A call for sound money

The Wall Street Journal is using the "Bretton Woods II" conference tomorrow to advocate for currency stability and sound money on its op-ed pages.  Here and here.  (Subscription required.)

While the Europeans are trying to foist their system upon us, including market regulation and "tax harmonization", the US should resist.  Instead we should keep it simple and focus on three things:

  1. Coordination between the US, EU, UK, BoSwitzerland and BoJ to stabilize monetary policy and currency values.  Currency values should be relatively stable relative to each other and to gold.
  2. Limiting the ability of countries to build currency reserves for the purpose of promoting current account surpluses.  Return the IMF to its role of supporting smaller currencies as a reserve holder of last resort.
  3. Coordinating bank reserve requirement policies to be counter-cyclical to damp wild market swings from debt inflation to debt deflation and back.

These three changes would reduce inflation, reduce wild swings in credit creation/destruction, and lead to more stable balance-of-payments between nations.  It will make investing less exciting, particularly for macro hedge funds, but will make business planning a great deal easier.

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