Thanks to Steve Forbes for reprinting an excerpt of a 2008 article of mine in the Far Eastern Economic Review.
Dollar Defense
The value of money is not like any other product, whose value is set in the marketplace. The value of money in a floating-rate environment where fine-tuning central banks print money cannot be ”set by the market.” This is an illusion. Money is not a product or commodity. Money is an abstract concept — a measuring rod, a standard of value, a unit of account that must remain constant over time. Only then can workers and businesses, entrepreneurs and investors engage in meaningful trade, risk new money in forward-looking ventures, and lend and borrow money on reasonable terms. Movement in the value of money is not a helpful ”adjustment” but harmful noise that impairs the transmission of all-important information. How can one determine the price of a house or a complex mortgage security, for example, when the value of money itself is under suspicion?
To achieve a dynamic and growing economy, you need an utterly undynamic, stone-cold unit of money. It is the information-rich creative spikes of entrepreneurship and profit — or economic entropy — that comprise all economic growth. A high-entropy message requires a low-entropy carrier.
The great events of the globe increasingly are governed by the movements of world currencies. We need a return to currency stability. But that requires a return to dollar stability. And the dollar is the responsibility of the Federal Reserve.
— Bret Swanson, in the Far Eastern Economic Review
