Pure Fiat Currency

Barack Obama is clueless about economics.

Criticizing the American war against jihadist Islamic terrorism that began on September 11, 2001 with financial displacement, Obama complains about the monetary expansion stimulated by the Federal Reserve, calling it a policy “that allowed Wall Street to run wild that nearly destroyed our economy.”

But as reported in The Washington Post, Obama is recommending more of the same, as the Fed gears up to stimulate economic activity by purchasing U.S. Treasury bonds from Wall Street, thus encouraging the monetary expansion characteristic of financial crises.

It’s an economic policy criticized by economists, from a liberal Nobel Prize winner to conservatives.  “This proposal calls for a pure fiat currency issued by the government, combined with 100 percent reserve banking and the elimination of all discretionary control of the quantity of money by central bank or other monetary authorities,” Milton Friedman said.  “Changes in the quantity of money would be produced entirely through the government budget.”

American allies will also notice that Obama’s dualism also exposes his unwillingness to “refrain from competitive devaluation.”

References

Barack Obama, “Remarks by the President at DNC “Moving America Forward” Rally in Chicago, Illinois,” October 31, 2010.

Milton Friedman, “Commodity-Reserve Currency,” The Journal of Political Economy, Vol. 59, No. 3 (June 1951).

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