Wednesday, April 26, 2017

The Kemp Foundation Forum on US Dollar and Exchange Rates - Overall Review

The Kemp Foundation has released a full set of videos of the entire forum on Exchange Rates and the US Dollar. You can view those here. Paul Ryan offers his support for the forum discussion here


Below is the introduction to the forum by the son of former Congressman Jack Kemp. He explains why the forum was held and what they hope to achieve from it. After that are a few key points for me from the event.

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My Added Comments:

In the video just above Jimmy Kemp says that a goal for this forum was to discuss how to improve the monetary system in clear language that the average person can understand. This is what we are all about here so I applaud this effort. 

A few key points for me after watching were:

- there is widespread consensus that the current monetary system is flawed and needs changes

-a floating exchange rate system is vulnerable to currency manipulation by governments and central banks who are vulnerable to political pressure


- the elusive goal is to provide a "sound currency" for everyone to use. This means that people have confidence that the currency they use will hold its value over time 

-the current floating rate system leads to volatile exchange rate fluctuations at times that make it harder to do business for everyone . The 2008 crisis is the most recent example of extreme volatility

- It's hard to get consensus on how to change the system, but it is important to keep trying (note Paul Volcker confirms what we have said here - getting global consensus is extremely hard to do and is why it usually takes a major crisis to get much significant change in the monetary system) 

- the alternative to a floating rate system is some kind of fixed exchange rate system

- their are a variety of ideas on how to move back towards a fixed exchange system



I would note that the only proposal that addressed a major overhaul to the existing monetary system covered in this forum was the proposal by Dr. Warren Coats. The other presentations were mostly about what is wrong with the system now or some lesser tweaks to the present system rather than any kind of major change. This is why we have covered the proposal by Dr. Coats so extensively here. 


When push comes to shove, if we do get a new major global financial crisis that forces policy makers to take some kind of action more quickly, they are more likely to look at a proposal that has already been put on the table and is based on real world experience like Dr. Coats has had building a currency system.


My overall impression from this forum is that if we do get major monetary system change in the future, it will likely be to return to some kind of fixed exchange rate system they might include gold or some other hard anchor. Other ideas might be tried first, but eventually to restore public confidence there would have to be a system that can truly provide a stable currency and sound money. All of the distinguished contributors to the forum seem to agree that a stable and sound currency is critical to a long term sustainable system.



Added note: I got this email about the forum from a reader:

"I just finished watching the Ben Steill presentation.  I think it was by far the best one I’ve seen.  I read his book a few years ago, (the battle of Bretton Woods ) "

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