A Guide to Good Money: Beyond the Illusions of Asset Inflation

Description

Modern money, having now become a key tool of government economic policy and a source of massive tax revenues, has strayed far from its original purpose. This is doubly regrettable, as the better money functions at an individual level in satisfying demand for quality, the better it is for economic prosperity and freedom. This book presents how modern money works both in the domestic economy and globally, outlining the essence of what makes good money. How does modern money differ from this ideal?  By focusing on the dichotomy between globalization on the one hand and modern money’s base in the nation state (or group of states) on the other hand, the book demonstrates how US dominance in determining monetary conditions globally has grown since the mid-1990s. The book then discusses the adverse consequences, many of which are camouflaged, of present money doctrines now so widely and radically applied, presenting novel research on how the US by pursuing bad monetary policies has been the catalyst to deepening geo-political danger.  The book continues by setting out how the illusions of asset inflation will fade, most likely in the midst of economic and financial tumult. The forces which bring about that income emanate in part from the long-run costs of growing mal-investment and monopolization which occur under monetary inflation especially in the context of a digitalization revolution.  Apologists for the present monetary regime rest much of their case on these illusions and on the contention that the bill for the costs comes only in the long run. This book dismantles that case.  A Guide to Good Money provides readers with the sight of a pathway to a promised land of real prosperity founded on sound money beyond those lost illusions, and will be of interest to academics, students, practitioners, and central bankers. Preface Introduction A Work in Five Parts Contents Part I The Present Scene 1 Modern Money—A Matter of Trust How to Think About Money The Trust Deficit How the Roles and the Powers of Officialdom Have Grown —Especially Since the Global Financial Crisis Central Banks’ Mandates and Confused Messages Some Flaws of the Policy Regimes— —Asset Inflation and Hidden Taxes —Fomenting Injustices and Arbitrary Power Chapter Plan and a Warning References 2 Globalisation Without Global Money Globalised Money and Its Flaws How It Came About An Age of Economic Growthmanship “Lake Districts of Money” How Boom-Bust Waves Spread like Tsunamis “The Dollar Is Our Currency, but It’s Your Problem” Currency Wars—Back to the 1930s? Further Symptoms of Monetary Malaise Large Maintenance Costs The Erosion of a Rules-Based Order The Regulation Juggernaut Muddled Responsibilities References 3 The Global Menace of US Monetary Policies How US Inflation spreads—And How It Can Be Resisted Official Destabilisation Policies Why Has Resistance Been Rare? How US and Its Allies Lose, While Their Enemies Gain Consider the Counterfactual German Defiance Fast Forward to the Present What Might Have Happened in Europe- —And in Japan? References Part II The Essence of Good Money 4 What We Mean by “Good Money” Good Money at the Level of the Individual Money as a Medium of Exchange Whose Store of Value? The Loan Standard The Numeraire Function Good Money for Society Enter Super-Money Why Super-Money Is so Important The Components of a Good Money System When the Banks Need Super-Money Money’s Wider Role Don’t Fret Over Volatile Short-Term Rates “Price Stability”—An Empty Slogan? Other Paths for Prices References 5 Why Good Money Has a Solid Anchor What Constitutes a Solid Anchor? Why It Matters How an Anchor Secures Money Convertibility to a Real Asset or Fixed Money Supply? Benefits of a Solid Anchor How Anchors Emerged Historically No Golden Guarantee The Classic Anchors in Practice Anchors for Fiat Money—Foreign Currency Anchors Anchoring Money by Constitutional Rules BASIC PRINCIPLES References Part III The Grip of Bad Money 6 Asset Inflation and Illusions of Prosperity How the Deceptions Form The Anxious Walker Down Wall Street Private Equity Loves a Crony Monetary Repression—Escape from an Invisible Tax? When Reality Shatters Illusions The Stimulus