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(This item originally appeared at Forbes.com on June 18, 2025.) The Federal Reserve, as most of us know, was established in 1913. What did the US monetary system look like before then? Of course there were gold and silver coins. But, mostly people used paper banknotes, issued by private commercial banks. In 1913, 7,404 private banks issued their own banknotes – all of them convertible to gold coin on demand. To this was added the United States Treasury itself, whose Treasury Gold Certificates (a form of banknote) was the most popular among the myriad options available in those days. Today, the idea of issuing private banknotes is not very popular. People would rather have a digital solution of some kind – such as Kinesis, Lode, Glint, or the United Precious Metals Association, which today provide digital gold transaction platforms. These seem very innovative, but actually they are not much different than the private banknote systems of 130 years ago. The most popular digital platforms today are not based on gold, but on dollars. Among these are the “crypto stablecoins,” with USD Tether (USDT) and USDC the most popular. Tether’s “money supply” or “coins outstanding” has risen from about $2 billion in 2019 to over $150 billion today. For a number of years, the primary use of these USD stablecoins was as a trading platform on crypto exchanges. This allowed traders to bypass the regular USD banking system. But, more recently, they have become increasingly popular as a method of payment for regular trade, or purchasing of goods and services. Now Walmart, Amazon and other big operators are actively setting up their own USD stablecoin systems. Among other advantages, this is expected to save these retailers billions in transaction fees. This process was recently smoothed by the passage of the GENIUS Act

The general process of a gold standard, or any fixed-value system, is that the money supply contracts when the value of the currency is below the parity, and the money supply expands when the value of the currency is above the parity. The most basic, and most common, means to achieve this is conversion at the parity. If you offer to either buy or sell gold at $35/oz., then when the currency is above the parity, at $34/oz. (the dollar is worth 1/34th oz. of gold, which is more than 1/35th), then everyone with gold to sell, sells it to the currency manager, who has a bid at $35 when everyone else is at $34. The currency manager buys this gold and creates new money to pay for it, increasing the base money supply. When the currency is at $36/oz. (1/36th is less than 1/35th), and the currency manager offers to sell at $35, then everyone who wants to buy gold buys it from the currency manager at $35, instead of paying $36. The currency manager sells this gold, receives $35 in payment, and makes this base money disappear. The base money supply contracts. This is also how stablecoins like Tether work, and also, things like money market funds, or bank deposit accounts — all of which maintain a value fixed to dollars. June 30, 2019: A Rosetta Stone of “Stablethings” Although this is what happens in the day-to-day, the result is that base money supply can expand quite a lot, because the currency is reliable and thus people want to hold it. Thus Less Money = More Money. In other words, being willing to support the currency by converting it at the parity price, which reduces base money supply, then leads to increased demand, which then leads to increased

(This item originally appeared at Forbes.com on May 31, 2025.) Although the Federal Reserve and other major central banks, even the Bank of Japan, are not today buying bonds or increasing the base money supply significantly, many people suspect that more overt financing of governments via the money-creation process may lie not too far ahead – what, in the past, often took the form of literally printing paper banknotes; although today, the process is likely to be more digital in character. One such person is Lawrence Lepard, author of The Big Print (2025). Just in recent weeks, Japan’s government bond market has had a price breakdown of the sort not seen since, perhaps, the late 1970s. People have been predicting disaster there literally for decades; but perhaps now the time is upon us. Even the US Treasury market, although one of the better credits in the developed world, has had a notable trend toward weakness. Bond buyers can see that today’s historically huge deficits – the Congressional Budget Office predicts 6%+ of GDP deficits basically forever – do not seem to have any upcoming resolution. Despite the heroic recent efforts of the Department of Government Efficiency, Congress has not yet found the will to cut its spending in any meaningful way, preferring instead minor tweaks. But, decades of minor tweaking, in lieu of significant reforms, are what brought us to this point in the first place. Lawrence Lepard is well qualified as a guide to this era. His history, first in the Venture Capital world in the 1980s, and later as a fund manager, has given him a front-row seat to the whole historical process. Most people don’t have the time to follow these things very closely, or the expertise to judge them. About the best they can do is read certain

We were recently talking about M2, and how it is basically a measure of the banking system. April 27, 2025: Understanding Money Mechanics #6: Blame M2 We would expect the banking system to, more or less, follow the progress of Nominal GDP as a whole. And indeed this is what we see. We looked at the recent example of Greece: Greece had some serious economic difficulties during this time. However, it didn’t have much of anything to do with the money. Greece shared the euro currency, with Germany, France and the other members of the Eurozone. The other euro users didn’t really have much problem, so we can see that this was not a monetary problem with the euro. It was a problem, basically, of bad economic policy. All of this focus on “M2,” which is basically just a correlate of Nominal GDP (with “third generation” Monetarists now just focusing on NGDP directly, or NGDP Targeting), adds up to an excuse to apply some kind of monetary “stimulus,” in response to non-monetary problems caused by other factors. This we saw during this time in Greece, as many economists wanted to “stimulate” the Greek economy through some kind of “easy money” solution. To facilitate this, they wanted Greece to leave the eurozone and basically introduce a domestic floating currency, whose value would promptly fall. Usually, these arguments are not for devaluation explicitly. They focus on other matters, such as “M2.” However, significant currency depreciation is the expected result; and indeed, these methods wouldn’t work without it. If they could work without it, you could just do it without leaving the euro (or, Gold Standard in the 1930s). From this recent Greece example, we can then extend to the Great Depression period, when exactly the same arguments were made for exactly the

(This item originally appeared at Forbes.com on April 23, 2025.) Economic Nationalism, done right, could work very well for the United States in coming decades. The most glorious period for US business, before 1913, was a time of high tariffs and controlled immigration. But, it was also a time when there was no Income Tax; and, in this pre-Federal Reserve era, the money was fixed to gold. The result was very good. The United States, at first a promising “emerging market,” ended up a global superpower. The present era of Globalism dates from Bretton Woods Agreement of 1944, passes landmarks such as the North American Free Trade Agreement of 1994, but reached its full expression with the inclusion of China into the World Trade Organization in 2001. This was paralleled by a range of technological developments, empowered by the new Internet, which made long-distance supply chains possible. Although this Globalist trend arguably did benefit the world as a whole, it is not clear at all that it benefited American citizens. Many industries were “hollowed out,” with unemployment, underemployment and depressed wages the first consequence. A weak domestic economy did little to pick up the slack. Supply-chain dependency proved incompatible with a trend toward a more “multipolar” world, where China or Russia’s growing regional authority combined with American exhaustion with its post-WWII role as global policeman. Within this framework, certain Economic Nationalists (such as Pat Buchanan) have argued in favor of an across-the-board flat rate tariff, avoiding the aggravating complexity of different rates for different products from different countries. It is basically the tariff equivalent of a flat-rate retail sales tax, and might be in the range of 10% to 20%. To this might be added some country-specific (but still flat-rate) tariffs, depending on the situation, perhaps 5%-20%. For some reason, we