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Away with Monetary Nationalism

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Benn Steil offers many interesting and important points in his contribution to the current issue of Foreign Affairs [2].  For example,

When currency crises hit, countries
need dollars to pay off creditors. That is when their governments turn to the IMF,
the most demonized institutional face of globalization. The IMF has been attacked
by Stiglitz and others for violating "sovereign rights" in imposing conditions in
return for loans. Yet the sort of compromises on policy autonomy that sovereign
borrowers strike today with the IMF were in the past struck directly with foreign
governments. And in the nineteenth century, these compromises cut far more deeply
into national autonomy.

I’m no fan of the IMF.  But my dislike of this institution has nothing to do with the fact that it puts conditions on receipt of its loans or that those conditions diminish each recipient-government’s sovereignty.  Indeed, nationalism and institutions that claim monopoly power to rule defined territories are curses.

One of the important points emphasized in this essay by Steil is that monetary nationalism is as stupid and as dangerous an idea as is economic nationalism.

(HT to Leonard Liggio.)

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