STEVE HANKE had an interesting 1998. He briefly became Indonesia's monetary czar as firebombs flew in Jakarta streets, made headlines in a dozen languages and visited Bill Clinton in the White House. World Trade magazine called him one of the "most influential people" on the planet along with Bill Gates, Rupert Murdoch and George Soros.
MIT economist Paul Krugman called Hanke a "snake-oil salesman" and an "obscure" bush leaguer. In a page-one profile, the Wall Street Journal basically called him a witch doctor and a quack. On its editorial page, the Journal repeatedly praised him and endorsed his ideas.
Did we mention Hanke is controversial?
The 56-year-old economist teaches at the Johns Hopkins University, divines markets and chides liberals in his Forbes column, advises mutual funds and well-heeled individuals, helps puncture bloated currencies and preaches the Good News about currency boards.
Mainly he preaches about currency boards.
A currency board is a monetary regime that fastens down a corner of stability in countries buffeted by corruption, inflation and bad politics. It takes floppy Third World money, lashes it to a solid unit like the dollar or deutsche mark and dares speculators to do their worst.
Don't confuse currency boards with "pegs" that many countries have used. Pegs, such as the late leash between the dollar and Brazilian real, ride on wishful thinking and central-bank dabbling.
Currency boards are like the gold standard, only instead of stocking the vaults with shiny metal, you stock it with greenbacks -- enough greenbacks to exchange for every last peso, kroon or ruble in the money supply.
The main idea is that currency boards are potent inflation antidotes and speculator shields. Because they replace central banks, currency boards keep countries from cranking the money presses and stoking inflation. Because they hold huge and adequate reserves, currency boards can't be drained by speculators.
They yield the bulletproof exchange rates and the monetary certainty prized by international investors.
Which sounded pretty good a year ago to Indonesia, whose rupiah had suddenly plunged four-fifths in value amid general Asian turmoil. In a matter of weeks, Indonesia gave up the economic gains of decades and saw millions of its people slip back into poverty.
Indonesia's President Suharto reached Hanke in Istanbul, Turkey, and Hanke flew to Jakarta four times in February and March 1998 to try to set up an Indonesian currency board. Subsequent events were complicated, but basically the International Monetary Fund and the Clinton administration threatened to withhold aid if Suharto installed a currency board. He backed off and was soon overthrown by a populace whose purchasing power had fallen by 80 percent.
What's perhaps most striking about the Indonesian affair is how quickly it mutated into enmity and petty politics. Was a currency board a good idea for Indonesia? It was hard to tell from the debate, which consisted of nitpicking about Hanke's resume combined with consternation that Suharto hadn't first sought approval from the international financial satraps.
Oh, objections were raised. None hold water.
A currency board would increase interest rates and hurt exports. Indonesia's banks were too weak. A currency board would keep Suharto in power.
The main technical objection, that a board would leave fragile Indonesian banks bereft of credit, could have been solved with a facility of the sort extended by private banks to Argentina, which has had a currency board for years.
As for interest rates, they're moot. Nobody's lending much money at any rates in Indonesia these days. Suharto's gone, but it's impossible to argue that Indonesians are better off than they would have been under a Suharto-led currency board.
The country is a mess. Thanks to the flaccid rupiah, foreign capital has evaporated like spilled milk in the Sahara. Millions know starvation close-hand. Riots flare. The economy is all but frozen. Thousands have died violently.
Some Indonesians are still talking about a currency board. Hanke, as always, is more than optimistic, not just in Indonesia but in wobbly little economies everywhere.
"These crummy little central banks -- we're gonna dump 'em," he says.
Time will tell. But currency problems are still on the front burner worldwide, and currency boards have a stellar record. Rare among emerging economies, Hong Kong, Argentina, Bulgaria, Estonia and Lithuania have all defied devaluation, capital flight and inflation over the past two years. They all have currency boards.
And with the advent of the euro and proposals to make the U.S. dollar Argentina's official money, it's not as if the idea of multinational currencies is going away anytime soon.