by Bob Cotton

Government Mischief in the Money Supply and the Destabilizing Evil of Fiat Money [1]

On September 11, 2001, we were shocked to confront enemies on our doorstep. Our policy prior to the attack, to give in to the demands of hijackers, had been rooted in our assumption that hijackers want to live. Relying totally on this premise, our policy invited disaster.

We learned this lesson the hard way. But our government felt it had to do much more than learn a lesson. Two wars later we are burdened with continued violence and unending expense in Iraq. Our budget and debt are out of control. Inflation is detectable and the Federal Reserve has carried out its usual series of interest rate increases.

The financial profligacy of the Vietnam era led to the stagflation of the late 1970's and early 1980's, when interest rates peaked at over twenty percent. Could we afford the taxes to pay twenty percent interest on our current debt? If not, what then? More debt to finance the interest? That way lies ruin.

Looking farther back, we are reminded of the founding of the Federal Reserve in 1913, followed not so many years later by the worst depression in American history. Many economists link the first event with the second, and observe how the depression helped to bring on World War II. Evidently, ideas matter.

Libertarians have always faulted our use of fiat money, preferring that it be backed by gold or other commodities. Fiat money is money whose use is mandated by law, which is issued without promise of redemption by the issuer. It has no intrinsic value. That it has any value at all follows only from the use of force; we must use it to pay taxes, and as legal tender. Everyone must pretend that it has value, and so it seems to have it. But there are unintended consequences. Its value slips. There has been far more inflation since 1913 than in the preceding century. Also, the supply of dollars is closely controlled by the federal government; it is not automatically increased by the availability of commodities that can be posted as loan collateral. During the great depression, there were full silos of grain all over the mid-west at the same time that unemployment exceeded twenty percent and people had little money. This phenomenon is described with the economist's gloss: it is difficult to push a string. It might not have been so difficult to push that string if people had been free to devise and use their own currencies. Laws that prohibit the natural order of things also matter.

It must be admitted that commodity currencies also have disadvantages. Financial tycoons, able to affect the market for gold or silver, can wreak havoc for a while. But here, simple remedies come to mind. First of all, world markets are now so large that it is more difficult than ever to corner a market. Secondly, absent the bias favoring a single currency, multiple currencies based on different commodities would allow one to spread the risk, just as one does in investing. In any case, though depressions also preceded 1913, they were not deemed "great depressions". It seems that achieving a great depression requires considerable help from government.

The use of multiple currencies might also pressure government to tax with uniform (flat) rates. Such rates would make sense in any currency. In developing countries, the freedom to use foreign currencies is a familiar popular demand.

The use of a single fiat currency provides far more convenience to government than to the rest of us. Every aspect of such currency is a source of income for government. It benefits from seigniorage in dispensing cash. It charges banks for loans at arbitrary rates it itself sets. Then it borrows to finance its elective wars and other extravagance and taxes us for the interest on the debt. Income tax is progressive, so that with inflation and bracket creep we all start paying at the rates once intended for the wealthy. Inflation rewards debtors, such as the government itself. That it impoverishes others may be regretted, but is likened to an act of God.

Adding insult to injury, whatever mischief is caused by government intervention in currency and the economy is blamed on the "business cycle". The causes of our misfortune are wrongly assigned by academics, who indoctrinate youth to have blind faith in government, and so in the use of force to solve every problem.

Economics is reputed to be a mysterious subject, understood only by the initiated. Where it should be a scientific study of voluntary exchange between and among individuals, in our world it has become the study of Federal regulation, force and plunder. When given a choice, people reject fiat money as having no value. We are denied that choice.

Economic apologists tell us that fiat money is just like the gold standard, or the pound sterling, but without the gold, or the silver. But the regulation of fiat money requires artificial manipulation of the interest rate, causing boom and bust, full employment and unemployment, just to maintain a stable currency. This is surely not like the gold standard.

Money is supposed to be an accounting device, used to measure and enable economic activity. Fiat money, unable to preserve its value without wrecking the economy it is supposed to serve, has become the master rather than the servant.

Through Alice's Looking Glass

The world of prices, accounting, and money reflects as in a mirror the real world of industry and commerce. Any transaction in goods or services is accompanied by a transfer of money. In order that the looking-glass world of finance should provide a true reflection of the real world outside, the setting of prices must be unconstrained by forces beyond the parties taking part in the transaction. Only then will prices reflect the unbiased judgment of the parties, and the benefits of the free market be realized.

