My short book presents a new information theory of money. Only in passing did I cite Ramesh Ponnuru and National Review as influential representatives of a monetarist faith curiously shared with Paul Krugman and most Democrats. With colleague David Beckwith, Ponnuru is a savvy and sophisticated monetarist who, like virtually all of his faith, wants us to attend to all the refinements of the recherche views that distinguish him from his unwonted allies.
My book, however, regards centralized monetary policy itself, regardless of refinements, as a socialist temptation. Controlled by central banks with floating currencies, and oriented toward the needs of obsolescent world financial institutions such as hypertrophic banks and governments, centralized money is the most fundamental cause of the current doldrums of the world economy. Channeling funds to government affiliated banks and other political favorites, it also demoralizes and discredits capitalism.
Foreign exchange trading is now 100 times more voluminous than all the world’s stock market trading put together, 25 times more voluminous than trade in goods and services, and more volatile than either. While shortening the time horizons of investment from decades to seconds and minutes, it provides an increasing share of financial profits without conferring stability, mitigating crises, or promoting trade. This is a scandal of money. I believe that new Internet technologies enable a new monetary regime that will be dominated by gold and alternative currencies such as bitcoin. I explain this exciting prospect in my book. Let the debate begin.
George Gilder is a bestselling writer and author of, most recently, The 21st Century Case for Gold: A New Information Theory of Money.