Transitioning Standards of Value in Fixed-Value Monetary Systems
By now I think we can agree that the absence of an official, rules-based, cooperatively managed monetary system has not been a great success. In fact, international financial crises seem at least as frequent and more destructive in impeding economic stability and growth. --Paul Volcker (2014) Soft and Hard Money Approaches to Monetary Affairs Historically, there have been two basic frameworks by which a government organizes its monetary affairs. One of these--the Soft Money approach--we are quite familiar with today: a process by which a committee of government bureaucrats manages a floating fiat currency of some sort, on a day-to-day and ad hoc basis. The other format--the Hard Money approach--is typified by the Rule of Law, which is some definite and unchanging framework by which the currency is managed. Consequently, there is no need or role for a day-to-day human discretionary element, except perhaps in some of the particulars of the system's execution. Nathan Lewis is a columnist for Forbes.com and the author of Gold: the Monetary Polaris (2013). The Soft Money Approach Under the Soft Money approach, the goal of monetary policy is to maintain full employment, price stability, and moderate interest rates--and to satisfy an array of interest groups. These include voters and the political class; exporters, importers, and other commercial interests; bankers and the financial industry; agricultural and other commodity producers; creditors; and debtors of various sorts, particularly the federal government. What a wondrous tool money can seemingly be, to address all of these issues and interests. And, it has no apparent cost, or, it appears, need to bother with a parliamentary process. Thus, the "Rule of Man" is paramount, and typically unfettered in practice by any defined framework whatsoever. The Hard Money Approach In practice, there has been only one kind of law or rule that is used in the Hard Money approach: namely, a "fixed-value system" in which the value of the currency is to be the same as some defined benchmark. Although a variety of commodities have been used as a monetary base, gold and silver have long been dominant. In the late 19th century, these bimetallic systems were simplified further into monometallic systems. The value of the currency would be fixed at, for example, 23.2 troy grains of gold, or l/20.67th of a troy ounce. Fixed-Value Policies Are Very Common Today Although it may seem that the Hard Money approach to organizing monetary affairs is basically nonexistent today, many countries have adopted forms of a fixed-value system. Consequently, these countries do not attempt to address all of the myriad interests of the Soft Money enthusiasts via management of the currency. There is no meaningful discretionary element. Many governments in the world have a fixed-value policy with some major international currency. The 19 members of the eurozone have adopted a common currency over which the members and their central banks have no direct control. In effect, they have given up their domestic discretionaiy policy in favor of a form of fixed-value policy with what amounts to an external benchmark. This arrangement is not much different from dollarized countries such as Ecuador and El Salvador. In addition, there are six other states that use the euro, but are not officially part of the eurozone (Monaco, San Marino, Vatican City, Andorra, Kosovo, and Montenegro), plus four territories (Akrotiri and Dhekelia, Saint Pierre and Miquelon, French Southern and Antarctic Lands, and Saint-Barthelemy). Also, there are 27 countries that have a currency linked to the euro, often via a currency board. They include eight African countries that use the West African CFA franc, seven African countries that use the Central African CFA franc, plus Bulgaria, Denmark, and Morocco. Altogether, a total of 55 nations and autonomous territories have variants of a nondiscretionary fixed-value policy with the euro, not counting those countries where the euro is in common but informal/unofficial usage. …
I: Political Science: Method and Theory/Science Politique: Méthodes et Théories
Certain types of militant groups — those suffering from leadership deficits — are more likely to attack civilians. Their leadership deficits exacerbate the principal-agent problem between leaders and foot soldiers, who have stronger incentives to harm civilians. We establish the validity of this proposition with a tripartite research strategy that balances generalizability and identification. First, we demonstrate in a sample of militant organizations operating in the Middle East and North Africa that those lacking centralized leadership are prone to targeting civilians. Second, we show that when the leaderships of militant groups are degraded from drone strikes in the Afghanistan-Pakistan tribal regions, the selectivity of organizational violence plummets. Third, we elucidate the mechanism with a detailed case study of the al-Aqsa Martyrs Brigade, a Palestinian group that turned to terrorism during the Second Intifada. [R, abr.]