Illusion and the Super-Long Cycle “The Business Cycle is Dead” The Bricks-And-Mortar Fantasy Infectious Myths Take-Aways References 7 Exposing the State Concept of Money The Story and Argument in Brief The Dominant State Theory The Dormant Classical Theory America’s Foundational Money Mill on the Dangers of Bad Money What is the State’s Proper Role? The Theories Compared Was There a Golden Age of State Money? Time to Ditch the State Concept References 8 A Short History of Modern Money Gold Standard’s Record Re-Examined The Advent of the Federal Reserve…. ….Stirs Asset Price Inflation A Bad Scene in Europe The Great Crash The Monetary World After World War II De Gaulle’s Gold Play Germany’s Bid for Monetary Freedom Living with a Weak Dollar How Tokyo’s Bids to Resist US Monetary Expansion Failed Why Governments Chose a Compass, not an Anchor ….In the US… ….And in the Euro Area “Not Our Job to Target Asset Prices?” “We delivered sound money!” Really? References 9 Symptoms and Consequences of Bad Money Mega Boom-Bust Cycles— Short-Term Investment Horizons —And Other Damaging Effects High Profits, Regulation, Debt and Depression The Damage to Daily Lives and Growth How Bad Money Raises Uncertainty Social Harm of Zero and Negative Rates How Inflation Targeting Detaches Money from Value Don’t Blame Liberal Economic Theory The Left also Should Condemn Bad Money Illustrating “the Essence of Bad Money” Modern Monetary Theorists Want Even More Bad Money Bitcoin—A Red Flag for Fiat Money Preserving the Appearance of Normality References Part IV Vested Interests, Politics and the Pandemic 10 What Keeps a Bad System in Power? Cash for Cronies Global Corruption Muscular Lobbying Why Money is so Vulnerable to Abuse A Money Crew Powered by Self-Interest and Greed Gambling on a Growth Spurt A Complaisant Media… Behind the (Lack of) Political Demand for Reform References 11 Bad Money’s Pyrrhic Victory Over the Pandemic Fear Recession? Inject Cash… Sit Back and Enjoy the Profits Boom What Would Have Happened Under a Regime of Good Money? Let Invisible Hands Work Futile Chase of Arbitrary Target Medium and Longer-Term Downsides of Policies More Mal-Investment More Hidden Taxes –Higher Inflation Might This Pyrrhic Victory Spur Reforms? References Part V Reform, Idealism and Prosperity 12 Two Real Anchors Back to the Future? A Reformed World Gold Standard Prospects for the Gold Price Interest Rates and Prices Under Gold Shopping with Gold We Answer Classic Criticisms of Gold Standard Another Anchor Based on Real Assets—The Ikon Key Properties of Ikons Other Benefits of a Real Asset Money References 13 We Reply to Potential Questions and Criticisms Introduction How Should Reforms Improve Society? Is Money Really as Bad as You Make Out? How Is “Bad Money” Linked to Low Capital Investment? Is Excess Debt, Not Excess Money, the Real Problem? Why Do You Focus on “Super-Money”? “Democracies Will Reject the Rules You Want” “There Is No Geopolitical Urgency for Change” “Your Reforms Would Increase Instability” Reference 14 Pathways to Good Money The Monetary Establishment Digitalisation—How Regulators Stifle Initiative —And Gold Remonetisation Engaging in Politics—The US —The World Outside the US Don’t Rule Out the EU Led by Germany and France The Swiss also Like Gold Britain or Japan: As US Satellites? —And Then There Is China Good Money’s Appeal to All Savers And to Greens The Pandemic and End of Regime Further Objections to Our Proposals—Our Answers in Brief No to Laissez-Faire? Economies Are Not Self-Stabilising? Regulation Is Needed to Counter Tendency to Excess Leverage? Markets Need Central Banks as Lenders of Last Resort? Markets Cannot Regulate Behaviour? System Needs 24-Hour Standby Liquidity Support? The Monetary Base Is Irrelevant? We Ignore the Fact That Money Is a Public Good? References 15 Criticism, Realism, Idealism and Reform Introduction The Moat of Consensus Illusions of Prosperity The Costs of the “Silent Killer” Steering a Course to Better Money A Reform Agenda Money in Its Proper Place Reference Glossary Asset Inflation Currency Wars Economic Sclerosis Goods Inflation Mal-Investment Monetary Anchor Monetary Inflation Monetary Deflation Monetary Taxation Natural Rhythm of Prices Super-Money Bibliography Index