Wondering if anyone here has read this? I know I'll disagree, but think half of it would be decent research. Anyone's thoughts?
Hayek and Rothbard would be in favor of floating exchange rates provided, for Rothbard, that there is a gold standard, yes? Or would Rothbard say that any flux negates what standard is used?
1. If there is a gold standard on both sides, then of course the exchange rate is stable, in theory. Because if a dollar is reddemable for, say, one hundredth of a gram of gold, and Swiss franc for the same amount, then the exchange rate would be one to one. Unless, of course, there were suspicions that one country is not going to honor its commitment to gold, in which case its value would drop.
2. If only one country is on a gold standard, then the exchange rate would have to float, depending on the price of gold in the fiat currency, which would of course float.
3. If both countries were fiat, a fixed exchange rate would mean a commiment by one country to inflate [=print money] when the other country does it.
Which would mean the second country giving away it's hard work for free to the first country, exactly as China is giving us its stuff for free right now.
4. Europe had a flexible exchange rate for a while. All the countries in Europr inflated, but Germany inflated a little bit less than others. This infuriated the other countries, because of course it meant their money was losing value compared to the D-mark, and made them look bad. Which is exactly why they were so insistent on having a Euro, the ultimate fixed exchange rate.
5. So bottom line, of course a floating exchange rate is better than a fixed one, because it means the market is free to do what it wants, and that countries are free not to finance the mistakes of other countries.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
Wondering if anyone here has read this?
He's a Monetary Crank, as defined by Mises.
Here's the evidence;
1. On the other hand, floating exchange rates free central banks
to adopt monetary policies aimed at stabilizing inflation and output. This
enhanced economic stability may encourage productive investment and raise
the long-run level of economic output.
Translation: Printing money is good. It results in wise investments [as opposed to AE's claim that just the oppaite is true, that it promotes malinvestments]. It has long run benefits of increased production. Again, just the oppsite of AE. I mean, do we need to copy Hazlitt's whole book here on the horrors of inflation?
2. Volatility in exchange rates is caused, he thinks, by speculators:
Economies with a high degree of capital mobility, which includes all the
advanced economies, have been forced out of the middle of the spectrum of
exchange rate regimes (adjustable pegs and soft pegs) by the damaging crises
that are associated with these regimes. These crises typically result from spec-
ulative attacks launched when exchange rate targets appear to confl ict with
other policy objectives, such as stable inflation and output.
Total nonsense, of course. Speculators are the cart, not the horse. Read Bagus's Tragedy of the Euro to see what ruined all the various pegs. Hint: It's not speculators.
After you see how this guy has no clue when it comes to the very basics, are you going to read his book, rely on his book, bother with his book?
P. S. What I wrote in the earlier post still stands, of course.
Sometimes I read what other economists say so I know what their positions are. This was a long time ago, but related to research I was doing on exchange rate policy/oversight and the ESF.