Monday, July 24, 2017

BIS Alert - Speech on Boom and Bust Cycles & Interest Rates

I get regular email alerts from the Bank for International Settlements when they issue a new report or speech. Just recently, they sent me this alert about the speech which you can watch below.

The global financial system, the real rate of interest and a long history of boom-bust cycles

Watch the lecture by Professor Hélène Rey, Lord Raj Bagri Professor of Economics, London Business School. It was followed by a panel discussion, chaired by Jens Weidmann (Chairman of the BIS Board of Directors and President, Deutsche Bundesbank), with William Dudley (President, Federal Reserve Bank of New York), Stefan Ingves (Governor, Sveriges Riksbank), and Veerathai Santiprabhob (Governor, Bank of Thailand.)

Published on Jun 26, 2017:

Financial cycles strongly determine real short-term interest rates. Wealth increases rapidly during financial booms, faster than consumption itself. As a consequence, the consumption to wealth ratio declines, as happened in the "Roaring 20s" and the "Exuberant 2000s". In the subsequent busts, savings increase and keep real interest rates low. The related global financial cycle constrains monetary poilcy independence, even for countries with flexible exchange rates, transforming the Mundellian trilemma into a dilemmma. Tackling these issues calls for combinations of monetary and fiscal policy coordination, macroprudential policies, and possibly capital controls. It also means considering the role of the US as a provider of safe assets, and asking whether a multipolar system would be advantageous.

Here is the video of the panel discussion after the speech


Here are my bullet points for this speech:

- there is a history of close ties between cycles of boom and bust and interest rates
- after boom and during a bust - interest rates tend to fall 
- falling interest rates can lead to another new round of credit expansion 
- capital often gets misallocated during these credit expansions
- better policies are needed to deal with these cycles
- the US has historically been the country to deal with the busts 
- in the future more global cooperation is needed since the US may not be able to continue in this role
- global rules of the game are desirable but not feasible at present due to national interests over powering global concerns

This speech pretty much echoes what was said recently by BIS General Manager Caruana which we covered here. Again, we just note that while new global rules of the game are often discussed, the reality is that they do not appear to be feasible at this point in time. 

In the panel discussion after the speech, US Fed representative Willam Dudley made it clear the US sees the US as its first priority. He makes the argument that the US helps the global situation by taking actions to stabilize the US economy and that he thinks any spillovers impacting other countries can be managed. He agrees that things like stress testing are useful. 

Stefan Ingves (Swedish Central Bank) says directly "I am not very optimistic" that much global cooperation is possible because each of us as central bankers have mandates to serve their own national interests that they have to answer to before they can worry about "what is globally best for everybody."

At around the 50 minute mark of the panel discussion video, William Dudley is asked if the world can expect the US to step in and bail out the next crisis (if we have one) with swap lines and would the US Congress go along with trillions more dollars of support?  Mr. Dudley answered by saying that swap lines are limited and that they are ONLY used when the Fed thinks they are needed to support the stability of the US economy. He made it crystal clear that the US comes first in their decision making and that he had testified to Congress along those lines.

Here we have a room full of central bankers from around the world. They are talking about the problems and risks to the global monetary system from booms and busts. Nothing in this speech or panel discussion implies that any major changes to the global monetary system are under consideration at this time. It still appears that without some kind of new major global crisis, there is not much momentum for major change and the individual national central banks are mandated to put their own national interests first as we have pointed out here on the blog.
Added note: Andrew Maguire Update - I am advised by a rep for Andrew Maguire that it will likely be next week before I may hear back on the list of questions I sent in related to BullionCoin and the large gold buy order. Also, a White Paper is being finalized on BullionCoin that should be available soon. When that is available, I will post it here. I plan to follow this story through until the launch for BullionCoin.

Wednesday, July 19, 2017

News: The New Gold Backed Cryptocurrency (BullionCoin) Mentioned by Andrew Maguire

We have been following the somewhat cryptic comments that London metals trader Andrew Maguire has made about an event coming in the gold market that he suggests will be significant. We submitted a brief written set of questions to his representative to get more details, but have not heard back yet. We believe Mr. Maguire has probably been traveling and perhaps working on activities related to the launch of the new gold backed product he has tweeted about. If he does get time to reply, we will publish his answers to the questions.

