In the libertarian fantasy world, we would have competing private currencies. In the real world, we have a government central bank.
And central banks have a track record of bad monetary policy, so here’s my two cents on how people can try to protect their household finances.
The above video is a clip from a longer presentation I made as part of “Libertarian Solutions,” an online program put together by the folks at Liberty International.
And I should point out that I goofed around the 3:28 mark of the video, when I meant to say “not planning to take it all out in 2009” (a dumb mistake, but not as bad as the time I said “anals” rather than “annals” on live TV).
That correction aside, I was tasked with discussing how people can prosper in spite of bad government policy, and, as you can see, I did not pretend to have any uniquely brilliant investment strategies.
So I focused on explaining the risks of bad monetary policy, especially the way that central banks (and other government policies) create boom-bust cycles in the economy.
If I had more time, I could have talked about additional threats, such as the crackpot idea of “modern monetary theory.”
And I probably should have found some time to explain the notion of “financial repression” since that’s a government policy that has a very direct adverse effect on people trying to build wealth.
One final point. While I’m very hopeful that they may somehow help people protect their personal finances, you’ll notice that I didn’t recommend cryptocurrencies such as Bitcoin. This is for two reasons.
- I don’t know enough about how they work to competently discuss the issue.
- I fear that governments will have the power, desire, and ability to squash the market.
Needless to say, I hope I’m wrong about the second point.
P.S. A classical gold standard could block central banks from engaging in bad monetary policy, but returning to that type of system is almost as unlikely as a shift to private currencies.
P.P.S. While I’m obviously not a big fan of the Federal Reserve, other nations have even worse experiences with their central banks, which is why “dollarization” makes sense for many developing countries.
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Image credit: Rdsmith4 | CC BY-SA 2.5.
