Alternatives to Central Banking: Toward Free-Market Money

monetary policy, monetary reform, bitcoin, cryptocurrency

monetary policy, monetary reform, gold standard, bitcoin, cryptocurrencyAccording to many experts, the Federal Reserve’s discretionary policies didn’t just fail to prevent the Great Depression of the 1930s, the stagflation of the late 1970s and early 1980s, and the Great Recession of 2009.  Instead, the Fed’s policies directly contributed to each dismal episode.

So it's only natural to ask whether we could do better.  Could a rules-based, free-market monetary system—one which is spontaneous, self-regulating, and independent of government meddling—serve us better than the existing fiat standard?  And if that’s the case, how could we get from here to there?

The latest issue of the Cato Journal, containing the proceedings of Cato's 32nd Annual Monetary Conference: Alternatives to Central Banking: Toward Free-Mark Money, addresses these very questions.  Its papers examine the constitutional basis for alternatives to central banking, the role of gold in a market-based monetary system, the obstacles to fundamental reform and how they might be overcome, the advent of cryptocurrencies, and much else besides.  Highlights from the conference proceedings include Axel Leijonhufvud's  look at expansionary monetary policy’s effects on resource allocation and the distribution of income, Norbert Michel's strategy for implementing a rules-based monetary framework, and the very different views of Edwin Viera Jr., Jerry L. Jordan, and George Selgin concerning the prospects for a revived gold standard.

In addition to the conference proceedings the issue features original articles by Peter Bernholz on the de-pegging of the Swiss Franc, and by Tyler Watts and Lukas Snyder on the resource costs of irredeemable paper money.

Here is a complete listing of the articles:

The Cato Journal, a valuable resource for public policy scholars that’s also accessible to the non-specialist reader, is published three times a year: Spring/Summer, Fall, and Winter.  To subscribe, please visit the Cato Institute’s online store.


  1. Free Market Money is in the Libertarian Party Platform. No other party has it.

  2. I have a better alternative.

    i call it MACRO-ECONOMIC DESIGN (the financial framework) AND MANAGEMENT (monetary instruments and how to use them)

    It is uses a free market in credit allowing interest rates to find their own value and ensuring that the credit which is available in the market is used to best effect. That is what free market pricing does.

    But on its own neither proposition, mine nor the alternatives suggested here are enough.

    Two problems remain:

    There are other prices which need to be free to adjust to offset the falling value of money, not just interest rates.

    Fixed interest bonds do not and cannot. This re-distributes wealth in the case of $60trillion world wide of bonds in issue from governments alone.

    The cost of housing finance is wrongly calculated which accounts for up to one third of GDP being disturbed and re-distributing wealth

    Currency prices are not market-related for trading purposes. This affects the pricing of around half of all prices involved in business plans.

    And of course, the absence of a free market rate of interest affects everything.

    A sub-problem is when people want a guaranteed return of the value which they saved rather than the money which they saved. A free market price with free market rates of interest does this automatically but there is no written guarantee. A measure which can do that as closely as possible is needed. I have researched this in depth and come up with linking value to National Average Earnings, NAE, or a similar index. Of course there may be better indices but only one can be given tax freedom in its entirety. Tax on all of the interest redistributes wealth. A part of it has to be exempt to offset the falling value of money.

    Undulations in spending are ongoing. There is no need to interfere in these unless they start to threaten to break into a downwards spiral. Then a stimulus of some kind needs to be created.

    I tackle this when I look at the monetary instruments which having a free market rate of interest necessitates:

    There are two such instruments needed:

    The creation of debt-free money
    The creation of debt-based money

    The debt-based money goes directly into the credit market alongside savings and deposits
    The debt-free money, which does not need more and more borrowing to sustain it, must beused to reduce sales taxes so that everyone gets some and spending patterns already established are sustained.

    But that is not going to sustain spending patterns in the debt-based sectors. A balanced stimulus of both kinds of money creation is needed.

    A FORTHCOMING BOOK will be based upon the findings of the course in Macro-economic Design and Management which I am currently running. This will put all of this and the findings of course attendees together.

    Here are the links you need to know:


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