Penniless

For many decades now, some economists, using robust analyses, have argued that a passive monetary policy is the best prescription for assuring sustainable long term growth. However, this has been too "simple," for those who seek to fine tune interest rates to move toward a state of optimum employment and inflation. The record of these people have been dismal but this has not helped them learn from their mistakes. On the other hand, some others, while correctly diagnosing the problem, had called for a return to the "gold standard," as if whatever worked in the past is the only solution in front of us. The idea of the shiny metal setting the value of money is as inexplicable as the committees of bureaucrats setting interest rates.

The concept of money is an antiquated one. It has been with us for many 1000s of years as humans moved away from bartering into setting standards of value that can be counted and accounted for. Modern technologies allow money to be electronic and we may be close to eliminating all physical money. This has to move in tandem with countries finally deciding to give up control over their segmented monetary regimes, that are, by definition, suboptimal. In an integrated world economy, that is mobile and value maximizing, country specific monetary policies do not make sense.

Countries should move to an integrated and passive monetary policy – essentially eliminating the need for such policies. The first step toward this is those countries with inefficient and value destroying active policies, deciding to set clear, well articulated and stable money supply targets and getting out of the business of interest rate tweaking.