On the Road

Center for Monetary and Financial Alternatives, ETH Risk Center, Futures Unbound, Institute of Economic Affairs, Liberty Fund
George Selgin in Zurich, Switzerland

Zurich CompressedIf you haven't heard much from me on these pages of late, it's because I spent most of the last two weeks traveling back and forth, and so had little time for blogging.

I did, however, participate in some interesting events while I was away.  The first of these was "Futures Unbound," the second installment so far of Cato's annual Summit on Financial Regulation, held at the Drake Hotel in Chicago on June 6th.  I gave a talk there on the regulatory role of private clearinghouses.  I also had the pleasure, the night before, of taking part in a speakers' dinner that was also attended by two distinguished (and very fun!) members of the CMFA's Council of Academic Advisors, George Kaufman of Loyola University Chicago and Randy Wright of the University of Wisconsin.

After the Chicago event I headed straight to London, where I'd been invited to give the Institute of Economic Affairs' annual Hayek Lecture.  Before the lecture Philip Booth, the Institute's Editorial and Programme Director, interviewed me briefly on the necessity of central banks.  The main event took place that evening at Church House, a few blocks away from the IEA's offices in Westminster; and I was pleased to find that in arranging for that commodious venue the Institute hadn't overestimated the audience for my topic, which included many good friends from all over Europe.

Alas, much as I would have liked to linger with that crowd, I had to be whisked away, first for some dinner, and thence to a Heathrow hotel, where I could rest a little before catching an early flight to the States, where I took part in the second in what I hope will be a long-lived series of Liberty Fund conferences co-sponsored by them and Cato's Center for Monetary and Financial Alternatives. This one, on "Liberty and Currency: The U.S. Asset Currency Reform Movement," took place (appropriately enough) on Jekyll Island, under the direction of CMFA Adjunct Scholar (and occasional Alt-M contributor) Jeff Hummel,  with David Henderson serving as discussion leader. The other distinguished participants included Rutgers' Hugh Rockoff and U.C.S.D.'s Lawrence Broz. Like every other Liberty Fund conference I've attended, this one was great fun. Unfortunately, it's unbuttoned proceedings were so in part (as is also always the case) because they were both confidential and unrecorded, so I'm unable to share any part of them with you.*

After Jekyll Island it was across the Atlantic again, this time to Zurich, where I took part in the ETH Risk Center's conference on "Alternative Financial and Monetary Architectures."  Others who spoke there included William R. White, another member of the CMFA's Council of Academic Advisors, as well as "Limited Purpose Banking" champion (and write-in U.S. presidential candidate) Laurence Kotlikoff.  Although this event's proceedings were also not recorded, the ideas I presented were a somewhat modified version of ones I presented at a Cato Monetary Conference a few years ago.

After the Zurich conference, I lingered for a day in Zurich, where I was able, by sheer luck, to dine with Cato Senior Fellow Jerry O'Driscoll, who happened to be on his way to an event in Lichtenstein. That dinner was a splendid and relaxing conclusion to a sometimes taxing itinerary — and the next-best thing to being back home again, with my very best friend.

Penelope compressed

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*Those interested in taking part in future Liberty Fund-CMFA events are encouraged to write to me expressing their interest.  Please note, however, that these events are generally open only to academics and other holders of graduate degrees.

6 comments

  1. "…interviewed me briefly on the necessity of central banks."

    This was great, my only question is the need to retain a quasi central bank with a Milton Friedman type computer model to help regulate the supply of fiat money. If fiat money from each issuing country or block of nations was not subjected to any form of government preference, control on capital flows, acceptance by merchants, etc. (so free flowing fiat across borders), and private currency was able to proliferate, it would seem to me that ill-managed fiat currency would be exposed and implode rather quickly. At which point other issuers using fiat as outside money, if there were any, could go to gold or silver, or whatever else. As you state earlier in the interview it is competition that regulated the free banking systems in Scotland and Canada and competition that would regulate money and banking in a non central bank world. Or, are you saying that the government would have just as much right to manage their currency as say, a private bank, but that even with the competition they would still be worse off with discretionary control, vs a model?

    And, agree, price stability is not a desirable goal to be managed by government, though each issuer, just like any producer of a product in a free market, should have the right to control the quantity and in which markets they do or do not operate, and ultimately impact its price in whatever way they deem necessary and prudent.

    1. Thanks for your remarks, Milton. Concerning competition among national fiat monies, you must keep in mind that the mechanism here is not nearly so direct or reliable as that which serves to regulate competing (domestic) issuers of redeemable banknotes and deposits. The last involves regular interbank exchanges of notes and checks, followed by settlement of net dues in the "outside" reserve medium, whatever that may be. For competing fiat monies, in contrast, the relevant constraint has to do with the elasticity of demand for each w.r.t. its relative rate of depreciation, which is not nearly so certain in its operation. Indeed, while that constraint might make for lower steady-state inflation than would prevail in the case of a monopoly issuer, it is far from clear that competition can be relied-upon to prevent an established provider from exploiting a one-time profit opportunity from hyperinflating. For details see chapter 12 of Larry White's Theory of Monetary Institutions.

      1. Read TOMI. Chapter 12, agree though the issue of "time inconsistency" as I understand it, basically fooling the public in an over-issue of irredeemable "money" and providing substantial one-time profits to the issuer, is a regime we are already living with, but in monopoly form. A multitude of competing issuers would, in worst case, help contain any damage to a smaller group and limited occurences.

        It seems to me the best historical example of irredeemable security issue is in publicly traded stocks. Assuming proper diversification, and on the whole, a bunch of supposedly greedy CEO capitalists with the risk of time inconsistency, have done alot better for the users of their collective issues than our beloved and benevolent monopoly money producer has done for the users of their issue, and only product.

        Also, it got me wondering, how long might certain stock issues float following a company bankrupcy if it was not restricted from use in commerce? Like, in particular, a non dividend paying share, in digital format, that gained wide circulation could continue to be used and retain value long after the company went under.

        Lastly, every producer of every product is faced with essentially the same decision as the producer of money. Do I try to fool the public and attempt to gain financially in the short run or do I build a certain quality product at a fair price (value proposition) for the long term? Historically, and outside government imposed monopoly, the latter has prevailed.

        Ultimately, consumers of money should decide redeemable, or not. And, there is no reason why both cannot exist side by side. The government has no valid role in money.

        Again, thank you for the recommendation.

  2. Secret proceedings on Jekyll Island, I can hear the 100%ers conspiracy theorizing already! ;D

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