‘Hardy always cited common building bricks as perhaps the best available single monetary commodity’ – Milton Friedman
“Are economists the world over using an outdated tool to measure economic progress?”
That’s how Bernd Debusmann began his column about the use of gross domestic product (GDP) to measure development.
The question, long debated, is worth pondering again at a time when two economic giants, the United States and China, are sparring over trade, currency exchange rates and their roles in the global economy.
Another reason for Americans to worry if the dollar is outdated is monetary policy with Obama’s tacit recommendation for another round of quantitative easing (QE2), another try by Obama to change the economy by flooding it with dollars.
But better than another disappointing try by Obama is an idea presented by economist Milton Friedman for a commodity reserve currency. The idea is based on using bricks for money. At the time of Friedman’s writing, over three thousand counties in the United States had brickyards, manufacturing a product that requires few specialized skills.
Fighting high unemployment and with the threat of deflation, economic policy would be more likely to stimulate progress by the government buying bricks. Government demand for bricks would put Americans to work; workers with incomes would demand property; construction of single- and multi-unit properties would demand government bricks stored in locations like Ft. Knox.
Join me to recommend common-sense policy and thus build a stronger foundation for America’s new growth economy.
Milton Friedman, “Commodity-Reserve Currency,” The Journal of Political Economy, Vol. 59, No. 3 (June 1951).
N. Gregory Mankiw, Principles of Economics, Fifth Edition (Mason: Cernage Learning, 2009).