The United States can't keep a completely open system if the rest of the world is less open. The United States may have to take a leaf out of the book of Japan, China, and Germany, and have protectionism inside the system.
The U.S. berates China for its exchange rate policy, which Washington doesn't like. But one-sided pressure on China to change its exchange rate is misplaced.
The problem started before World War I. The gold standard was working fairly well. But it broke down because of the war and what happened in the 1920s. And then the U.S. started to become so dominant in the world, with the dollar becoming the central currency after the 1930s, the whole world economy shifted.
In my early days, I wrote my dissertation for MIT at the London School of Economics, really under James Meade, but my dissertation was five chapters on the theory of capital movement, but it didn't mention money.
I went to the University of Washington in Seattle. This was a very good place to study, and I learned a lot. But it wasn't the right place for my Ph.D.
I have never believed that central banks should have rigid inflation targeting. That is not a good thing to stabilize. There is nothing in economic theory to back this.
The whole idea of having a free trade area when you have gyrating exchange rates doesn't make sense at all. It just spoils the effect of any kind of free trade agreement.
The price of gold was fixed at $35 an ounce in 1934, but by the time the U.S. got through the Korean War, the Vietnam war, with all the associated secular inflation, the price level had gone up nearly three times.
