In a recent post Dr. Sam Gregg outlined several arguments in the case for returning to some kind of gold or commodity-based monetary system. One of the advantages to a commodity standard, Dr. Gregg argues, is that it “placed a high premium on economic security by reducing the uncertainty and risk that flows from fluctuations in the value of money that have nothing to do with the relative valuation of different goods and services.”
One of the main determinants of trust in a currency is its ability to maintain its value over time.
On that note, reports have begun coming recently from central Michigan about the emergence of “competing currencies.” One of the concerns that the currency traders specifically raise during the video is their uncertainty over the future value of the dollar.
Milton Friedman used to remark that one indicator of a country’s relative success was how people “voted with their feet”: i.e. people fled from Cuba to the USA, and from China to Hong Kong, but never the other way around.
In the same way, even as Fed Chairman Ben Bernanke assures us that the nation’s central bank expects low inflation for the near future, perhaps this episode raises a new question: What does people “voting with their currency” mean for expectations of inflation and the stability of the dollar?