I recall an historical fiction story I read once about a time in the US when that was the way printed money worked – all banknotes. It led to a scam where dude #1 wanted to know if his bill was valuable, and dude #2 pulled out a list that showed it wasn’t.
So dude #2 convinced dude #1 to sell him the bill at a huge discount. Later, dude #1 found out the list had been doctored, and the bill was worth a lot more than he sold it for.
I’m curious what actual benefits currency privatization offers. I guess we’re finally at the technological stage where it might be feasible for every citizen to carry around a scanner to instantly verify that an offered currency certificate is genuine (i.e. that it was issued by the indicated bank, which itself is a viable institution), but this seems cumbersome. If you want to pay for something by offering a document from your bank that expresses value, why not just offer your debit card?
What keeps the Bank of Podunk from covertly buying the Rongovian Credit Rating Agency* and effectively rating itself secure regardless of its actual soundness? Do we have to buy a copy of All-Turtles Review of Credit Rating Agencies?
*Local joke. Go Raiders.
Never mind whether or how a Libertarian money-system can work, why is it better than what we’ve got now?
It’s a relevant question because the basic principle of Libertarianism is that the government shouldn’t do anything that it isn’t absolutely necessary to have the government do. If it turns out that the private sector cannot feasibly supply a stable form of currency that’s conducive to economic activity, then it’s arguably one of those few things the minimalist libertarian government should do, alongside contract enforcement and national defense.
Seems like kind of a high-risk experiment. Sure, the last few survivors of the Great Plague will know that the genetic research industry can’t be relied on to set up its own safety protocols but they probably would have preferred a little pre-emptive oversight.
My wife’s company tried to issue it’s own form of currency, that they then give as rewards. But it could only be redeemed at the company gift shop. If the gift shop had anything useful in it, the money would have been valuable. Eventually they stopped and started giving out currency issued by Target, and only usable at Target. Turns out people like shopping at Target, so the reward was appreciated.
Is this really that complicated?
What keeps them from doing this now?
The real answer to your question is: what forces people to stay in Exxonland? If they are not free to leave, then it isn’t libertarianism. If it’s successful, Cevron would do the same thing, and compete against Exxon.
Anti monopoly laws? Minimum wage laws? Laws forbidding censoring the internet in an area? Laws that are enforced by public police forces?
As mentioned earlier, it might be better because when we give government control over the money supply is has the power to print so much the currency becomes worthless. Are you not familiar with governments printing so much money they cause hyperinflation?
Essentially, you are standing in the middle and looking in one direction towards more libertarianism and seeing bad things, without looking in the other direction towards more authoritative governments that can be far worse. Giving the government control over the money supply gives the government power to destroy the money supply.
All of the descriptions about Exxonland is how a lot of people see government control.
No, because if they own the land they own the right to build what ever stores they want. Exxon is currently allowed to buy the land around it’s refinery if the land is available for sale, and each party consents. On that property they can build their own grocery store, apartment complex, and monorail. Cevron isn’t allowed to then put in a gas station on Exxon’s land.
Disneyland isn’t required to allow a competitor to build a theme park on their land. Disneyland also has their own security team that enforces their own rules.
Not sure what censoring the internet has to do with anything here, and your issue about police forces is just shows you’ve once again confused libertarianism with anarchy.
“Then you get every person in the town working for Exxon.”
How or why? If it’s by force it’s not libertarianism. So that means people choose to live/work there, meaning Exxon has to compete with other places to live/work.
“they run the internet and cable in this town too to quell any fears”
They are allowed to do most of that, since it’s their land. As long as people are allowed to leave there’s nothing wrong with that.
“Is there any reason they wouldn’t do this to have a captive workforce?”
Because the workforce might not like it and move to the Chevron town, sort of like how people float from Cuba to Florida when they don’t feel like working for the Cuban government any more.
That doesn’t answer his question. We don’t have hyperinflation now, so inviting the complexity and problems of privatized currency to address a problem that might occur is grossly premature, to say the least.
Frankly, I can easily see a private business creating its own hyperinflation - overprinting certificates when it finds itself in a financial bind, thus devaluing its own “currency”. You’d end up bringing about the very thing you were supposedly trying to avoid.
And preserve and protect it, too.
Well, let’s hope pessimism and exaggeration don’t win too many elections.
Actually, late in life he did come up with an idea, which he outlined in Denationalisation of Money. This very booklet spurred the modern “free banking” movement, the push for privately issued fiat currencies. It’s an interesting piece. Not pragmatic, but extremely interesting. Recommended.
To go with the answer of only the very smartest and most knowledgeable free-banking advocates: To avoid recessions, or at least to avoid the worst part of the downturn, while also avoiding the worst excesses of government control.
