Saturday, 11 November 2017

Hayek asks: Has monetary policy has ever done any good?

As the ruling parties work to change the country's monetary policy, Hayek's answer to the question above couldn't be more topical.

Hayek's answer starts with the origins of money, as explained by Carl Menger:
You see, the great trouble is that money wasn’t allowed to develop further. After two or three hundred years of coins all governments put up their hands and stopped any further developments. We’re not allowed to experiment on it — and money hasn’t been improved, rather it has become worse in the course of time.
Because … with law and language and money [you have] the three paradigms of spontaneously [developed] institutions [as explained by Carl Menger and Hume and Mandeville]. Now fortunately, law and language have been allowed to develop; money has originated in original form, but as soon as it was there in its original form [however] it was frozen — government said it must nor develop any further. And what we have had since in development were matters of government invention — mostly wrong, mostly abuses of money — and I have come to the position of asking if monetary policy has ever done any good. I don’t think it has. I think it has done only harm, and that is why I am pleading now for the de-nationalisation of money

In his view, with which I concur, the problem is not what monetary policy the government adopts, but that it has any monetary policy at all.

Watch the full interview (F. A. Hayek on Monetary Policy, the Gold Standard, Deficits, Inflation, and John Maynard Keynes):

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