Meanwhile, we did a little sleuthing and actually have found quite a bit of information about this new gold backed cryptocurrency. David Gibson of confirmed by email that this is the new product Andrew was talking about. It will be called BullionCoin. Here is quite a bit more detail about it. Below are some key bullet points from the web site on how it will work and then a few added comments.

Simple Summary of How It All Works

The following is a simple overview of the whole BCX and BullionCoin process:
  1. Primary market participants buy physical precious metals at the wholesale contract rates & hold Title of Ownership to it
  2. Those participants then authorise for BullionCoins to be created/minted against their precious metals
  3. Minting / creating BullionCoins is just a process of digitisation of the Title of Ownership to that metal
  4. Primary market participants then sell those digital coins into the secondary (retail) market
  5. That sale, is the selling of the Title of Ownership from the primary market participant to multiple retail investors
  6. The digital coins that those investors now hold, act as an electronic Bearer's Title to the physical gold & silver that's backing it
  7. Coin holders can use them in transactions and trades, in the same way that you use fiat currency
  8. As the coins are electronic Bearer's Titles to the physical precious metals backing them, investors holding those coins can then redeem them at any time in exchange for the equivalent quantity of physical gold & silver that those coins represent
My added comments: Now that we see how this new gold backed cryptocurrency product will work, a question in my mind was if the 250 tons of gold buy orders that Andrew Maguire has talked about recently might tie in to the launch for this new product. I am advised by David Gibson of GoldVu (see email exchanges below) that the two events are likely separate and that as far as he (David Gibson) knows the 250 tons of sovereign gold buy order does not relate to the launch of the new gold backed cryptocurrency - only Andrew can confirm that.

This is an interesting new product. It appears to actually combine block chain technology with a new cryptocurrency coin 100% backed by physical gold and silver. The gold Bullioncoin will be equivalent to one gram of gold while the silver Bullioncoin will be equivalent to 50 grams of silver. (note: 1 troy ounce = 31.1 grams)

Investors or institutions that want to be part of the startup process of providing initial liquidity will be offered an opportunity to earn a yield on the newly minted Bullioncoins produced as they are bought and sold over time. The yield comes from a portion of the transaction fee for buying and selling the coins. I assume block chain will be used to track each coin over its life as it is bought and sold.

According to the web site, the coins can also be convertible to actual physical gold or silver at any time and account holders will be issued a debit card allowing them to also be able to spend the coins around the world like cash. To make a purchase using the debit card, the gold or silver backing the coin is instantly converted into the currency of the country desired at the then current spot price for gold or silver at the time of purchase as I understand it from looking at the web site. Here is the info from the web site on that:

The BullionCoin Debit Card

The majority of users of will perform their transactions via the mobile or online payment applications.
However, as mobile payments still haven't been fully adopted worldwide, you are able to get a BullionCoin debit card and use it worldwide similar to the way you currently use Visa, MasterCard, American Express, etc.
It's unique in that you can use it for any local currency without having to first pre-sell your precious metals holding before using it. When payments are processed at the point of sale, the exchange rate for local currency vs allocated gold or silver is automatically calculated and the equivalent amount of bullion is debited from your e-wallet account.
No other "physical precious metals" debit cards are directly linked in this way to their bullion account. Other providers need you to first sell your gold and silver, after which you then have to transfer/load the realised cash onto your card.
The BullionCoin card is a genuine revolution in physical bullion card payments.

Finally, how did I confirm that this is the new cryptocurrency product Andrew Maguire has been talking about? I contacted David Gibson and asked him directly. He says the product launch should be in the next 3 or 4 weeks and he also clarified his role in the process. Below are my email exchanges with him. 

This will be an interesting story to continue to follow over time. I expect a lot of interest in this globally based on some new information I have seen but cannot yet discuss. Here is a bit more information from Andrew Maguire's trading web site that is now available online.

