Quarterly Journal of Austrian Economics

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The Case Against Currency Boards

The Quarterly Journal of Austrian Economics

Tags Money and BanksMoney and Banking

07/30/2014Nikolay Gertchev


Volume 5, No. 4 (Winter 2002)


The authors argue that a currency board is a creation of the state, aiming at granting particular political favors,and purposefully designed to secure the reappearance of an independent domestic money producer.  A currency board establishes a foreign fiat money standard enforced by legal tender laws for its bank notes, which are mere money substitutes in the context of fractional-reserve commercial banking.  This insight helps us to understand why currency boards have always degenerated into national central banks of the modern type: they were intentionally created to do so.  This surely will also be the fate of present-day currency boards.  Although technically the transition from a currency bank to a commodity money (gold or other commodity standard) is facilitated by the warehouse aspect of the currency board, this institution does not present any incentive for the policy-makers to subject the production of money to the regulation of the free market.


Nikolay Gertchev

Nikolay Gertchev holds a Ph.D. in economics from the University of Paris 2 Panthéon-Assas and currently lives in Belgium, where he works for an international organization.

Cite This Article

Gertchev, Nikolay. "The Case Against Currency Boards." The Quarterly Journal of Austrian Economics 5, No. 4 (Winter 2002): 57–75.