Is there a better system than the U.S. Fed?

Pj de Marigny / DITMo Strategies
Director, GARP, S. California Chapter

14July2011, Newport Beach, CA. Alternative systems to the U.S. Central Bank such as a proxy currency, free banking sytem and commodity system. The balance between Fed and Treasury is all but unsustainable in the U.S. deficit trajectory within our political system. In my view the Euro will be history in three or four years even with Capital Market securitization of sovereign debt in return for austerity.

So, what’s the next step? Wait for the Fed to layoff agencies, futz with monetary policy, hope for deficit mitigation by Congress, and hope the business cycle can stand without Fed Meds?

Perhaps we can take a page from former Fed Chief Paul Volcker and consider a common currency which monetary policy is set by standards of Basel and executed by the present consortium of central banks – The Bank of International Settlement. BIS can easily be chartered to act as the executing entity with BASEL by-laws.

And by the way, for Mr. Bernanke who today said the popularity of gold is due to a perception of tail risk, the true tail risk is money, gold’s value changes not, supply and demand of it is a function of currency value.

Last, what risk manager wouldn’t be interested in a real-life stress test of U.S. default? Even posing the question unmasks the U.S. Fed purpose as credit facilitator. Currency, like capital, should be fungible. *.*