As an economic policy, the choice of an exchange rate regime has been oversold. That choice pales in comparison with establishing a legal system that carefully defines property rights and creates an institutional framework in which people can freely utilize and trade their resources. It also is far less important than avoiding the plunder of political and legal battles that waste scarce resources to fight over the division of wealth, or avoiding taxes and regulations that create static inefficiencies and choke the forces of creativity and progress. The issue of choosing an exchange rate system is merely a subissue in the broader question of overall monetary policy. And while monetary policy is clearly important, its role can be easily overstated, as Milton Friedman (1968) pointed out more than three decades ago. Given the history of monetary policy in the United States and around the world, including the political forces that inevitably shape the actions of governments, not to mention scientific uncertainty over many key economic questions (and regardless of the fact that many economists operating in the policy realm deny the existence of this uncertainty and arrogantly exaggerate the extent of their knowledge), probably the best way to approach the real-life policy of choosing an exchange rate regime is to take a broad perspective on how to do the least harm. The past few decades have witnessed tremendous turmoil in the exchange rate practices of the nations of the world: from the Bretton Woods system to its inevitable collapse, through a period of floating clean and dirty, through pegs, devaluations, denials of devaluations, and more devaluations, through floating rates, currency boards, and the emergence of a common currency over much of Europe. The massive swings and differences in exchange rate policies contrast wit
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