The theory of monetary institutions
List of Figures and Tables. Preface. Acknowledgments. Part 1: The Evolution of Market Monetary Institutions:. The Mystery of Money. Mengera s Theory Restated. Some Implications of the Theory. From Simple Commodity Money to Coins. Bank--Issued Money. Regular Par Acceptance. Clearing Arrangements. The Path to Fiat Money. Spontaneous Separation Between the Media of Redemption and Account?. Questions. Part II: Commodity Money:. Determining the Price Level. The Simple Stock--Flow Analytics of Gold Supply and Demand. The Historical Sources of Gold Supply Disturbances. The Benefits of a Gold Standard. The Resource Costs of a Gold Standard. Is a Gold Standard Worth the Resource Cost?. Questions. Part III: Money Issue by Unrestricted Banks:. The Purchasing Power of Money. Bank Optimization and the Equilibrium Quantity of Bank--Issued Money. Correcting Over--Issue by an Individual Bank. Correcting Over--Issue by the System as a Whole. Responding to Shifts in Demand. Shifts Between Deposits and Currency. Questions. Part IV: The Evolution and Rationales of Central Banking:. Central Banking Roles and Clearinghouse Associations. The Origins of Government Central Banks. Historical Cases. Questions. Part V: Should Government Play a Role in Money?. Is Some Aspect of Money a Public Good?. Are There Relevant External Benefits in the Choice of Which Money to Use?. Are There Relevant External Benefits to the Choice of How Much Money to Hold?. iv. Is the Supply of Base Money a Natural Monopoly?. Questions. Part VI: Should Government Play a Role in Banking? . The Problem of Bank Runs. Inherent Vulnerability in Theory: The Diamond--Dybvig Model. The Fragility of the Diamond--Dybvig Bank: A Numerical Example. Deposit Insurance in the Diamond--Dybvig Model. Criticism of the Diamond--Dybvig Model. Are Deposit Contracts Inherently Fragile?. Historical Evidence on Inherent Vulnerability. Is There a Natural Monopoly in Bank--Issued Money?. Questions. Part VII: Seigniorage:. The Sources of Seigniorage. Maximizing the Take from Seigniorage. Reserve Requirements. Other Legal Restrictions. The Dynamics of Hyperinflation. The Transition Between Steady States: Is Honesty a Governmenta s Best Policy?. How Well Does Seigniorage Explain Actual Governmentsa Behavior?. Questions. Appendix. Part VIII: Central Bank as Bureaucracy:. Bureaucratic Explanation of the Feda s Operating Procedures. Bureaucracy and "inflationary bias". Questions. Part IX: Political Business Cycle Hypotheses:. The Nordhaus--MacRae Model. The Rational Expectations Critique. An Alternative Formulation: Wagnera s Political Seigniorage Cycle. The "Partisan" Political Business Cycle Theory. Questions. Part X: Discretion and Dynamic Inconsistency:. The Kydland--Prescott Model. Positive Implications: Using the Model to Explain Changes in Inflation. Policy Implications Under Discretion. Rules Versus Discretion. Subsequent Literature. Questions. Appendix. Part XI: Monetary Rules:. Benefits and Burdens of Counter--Cyclical Policy. Independence for the Central Bank. Arguments for Rules. Friedmana s Proposals. McCalluma s Case for a Feedback Rule. Simple Versus Complicated Rules. Questions. Part XII: Competitive Supply of Fiat--Type Money:. i. Kleina s Model with Perfect Foresight. ii. Kleina s Model with "Imperfect Foresight". Is the Equilibrium Rate of Inflation Bounded under Imperfect Foresight?. Conclusion. Questions. Part XIII: Cashless Competitive Payments and Legal Restrictions:. The Greenfield--Yeager Proposal. Is Bundles--Worth Redemption Workable?. Other Concerns About the GY Proposal. The Legal Restrictions Theory. Historical Evidence on the Non--Coexistence Prediction. Questions. References. Index.