The goal is to have “neutral money”, where the amount of currency issued is exactly enough to efficiently facilitate all current transactions, but not too much that it causes undue inflation. The current problem with the world economy, right now, is that monetary policy is too tight, in that the demand for money far exceeds the supply. (This is basically equivalent to saying that everyone wants to save for the future instead of spend now, which means there is not nearly enough demand for present goods.) The idea of the free banking advocates is that completely unregulated banks, which are able to issue their own currencies without any interference from the government, will be more likely to provide neutral money – they will be more likely to issue more money when more is needed, and more likely to restrict the supply when inflation gets too hot.
The current practice of “inflation targeting” most likely leads to a too-high inflation rate when the economy is good, and a too-low inflation rate when the economy is bad. NGDP targeting from the central bank would be better, but sophisticated free banking advocates think their own system would work even better than that.
I see zero reason to believe them, but I still (very occasionally) read what they have to say. Just in case.
The difference is we’re already standing in the United States and we can form a realistic assessment of what it can and will do. The United States hasn’t printed so much currency is became worthless.
Exxonland, on the other hand, is an unknown quality. Why should we assume its currency control will be as good as, much less better than, the United States’?
As someone who is perhaps Libertarian-lite I don’t see any reason a government can’t or shouldn’t provide money. You really have two systems available to you:
Some sort of barter or general IOU system. This is hard to deal with, especially with luxuries. If you think things are arbitrarily valued now, wait until you have to decide how many chickens your sofa is worth. It also would cause problems of having to carry around a list of every good you’re willing to trade on you, and then compare notes whenever you do a transaction. If you don’t deal in goods the recipient has a need of, or expects to be able to trade away soon, you’re SOL. Not fun. Inevitable in these cases, people will say “I’ll pay you later” and then when somebody’s yield doesn’t turn out as expected you end up with a paper money system by accident anyway once people start trading IOUs around. Also, it’s hard to value some trades that are worthwhile in a non-barter system (i.e. research such as abstract mathematics).
Anybody can create their own currency. There’s no point in this system. Even if every company starts out only allowing you to spend their own money, eventually to attract business they’ll start accepting another company’s with no fuss. Inevitably this will lead to a handful of companies becoming the de facto currency, just like how almost every place accepts Visa and Master Card now. At this point, possessing any other currency is near useless, aside from reward points or some such, which is really no different than possessing a Target Credit Card or whatever now.
Further, as a company goes up and down in value, so will its currency. At this point, you may as well just stop calling it currency and relegate everybody to bartering for stocks.
It seems to me that pretty much whichever way you slice it, unregulated money printing is going to reach a near-singularity and cause what amounts to a monopolized market failure. May as well just let the government do it since whoever it reaches equilibrium for will essentially amount to a government anyway.
They already do something like this (albeit on a smaller scale) with loyalty cards.
That’s true…though I might add that at least the value of a dollar is somewhat stable, and the other “currency” involved merely discounts what you need to pay with the first. The discount card is not currency in and of itself, and has no net worth of it’s own.
What happens in this case is that some key good is used as money. The classic example is cigarettes in prison. You trade cigarettes, not neccesarily because you want to smoke them, but because you know you can trade them to other people, who may not want to smoke those cigarettes either, but know they can trade them to other people. And throughout history, various goods became key goods in different economies–cowrie shells, cacao beans, cattle…and metal ingots.
Eventually people noticed that gold and silver made particularly useful key goods, because they were non-perishable, difficult to fake, divisible, and so on.
And so, you can trade gold and silver at specified weights, keep gold and silver as a store of value, and use gold and silver as a unit of account. Then some wisacre notices that you don’t actually have to trade the gold or silver, just trade notes that say you owe so much gold or silver. And so we have paper money. And once we have paper money, the gold or silver itself becomes unnecessary.
But we’re really dealing with two issues here. First, in a libertarian context, would the government be prohibited from issuing paper money? Second, in a libertarian context, would the government be able to stop others from issuing paper money?
I don’t see why, just because the government would be allowed to issue money, they should also be allowed to stop others from issuing paper money. Just because no one wants your bitcoins or egold or frequent flyer miles or company scrip or Big Mac coupons doesn’t mean you should be prohibited from creating them. Just because you’re free to use them doesn’t mean other people want them.
Here’s an interesting article today from Bloomberg Businessweek that mentions Friedman’s reaction to Nixon’s closing of the gold window.
http://boards.straightdope.com/sdmb/newreply.php?do=newreply&p=14107024
What the article also reminds me, is how a small circle of fallible and politically-motivated human beings could be vested with so much government power to make decisions that affect the world. Which one of the main planks of libertartian thought.
But handing that power over to some corporation or consortium of corporations would somehow be an improvement?