Hayek argued that in competitive private markets, private currency issuers would compete to maintain the value of their currencies.
FORBES: Rethinking Money: The Rise Of Hayek's Private Competing Currencies
The introduction of private currency competition would allow the markets to settle the question without causing harm throughout the system.
Another private currency model is time-backed currency, which has been spearheaded by liberal lawyer Edgar Cahn, former advisor to Robert Kennedy and Sargent Shriver.
FORBES: Rethinking Money: The Rise Of Hayek's Private Competing Currencies
Among others, Benjamin Graham and Friedrich von Hayek advocated a basket of commodities, the latter within the context of a system of private currency.
This is so because legal tender laws allow debtors to effectively abrogate private currency debt contracts at will by offering Federal Reserve notes in lieu of what was specified.
The paper argues that we should eliminate legal restrictions on private currency issuance to allow private firms to create money backed either by Federal Reserve notes or commodities like gold, a position I completely agree with.
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If one retains doubts about the benefit of trying anything other than gold, there is still an important reason to advocate private currency competition over a government gold standard, and that is the practical execution of the standard.
Another such private, regional currency is Berkshares, traded in the Berkshire region of Massachusetts.
FORBES: Rethinking Money: The Rise Of Hayek's Private Competing Currencies
He advocates less for a gold standard than for an idea of Friedrich Hayek, the Nobel laureate who came to favor what he called the denationalization of money and a system centered on private coinage and currency that would compete with government-issued money.
Obama and the Republicans twist themselves into pretzels protecting private corporate bonds from default by commandeering private capital and debauching the currency through the Fed to make multi-trillion-dollar bailouts of financial institutions.
Earlier this year, the government launched a new dollar auction system, which complements existing state-run currency channels, in a bid to pump more hard currency into the private sector, but economists have so far questioned how effective the mechanism will be in satisfying demand.
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Even today private banks in Northern Ireland and Scotland issue pound notes redeemable into pounds sterling, and in Hong Kong paper currency is supplied exclusively by private banks.
Last but not least, here is my video on the origin of central banking, which starts with an explanation of how currency evolved in the private sector, then describes how governments then seized that role by creating monopoly central banks, and closes with a list of options to promote good monetary policy.
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This is the private sector institutional backdrop to the evolving currency wars.
He points out that when a private corporation is in control of a currency, there has to be trust in its ability to look after its customers' credit.
Even if inflation remained moderate, many firms as well as the government would default on loans, since 90% of government debts and 80% of private-sector debts are in foreign currency.
Under the classical gold-coin standard (1717-1914) private banks and central banks alike issued currency convertible into a fixed weight of gold, with balance sheets consisting primarily of gold coins and short-term loans denominated in local (but gold-convertible) money.
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China must foster private-sector domestic demand with a stronger currency, among other things.
The government has abolished jail terms for those caught dealing in foreign currency, offered extra incentives for private investment and brought the official exchange rate closer to the black-market one.
As a result, it applies a very different set of criteria in its analysis of investment risk than it would for a private company, or even a government whose currency has no reserve status.
"In other circumstances, for instance in video games like Eve Online, the company that puts together this game is the one that issues the currency and it effectively becomes a private central bank, " he says.
Although the latest reading is above the preliminary "flash" estimate of 47.9, the sub-50 reading still means private-sector output in the 17-nation currency bloc contracted in December.
However, if it were to reintroduce the drachma, the new currency would quickly become worthless, while the private Greek economy went underground and continued to do business in euros.
Indeed there is no reason why private firms like Microsoft or News International, should not set up their own currency for internet trading and investment.
At the time, private investors were selling in the belief that Hong Kong would have to abandon its currency peg to the dollar.
"Greece is definitely coming back on the agenda, as negotiations with its private-sector creditors are in a crucial stage, " said Ian Stannard, a currency strategist at Morgan Stanley in London.
And so there is understandable tension in the currency market on Monday as investors swiftly conclude that recent squabbles over the role of private bondholders now seems to play second-fiddle to whether Greece wants any further part in an increasingly ugly game.
Although the nature of human creativity does not allow us to predict exactly what will come out of the privatization of currency, it is only logical to conclude that the increased stability and predictability of private currencies will also allow the development of value-creating endeavors that otherwise would not be feasible.
During his second term, he vetoed the renewal of the charter for the independent Second Bank of the United States, a private institution that kept the federal government's deposits interest-free, and issued uniform paper currency.
Lietaer and Dunne suggest that there is special opportunity for such private currencies anytime there are unused resources that can be linked with unmet needs, which the established currency is not serving, as in the example above.
FORBES: Rethinking Money: The Rise Of Hayek's Private Competing Currencies
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