Added note 7-20-17: I got this email from a rep for Andrew Maguire:

Hi Larry,

To assist your readers in the interim (while awaiting his Q&A answers), Andrew suggests that you put the direct link to the BullionCoin website at so that investors are able to register their interest and receive first hand information regarding the launch date etc.

My email dated 7-19-17:

Can you confirm if this is the new gold backed cryptocurrency product that Andrew Maguire has mentioned recently in his comments on Twitter? If so, do you know the launch date yet?



Reply from David Gibson dated 7-19-17:

Dear Larry,

BullionCoin is the digital currency that Andrew Maguire is referring to. The launch date hasn't been fixed yet but should be in the next 3-4 weeks. If you need any further help or information, then please do get back to me.

Yours sincerely,
David Gibson
Managing Director 

Reply from David Gibson on his role with BullionCoin & the 250 ton gold buy order -  dated 7-19-17

Hi Larry,
In the first paragraph of your added comments, could you word the second sentence to be:
"I am advised by David Gibson of GoldVu (see email exchange below) that the two events are likely separate and that as far as he knows the 250 tons of sovereign gold buy order likely does not relate to the launch of the new gold backed cryptocurrency - only Andrew can confirm that."
This is because:
1) GoldVu is not BullionCoin, nor are we involved in its design or set up. BullionCoin is by a company called Digital Gold Ltd and we are both members of the ABX (so is Andrew Maguire's company). I am only helping to help them to promote BullionCoin in the same way Andrew is. GoldVu is just currently the leading source of specific information relating to BullionCoin prior to its launch.
2) I don't know whether the 250 tons and BullionCoin are or are not linked. So it's best to avoid absolutes one way or another, which is why I added the word 'likely'.
All the best,

Added notes 7-21-17: A thank you to Silver Doctors for picking up this article. (one note: Silver Doctors chooses their own title for articles like this that they decide to pick up). Articles they run usually get several thousand additional views so I always appreciate it when they pick one up. A thank you to The Daily Coin as well.

Also, they discussed this in an interview with Bill Murphy. Bill Murphy said during the interview that this news (from Andrew Maguire) has gotten as much attention as anything he has seen over many years. There is clearly a lot of interest in it as I can tell from the blog stats here. We will continue to follow it.

Monday, July 17, 2017

Jim Rickards on Gold - Recent Interviews and Articles

Recently Jim Rickards has had quite a few updated comments on the gold market including his view on where the price is headed towards the end of this year. Below are links to his latest comments on the subject.


First, here is his most recent article on the gold market appearing in The Daily Reckoning:

A Tale of Two Gold Markets  - below is an excerpt

"There is a lot of speculation about the actual motive of the flash crash paper gold short seller. Was this a so-called “fat finger” trade where the trader made a mistake by entering the wrong quantity or pushing the wrong button? That’s possible, but a more nefarious explanation comes to mind. 

Paper gold trades not only as futures and bank forwards, but also as options on futures. The flash crash happened the day before an important expiration date in the options market.

Was a seller of call options at, say, $1,245 per ounce trying to sink the price the day before expiration in order to avoid a $10 per contract loss? That’s entirely possible, even plausible. We’ll probably never know, because enforcement in this area is almost nonexistent."

(My added note: See this Bloomberg article on the "flash crash" Jim mentions)

Next, An in depth interview discussing the 2017 "In Gold We Trust" annual report

Published on Jul 3, 2017
Jim Rickards discussed with Ronald Stöferle and Mark Valek the key topics of the new In Gold We Trust Report 2017.

The key points debated were:
• Introduction – monetary surrealism – and where we stand
• Shadow Gold Price
• White Gray and Black Swans (esp. recession in the US)
• Populism and its true Cause
• De-Dollarization: Good-bye Dollar, Hello Gold (including the interview with Judy Shelton)
• A Coming War with North Korea
• Bitcoin and its Dangers
Finally, we have this.

