The lesson here is that without political will, fiat money in any form—be it in a monetary union, anchored to a reserve currency or run by the sovereign—is unreliable. As Messrs. Steil and Hinds note, "money untethered to a commodity gives rise to inflation when managed by corrupt, irresponsible or incompetent rulers," thereby covering Greece, Argentina and Venezuela in one breath.
Harkening back to the wisdom of a 15th century Spanish canon lawyer, the authors capture today's fiat currency problem: "The ruler's power to create value from the valueless by designating it 'money' was bound to lead to inflation."
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