[OPE-L] return to commodity money?

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Mon Jun 11 2007 - 00:54:28 EDT

In our old debate about money, I also suggested 
that inflation targeting in terms of a basket of 
goods represented something of a return to 
commodity money, though I disagree with Paul B 
and Claus that gold is today the universal 
equivalent. I was certainly wrong however about 
the actual content of the basket of goods on 
which inflation targeting keeps its eyes.


He states that the Bretton Woods monetary order 
"was unique to monetary history," in being 
designed by experts "from scratch" (pp. 133, 
188), but also sees it as a "vain attempt to 
revive  commodity money" (p. 189). He reasonably 
follows much of the literature in using "Bretton 
Woods" as a convenient label for a period rather 
than as a system in actual operation.
He might have followed up the implications of his 
description of the new system by pointing out 
that with "inflation targeting" we have returned 
to commodity money. A dollar, pound, or Euro is 
convertible into a basket of goods. Of course 
inflation targeting is subject to the 
government's discretion, but that was also true 
of the gold standard. The new system is also like 
the old in rejecting the managed-money theories 
that prevailed during much of the transition, and 
delayed it.

Monetary Theory and Bretton Woods: The 
Construction of an International Monetary Order | 
Book Reviews
Published by EH.NET (June 2007)
Filippo Cesarano, Monetary Theory and Bretton 
Woods: The Construction of an International 
Monetary Order. Cambridge: Cambridge University 
Press, 2006. xiii + 248 pp. $80 (hardback), ISBN: 
Reviewed for EH.NET by John H. Wood, Department 
of Economics, Wake Forest University.

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