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.

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Cite This Article

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

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