Physical Gold Fund Update Report - Jim writes the conclusion section (see last page of the report)

"Our models show bonds and gold have it right and stocks are headed for a fall. The stock market correction won't come right away . . . ."

Added notes: Since we are looking at gold here are links to two recent articles by Alasdair Macleod that make an argument that China will implement some kind of new gold backed currency system. I see this speculation quite a bit so these articles provide some of the reasoning behind that view.

Time for a New Gold Standard for Asia

The Logic of a Mondern Gold Standard 

Update on Andrew Maguire - I may be able to provide an update from Andrew Maguire on his recent comments about a gold backed cyptocurrency along with large buy orders for physical gold. He has been traveling in Europe, but may be able to provide me a short written Q&A to publish here on this topic. If that does pan out, I will alert readers.
Added note on Jim Rickards 7-19-17: Looks like Jim has been busy this week. Says he spent two days working in an IMB Lab on this project. This is the reason I seek out Jim for comments on events that may impact systemic stability.

Wednesday, July 12, 2017

The True Gold Standard - A Monetary Reform Plan Without Official Reserve Currencies

A thank you to a blog reader (a former correspondent for Time magazine who prefers to remain anonymous) who alerted me another formal proposal to consider a return to the gold standard. In an earlier article, we featured the work of Dr. Lawrence White who also speaks favorably about returning to the gold standard. In that article, I made this comment:

"There are a variety of ideas on how gold might return to the monetary system, but until I learned of this information from Dr. White I had not run across a formal proposal for how to transition back to an actual gold standard."

The blog reader mentioned above picked up on that comment and sent me an email that encouraged me to look at another proposal for returning to a gold standard. The reader had this to say:

"In your June 23rd post:  "Dr. Lawrence White - Experts and The Gold Standard” you cite a range of proposals “for how to return to a gold standard.”   Let me add to it the following work:  The True Gold Standard - A Monetary Reform Plan without Official Reserve Currencies (Second Edition - Newly Revised and Enlarged). "

I am also advised from the reader that John D. Mueller made some contributions to the book linked just above. Mr. Mueller is The Lehrman Institute Fellow in Economics at the Ethics and Public Policy Center in Washington DC. He was a featured speaker at the Kemp Forum in Washington DC that we covered here earlier this year. The book was authored by Lewis Lehrman and offers his view on why we should return to the gold standard. Mr. Lehrman served in Reagan Administration and was on the US Gold Commission along with US Congressman Ron Paul.

I reached out to John D. Mueller for any comments he might have on the book. He replied with these comments:

"Lewis Lehrman is a remarkable man. Trained as a historian at Yale and Harvard, he became a successful businessman (helping found Rite-Aid drugstores)—in Lew’s telling, after Lew’s graduate fellowship was cut by 25% and Lew’s father remarked that perhaps he should try a field with more economic promise. Lew made and spent a couple of fortunes supporting public-spirited efforts including international monetary reform. One website organized by The Lehrman Institute,, is a treasure trove of articles on sound monetary reform, and includes extended interviews with experts like Lew Lehrman and Dr. Larry White. Lew Lehrman’s occasional op-ed articles are also a crash course in American history: He has probably done more than anyone to explain the importance of Abraham Lincoln. And he has just published an excellent and interesting book on Roosevelt, Churchill and Company.

I can join in heartily recommending the book mentioned to you by your blog reader, The True Gold Standard - A Monetary Reform Plan without Official Reserve Currencies (Second Edition - Newly Revised and Enlarged)

 (My role was limited to providing charts and appendices for the second edition.) In it, Lew Lehrman answers the question, how would one actually implement a workable gold standard? The provision mentioned in the subtitle—that any new system must eliminate official “reserve currencies”—is vital to the success of such a plan. I discussed the reasons in my recent talk at the Jack Kemp Foundation forum on exchange rates and the dollar."    --- John D. Mueller

My added comments: Interestingly, in his presentation at the Kemp Forum earlier this year, John D. Mueller said he felt these were the three main alternatives for the global monetary system in trying to solve its problem (The Triffin Dilemma):

a)  muddle through until the (US) dollar standard's collapse.

b)  turn the IMF into a world central bank issuing paper (SDR) reserves.

c)  turn to a modernized international gold standard.

