Choice in Currency

The chief root of monetary troubles is the scientific authority the Keynesians gave the superstition that increasing the quantity of money can ensure prosperity and full employment.
The superstition was fought successfully by economists for two centuries of stable prices during the age of modern industrialism and the gold standard.
Before then inflation largely dominated history
Keynes’s (macro-economic) error was to suppose that labour demand and supply can be equated (and unemployment avoided) by managing total demand. Employment depends on demand in each sector of the economy. Managing total demand by expanding money supply creates only temporary and therefore unstable employment.
A ‘lost generation’ of economists who have learned nothing else continues to offer the quack ‘full employment’ remedy and to win short-term popularity for it.
No government, national or international, that wants to remain in office can be expected to limit the quantity of money better than a gold standard or any other (semi-) automatic system because in practice it succumbs to sectional pressures for additional cheap money and expenditure.
The gold standard, balanced budgets, fixed exchanges, enabled governments to resist sectional importunities. The removal of these ‘shackles’ has enabled governments to act more irresponsibly.
The only hope for stable money and resistance to inflation is to protect money from politics by removing the power of government to require its citizens to use its money as the only legal tender.
Government would then not inflate its supply, because it would be forsaken for other currencies.
Inflation can therefore be stopped by introducing competition in currency. The notion that it is a proper function of government to issue the national currency is false. Citizens should be free to use and refuse any currencies they wish: politicians would then have to limit their quantities. Then inflation would be avoided.

Based on an Address entitled ‘International Money’ delivered to the Geneva Gold and Monetary Conference on 25 September, 1975, at Lausanne, Switzerland.