Gerald P. O’Driscoll has an important new working paper at Cato, “Central Banks: Abolish or Reform.”
HT to Kurt Schuler at Free Banking.
Conclusion:
We have two bad systems: the fiscal and the monetary. They are intertwined now as they were in the 18th and 19th centuries. They must be reformed, or together they will destroy the economic system that sustains them. They have become parasitical. The unsettled question is whether anything less than radical reform of both will work. Can central banks be constrained to a Bagehot‐like role, or must they be abolished? Can a “bad system” be made better, or do we need wholesale replacement? That is the question that monetary economists should be discussing.