This is pretty much what we have been saying here on this blog as well. I will add that the Real SDR proposal (Dr. Warren Coats) that we have featured here is somewhat different than option (b) above as I understand it. While it does involve using the SDR as global reserve currency, it would change IMF rules so that the currency was issued under Currency Board rules (based on public demand, not IMF discretion) and also would anchor it to a basket of goods (not to the five currencies in the current SDR basket). I do not believe Dr. Coats supports giving the IMF arbitrary discretion to issue SDR's. Readers can look into this more in depth in this recent blog article. Robert Pringle has another more "out of the box" proposal he calls The Ikon also covered in that article.

At this point in time, it seems as though we are clearly still under option (a) above. This blog watches for any indications that change from option (a) might be underway to option (b) or option (c) or something else. These days some believe that something else might be decentralized cryptocurrencies (not issued by any central bank). Cryptocurrencies seem like the least likely alternative to me for a variety of reasons to lengthy to discuss here, but there are people who think otherwise. We covered what we think is the current status of cryptocurrencies in this recent article. Our goal here is to present readers with what we believe are the most likely scenarios for monetary system change and encourage them to learn as much as they can about them. 

We greatly appreciate all the contributions from the various experts we have featured here on various ideas and proposals for monetary system change. Readers here benefit from their knowledge and generosity. I would like to add a special thank you to John D. Mueller for taking time to offer his thoughts included above. 

Added note:  I received this additional comment by email from John D. Mueller. He kindly granted permission to add it to this article:

"Since option A is inherently doomed, I think we will wind up the only sustainable option, option C, after more or less painfully exhausting the alternatives."

All the best,


John D. Mueller

The Lehrman Institute Fellow in Economics
Director, Economics and Ethics Program
1730 M St. NW, Suite 910

Washington, DC 20036

Dr. Judy Shelton agrees with John D. Mueller in this Twitter comment.

Tuesday, July 11, 2017

News Alert - Jim Rickards on Donald Trump Jr. Email News

I don't try to cover politics on this blog, but I do understand that political events can impact financial markets and even financial system stability in some extreme cases. The news out on the email exchanges involving Donald Trump Jr. is just an additional potential stress factor to monitor in that regard. 

I reached out to Jim Rickards to get his reaction to this news. As always, Jim replied very quickly and offered his take on this news. I view Jim as the best source for things like this because he offers pure analysis based on what he believes is the true situation. Below are the comments he just sent me by email on this. 

"Those who contacted Donald Trump, Jr. said they represented the Russian government and claimed the Russian government supported Trump, but they did not in fact represent the Russian government, and had no basis or authority to make the claim. Trump Jr. took the meeting to explore the negative information on Clinton, which is exactly what anyone associated with any campaign would do. He quickly concluded the meeting was a waste of time, which shows good judgment on his part. End of story.

In the same sense that Donald Trump could not obstruct a crime that never happened, Trump Jr. could not collude with Russians who were not in fact Russians. It's just more fake news and parsed wording for the sake of salacious but insubstantial headlines. There's no there, there.

This will be revealed as a waste of time in due course. Meanwhile the Democrats keep chasing rabbits down rabbit holes while the Republicans keep advancing their agenda through executive orders and regulations.

Unfortunately for all concerned the big things like health care, tax reform, infrastructure spending and the budget are not getting done. Washington is a circus that goes on while the nation languishes."

James Rickards
Editor, Strategic Intelligence


My added comments: Readers here should understand that Jim takes time from a busy schedule to offer his thoughts. It is hard to find good sources on these very political issues so I greatly appreciate his being willing to share his thoughts with us. Jim did not ask me to do this, but I am including a link (just above and here) to his newsletter. It's the least I can do for the time he generously donates to help us out here.

