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Homepage > News > Editorial > Reserve assets are for idiots Historically, reserve assets have played a pivotal role in shaping monetary systems. From gold bullion sitting in the vaults of the Bank of England (BoE) to the U.S. dollar’s post-Bretton Woods hegemony, the concept of a reserve asset has always carried a double-edged sword. On one side lies the promise of stability and trust while empowering the empire with the most liquid assets; on the other, the creeping specter of corruption, inflation, and economic inefficiency. This was the brilliance of Keynes. He gets rightfully criticized for devaluing the purchasing power of the fiat unit, but few understand that Keynes knew this would be the case. His goal was for the British pound to simply outperform other fiat currencies and drive economic growth in the belief that economic growth would also outpace the devaluation of spending power in the United Kingdom. With few exceptions, he was right. This economic philosophy was transplanted onto the U.S. monetary system with some updates in sophistication, leading to similar outcomes: incredible creation of wealth for people in the U.S., despite the fact that purchasing power of the currency was constantly eroding.  Sounds like I’m a Keynesian, huh? I’m not. The system still has major flaws, but we must at least understand their ideas before we deconstruct them.  Sound money As a staunch advocate of sound money and the principles behind the gold standard, I deeply respect systems that prioritize accountability, scarcity, and real economic balance. I’m essentially a classic Austrian on the topic of monetary economics, but the idea has always had a practical limitation of trust in reserve assets for full reserve banking and lending. Essentially, it’s near impossible to trust that the circulating supply of money is always redeemable 1:1 for the…

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Filed under: News - @ November 19, 2024 2:21 pm