Take a simple example. An industrious cobbler produces shoes and makes a bundle of money, which he hides under the bed. A burglar robs this money. To some economists [Sam 2] little harm has been done, for the money will no doubt be used, so is still in circulation. But great harm has been done to the relationship between the cobbler's industry and his consequent savings. The burglar made no shoes or anything else of value, yet ended up with the money. The image in the money mirror is now a highly distorted view of the real world of production and consumption.

The reason that a free market (without theft) provides superior results is that no deal occurs save by the mutual consent of the parties to the deal. A buyer would prefer a lower price; a seller a higher one. The price at which they can agree thus becomes an important piece of economic data, used by everyone in making decisions. When prices are distorted from these natural levels, the information is wrong, and subsequent decisions that rely on this data tend also to be wrong.

Price controls are justly criticized on this basis. Probably the largest single case of controlled prices is the interest rate on money. The government has mandated the use of dollars, then subjected dollars to massive price control via an interest rate administered by the Federal Reserve. Just as price controls on gasoline produced massive shortages in the 1970's, so this mandating and control of the U.S. dollar has led to much of the economic mischief we have experienced over recent history.

The looking glass to which we have been referring above has a name: it is called accounting. In order for the image in the looking glass to be reliable, accounting rules must be followed. The total of assets must equal the total of liabilities. A unit of currency is a liability of the issuing bank. It once could be exchanged on demand for a unit of the bank's assets, such as gold or silver. In issuing fiat currency, the Federal Reserve Bank effectively breaks the mirror.

Fiat Gas

Enough time has passed since the founding of the Federal Reserve that economic theory has come to better understand the behavior of fiat money. The views of the Chicago school, once held in low repute by many, have become widely accepted. The further contributions of the Austrian school are also better known than previously.

The Chicago school observed the inverse relationship between the quantity of money and its value. When the quantity of money increased markedly, as after the discovery of gold in the new world, the effect was to reduce the price of gold, and so to increase the prices of everything else when these prices were expressed in terms of gold. History records the resulting inflation in prices.

The same thing happens with fiat money. As government "eases credit", that is, increases the quantity of money, prices soon begin to rise. The effect happens unevenly, producing winners and losers, instability and inefficiency. Prices eventually rise in direct proportion to the quantity of money; that is the value of the dollar varies in inverse proportion to the quantity of money.

Science students will recognize this relationship as the ideal gas law. The pressure of the gas is the value of the dollar. The quantity of gas is the number of dollars in circulation. In the ideal gas law their product is constant. The "constant" with fiat money depends on such factors as the velocity of money, that is, how often it it enters into a transaction, and on the interest rate. So variations in these two things affect prices and inflation. Of these two, the interest rate is the one that is more easily observed. Its effect must be highly indirect, since the Federal Reserve must vary it over a wide range in order to control inflation.

Economists of the left [Sam 1] have sometimes seen the national debt as an aid in stabilizing the currency. If it does this, it certainly does it badly and at immense cost. The interest on the debt is one of the largest items in the Federal budget, transferring wealth from taxpayers to savers, in risk-free loans. Savers, as a group, tend to be wealthy. Why is this result favored by the left wing, the liberals?

Gold had the advantage that its quantity could not be cheaply increased, nor would it likely be destroyed. Fiat money can easily be created and destroyed, and government has assumed the power to do this. But we will see in the next section that there is reason to doubt that any means exists whereby the Federal Reserve could exercise this power without massive pain to the economy.

Whereas private firms using sound accounting practices are required to make their assets and liabilities stay precisely in balance, and so can offer precisely the amount of currency for which they have the redeeming assets, the Federal Reserve offers only gas. The value of the dollar is spongy, not firm. As with a casino where the only sure winner is the house, the only sure winner with the fiat dollar is the government. The rest of us? Losers.

The government is currently able to raise the debt to any level, pay any rate of interest required to obtain the unsecured loans, and charge the taxpayer for the interest, even if the economy be destroyed. This is how many earlier civilizations came to grief. [Adams 1] Experience indicates that to control the inflation of fiat money, the interest rate must exceed the rate of inflation. This becomes impossible with runaway inflation as experienced in many countries. Prudence dictates that the use of fiat money should be abandoned.

