The Freeman 1972 - The Ludwig von Mises Institute

176 THE FREEMAN Marchupon its magistrates and constables,it prohibits any dealings in foreignexchange on terms different from theordained maximum price. 14Radical economic discontinuitiesare difficult to predict-far harderthan economic countinuities. Thesteady movement of internationalexchange transactions in terms ofan unhampered free market isbasic to economic continuity. Imposefiat exchange rates, and youcreate the "stability plus devaluations"program which the BrettonWoods agreement imposed onthe world. You create the "hotmoney" effect, as currency speculatorsare forced to anticipate radicaljumps in the fiat exchangerates, thereby encouraging themto transfer billions of dollars ormarks or pounds or francs fromone country to another, trying tobeat the imposition of September18ths or August 15ths. 15 It is ahuge game of musical chairs, exceptthat people's lives - economically,politically, and physically ­are at stake. In the 1949 edition ofHu,man Action, Mises wrote, concerning"hot money": "All thisrefers to European conditions.American conditions differ onlytechnically, but not economically.However, the hot-money problemis not an American problem, asthere is, under the present state'of affairs, no country which a capitalistcould deem a safer refugethan the United States."16 It is atestimony to the monetary inflationof the past twenty years inthis country that Mises saw fit todrop that footnote from the 1963and 1966 editions of his book.Instability?Wouldn't the establishment of atotally free market for internationalmonetary transactions addelements of instability into internationaleconomic affairs? Emphaticallyno ! What it would do isto present a highly accurate reflectionof the economically irrationalpolicies of fiat money creation thatare being pursued with a vengeanceby almost every governmenton earth. It would serve as an economicmirror which would answertruthfully the question, "Mirror,mirror on the wall, who has themost honest currency of themall ?" Daily, the international moneymirror would answer the truthand it would also give its guess asto the answer at any point in thefuture concerning any given currency.Like the wicked witch ofSnow White, domestic magiciansof fiat money resent that inescap;,.able answer. So they buy themselvesa new mirror - fixed exchangerates. Unfortunately, thesefiat mirrors break periodically,causing great confusion, consternation,and windfall profits andlosses to speculators. And, need we