Manuel Hinds, former finance minister of El Salvador, shares some thoughts on paper money in this Wall Street Journal op-ed today, making a number of very good points about the current global monetary system, all of which should just add to the cognitive dissonance being experienced by mainstream economists and policymakers.

Unbridled monetary printing led us to the collapse of Bretton Woods in the late 1960s and then into the stagflation of the 1970s and early 1980s. Then, after a brief recess that ended in the mid-1990s—the result of Paul Volcker’s refusal to print money during his tenure as Federal Reserve chairman—we returned to trigger-happy monetary creation.

As a result, in the past 15 years we have gone from bubble to bubble, and from bust to bust, printing money first to keep the economy going; then to overcome the bursting of the dot-com bubble, then to sustain a triple bubble of housing, securitized instruments and commodities; then to overcome the effects of the bursting of these bubbles, which is leading to a second commodity bubble and a boom in emerging markets that seem to be waiting to go bust.
…
This failure should lead us back to the drawing board to re-design the international monetary system, reversing the trend that prevailed during the 20th century. We started that century with a fundamental international currency, gold, which kept its value through time and was widely accepted around the world. We ended the century with more than 150 currencies that change their value constantly and at different rates from each other, in such a way that most currencies are not accepted in most countries.

In pursuance of the illusion that money can remove hard budget constraints, we moved from order to disorder. After demonetizing gold in the 1970s, now we are demonetizing money by debasing and politicizing it.

Mentioning the gold standard that prevailed all over the world during the Industrial Revolution brings about derisory comments, some of them suggesting that the value of gold was based on fetishism. This is a mistake. The gold standard was a highly rational system. It kept prices constant through centuries and provided an automatic mechanism to remove international imbalances, such as those that are creating today’s currency wars, without the help of any international bureaucracy.

The gold standard achieved this not because of any mystical property of gold itself but because it was an impersonal system. Central banks or governments could not tamper with monetary creation. This is what we need today.

And that’s precisely why a return to sound money – in whatever form – is not likely to come voluntarily. It would take power and control away from governments, their central banks, and the rentier class to which they’ve now become beholden.