend to my readers to read Steve’s recent piece on global monetary policy. See here and here. You should not be surprised to find that Steve’s position is that the main problem today is too tight rather than too easy monetary policy – particularly in the euro zone.

PS I should of course note that Kurt is a Free Banking advocate so he ideally prefers Free Banking rather anything else. I have no disagreement with Kurt on this issue.

PPS Phew… it was much nicer to write this post than my recent “anger posts”.

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Related post:
Schuler on money demand – and a bit of Lithuanian memories…

Free Banking theorists should study Argentina’s experience with parallel currencies

The latest book I have got in the mail is Georgina M. Gómez’s “Argentina’s Parallel Currency” about Argentina’s experience with parallel currencies or what has also been termed Complementary Currency Systems (CCS).

I have only read 10-15 pages in the book and studied the index and references – so this is certainly no book review. As I expected this is not exactly the type of economic literature that I would normally read and it is certainly not in the broader neo-classical tradition of economics that I feel comfortable with. Rather it is an piece of institutional economics – and not in the tradition of Hayek. Anyway, I find the book very interesting nonetheless. And no, I am not open-minded, but I see opportunities in what I read. Opportunities that the research on CCS can teach us a lot about monetary theory and to a large extent can confirm some key Market Monetarist and Free Banking positions.

What strikes me when I read Dr. Gómez’s book is the near total lack of references to Free Banking theory and to monetary theory in general. For example there is no reference to Selgin, White, Horwitz and other Free Banking theorists. There is no references to Leland Yeager’s views on monetary disequilibrium either. That is too bad because I think theorists such as Selgin and Yeager would make it much easier for Gómez to explain and understand the emergence of CCS if she had utilized monetary disequilibrium theory and Free Banking theory.

For example Dr. Gómez notes the countercyclical nature of CCS. When the economy turns down people turn to CCS. In Argentina the participants in the country’s CCS exploded in 2001-2. Dr. Gómez note the correlation unemployment, property rates and growth, but fails (I think…) to mention the obvious connection to money-velocity.

To me it is pretty clear – if money demand outpaces money supply then there is an profit opportunity that entrepreneurs can explore by issuing “money substitutes”. This is exactly what CCS is. Therefore, we would expect that when money-velocity drops then the use of CCS will increase. This is exactly what happened in the US during the Great Depression and in Argentina in 2001-2.

The very clear countercyclical nature of CCS “users” to me is indirect confirmation that under a truly privatized monetary system of Free Banking the money supply would increase in response to an increase in the money demand. Hence, a Free Banking system would be truly “countercyclical”. Said, in another way nominal GDP would be stabilized – as under NGDP level targeting.

George Selgin has been very critical about CCS and I would certainly agree that the motives of many proponents of CCS seem rather dubious. For example many CCS proponents stress the “localist” nature of these systems. That smells of protectionism to George – and to me. However, the motives for CCS proponents are not important. What is important is that the experience with CCS in for example Argentina provides data for studying some key positions of Free Banking Theorists – such as the “countercyclical” nature of the money supply in a privatized monetary system.

Finally I should once again note that I have only read 10-15 pages of Dr. Gómez book and this is certainly not a review of her book and the points raised about is no critique of the book, but rather a call for monetary theorists to have a closer look at the Argentine experience.

Related post:

Time to try WIR in Greece or Ireland? (I know you are puzzled)

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Unrelated links:

Take a look at Ambrose Evan-Pritchard latest piece on US monetary policy. Ambrose is clearly the leading proponent of Market Monetarism among European journalists.

Kurt Schuler contributes to the renewed war of words between the Free Bankers and the Rothbardian Austrians. See my earlier post on the war here.

Ramesh Ponnuru tells the story of “The Republicans’ Most Hypocritical Economic Argument”, which is basically the story about why the Sumner critique also applies to defense.

PS I have not forgotten that I promised to do more on African monetary reform – I have 2-3 pieces in the pipeline. I still welcome suggestions on what to focus on in terms of my Protect African Monetary Reform.

“Good E-money” can solve Zimbabwe’s ‘coin problem’

The New York Times reports on the Zimbabwe’s so-called “coin problem”:

“When Zimbabweans say they are waiting for change, they are usually talking about politics. After all, the country has had the same leader since 1980.

But these days, Robson Madzumbara spends a lot of time quite literally waiting around for change. Pocket change, that is. He waits for it at supermarkets, on the bus, at the vegetable stall he runs and just about anywhere he buys or sells anything.

“We never have enough change,” he said, manning the vegetable stall he has run for the past two decades. “Change is a big problem in Zimbabwe.”

For years, Zimbabwe was infamous for the opposite problem: mind-boggling inflation. Trips to the supermarket required ridiculous boxloads of cash. By January 2009, the country was churning out bills worth 100 trillion Zimbabwean dollars, which were soon so worthless they would not buy a loaf of bread.

But since Zimbabwe started using the United States dollar as its currency in 2009, it has run into a surprising quandary. Once worth too little, money in Zimbabwe is now worth too much.

“For your average Zimbabwean, a dollar is a lot of money,” said Tony Hawkins, an economist at the University of Zimbabwe.

