The editors of The New York Sun wonder if Javier Milei, the new president of Argentina, is setting the country on course for the adoption of a new gold standard by first aiming toward dollarization. They write:
Are we the only newspaper that sees a certain irony in the vow of Argentina’s next president to abandon its puffed up peso and adopt the fiat American dollar as its money? We ask because we Yanks have been fit to be tied over our own debased dollar and how it has enabled vast deficit spending and given us soaring prices. Now comes Javier Milei, an actual economist, vowing to cure Argentina’s inflation by making the greenback its currency.
Why not go for a more radical reform, we say? Meaning, if Mr. Milei wants to stand on principle, why not establish the goal of his monetary policy as a return to the gold standard? Argentina was on el estándar dorado in the first decades of the 20th century. That was the era of America’s own reform, the Gold Standard Act of 1900, which gave us an honest dollar until the accession to the presidency of Franklin Roosevelt.
Just to mark the point, the new Argentine president, a man of principle, wants to get rid of Argentina’s own central bank and adopt as the country’s currency the notes issued by our own Federal Reserve. We can see the logic of relativity. When you’ve been running inflation of 140 percent, three and a half percent inflation has an attraction. Economist Steve Hanke, who knows this beat, thinks dollarization could be done.
What a chance for a professor, like Mr. Milei, to educate Argentines — and others — on the merits of a metallic standard. The scale and challenge of the task could appeal, too, to a contrarian like Mr. Milei. Achieving the objective would require Argentina to again define its peso in terms of specie and make the currency convertible into gold, as was the case before the country abandoned the estándar dorado in 1929.
Before then, Argentina was an economic rival of America — both were “young, dynamic nations with fertile farmlands and confident exporters,” journalist historian Alan Beattie observes, putting Argentina “among the 10 richest economies in the world.” The abandonment of honest money, and the rise of the statist Perónist regime, drove the country’s economy into the ground. Restoring a sound peso would help reverse that course.
Such a restoration would, if Mr. Milei could keep it, give his country an enormous moral authority and a chance to challenge the logic of the age of fiat money. Recall how Hamilton, in the Coinage Act of 1792, defined the weight of America’s unit of account as “the same as in the Spanish milled dollar.” If Mr. Milei makes Argentina the issuer of the world’s only honest currency America could, again, turn to a Spanish currency as a model.
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