Inflation, Feedback and Doing the Impossible

The principle of negative feedback is employed when your thermostat regulates the temperature in your home. When the temperature exceeds an upper limit, the heat is switched off. When the temperature drops below a lower limit, the heat is switched on. These two limits are not far apart, so the temperature in your home stays fairly constant.

Anyone who has followed business news knows how the Federal Reserve chairman uses negative feedback in trying to control inflation. When he feels that inflation is increasing, he raises the interest rate on various government loans and securities. When inflation is low he reduces interest rates. In this way he tries to give fiat money the appearance of constant value, where in fact no value exists. If this technique had a theoretical basis, worked well, and had no significant disadvantages, we would owe the Federal Reserve our thanks. But unfortunately none of these things is so.

We can see from the historical record that the technique does not work well. Rather, interest rates vary widely over time, from nearly zero recently to over twenty percent in the early 1980's. The economy experiences inflation, recession, and at least once, stagflation, that is, inflation and stagnation at the same time. In most foreign countries the record is even more dismal than in the U.S. Many countries have seen their currencies lose 99 percent of their value over a relatively short time period. [2]

The costs of this intervention in the economy are immense. When interest rates are high, our perpetually large national debt produces a massive interest load on U.S. taxpayers. In 1988 interest on the debt exceeded 40 percent of personal income tax receipts. [3] This represents a large transfer payment from ordinary people to the wealthy, who own most of the the bonds and securities. Thus, the effect is regressive, a fact sheepishly admitted by liberal economists. [Sam 3] When interest rates are high, investors prefer bonds to corporate stock, so stock prices are depressed. Money is also less available to consumers, so demand suffers. The entire economy is depressed, and unemployment increases. Since both supply and demand are depressed, the effect on prices, which was the purpose of the policy, is somewhat muted. A large intervention produces only a modest result. Money is moved from spending and useful investment in industry into government bonds. A recession is announced. Murray Rothbard provides a more detailed analysis of these phenomena. [Roth 1]

After the recession, interest rates are low. Industry has been chastened, and has reason to doubt the return of consumer demand and investor confidence. Often, the recovery takes years. Money, though cheap in terms of the interest rate, does not go where it would have been absent the boom and bust. The economy is back at square one, and each participant must prove himself all over again.

So much for the significant disadvantages of fiat money. How about the theoretical basis? Feedback is an idea from engineering. One might think that a formal technical justification had been developed in the academic literature for regulating fiat money in this way, with either formal proofs or extensive simulations showing that the technique is sound. This has never been done.

Indeed, a case can be made that any feedback-controlled fiat currency will distort pricing relationships in the economy. Keep in mind that artificial distortions in pricing relationships are exactly what lead to unwise purchases, malinvestment and other mischief.

Suppose the Fed chairman had access to a magical parameter that could be varied to produce a proportional change in all prices, thus avoiding price distortion. Then a second parameter could be defined in terms of the first so that prices would vary in direct proportion to this second parameter. Without loss of generality therefore we may assume that his magical parameter has this additional property. But prices are also set by sellers, or by buyers and sellers in mutual agreement. The collection of equations setting prices as we have just described is thus an over-constrained linear system with no solution unless all prices are zero.

The common-sense interpretation of this trivial but interesting result is that if prices are set by market participants, they cannot also be set by the Fed. The Fed cannot affect prices except by itself participating in the economy in a major way so as to distort prices and so influence the behavior of the other market participants enough to achieve its goals. Of course this is what actually happens, at great cost to us all. Thus does money become the master rather than a servant.

No wonder there is respect bordering on reverence for the Fed chairman. He has been handed a sword of Damocles to hold over our heads, and to avoid harming us with it, he must perform an impossible task.

Hard Commodity Money

Hard money certificates would be issued by private banks for use as money. The bank would promise to exchange the certificates for gold or other commodity in accordance with its contract commitments. It would also be authorized to issue new certificates in exchange for suitable commodity collateral deposited in its vaults. In this way, the value of the currency would be kept exactly in step with the market price of the commodity. Commodities suitable for currency are homogeneous, divisible, suitable for storage, with an active market.