Zimbabweans call it “the coin problem.” Simply put, the country hardly has any. Coins are heavy, making them expensive to ship here. But in a nation where millions of people live on a dollar or two a day, trying to get every transaction to add up to a whole dollar has proved a national headache.”

This is of course is a very visible monetary disequilibrium – the demand for coins simply is outpacing the supply of coins. As a consequence Zimbabwe is now struggling with a quasi-deflationary problem. Somewhat paradoxically taking recent Zimbabwean monetary history into account.

Monetary history is full of this kind of “coin problems” that we now have in Zimbabwe and there are numerous solutions to the problem. In the NYT article one such solution is suggested is that the Zimbabwe government should start minting coins again. However, in Zimbabwe nobody is willing to accept in coins made produced by the government and who can blame them for that?

Good E-money

However, there is another solution that would make a lot more sense and that is simply to allow for private minting of coins. George Selgin in his 2010 masterpiece “Good Money” describe how Britain’s ‘coin problem’ in the 1780s was solved. Here is the book description:

“In the 1780s, when the Industrial Revolution was gathering momentum, the Royal Mint failed to produce enough small-denomination coinage for factory owners to pay their workers. As the currency shortage threatened to derail industrial progress, manufacturers began to mint custom-made coins, called “tradesman’s tokens.” Rapidly gaining wide acceptance, these tokens served as the nation’s most popular currency for wages and retail sales until 1821, when the Crown outlawed all moneys except its own.”

In fact we are already seeing this happening in Zimbabwe in a very primitive form – again from the NYT:

“Zimbabweans have devised a variety of solutions to get around the change problem, none of them entirely satisfactory. At supermarkets, impulse purchases have become almost compulsory. When the total is less than a dollar, the customer is offered candy, a pen or matches to make up the difference. Some shops offer credit slips, a kind of scrip that has begun to circulate here.”

So credit slips, candy, pens and matches are used as coins. Obviously this is not a very good solution. Mostly because the “storage” quality of these quasi-coins is very bad. The quality of candy after all deteriorates rather fast is you walk around with it in your pockets for a couple of days.

Among the problems in Zimbabwe is also that there is really not any local “manufacturers” that would be able to issue coins which would be trusted by the wider public and as the general “trust” level in Zimbabwean society is very low it is questionable whether any local “agent” would be able to produce a trustworthy coin.

However, a solution might be found in another African country – Kenya. In Kenya the so-called M-pesa has become a widely accepted “coin”. The M-pesa is mobile telephone based payments. Today it is very common that Kenyans use there cell phone to make payments in shops with M-pesa – even with very small amounts. Hence, one can say that this technological development is making “normal” coins irrelevant. You don’t need coins in Kenya. You can basically pay with M-pesa anywhere also in small village shops. M-pesa is Good Money – or rather Good E-Money.

Therefore, the Zimbabwean authorities should invite international telecoms operators to introduce telephone based payments in Zimbabwe. The mobile penetration in Zimbabwe is much lower than in Kenya, but nonetheless even in very poor Zimbabwe mobile telephones are fairly widespread. Furthermore, if it could help solve the “coin problem” more Zimbabwean’s would likely invest in mobile phones.

Hence, if private telecom operators were allowed to introduce (lets call it) M-Mari (Mari is shona for ‘money’ as Pesa is swahili for money) then the coin problem could easily be solved. In Kenya M-pesa is backed by Kenyan shilling. In Zimbabwe it M-Mari could be backed by US dollars (or something else for that matter).

The future African monetary regime – M-pesa meets Bitcoin

This might all seem like fantasy, but the fact remains that there today are around 500 million cell phones in Africa and there is 1 billion Africans. In the near future most Africans will own their own cell phone. This could lay the foundation for the formation of what would be a continent wide mobile telephone based Free Banking system.

Few Africans trust their governments and the quality of government institutions like central bankers is very weak. However, international companies like Coca Cola or the major international telecom companies are much more trusted. Therefore, it is much more likely that Africans in the future (probably a relatively near future) would trust money (or near-money) issued by international telecom companies – or Coca Cola for that matter.

In fact why not imagine a situation where Bitcoin merges with M-pesa so you get mobile telephone money backed by a quasi-commodity standard like the Bitcoin? I think most Africans readily would accept that money – at least their experience with government issued money has not exactly been so great.

Atlas Sound Money Project Interview with George Selgin

See this new excellent interview with George Selgin. I think it is harder to find any bigger expert on Free Banking theory and Free Banking history than George. Great stuff – even though I do not agree with everything (yes, believe it of not – I do not agree with everything George is saying).

George in the interview recommends that the Fed should introduce a NGDP target rule as a second best to his preferred solution to abolish the Fed. George thinks that a NGDP target rule could be introduced as a Bitcoin style computer algorithm – similar to what he suggests in his recent paper on Quasi-Commodity money (in the paper he discuss a Free Baning solution rather than a central bank solution). I personally think that a Quasi-Commodity standard could be the future for Free Banking money, but I think Scott Sumner’s suggestion for a futures based NGDP targeting regime would work better as long as you maintain central banks.

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