A Review by Warren Coats
“Robert Pringle’s The Money Trap should be very high on the list of books for anyone wanting to understand the weaknesses and flaws in the existing approaches to national monetary and banking policies and the international arrangements that link them. “
Robert Pringle’s The Money Trap should be very high on the list of books for anyone wanting to understand the weaknesses and flaws in the existing approaches to national monetary and banking policies and the international arrangements that link them.
Pringle, who brings decades of study of the financial system including as founder and editor of the journal Central Banking, provides a very readable history of the current system’s (or non-system’s) evolution and a succinct analysis of its flaws.
These flaws concern above all the weaknesses of international coordination of money and banking policies in a world of relatively free trade, the lack of a real anchor for the value of money and the excessive and pro-cyclical elasticity of bank credit. As a result, one asset bubble and bust follows another with unnecessary damage to lives and economic prosperity. Central banks and bank regulators learn the lessons of the last war and are blindsided by the next one.
Pringle recounts the shock felt around the world when Richard Nixon scuttled the gold (exchange) standard, introducing a monetary nationalism that carried with it highly volatile exchange rates between unanchored national currencies. Such volatility was not inevitable, but was rather the result the US’s unwillingness to take into account the international consequences of its domestically focused monetary policy. The US was willing to provide the world’s reserve currency but not willing to play by the rules required by that role.
Warren Coats retired from the International Monetary Fund in 2003 as assistant director of the Monetary and Financial Systems Department, where he lead technical assistance missions to central banks in more than 20 countries. He was a director of the Cayman Islands Monetary Authority from 2003 – 2010 and is currently Senior Monetary Policy Advisor to the Central Bank of Afghanistan, Iraq and Kenya for the IMF and an advisor to the Bank of South Sudan for Deloitte. His most recent book, “One Currency for Bosnia: Creating the Central Bank of Bosnia and Herzegovina,” was published in November 2007.
He has a Bachelor of Arts degree from the University of California, Berkeley, and a PhD in economics from the University of Chicago. He lives in Bethesda, Maryland.