Demand deposits would be handled similarly. A bank customer might have some of her money in certificates and some in a demand deposit account. The total of a bank's demand deposit accounts and certificates in circulation would equal the amount of commodity it had in storage. Only one commodity would be used for any given variety of money. (Milton Friedman [MFriedman 1] and David Friedman [DFriedman 1] both mention the possible use of mixed baskets of commodities for a currency. My suggestion here is for multiple currencies instead. Then derived currencies based on a basket of currencies could be established in terms of the single commodity currencies.)

Advantages of this type of money are:

1. The quantity of money, and its value, are firmly anchored to something tangible.

2. New money is available automatically upon presentation and posting of suitable new tangible assets.

Disadvantages are:

1. Tangible property deposits must be guarded and protected against loss. Thus, there are costs associated with maintaining a deposit balance in such a currency.

2. Different types of commodity would define different currencies. This would lead to a multiplicity of currencies.

3. Some economists have argued that there would not be a sufficient supply of currency for a modern economy. We consider this in the next section.

One might ask whether commodity currencies would be expected to inflate or deflate over a long time period. If the effect were slow, it would not matter a great deal. The famous wager between Julian Simon and Paul Ehrlich supports the optimists, that commodities will get cheaper. Environmental pessimists would tend to support Paul Ehrlich, expecting them to become more expensive. The optimists then would expect price inflation in terms of their commodities; the pessimists price deflation. Either way, commodity currencies would be free from the danger of runaway inflation, periodic high interest rates, and the resulting cycles of boom and bust that plague fiat currency.

Providing a Sufficient Quantity of Money

According to Murray Rothbard, [Roth 2] business cycles started in the eighteenth century, when some European banks began the practice of issuing more money certificates than they had gold or silver on deposit. This fractional reserve banking has persisted ever since. Now, however, since no redeeming commodities are used at all, the fractional reserve idea is used by the central bank to limit the amount by which ordinary banks may increase the money supply on their own. The central bank directs the other banks, and retains the power to vary the money supply at will. The use of fractional reserves has been defended primarily as a way of increasing the quantity of money. Its defenders claim that a modern economy requires a quantity unattainable by commodity money.

We agree that there must be an adequate supply of money, which can be increased by market forces as required, in order prevent a scarcity from affecting prices too much. For this reason, we feel required to explain how a free market with private institutions could provide a large reservoir of stable money. We list here five ways in which the effectiveness or the effective quantity of commodity money is, or may be, increased. Each item is then discussed in turn:

1. The effect of the commodity market;

2. Hot potato money, or the disincentive to hold onto commodity money for very long;

3. the use of multiple commodity currencies;

4. the use of payment clearing techniques;

5. permitting the use of non-commodity financial instruments in trade.

The Commodity Market. If a commodity currency became somewhat scarce, this scarcity would be immediately be transferred to the commodity itself, raising its price. This would stimulate the production of the commodity in the usual way. Conversely, a reduction in demand would tend to lower the price, discouraging production, and increasing scarcity. The self-regulating nature of free markets thus translates into a natural means of regulating the value of a commodity currency.

Hot Potato Money. Investment advisers have long pointed out that gold does not make a good long-term investment. Over time it loses value in comparison with any good stock or bond. Why is this? First, gold held in deposit is not financing investment in productive enterprise. There is no way that gold can produce a dividend or interest. But even worse, the fact that it is valuable means that it must be protected and defended at some cost. Security measures are expensive, and the owner of the asset is the one who must pay. For this reason, commodity money cannot be expected to produce any positive interest, but only charges. This amounts to negative interest.

There can be no clearer indication that fiat money is inflationary and thus unsuitable for use as currency than the fact that it produces, without risk, positive interest in savings accounts or government bonds. No currency that truly held its value could do this, unless it were a part of a program for the forced redistribution of wealth. To the extent that the dollar is in fact involved in such a program of redistribution, the effect is regressive, as mentioned before.

The negative interest on commodity money would mean that, like the change in one's pocket, it would be owned and held only briefly. Users would quickly pass it on to others in trade, putting their assets into goods or appreciating securities: stock and bonds. It would provide a unit of measure, like the physical units, the meter, gram, or second. One does not need a barn full of yardsticks; one or two suffice.

The natural disincentive to hold onto commodity money for very long would tend to increase its effectiveness in trade. The disincentive would tend to increase the frequency or velocity with which it was used in successive transactions, and so increase its usefulness.

