Libertarian system for money

[emacknight]

@Bryan_Ekers

That doesn’t answer his question. We don’t have hyperinflation now,

@Little_Nemo

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.

Yet. We haven’t over printed, and we don’t have hyperinflation yet. It is still possible. None of the countries had it before it happened either. No one thinks it will happen to them.

But you can look at the falling value of the dollar. Canada printed a lot of money in the 80s leading to a horrible currency exchange with the US. Now it’s worth more than the US.

@Bryan_Ekers

so inviting the complexity and problems of privatized currency to address a problem that might occur is grossly premature, to say the least.

We’re not inviting anything. Companies already print their own currency. Canadian Tire has been doing it for decades. Any shop you go in now has a gift card or gift certificate. Only difference is that right now it’s tied to the US dollar. But if you wanted, you could buy a Best Buy gift card in Canadian dollars, or US dollars.

What you are describing is simply that currently things are pegged to the US dollar, but that doesn’t have to be the case. Outside of the US money gets pegged to other things, and sometimes to the US dollar. There is no reason Exxon couldn’t issue coupons for gallons of gas instead of dollars. The value would then float with the price of gas.

When McDonalds prints a free Big Mac coupon, that’s fixed to the price of a Big Mac.

@Bryan_Ekers

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.

Yes, that would be bad, and the private business would know that. Doing so much mean short term gain, it might be financial ruin.

What’s funny about this discussion is that instead of federal money, each state could print its own. And eventually smaller states might find it easier to use a neighbouring state’s currency the way some countries find it easier to just used US greenbacks.

What ever negative arguments you are going to make about private companies equally applies to the federal government. What ever positive arguments you make about the government equally applies to companies.

@Bryan_Ekers

And preserve and protect it, too.

How’s that working out for us? Greece? Do the dingbats in Washington really have our best interests at heart?

@Bryan_Ekers

Well, let’s hope pessimism and exaggeration don’t win too many elections.

What else is there? Did you think logic and reason won elections?

@Little_Nemo

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’?

You shouldn’t. Why should you assume it would be worse? You know, they’re the most profitable company on the planet, the US government could stand to learn something from them.

Going back to reality for a second: companies (like Exxon) issue shares, and can issue as many as they want. When a stock is hot and in demand companies can issue more, which get bought and provide financing for new ventures. If the company sucks and people don’t value it, adding more shares dilutes the pool and lowers the price.

[Measure_for_Measure]

@Sam_Stone

Friedman was a Monetarist who would be broadly supportive of everything Bernanke has done so far.

Only insofar as Friedman would be broadly supportive of what was done in 1929-33. Bernanke has conducted loose monetary policy. A labor market recovery has not occured (though the bleeding has halted for now). Cite. Ergo, Friedman would presumably argue (like Sumner) that Bernanke hasn’t gone far enough. Of course, the real question is what we should do, not what one great man or another might have opined.

Ultimately, all a currency should be is a proxy for barter - a way for people to exchange goods and services without having to move physical goods through intermediaries and such. But the implementation of a system of currency almost certainly requires the government to be involved, so there’s no pure ‘libertarian’ answer.

I think there’s a pure anarchist answer, but libertarians acknowledge the need for the establishment of property rights by the government. It’s not hard to conceive of currency as part of the infrastructure.

@IdahoMauleMan

The one thing I would add is that governments often need to borrow - especially from their own citizens - to fund large enterprises such as war-making that can’t be sustained from a nice, sustainable collection of tax receipts in a stable Libertopian environment.

At many points in history this is a turning point where a country begins to devalue the currency.

Well… just as companies run deficits, so do governments. I assume by “Devalue” you mean “Inflate”.[sup]1[/sup] And yes, during times of war that can happen. But war is hardly unique to government, as can be seen during times of anarchy like Somalia.

…What happens instead today is a slow, almost invisible drip feed of inflation and devaluation so that the government can get away with it, by doing it more slowly over time. At least, I hope it will stay “slowly”.

C’mon. All of that can be circumvented with a well managed investment portfolio. It’s civil chaos which is more of a challenge.

