George Selgin: evaluation

Transcript context

…In 2025, how do you reform the Fed? You’re in charge, Dictator George, tell us. Well, I’m an NGDP stabilizing person. I have been for a long time. By the way, my first book, The Theory of Free Banking, puts forward a proposal or an ideal of a frozen monetary base, fiat money. It’s not a gold standard, and it argues that ideally you want to stabilize spending. It looks at how well the system does that. I’ve never been a return-to-gold advocate, and I’ve always understood that free banking could be based on a fiat monetary standard. What has to be understood, though, is that if you have free banking with a fiat monetary standard, then you have solved problems because I think the freedom of the banks creates a lot of greater robustness in the banking system and less risk of financial crises. Mind you, freedom has to, here, include no bailouts, right? You still have to deal with monetary policy in the narrow sense of how the monetary base itself is managed by the central authorities. In the book, I recommended freezing the base, which would be like turning the dollar into so many bitcoins, but a less dramatic, less drastic proposal would be a Friedman-type proposal. I think Friedman, in the ’80s, was fantastic on this stuff. He said replace the FOMC with a computer and program the computer so that you just get enough increase in the monetary base, or you choose interest rates such that you end up with enough money to keep nominal spending stable, but not more than that. I sometimes talk about a night watchman Fed. You don’t have to have the FOMC doing anything. You just have a big computer in there and a night watchman who makes sure nobody can go in there and tamper with it. That’s my ideal reform. How many countries should dollarize?…

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