Multiple Currencies. One of the myths of modern life is that a modern state must have a single official currency. Never mind that we insist on a multiplicity of nearly everything else, including investment instruments. We deplore monopoly in the private sector, but exempt the public sector from the same skeptical scrutiny.

Foreign developing nations have had such bad experiences with official currencies that there is often popular demand for the ability to use several currencies. World trade requires the use of multiple currencies, so that dealing in them has become routine in commerce.

If different currencies, each using a particular commodity, were issued by private banks, then the free market would sort out the winners from the losers, and we would be left with a few widely used currencies. Exchange in kind, with any one of these few currencies, would be nearly cost-free; only exchanges among different currencies would have an appreciable cost. There would be a need to maintain stockpiles of the most popular commodities, tending to stabilize their prices. The ability to institute new currencies at any time using stockpiles of any suitable commodity would prevent the depression effect: stockpiles existing at the same time that there is a shortage of money.

The law would be changed to permit the use of any private currency to pay debts, even for paying taxes.

Payment Clearing Techniques. Banks discovered long ago that they could conduct business more inexpensively if they cleared their mutual debts in large batches. Debts incurred though checks issued on other banks were combined perhaps once a day. Net debit or credit amounts were struck, and payments made from net debtors to net creditors.

The process was simplified further by the formation of clearing houses with their own accounts. Rather than each net debtor paying many other banks, debtors would first pay the clearing house, which would then pay the net creditors. This reduced the total number of payments required, and so permitted the process to be conveniently extended to a larger number of banks.

More recently, some large clearing houses have adopted automated clearing techniques. Payment orders are held in queue until such time as suitable account balances are available for their transmission to recipient banks. Then the payments are automatically released. Using such techniques, CHIPS (the Clearing House Interbank Payment System) has been able to accomplish the release of between $1 and $1.5 trillion per day with total bank deposits totaling about $3 billion, for a clearing ratio of several hundred to one. These techniques accomplish the early pre-settlement of the large majority of the daily volume of work, in nearly balanced exchanges. The larger daily net positions of the bank participants are contained within relatively few (mostly large) payments that are settled at end of day.

Fractional reserve banking boasts a money creation multiplier of perhaps only five or six to one. When the reserve currency is fiat currency, achieving even this small advantage is pointless. Even when the reserve currency was gold, fractional reserves perpetrated a fraud on the public, in that loan-backed money was commingled with hard currency. The Jimmy Stewart character in “It's a Wonderful Life” had to explain to irate bank customers that their money had actually been invested in mortgages, without their full knowledge or consent. In our scheme, different types of money and securities would be honestly represented and sold for what they are.

In sum, modern clearing methods could increase the effectiveness of commodity currency, as they today increase the effectiveness of dollar holdings. This would reduce the currency volume required for the conduct of business.

Non-Commodity Instruments. Only financial laws and regulations prevent us from using brokerage instruments such as money market funds or REIT funds (Real Estate Investment Trusts) to settle debts. If both buyer and seller keep assets in such forms, they could agree to use the current price of the fund in terms of gold or other commodity to determine the price expressed in shares of the fund. Then shares could be transmitted in payment. This would avoid the transaction charges that might be incurred under current law. Currently, the buyer would have to sell shares for dollars, pay in dollars, then the seller would have to invest the dollars. Conversion usually incurs greater cost than payment in kind. Only the law prevents this improved efficiency.

If securities funds could represent currency, the potential volume of currency would be truly huge. There could no longer be any claim that the needs of a modern economy require fractional reserve banking or fiat money. The long era of the “business cycle” might finally end, and with it one cause of misery, mischief and war.

Price Indexing

Price indexing has been proposed as an alternative to commodity money. [MFriedman 2] At first glance it might appear that indexing might provide better regulation of the value of money than even commodity money could offer, at lower cost. Unfortunately, the notion of price indexing does not immediately suggest how to design a currency.

One possible use for an index might be in writing very long-term contracts. Contracted amounts to be paid well in the future might be indexed to compensate for commodity price changes over that time. One type of index that comes to mind is the price of labor. A national income percentile (such as the 50th percentile or median income) might be used to provide an index. This idea could be of interest to seniors shopping for pensions. Hayek has expressed doubt that sufficient demand would exist even in this case.

How would this work? An annuity contract might be written that specifies payments to be paid in future months in terms of a fraction of the annual median income as posted by a suitable independent organization or government agency. A senior who could have thirty or more years of life ahead would then be much better protected against the effects of inflation than is currently the case with an income fixed in dollars.

