Thursday, 13 August 2009

A Call For Monetary Reconstruction


The Taipei Times’ recent overall coverage of economic developments displays an attempt at even-handedness that belies a misunderstanding of the nature of what is happening.

On the one hand, your readers are told that Taiwan relies excessively on exports to, and other investments in, China and that there is in contrast a pressing need to ‘stimulate’ domestic demand. On the other hand, they are told that further depreciation of the NT dollar is necessary to boost Taiwan’s export economy.

You do not have a coherent stance on economic affairs, and consequently are of no help to your readers.

Taiwan’s export economy will continue to contract for a long time yet. That is because the United State’s Congress’ ‘stimulus bill’ will fundamentally alter the basic political and economic premises of that country over the coming years. The consequences of that alteration which is now in progress will eventually be catastrophic for world trade.

In that context, a chief danger to the Taiwanese people is the risk of the government furthering an inflationary monetary policy in the coming years not merely to give aid to the export economy and save jobs that cannot be saved, but to pay for massive increases in domestic security expansion.

What better way to thwart such a potentiality than by a shift to a stable monetary system with the abolition of the central bank – such as would be required either under a system of free banking or a revival of the now forgotten gold standard?

Contrary to popular opinion, the technical difficulties of effecting such a transition are far from insurmountable – indeed they are not overly complicated. The chief difficulty lies with the legal and political barriers, not least of which is the assured opposition of the government together with a great many exporting industries.

Yet if enough public pressure is brought to bear upon these interests, I believe it may be possible to force them to accept a change in monetary system. It is therefore high time for a complete change in your overall editorial policy.


Michael Fagan

(Sent: Wednesday February 18th 2009. Published in the Taipei Times: Monday February 23rd 2009)