Greenspan is correct. Central Banks, since 1986, have done about as well as one would expect from a system of Central Banks under a gold system – whether one assumes fractional reserve banking, or not.
You might consider what that really means, and find your way to understanding that centralized control of the money supply can only be optimized under conditions of complete knowledge and perfect foresight, which, of course, means never. The only way to consistently match marginal supply of money to the marginal demand is through free banking, meaning leaving the creation of money totally to the market, but that is far from what is advocated by most individuals who believe they are “free market” advocates, especially ones that insist on a gold standard. Most of those advocating a gold standard are really wishing for a constant money stock, which is not an inherent feature of using gold backed money, and further is no better than a constantly growing money stock. Both of these options, constant stock and constant money growth, have been proposed by monetarists, btw. |
