Develop This Idea: (Why Did Milton Friedman Think This?) "Either Extreme: A Fixed Exchange Rate Through A Currency Board, But No Central Bank, Or A Central Bank Plus Truly Floating Exchange Rates; Either Of Those Is A Tenable Arrangement. But A Pegged Exchange Rate With A Central Bank Is A Recipe For Trouble." (Hint: A Peg Is A Contingent Commitment, And

 

Develop this idea: (why did Milton Friedman think this?) "Either extreme: a fixed exchange rate through a currency board, but no central bank, or a central bank plus truly floating exchange rates; either of those is a tenable arrangement. But a pegged exchange rate with a central bank is a recipe for trouble." (Hint: a peg is a contingent commitment, and needs reserves. With no central bank, local banks can print money of they have a "USD" per home peso. In other words, 100% reserves. This is the case in HK)