The last forty years have been the most turbulent in monetary history. More than forty countries have had banking crises. The source of the monetary instability is the sharp variability in cross border investment inflows. There are more money market shocks when currencies are not anchored to parities and investors have a greater incentive to change the currency composition of the securities in their portfolios. Moreover investors can buy more foreign securities in response to changes in fiscal policy, tax rates, and political circumstances. The proponents of a floating currency arrangement believed that adjustments to goods market shocks would be less costly if currencies floated. They preferred monetary independence for central banks. Their positive claims of the advantages of a floating currency arrangement depended on an implicit assumption that investor demand for foreign securities would be constant despite various money market shocks including changes in central bank monetary policy. The case for flexible exchange rates is intellectually bankrupt because it is unreasonable to assume that investor demand for foreign securities would be constant.