John Tamny continues the National Review’s gold bug obsession:
In 1898 Knut Wicksell said there was “no need to waste words proving how important it is that the exchange value of money or, what is the same thing seen from the opposite angle, the general level of commodity prices, remains as stable and constant as possible.” … Importantly, Wicksell’s currency-stability approach did not just rely on the value of the home currency (in his case, the Swedish Kronar) against others. Foreign exchange values were but one factor in his price-rule model.
1898? Is Tamny referring to Interest and Prices where Wicksell also wrote:
In passing, there is a point to be noticed. The growth in the use of money, and the increase in monetary stocks, tends more and more to reduce the significance of the commodity characteristics of money. On the other hand, the development of the monetary system results in a displacement of specie by credit instruments and so-called money substitutes, and there exists, therefore, an important tendency towards a strengthening of the commodity aspect of money and of its influence on prices. It is sometimes said to be feasible to base a monetary system upon gold and yet to dispense entirely, or almost entirely, with the employment of gold both in circulation and in the banks’ reserves. This would be done by extending the use of cheques, by the issue of notes of which the cover is of a purely banking nature, and so on. This view, which is held by some of the most prominent writers on monetary questions, must be regarded as utopian. In such a system the value of money would be directly exposed to the effects of every fortuitous incident on the side of the production of the precious metal and every caprice on the side of its consumption. It would undergo the same violent fluctuations as do the values of most other commodities. But it would be quite possible to maintain a stable value of money without the use of reserves of a precious metal. Only it would be necessary for the metal to cease to serve as a standard of value.
So Wicksell noted that a commodity-based monetary system could exhibit instability and that a stable value of money was possible even without a commodity-based monetary system.