Sunday, July 9, 2017

Robert Pringle - Allan Meltzer Email Exchanges on Monetary System Reform - Part I

Recently I ran this article on the blog that featured a tribute to Allan Meltzer from John Taylor. Mr. Meltzer was a highly respected economist around the world. While working on that article I was alerted by Robert Pringle to a series of email exchanges between himself and Allan Meltzer that are published on his blog (The Money Trap). 

Since their discussion directly relates to what we watch for here (potential monetary system change), I decided to present unedited the full set of their email exchanges below. I think they are a fascinating look at how this topic is discussed by experts. Part II is presented just below Part I (just scroll down below Part I to find it).


A Debate With Allan Meltzer - Part I

Professor Allan Meltzer debates international monetary issues and The Money Trap with Robert Pringle

On 3/14/2014 12:57 PM, Robert Pringle wrote: 
Thinking further about the international monetary system, I now find it difficult to conceive monetary stability being established in one country alone – even if that country is the US. This is to me the main lesson of the crisis and why I have changed my mind. I would welcome your view. 
Allan replied:
Yes, international stability would be a big improvement.  But it isn’t possible without better domestic policy–limits on budget deficits and money growth.  If forced to choose, I would choose limits on deficits.
Notice, please, that Germany chugs along year after year without world currency stability.And Japan has for decades gone its own way, remaining stable while growing very slowly.
On 3/15/2014 9:30 AM, Robert Pringle wrote:
Glad we agree on need for international stability. I feel it is a prior condition of domestic stability in any country. Interestingly, Paul Volcker and Jacques de Larosiere understand this – in the past two weeks both of them have endorsed the thesis of my book in public. Yet few economists do.
I would say Germany and Japan have been among the chief victims of the international monetary anti-system having been repeatedly destabilised by huge swings in exchange rates, political pressure from a profligate US, and inability to impose discipline on deficit countries, leading to accumulation of depreciating dollars.

On 15 Mar 2014, at 16:24, Allan  Meltzer wrote:
You know that I favor an international agreement.  But no agreement can work without fiscal restrictions.  That should be obvious from the ECB, where the countries had an international agreement that failed to enforce fiscal discipline on the participants.  Unlike the gold standard, the ECB treaty did not permit suspension in a crisis.  It may survive, but it has not worked satisfactorily.  The only major question now is how much additional Germany will agree to pay in order to make the system survive.
A common currency works in the US because we have fiscal transfers.  The gold standard worked for a long time because it permitted suspension during troubled times.
No international agreement on currencies can work satisfactorily if there is not a PRIOR fiscal agreement.

On 15 March 2014 at 1:07 PM, Robert Pringle wrote:
Yes, fiscal rules plus – I would add – a credible no  bail-out rule. My argument is that fiscal rules may be easier to impose and adhere to if part of an international agreement to preserve free trade and free capital flows and capture the gains from globalisation. Fixed exchange rates can be again part of the mechanism to enforce fiscal discipline. It is hopeless to try to “coordinate” national policies ex post – there has to be something in place that governments know they will have to defend/stick to ex ante. Countries lack the political capacity/incentive to observe fiscal discipline on their own. We have discussed this before.
Further, the US would get a good deal if it negotiated a deal now. If it waits 20 years, it will be (I expect) in a weaker position. 
On EMU, remember the poor experience many had with floating – there was a strong desire for more stability.
 On 15 Mar 2014, at 19:14, Allan Meltzer wrote:
We agree on many things.  Recall that I have had a proposal for increased exchange rate stability since the mid 1980s.  It depends on markets to enforce the agreement, as the gold standard did.
 The big change from the gold standard, as Bretton Woods demonstrated, is that voters have learned that monetary authorities can increase employment.  I see much evidence that most publics will trade off exchange rate stability for more employment, even if the latter proves to be only temporary.   That is the hard fact that you or I or any proposal has to overcome. In your words “governments lack the capacity.”  I say the voters want governments to put “full employment” ahead of any other objective.   Alas, that remains true even when governments do a poor job of providing full employment.
 My proposal would be voluntary for each government.  The markets could punish them by devaluing if the government expands too much to maintain the exchange rate.  Do you think  governments would choose to restore the exchange rate?  Or do you agree with me that they would welcome devaluation as a way of increasing employment?
 Your proposal ignores the public’s demand for more jobs.  That’s why Bretton Woods failed.  That’s why the ECB failed.  People can see that Sweden, Britain and others outside the fixed exchange rate system can do better at increasing employment than those in France, Italy, et al. inside the system.
 I, too, would like greater international stability.  But I can see that central banks seem determined to respond to very short period data,  Any program emphasizing stability requires them to act according to medium- or long-term objectives.  They are unwilling to do that.  They may assert their independence, but an independent central bank does not finance a large part of the government deficit.
 Everyone who knows anything about data knows that the monthly unemployment rate is a noisy number subject to very large revisions.  Yet, the Federal Reserve responds to it almost slavishly.   Are they stupid?  Or politically driven?
 Should we have this discussion in public?
 The debate continues in Part II….

