James Dorn
1999 Cato Journal   unpublished
The key to avoiding [international currency] crises is not international gimmickry. Instead of fiddling with exchange-rate arrangements , policymakers should pay attention to the currencies themselves. So far, absurdly, these remain undefined in value; and their values depend precariously on the changeable policies of central banks, which are constantly badgered with short-run-oriented advice from home and abroad.-Leland B. Yeager (1998: 264) Fundamental Monetary Reform The Mexican currency
more » ... is of 1994-95, and the ensuing crises in Asia, Russia, and most recently Brazil, have focused attention on the global financial architecture and provided an opportunity to think about fundamental monetary reform. Policymakers are beginning to acknowledge that the system of pegged exchange rates is not feasible in a world of mobile private capital, and that a clear choice must be made between rigidly fixed exchange rates and freely floating rates. But most policymakers continue to ignore the deeper issue of the inherent weakness of monetary regimes based on discretionary government fiat monies. The basic issue is, Will governments leave markets alone and focus on establishing a legal framework for free trade, free capital flows, and sound money, or will they be led by the so-called best and brightest to create institutions that enhance the discretion and power of the state? The temptation is to think that we can improve upon the spontaneous or undesigned order of the free market by deliberately