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The Resource Cost of Irredeemable Paper Money

Milton Friedman
Journal of Political Economy
Vol. 94, No. 3, Part 1 (Jun., 1986), pp. 642-647
Stable URL: http://www.jstor.org/stable/1833052
Page Count: 6
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
The Resource Cost of Irredeemable Paper Money
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Abstract

Since 1971, no major currency has a formal link to a commodity. For the first time in history, every currency is wholly irredeemable, not as a temporary expedient but as a permanent matter. Monetary economists have generally treated irredeemable paper money as involving negligible real resource costs compared with a commodity currency. To judge from recent experience, that view is clearly false as a result of the decline in long-term price predictability. A key question for the future is, What if any substitute for a commodity standard will emerge as a long-term anchor for the price level?

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