The Freeman 1972 - The Ludwig von Mises Institute

170 THE FREEMAN Marchfiscal policY,fine tuning ofthe economy,econometric models, datagathering on .a massive scale, andcontrols over the money supply.Especially controls over the moneysupply. Naturally, certain flawsappear from time to time: a $1.5billion predicted surplus for fiscal1970 became a $23.3 billion deficit,but what's a few billion dollarsamong friends? We owe it to ourselves,right? A private firm, un~less it has a cost-plus governmentcontract, would not long survivein terms of such a woefully inefficienteconomic model, but whatdo businessmen know about economics,a faithful econometricianmay ask? If reality does not conformto the model, scrap reality,by law.So reality is scrapped, and theKeynesian finds it necessary toabandon one more area of marketfreedom, namely the freedom· ofprivate, voluntary internationalexchanges of money at prices establishedby the market. Such avoluntary system of internationalexchange would reduce the predictabilityof the government'seconometric model. That would allowa "bleeder" in the overall controldevice. That would allow mento measure the extent of the depreciationof their own and other'sdomestic currencies, thus callingattention to the policies of inflationand confiscation being enforcedby their governments andother governments. As for theUnited States, floating exchangerates on a free international marketfor currencies would end, overnight,the exported inflation of ourcontinual budgetary deficits. 3 Thatis why government bureaucratsdo not generally approve of floatingexchange rates.Flexible Exchange Rates:A Counsel of Despair?This does not explain why variousconservative economists also opposethe extension of the market into therealm of international monetaryexchange. The late William Roepkecalled the idea "a counsel of despair."4His argument against flexibleexchange rates: "Withoutstability of exchange rates any internationalmonetary system wouldbe flawed at an important point, becauseit would lack a major conditionof international economic integration."This sounds plausibleenough, until one reads his nextsentence: "Just how importantthis condition is will be seen if wereflect that national economic integration(among the separate regionsof one country) is unimaginablewith fluctuating rates ofexchange between, say, regionalcurrencies."5 The government'sanswer to this "unimaginable"process of regional currencies isto establish a central monopoly of