Debate With Allan Meltzer - Part II

Debate With Allan Meltzer Part II

On 15 March, 2014, at 22.24 Robert Pringle wrote:
It is necessary to agree on many things to have a useful discussion, and it is not surprising we do as my thinking has been much influenced by yours for many years. In a sense I am trying to reconcile my understanding with what I have learnt from Mundell, which is difficult as you have different underlying assumptions and ways of viewing the economy. Never mind, we can cut through the treacherous theoretical minefield to get at practical policy issues we face.
It would be useful to list sometime the big issues on which we agree and why.
I too agree on the need to have a largely voluntary system, with a safety valve as in the gold standard. And market enforcement. But you would need a core of countries to get it going. I do not believe in Hayek’s currency competition – the State has to agree on the definition of the monetary standard, but you can have free competition among producers of money to that standard.
I think you should have the minimal state – in fact tolerate quite a lot of anarchy – politically. But you need a unified currency. Money should not form part of the struggle because it is a zero sum game and because any central bank or money creating centre is always controlled by powerful  groups, as today. (I fear crony capitalism is a mortal threat to democracy, especially in the US; see Luigi Zingales’ book “A Capitalism for the People: Recapturing the Lost Genius of American Prosperity,” .) The trouble is Republicans tend to have a knee-jerk reaction whenever banks are criticised. Breaking up the banks and defending the US constitution against crony capitalists should be central to the Republican agenda. (You probably deal with that in your book , Why Capitalism?, which I must re-read).
Of course there will always be competition and fights over resources, territory, positional goods, gold, intellectual property.  But as in the Roman Empire you can have this take place within a common monetary area where the definition of money does not form part of the struggle.
The public learnt in 1950-75 that pre-election booms were likely to end in busts and to accept the attempt to make central banks independent. This was a step in the right direction. I know it is likely to fail as central banks abandon rule-based policies in favour of policies that suit powerful groups, but it shows progress in this direction is possible.
People can likewise learn that the power to devalue brings short-term gains to employment but has bigger long-term costs. EMU has been a setback, so far, and a public relations disaster for currency areas/monetary unions of all sorts. We know the reasons. They can be fixed, especially if applied at the world level.
Of course it is true by definition that (as Larosière says) nations are “not ready’ to abandon the pretence of national autonomy – if they were it would already have happened.  But suppose that the next crisis brings unemployment to 20%, further financial chaos, leading to nationalisation of the finance industry, extreme controls on personal freedom, state-directed investment, restrictions on travel and capital flows. And imagine that there is a plan to jump to a world money where we could have freedom in all these respects and restore capitalism  IF governments accepted limitations of national sovereignty –  and if there is a good plan ready – we would have a chance of selling it to a desperate world. And I think there WILL BE another worse crisis!
My reading of the Bretton Woods agreement is that it was pushed through by a few determined people who grasped a unique opportunity – there was nothing inevitable about it.
Of course would be delighted to have this in the form of a public conversation – honoured indeed.
I had a lovely talk with Paul Volcker in public last night. It has been posted on Central Banking’s website.
PS I attach a new paper on international money by Jacques de Larosière (to be published by Central Banking in a forthcoming issue).