@Hellestal

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. …
I see zero reason to believe them, but I still (very occasionally) read what they have to say. Just in case.

Free banking advocates have to address its utter failure (or what they would more accurately characterize as a mixed failure) during the 19th century. I agree the era is interesting.

@emacknight

Yet. We haven’t over printed, and we don’t have hyperinflation yet. It is still possible. None of the countries had it before it happened either. No one thinks it will happen to them.

Um. 1. Federal open market operations have been unprecedented. Cite. The fact that hyperinflation has not occurred given that chart implies that something is terribly wrong with simplistic monetary stories and fears espoused by amateurs and cranks.

2. Hungary and Poland have both had 2 episodes of hyperinflation. I’m not convinced by your implication that hyperinflation is a huge mystery. Hint: In order for the inflation rate to exceed 1000%, it first must exceed 10% and 100%.

3. I sort of agree with your McDonald’s example: there’s no basis for libertarian whining about currencies: if they don’t like it, there are lots of alternative assets to choose from in the modern world. They can even choose gold, which has performed terribly over basically any 30 year period of time. But this point is a hijack from the OP.

[sup]1[/sup]“Devalue” to me implies a decline in the value of a currency relative to another currency. That can happen at any inflation rate – the relationship between relative inflation rates and currency appreciation is very noisy, as there are many factors affecting exchange rates.

[Measure_for_Measure]

In 2000, Friedman was asked about what the Japanese should do about their deflation problem. He advocated lots of purchases of long-dated government securities.

Brad DeLong, Jim Grant, and Milton Friedman

http://delong.typepad.com/sdj/2011/06/delong-smackdown-watch-ghost-of-milton-friedman-edition.html

@Brad DeLong

David [Beckworth] is, of course, correct. Successive rounds of limited amounts of quantitative easing [as Bernanke did with QE1 and QE2] would have given Friedman hives–even though they would push policy in the right direction.

As I said earlier, my take is that Friedman’s criticism of Bernanke would be identical to his criticism of any instance where monetary policy was ineffective: Friedman would say that too little was done.

[Chronos]

A lot of folks are stating that we don’t know how company towns would actually turn out, or that if things got bad, that of course the workers would just leave. Have we all forgotten the lessons taught by Ernest Tennessee Ford so easily? We really did have company towns in the past, and the workers really didn’t have the means to leave. What would be different in Libertopia that would prevent abuses like that? Because in the real world, I’m pretty sure that what stopped those abuses was government intervention.

[Little_Nemo]

@emacknight

You know, they’re the most profitable company on the planet, the US government could stand to learn something from them.

So you think we’d be better off if the United States government was looking to make a profit off of what it does?

Who exactly would be the people who collected this theoretical profit?

[XT]

[QUOTE=Chronos]
A lot of folks are stating that we don’t know how company towns would actually turn out, or that if things got bad, that of course the workers would just leave. Have we all forgotten the lessons taught by Ernest Tennessee Ford so easily? We really did have company towns in the past, and the workers really didn’t have the means to leave. What would be different in Libertopia that would prevent abuses like that? Because in the real world, I’m pretty sure that what stopped those abuses was government intervention.
[/QUOTE]

We sure did…but then, we didn’t have a national road system or wide spread access to personal transport, or affordable transport at those times either. You might have noticed that things have changed quite a bit in the last 20-30 years, let alone in the last 50 or 100. Could we still have company towns today where the company can run roughshod over a small local populace, forcing them to buy all their goods and services from the company? I suppose it could still happen that way, sure…but it would be more difficult to do now that people have wide spread access to the internet and to personal vehicles.

I don’t believe that it was government intervention so much as a widening of horizons that doomed the monopolistic and exploitative company town in the way you mean here. Or, perhaps it was a combination of broadened horizons and wider awareness of the greater populace that such abuses were going on. Be a bit harder to hide these days, as well as a bit harder to keep them down on farm (or, chained to a company town and completely dependent on the company for everything and unable to do anything about such abuses).

