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This essay explores the critical vision of Francisco Barrera Lavalle about the Mexico’s Monetary Reform of 1905. In his critique, Barrera inserts an argument about the nature of the balance of payments in the Mexican economy: the disequilibria in Mexico’s trade balance were structurally recurrent given the characteristics of what the country exports: commodities and raw materials. Barrera believed that the authorities made the mistake of overvaluing the peso, assigning it a value higher than what silver currency was worth at the time on international markets. Barrera also dismissed the idea that monetary stability could be achieved by suspending the free coinage of silver currency. Finally, Barrera held that banks should be obligated to pay their banknotes in gold, as they were in Great Britain and in the United States, not in silver coins.

After the end of the Napoleonic War, few issues of public policy dominated discussions in England as fervently as the issue of currency and the national debt. A time of civil unrest and social radicalisation, the circulation of ideas and pamphlets was prolific. The difficulties of post-war reconstruction sparked a long debate on issues of monetary reform and repayment of the national debt. The growth of national debt increased the size of the financial market and had important consequences for a changing class dynamic in domestic political affairs. The distributional aspects of the conflict were present, as was the satirical mockery of mishandling of public affairs. In much of the subsequent scholarship the organisation of taxation and expenditure, and the financial system and the issue of currency have been analysed as separate. This chapter brings them together. In particular, it focuses on Ricardo’s monetary thought and his views on public finance and contextualises them in light of his contemporaries.

Traditionally, monetary policy in Latin America followed the recommendations of the missions of the monetary “doctors” who defended an independent central bank and a pro-cyclical monetary policy, adhering to the automatic adjustment of the gold standard. A key function of central banks was to support fiscal stability. The effects of the Great Depression and its aftermath in the periphery countries questioned these recommendations and gave way to a shift in monetary policy. An illustrative example is provided by the creation of the Central Bank of the Argentina Republic (BCRA) under the auspices of Raúl Prebisch, and the technical assistance missions of the United States Federal Reserve to several Latin American countries some of which were led by Robert Triffin. Prebisch actively participated in mission to Paraguay and the Dominican Republic bringing the experience he had acquired as director of the BCRA and the tools devised to adapt monetary policy to a changing external context and circumstances. The use of the discount window and exchange controls, among other instruments, was seen in this new view as necessary to pursue counter-cyclical policies and to provide support for industrialization and full employment in the periphery.

This chapter argues that monetary integration must precede, rather than follow, monetary unification, in order to avoid the occurrence of structural and systemic crises. It briefly overviews the relevant literature on european monetary union (EMU) with regard to the criteria to set up an optimum currency area (OCA) according to the mainstream view. It then points out that adopting the euro as single currency for a number of heterogeneous countries led inevitably to a number of major negative effects, so much so because of the counterproductive financial constraints induced by the Euro-area fiscal and monetary policies framework. Particularly, the lack of fiscal transfers between these countries and the dogmatic attitude of the European Central Bank (ECB) as regards its policy strategy and goal increase, rather than reducing, the unemployment rate, and the degree of financial instability across the euro area. In fact, a way out of the euro area exists without renouncing to the (long-run) benefits of monetary integration. It implies that countries whose population suffers most of “fiscal consolidation” introduce their national currencies again, limiting the use of the euro to their central banks only, in order for them to settle all international trade and financial-market transactions carried out by residents in these countries. This monetary–structural reform will be instrumental in increasing financial stability and employment levels across Europe, thereby inducing positive effects also for trade and public finance.

The central hypothesis to be tested is the relevance of gold in the determination of the value of the US dollar as an international reserve currency after 1971. In the first section, the market value of the US dollar is analysed by looking at new forms of value (financial derivative products), the dollar as a safe haven, the choice of a standard of value and the role of special drawing rights in reforming the international monetary system. Based on dimensional analysis, the second section analyses the definition and meaning of a numéraire for international currency and the justification for a variable standard of value based on a commodity (gold). Then follows the theoretical foundation for the empirical and econometric analysis used later. The third section is devoted to the specification of an econometric model and a graphical analysis of the data. It is clear that an inverse relation exists between the value of the US dollar and the price of gold. The fourth section shows the estimations of the different specifications of the model including linear regression and cointegration analysis. The most important econometric result is that the null hypothesis is rejected in favour of a significant link between the price of gold and the value of the US dollar. There is also a positive relationship between gold price and inflation. An inverse statistically significant relation between gold price and monetary policy is shown by applying a dynamic model of cointegration with lags.

This chapter analyses the causes and effects of the financial crisis that commenced in 2008, and it examines the dramatic government rescues and reforms. The outcomes of this, the most severe collapse to befall the United States and the global economy for three-quarters of a century, are still unfolding. Banks, homeowners and industries stood to benefit from government intervention, particularly the huge infusion of taxpayer funds, but their future is uncertain. Instead of extending vital credit, banks simply kept the capital to cover other firm needs (including bonuses for executives). Industry in the prevailing slack economy was not actively seeking investment opportunities and credit expansion. The property and job markets languished behind securities market recovery. It all has been disheartening and scary – rage against those in charge fuelled gloom and cynicism. Immense private debt was a precursor, but public debt is the legacy we must resolve in the future.