Mr Jude Wanniski seemed to give no reason why Chairman Greenspan has pursued (as he claims) a deflationary monetary policy.
But it seems that governments can hold on to their function of determining a unit of account only if they operate in a non inflationary or deflationary manner. Governments are being disciplined by the market because in the age of instant global communications and financial institutions, any increase in inflation immediately causes a capital and currency flight. This non inflationary tendency will be strengthened by the development of electronic payment technologies that will holders of assets to earn interest or other returns on these assets up to the moment when they transfer the ownership of a portion of the assets to pay for a good or service (it is almost certain that smart cards and the like will be implanted in the human body on the ostensible grounds that one will never lose his wallet again!). So as more money becomes interest bearing electronic money, there is less inflation risk since there is no incentive for private banks or other financial institutions to over issue interest bearing currency since it increases their own liabilities. (This is so because the issuance of interest bearing 'money' makes the issuer not only liable for the principal, but also for the interest).
Let me also note that if the producers of govt monies fail to maintain constant measures of purchasing power, private producers of money numeraires will gain acceptance for their products in the digital world.
Due to technological changes then there should be a strong non inflationary, if not deflationary, bias in the world economy. If the handmill gives you the feudal lord, the steel mill the industrial magnate, electronic money will give you sadistic central bankers.
Your friend, Jan Carowan
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