Walter Block got an e-mail in which “Eric” wrote
“Money should be whatever people deem as money, whether it is tied to gold or rice patties or nothing. The way I am imagining a completely unfettered money market is that banks could each issue their own currency. Then, it would be in their best interest to keep the value of their currency high, in order to attract more customers and keep their current ones happy. Problems could arise if other banks don’t accept another’s currency, but that would hurt them financially if ever sustained. The competition that would ensue for the ‘best currency’ would be fantastic, and a boon to the common man.”
Eric’s view has a great deal of merit, more merit, in my view, than the idea that money must be gold or gold coins or backed 100% by gold or variations thereof; because the “must be” school doesn’t allow market determination of money. Money can be market-determined. Eric is advocating a free banking system. That’s a viable free market option, in theory and probably in practice; the outcome of such a competition is unknown. If Eric searches on “free banking”, he’ll find a literature on the subject. One such work is here.
5:46 pm on April 30, 2016
