Any system which gives so much power and so much discretion to a few men that mistakes—excusable or not—can have such far reaching effects is a bad system. . . . Mistakes, excusable or not, cannot be avoided in a system which disperses responsibility yet gives a few men great power, and which thereby makes important policy actions highly dependent on accidents of personality. This is the key technical argument against an “independent” bank. To paraphrase Clemenceau, money is much too serious a matter to be left to the Central Bankers.
Capitalism and Freedom The Need for Institutional Reform Once again Argentina is experiencing a serious institutional and economic crisis. A centerpiece of the economic imbalance is the weakness and untrustworthiness of its monetary institutions, manifested by high inflation and currency devaluation. We acknowledge that the economic and social problems currently affecting Argentina extend beyond monetary policy. The monetary reform that we offer here should not be understood as a sufficient measure to end the recurrent economic problems in Argentina but as a useful step in that direction. Our plan is an update of the monetary reform for Argentina proposed by Steve Hanke and Kurt Schuler (in Hank and Schuler 1999a, 1999b; Hanke 2001; Schuler and Hanke 2002), with insights from George Selgin’s proposal for the United States (1988, chap. 11). Briefly, our proposal, which closely follows Hanke and Schuler’s, is that the central bank be eliminated as the monetary authority and that the Argentine peso (ARS) be eliminated as the country’s national currency. The central bank should change all ARS into U.S. dollars (USD), but no restrictions should be imposed on the use of other currencies to negotiate contracts. Hence, the term flexible dollarization: the country would not be tied to the USD but freed from the ARS. In other words, Argentina should unilaterally dollarize rather than enter into a bilateral agreement with the U.S. Federal Reserve. In addition, commercial banks should be allowed to issue their own banknotes. As discussed later, this second aspect of the reform has financial and macroeconomic benefits.
Nicolás Cachanosky es Doctor en Economía, (Suffolk University), Lic. en Economía, (UCA), Master en Economía y Ciencias Políticas, (ESEADE). Fué profesor de Finanzas Públicas en UCA y es Assistant Professor of Economics en Metropolitan State University of Denver.
Adrián Ravier es Doctor en Economía Aplicada por la Universidad Rey Juan Carlos de Madrid, Master en Economía y Administración de Empresas por ESEADE. Es profesor de Economía en la Facultad de Ciencias Económicas y Jurídicas de la Universidad Nacional de La Pampa y profesor de Macroeconomía en la Universidad Francisco Marroquín.