Note that if a price index were used to regulate a fiat currency through negative feedback, we would be left with the situation already treated earlier. It has been shown that manipulation of the interest rate by the Federal Reserve distorts the structure of prices in the economy. We will see in the next section proposals for asset-backed currency that should be free from this defect.

A Better Non-Commodity (Equity and Loan-Based) Money

Hayek [Hayek] has suggested that private banks could issue a superior currency, since market forces would compel them to succeed. I agree, except that unlike Hayek, I do not feel that this should be a fiat currency, but rather should be either commodity currency, well-established stocks, and bonds based on mortgages or secured loans. This is closer to current practice, and seems far more sound.

Here is a concrete proposal that we will call free brokerage, that takes a step beyond the older notion of free banking. Suppose that government leaves the creation of money to the private sector, and repeals laws taxing securities. It would allow shares in any security to be used as valuable consideration (money) in any financial deal. Brokers could act as banks, transferring shares from one person's account to another based on checks or electronic orders, at zero or low cost.

We would expect that a demand would arise for mutual funds that behave like Hayek's proposed money, by being based on a basket of commodities. Fund managers could design mutual funds that roughly track the median income in value; that is, by this measure they neither inflate nor deflate much over time. Those making time deals, employers and employees, borrowers and lenders, pension funds and pensioners could elect to use shares in such funds as a basis for their contracts. Employers, borrowers, and pension funds tend to be pleased by inflation and unhappy with deflation, while employees, lenders and pensioners have the opposite preferences. All parties might therefore be willing to agree on the use of a fund share that succeeded in being inflation neutral. Funds whose shares exhibit this property reliably over many years would earn a favorable reputation for use as money. They would win acceptance in the free market for these uses.

It would be well for such inflation-neutral mutual funds, when using corporate stock, to restrict themselves to preferred stock in debt-free corporations. This would both decrease investment risk and prevent control of the underlying corporations by governments. Similarly, their loan-based bonds and securities should be restricted to fully collateralized loans, such as mortgages and inventory loans. Of course, select commodities could also be used to achieve the fund's goal of being inflation neutral.

Conclusions

We agree with Hayek, as well as with many other distinguished economists, that private currency is perfectly feasible, and would provide a superior alternative to government fiat money. Again with Hayek, we find that the notion that there must be only one currency in a given nation is without merit. It is a myth used to exalt the role of government, but provides no advantage to business or to the individual citizen. Indeed, it has dramatic disadvantages.

What changes would occur if these ideas were put into practice? The Federal Reserve would be phased out, and with it fiat money and the practice of regulating monetary value by manipulating the interest rate. Banks would assume a new function, that of depository for the commodity backing of money. They would give up the power to create loans with fractional reserves. Instead, different classes of money would exist separately, actively traded in the market. Loans could be created through the issuance of investment instruments. We have mentioned REIT's as an example of such instruments in current use.

Brokers would be granted a new power, to serve as banks for security funds and instruments, with the power to transfer bond and loan fund shares among their customers as a secondary form of money. The taxation of such securities would have to be simplified or eliminated to make this possible. It is doubtful that a distinction between banking and brokerage functions would be needed in such a system.

It is imperative that taxes and other debts could be paid in any commodity or equity and loan-based money. If tax rates were flat, no particular currency would assume special importance. If government continued to insist on progressive taxation, indexing via income percentiles could provide a way to achieve this, without bracket creep, and without a distinguished currency.

Federal bonds would remain, but they would be bought and sold in a commodity or other private currency. The government might also obtain loans from private banks, but the charters of these banks would require that adequate marketable collateral be posted, as with a mortgage or home equity loan. The national debt could gradually be converted into a debt denominated in private currency. These changes would reduce the power of the Federal Government to borrow as much as it does at present. The advantages of the new system would not be fully achieved unless the power of the government were curtailed in other ways as well. Nevertheless, denying government the powers to issue fiat currency and to have a monopoly on currency would tend to restrain its excesses significantly.

There would be no legal tender law equating one form of money with another, as under our fractional reserve system dollars are partially loan based and partially pure fiat money.

If all of this were done, with banking reconstituted and government restrained, the largest single source of economic instability would have been removed, and attention might then focus on lesser sources of instability in both the public and private sectors.