I suppose I could have started this in General Questions, but since by post #5 it would have to be moved anyway, I figure I will save the mods a step.
Rather than hijack this thread I’ll start this new one.
How do libertarians imagine that “money” should work. Who would issue currency and why would people have confidence in it. I imagine they are not all adherents of a gold standard administered by private banks, but I am struggling to think of another way that does not involve something like a central bank issuing fiat currency, which presumably is anethmatic to the libertarian way of thinking.
I am not a libertarian so I will not defend this idea, but the answer is called free banking. Anybody could create their own currency as long as you could convince someone else to take it. Banks, companies, even individuals, would create their own currencies and anyone would be free to accept or not accept them. Different currencies could trade on exchanges like national currencies do currently and if anyone tried to inflate or deflate their currencies too much people could just stop accepting that currency and switch to stable currencies. Bitcoin is an example of a privately created currency of the type that would be created in Free Banking.
Private banks issuing fiat currency. Instead of a single actor (the central bank) doing its best to determine the value and demand for currency, there would be multiple, local actors, each making their best guess, to create an average closer to what is good.
Though, you would need to limit this in some way so that some bank doesn’t just go bonkers and crap all over the system. And you would want them all to be issuing US dollars.
Note that I don’t, particularly, subscribe to this proposal. I’m merely relating it as something I’ve seen mentioned.
So, instead of having to figure out the worth of the unified dollar we now have, we would have to weigh the worth of each dollar from…how many potential different sources are we talking about here, anyway?
There’s nothing about libertarianism that inherently says that money can’t be managed by the government, it all depends about how extreme one is about some of the libertarian views. Some might argue that anything that can be done privately should, others might argue something a bit lighter that some things “should” be done by government and include money.
That said, I don’t really support this view, but I could see private money working if it’s all actually based on something that has some sort of intrinsic value, like gold or silver. I think the idea would be that the currency issued by an entity that is redeemable in a precious metal would inherently have a value that is easily understood and exchanged and only potentially be worth less if the reputation of the issuer is something less than pristine. That might be more stable if a group of issuers got together and established some sort of standard and insurance, but then it’s sort of difficult to distinguish from the government doing it.
There might also be some way to tie a currency directly into the economy by taking into account relative values of stocks and defining some base currency from that. For example, I could see a company establishing a large and diverse portfolio and then offering credits as either some share in that portfolio or simply as shares in that company’s stocks. Thus, what the issuer offers is some sort of stability through large and diverse investments in the market rather than a precious metal and the relative value of various issued credits would be based upon the stability and reputation of those companies and a universal standard based from those relative stock values could also fairly easily be determined.
Of course, I’m not an economist and, again, I don’t really support those ideas, so I’m not really sure how well they would or wouldn’t work.
Yes, the problem is that either:
(1) Each bank’s currency has to be regulated so that the government can guarantee the currency. That probably means that the currency has to be backed by reserves, such as Federal Reserve notes, Treasury bills, or an account at the Federal Reserve.
Or:
(2) When you are offered a $100 note issued by the First Bank of Podunk you have to check how credit-worthy that bank is, and perhaps discount the note based on how close to insolvency the bank is. You might get credit-rating agencies issuing tables with entries like, “First Bank of Podunk - 95%”, meaning that the market value of that $100 note is really just $95.
The “money” is only as secure as your hard drive, making it potentially easier to pick than your pocket, and anything that can explode in value can implode just as fast, or maybe even faster. Doesn’t look too stable to me.
There’s nothing inherently wrong with the government issuing currency. This is something that anyone is legally capable of doing, if people trust you enough to sell you things in exchange for IOUs. As long as the government doesn’t pull a Mugabe and start acting like an idiot, you’d probably have de facto official currency issued by the government anyway, just because it’s the issuer whose currency people have the most confidence in.
I think going to the grocery store would be a big hassle if the owner would have to list different prices for each item depending on what currency was being used. You could kiss the express lane goodbye:
“Could I see the current exchange rate, please? I’d like to pay for this item in Fredbucks, these two things in DaveDollars and two QuinnQuarters, and the last three items in Chuckash…and could I get my change in ChrisCoins-the local laundromat doesn’t take the QuinnQuarters any more.”
Eventually there would be a bunch of company stores that the plebs would be forced to shop at. “You’re paid in Exxon Chits, and can only spend them at the Exxon Super-Complex located a convenient 98 minute tram ride from the plant.”
First, Exxon could not prevent other retailers from accepting Exxon Chits, just like they couldn’t force them to accept them.
Second, if they make their currency difficult to use, all they’ve accomplished is to devalue their own currency through pig-headedness. Nobody will ever work for Exxon Chits unless they get paid enough extra to make up for their inconvenience, just like nobody would be willing to get paid in cows unless they got enough extra cows to make it still worthwhile (and that might be a lot of cows).
No, but the Chits are worthless unless the bank originally issuing them will redeem them. Presumably the employees can’t do that, because if they could, their first step after being paid would be to convert them into U.S. dollars; and presumably traders other than the company store can’t do that either. Unless you can freely convert them into real money, they are worthless outside the company store.