An Opportunity for Monetary Reform
By Mike Ryan*
January 27, 2009


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6. Implement interest-free state loans and create incentives for community currency initiatives and business-to-business currency.  States are facing severe deficits and responding by cutting services at precisely the time when we need to be fostering an environment of productivity.  The Treasury can ease these shortfalls by providing interest-free loans to state governments.  This will create a productive investment in the infrastructure we so desperately require for future growth.

Communities should also be encouraged, through education and financial incentives, to set up local currency systems to provide needed liquidity to local economies.  There are hundreds of successful systems in place throughout the world that have proven their efficacy.  When dollars are tight these sorts of local money can provide significant stimulation to economically challenged communities.

  1. Peg international currency to an accepted standard based upon a “basket” of diverse commodities.

    Until 1971 the US was on a gold standard, instituted by the Bretton Woods agreement of 1944. The rationale of this system was to create an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value—plus or minus one percent—in terms of gold and the ability of the IMF to bridge temporary imbalances of payments.  The system collapsed in 1971 when the US faced a run on its gold supply, forcing the elimination of the gold standard.

    Since then currency values have floated in an open market.  This has caused extreme distortions in pricing as speculators bet on valuations.  A stable money policy requires a stable measure of value.  While gold has provided this in the past, the physical limitations of gold and its vulnerably to political and economic manipulation limits its effectiveness.  Instead a “basket” of diverse commodities could be used to peg the value of national currencies. 

These are dramatic proposals.  Yet our current system has put us in a position of imminent financial collapse.  There is nothing more dramatic than total financial failure on a world level.  Accepting the status quo is not an option.  We owe it to ourselves and to future generations to create out of this crisis the beginnings of a more viable, sustainable 21st Century financial system.

Mike Ryan, CFP®, is a financial advisor with Paragon Asset Management, Ltd., based in Wilmette, IL.  This article is part of a larger essay, Freedom and the Money Power, available on Paragon’s web site.

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