On 17 March at16.02 Allan Meltzer wrote:
Dear Robert:
The point of Jacques paper with which I agree most  is on p4 where he writes:  “This is a world composed of states determined to preserve their own interest …without having to accept external constraints.  In sum a world of national objectives.”
I read that as saying that international coordination is a good idea, but it won’t work without PRIOR agreement on fiscal policy.
On 18 March at 11.02 Robert Pringle wrote:
Yet 18 developed countries have opted to enter into a currency union in Europe and are sticking with it including 12 of OECD’s member countries and several others have heavily managing exchange rates. In fact which are floating? UK, Canada, Australia, Japan? Korea? Mexico? Turkey……And how much effective autonomy does this give them?
I think international coordination is the wrong idea – unworkable; bringing national monetary policies into line with each other – as outlined in the first part of Jacques’ paper – and disciplining fiscal policies is not a matter of co-ordination but following international agreed rules – ex ante. As you say, PRIOR.
 Allan Meltzer’s closing statement (20 March 2014):
Robert Pringle and I have discussed the problem of achieving greater international financial stability.  Although we started from very different origins we converged to a small number of principles.  We agreed that the current non-system reduces growth and productive opportunities and that no international system can last without a major change everywhere but especially in the United States to less expansive, and less variable budget policies accompanied by more stable monetary policies.  We agreed also that countries should seek a voluntary system that, like the old gold standard, depends on market enforcement.
A remaining disagreement is over the ability of a single country, particularly a large country like the United States to achieve stability acting alone.   In his very good book, The Money Trap, Robert makes a strong case for his system.  I agree that a multi-national system has great merit.  I differ by believing that Germany, Japan and some others have achieved stability by following relatively independent policies.
I hope our exchange will stimulate others to discuss the requisites of much greater financial stability.
Allan Meltzer
My added comments: I wanted to focus on one key comment by Robert Pringle from the email exchange above (bold emphasis is mine):
"Of course it is true by definition that (as Larosière says) nations are “not ready’ to abandon the pretence of national autonomy – if they were it would already have happened.  But suppose that the next crisis brings unemployment to 20%, further financial chaos, leading to nationalisation of the finance industry, extreme controls on personal freedom, state-directed investment, restrictions on travel and capital flows. And imagine that there is a plan to jump to a world money where we could have freedom in all these respects and restore capitalism  IF governments accepted limitations of national sovereignty –  and if there is a good plan ready – we would have a chance of selling it to a desperate world. And I think there WILL BE another worse crisis!"
Sometimes people ask me why I continue this blog since there has been no crisis or any other event that has prompted any calls for major monetary system reform. After all, Janet Yellen recently said she does not think we will see another major crisis "in our lifetime".

The comment in the email above is the reason. The potential for another major crisis that could prompt monetary system change is taken quite seriously by experts around the world (please note how similar Robert Pringle's comments on the impact of  a new crisis are to Jim Rickards). These experts regularly discuss and exchange ideas on how to reform the system if and when something does prompt major change. 

I believe that the average person like myself needs to take the potential for major change seriously as well and that it is a good idea to learn about various proposals that might be considered to reform the present system (like we presented in this article). That is the purpose of this blog and why I will continue to monitor events until it becomes clear that events leading to major system reforms are in progress or that they are unlikely to take place any time soon. Right now I suspect that will be clearer by mid 2018.

The links at the upper right hand corner of the blog (systemic risks & SDR information) will always remain available to anyone interested in some background on these issues regardless of how events unfold as long as Google Blogger stays online. They contain input from some of the best experts in the world on this topic as well as links to some of the various ideas out there for major system reform.

Added note: I want to add a word of thanks to Robert Pringle for his willingness to take time from a busy schedule to reply to my questions by email and to alert me to this kind of useful information (like these email exchanges). Mr. Pringle is a well respected expert on central banking having Founded Central Banking Publications and having been a former Director of the Group of 30. He has been very kind to keep me in touch with monetary system issues discussed around the world and offer his ideas on the status of the situation.