-XT

[Measure_for_Measure]

The company controls the phone lines. The company controls the internet. The company controls the post office. It’s a company town. All of the preceding would be part of the contract, enforced by a captive libertarian government. Much like the one signed by Skype/Silver Lake’s engineers, in terms of transparency.

The company controls where you work. The company controls where you worship-- after the contracts are signed. Arbitration clauses operate in a context of endemic cartelization, since anti-trust regs run counter to Libertaria’s Prime Directive. The company controls recreation and spectator sports – everyone must work as a team and individual effort is futile.

You know, they’re the most profitable company on the planet, the US government could stand to learn something from them.

Yes comrade! The US government should learn how to take over other companies, as Exxon did with Mobil and negotiate deals with dubious foreign governments. Scale is where it’s at.

[Lemur866]

@emacknight

What you are describing is simply that currently things are pegged to the US dollar, but that doesn’t have to be the case. Outside of the US money gets pegged to other things, and sometimes to the US dollar. There is no reason Exxon couldn’t issue coupons for gallons of gas instead of dollars. The value would then float with the price of gas.

When McDonalds prints a free Big Mac coupon, that’s fixed to the price of a Big Mac.

Yes, and any Libertarian who doesn’t want to deal with Federal Reserve Notes is free to conduct their business using any other medium of exchange they can find other people willing to use. So you can go to your boss and tell him from now on you’d like to be paid in gold, or Swedish Kronar, or cabbages. And he’ll tell you to get stuffed. And then you can quit if you don’t like it. Nothing compells you to accept Federal Reserve Notes except the fact that everyone else in the country uses them. You aren’t forced to just because we do.

[Ludovic]

@Tom_Tildrum

They already do something like this (albeit on a smaller scale) with loyalty cards.

And this is an argument that it is NOT a hassle, how? ETA: oops, Zombie loyalty card!

[Czarcasm]

So you’re working in a company town that pays you KompanyBucks that you can spend at the company owned store. If you don’t like it, you have the freedom to move to the next town…but there’s a small problem. When you attempt to sell your house people offer to pay with KompanyBucks. The local company bank doesn’t have to(and certainly doesn’t want to) exchange it for currency that you can use in the next company town.
What do you do?

[Indistinguishable]

Minor zombie alert, etc.

[WillFarnaby]

@Measure_for_Measure

Free banking advocates have to address its utter failure (or what they would more accurately characterize as a mixed failure) during the 19th century.

“Free banking” of the nineteenth century was not free banking as it is advocated for in the present day.

4.United States.[7] Although the period from 1837 to 1864 in the U.S. is often referred to as the Free Banking Era, the term is something of a misnomer, for it refers not to a general system of “free” banking in the literal sense described previously, but rather to various state banking systems based on so-called “free banking” laws, which, though they made it unnecessary for new entrants to secure charters (each of which was subject to a vote by the state legislature), nonetheless restricted their undertakings in important ways. Most importantly, U.S. “free” banks were denied the right to establish branch networks, and had to “secure” their notes by purchasing and surrendering to state banking authorities certain securities those authorities deemed eligible for the purpose. The securities in many cases included bonds of the authorizing state governments themselves; and it has been determined that the depreciation of these very securities was the chief cause of “free bank” failures, and indeed of bank failures generally, during the period in question. The lack of branch banking, in turn, caused state-issued banknotes to be discounted at varying rates once they had traveled any considerable distance from their sources. In short, the shortcomings of banks and bank-supplied paper currency during the so-called “free banking era” in the U.S., far from establishing the need for special regulation of banks, testifies to the dangers of unwarranted or unwise regulation.

In the past, allowing banks to issue their own notes has not been as chaotic as some posters suggest. Take the Suffolk bank for example.

John Jay Knox, a former Comptroller of the United States Treasury, stated that the success of the Suffolk Bank demonstrated that,
" the fact is established that private enterprise could be entrusted with the work of redeeming the circulating notes of the banks, and it could thus be done as safely and much more economically than the same service can be performed by the Government".