Free Market Money
September 4, 2002
Despite the overwhelming evidence that markets perform best when left alone by the government, it is still virtually taken for granted that one consumer product should be completely controlled by every government in the world. One product, so ubiquitous, that it's used by almost everyone in the world on a daily basis: money.
However, some economists and historians point out government monetary control is not a given. Historically, banks issued their own notes before the rise of government-owned central banks. Theoretically, there is no obstacle to freely competing, privately issued currencies, as proposed by the late Frederick Hayek.
Thus free market money advocates in the United States call for a reexamination of the Federal Reserve System; urge that monetary policy be deregulated; and say the issuance of money should be privatized. To do so, they recommend:
- Repeal all laws giving the Fed monopoly power to issue currency.
- Eliminate all government regulation of banks and financial institutions, and exempt them from antitrust laws.
- Change the tax laws so there is no preference given to transactions denominated in dollars, rather than other currencies.
- Completely privatize the Fed through either an auction or fair distribution of shares to taxpayers.
Reformers argue privatizing monetary policy would be better not only in a strictly utilitarian sense but also in a moral sense. People could store the fruits of their labor as they see fit, and not be forced to submit to a tax (monetary inflation) that is not explicitly levied and voted on.
Source: Robert Gelfond, "Toward Free-Market Money," Cato Journal, Volume 21, Number 2, Fall 2001.
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