Passing through London recently, I was intrigued by the fuss over ‘saving’ the pound. Not so long ago the pound was worth five dollars, and now sterling is hovering not far above five quarters. A cynic may think it is beyond saving. After all, no-one protests in Rome to ‘save the lira’.
I can even remember when Britain went decimal. Who was shouting then to save the shilling, the farthing or the florin? And even earlier, the guinea and the groat went the way of all gold-backed currencies without too many tears shed.
Only last year, the US abandoned the ‘mill’ with no protest from the American public, a group so conservative it keeps the world’s most easily forged bank notes rather than alter its beloved greenbacks. It helped that few, if any, knew mills existed – at ten to the cent. Even fewer ever clutched them in their sweaty little hands on the way to the candy store.
But the mill survived two centuries after Thomas Jefferson invented it, along with an assumed right to a central bank. (No Virginia, Alan Greenspan is not mentioned in the declaration of independence, nor the constitution.)
But looking at the poor performance of the euro, and the problems of matching economic cycles so the UK can join, gives rise to further speculations. If the pound reflects the idiosyncrasies of the British economy, and helps it throb along lustily as the Europeans flop flaccidly, then having a local currency within a free trade area may be no bad thing.
After all, currency values are undoubtedly a great aid to competitiveness, and we are led to believe they are every bit as irrational as the twitching-Parkinsonian-hidden-hand of the market. Europe is running a heavy balance of payments surplus in contrast with the US, which has been running a huge deficit. So the euro is low and the dollar is high, injuring American competitiveness – and still the euros flow westward across the Atlantic. This is not just counterintuitive; in the long term, it has to be economic insanity for all concerned.
The dollar clearly needs attention. I’m not talking about the strong dollar that is causing US manufacturers grief, but the regional dollar. Surely the slower growing US regions should be thinking of emulating the British by setting up their own currency? We may believe the dollar is a unified currency and that the US is a unified economy, but when you travel ‘from California to the New York Island,’ it is obvious that our land is almost as diverse as Europe. The best and most immediate barometer for the local exchange rate is a quick glance at the ATMs in each place, and what they offer for withdrawal. Out in the boondocks, the machines begin at $20 and occasionally reach $100. My neighborhood midtown Manhattan magic money machines begin at $100 and work up to $500.
So is a New York dollar the same as a Poughkeepsie dollar or an Arkansas dollar? When Arkansas governor Bill Clinton found a lucrative job on the state payroll for Gennifer Flowers (remember?), what was really surprising was not the nepotism and patronage, but the salary. At $14,000 it was half of what a would-be typist with impossibly long false nails and a bad case of dyslexia would earn in Manhattan. His Arkansas dollars were clearly worth twice as much as the New York variety, hence, no doubt, his perpetual self-satisfied smirk.
What works on an international level should work on a local level. In this era of states’ rights, it is worth remembering that each of the original colonies had their own currencies so the state governments could get the benefit of seigniorage and local control of the money supply. Why not reintroduce local currencies to the US?
If the US mint can issue 25 cent pieces for each state, then it is only a small step to issuing local dollars. In practice, it may perhaps be a trifle adventurous to go to the state level. No state where the invisible hand from the graveyards determines the results of elections could be seriously trusted to appoint reputable central bankers to wrestle the invisible hand of the marketplace.
However, the dozen or so regional Federal Reserve banks should surely be able to set local interest rates and money-issuing guidelines in their respective areas. If Cleveland is having a hard time, then let the local Fed devalue the Cleveland dollar and make it competitive with Canada across the lake and Chicago down the shore. Of course there would be a few teething problems, but nothing we haven’t seen before in places like Russia where true Chicago-school economics were forced down people’s throats. It will be a blow for liberty, which will rescue Americans from the tyranny of an overweening government that has usurped the currency with no constitutional mandate to do so.
The Speculator
