Floating Exchange Rates are Causing a "Race to the Bottom"

“Milton Friedman was, as almost anyone who has read his work knows, a great economist of the 20th century,” Lewis Lehrman explained.

“He was a great advocate in writing and in speaking of the free market. He was not so much pro-business as he was pro-free-market and that, of course, is a very good thing. He was as opposed to crony capitalism as some of us younger men were. Totally interested in a free-price mechanism and letting the market do an equitable job of allocating resources.

“He was recognized by a group of insular Norwegians by giving him the Nobel Prize and it’s a great distinction. In the area of domestic policy, domestic free-market economics, I see him as a great teacher of mine.

“In the world of international economics, International Monetary Order, on the issue of what characterizes the best institution for developing and maintaining stable money or stable purchasing power over the long run for people from all walks of life. Let’s say a century where a dollar will purchase approximately the same random assortment of goods as it might have 100 years ago. I think Milton Friedman did make a very serious, but sincere, error. He wanted to blow up the Bretton Woods system, not because Bretton Woods was a flawed gold exchange standard, but he believed that floating and flexible exchange rates were the optimum or the best arrangement between trading nations and the currencies with which they operated.

“I think this was a terrible mistake and the evidence, I think, everywhere to be seen. We are now, because of floating exchange rates, engaged in currency wars all over the world. Every country is in a race to the bottom to try and depreciate it’s currency in order to beggar its neighbor that is to say in order to subsidize its export industries and export its unemployment. Under an International Gold Standard such a ‘beggar my neighbor’ approach, such a currency war so long as the International Gold Standard is maintained is not only impossible, but it’s against the rules of treaty. That doesn’t mean that people can’t violate treaties, it’s just that, that what laws is for. Law can’t keep people from murdering one another but it has a preventive effect.”

[Ed. Note: You can purchase a copy of Mr. Lehrman’s latest book Gold, Money, and History through our Laissez Faire Bookstore. Click here to get yours now.

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