What are the implications of dollarization for U.S. monetary policy?
A country like Argentina, trivial. Canada would be more serious. Now if you take my view of proper monetary policy, which is to get rid of the central bank and have a fixed rate of growth of high-powered money, then it doesn’t matter how many countries you have attached to it. The same thing would happen to all of them. But that’s not realistic. You’re going to have a central bank. Oh, really? Yeah, I’m afraid so! [Laughs.] And the central bank is going to exercise discretionary policy because bu-reaucrats want to be important. So you have to look not only at the reports from the 12 Federal Reserve districts but also from the Bank of Canada and the Bank of Argentina. I’m not sure how you would fit those to-gether, especially since you have no political responsibility for those countries. When we first talked (Dec. 12, 1988) you said that liberalism in the American sense of big government was dead. But it is taking a long time to lie down. Federal spending as a fraction of the economy i
