A Short Essay on Sound Monetary Policy
This will be brief, appropriate to the topic at hand. It consists of a quote from Milton Friedman found in Joseph Salerno’s outstanding book, Money: Sound and Unsound:
If a domestic money consists of a commodity, [such as] a pure gold standard or cowrie bead standard, the principles of monetary policy are very simple. There aren’t any. The commodity money takes care of itself. (emphasis added)
Imagine that. If we have sound money, we don’t need the Fed. Or Congress. We just need sound money.
End of essay.
Postscript:
Economist Nouriel Roubini once attacked the gold standard:
Roubini raises the following question: If you are on a gold standard, or modified gold standard, what do you do in the event of a bank run—if you don’t have enough gold to fully back the currency?
Translated: What happens if the banks have created bogus IOUs for their depositors’ gold? Suggestion: Have them indicted for fraud. Gold doesn’t “back” anything. It is the money. The banks issue IOUs for the money. When they issue more IOUs than they have gold on hand, they’re cheating.
In my view, issuing promises to pay on demand in excess of the amount of the good
Article from Mises Wire
