After reading Alan Greenspan's essay on the gold standard in Capitalism: The Unknown Ideal, I am curious to know how exactly currency (not wealth) would be handled. In the essay, he writes about banks keeping gold reserves, saying:
Does this mean, under Laissez-Faire, that banks and not governments would print currency? Or would governments simply print currency according to the needs of banks? Mr. Greenspan also mentions the national currencies of a few nations as well.
I think that this would suggest some government minting function, but I am unsure.
The pure laissez-faire approach to currency would entail the denationalization of money. Strictly speaking it isn't even necessary for governments to define currencies, only units of weight and measure. Money is then a fixed weight of some commodity or commodities (gold and silver being common historical examples). There's a reason the British pound sterling is called what it is -- originally it was a literal pound of literal sterling silver. Allowing governments to define units of money simply opens the door to legal debasement and introduces distortions into the money system by enforcing a fixed ratio between a measure of weight and a measure of value.
I see no need for a government minting function. It isn't like government has shown itself a responsible guardian of the currency. There is also an important feedback loop in private minting that isn't present in government minting: if the creation of money is left in private hands, new money will only be created when it is profitable to do so. Government mints, by definition, are not acting in pursuit of profit and are thus likely to produce more money than is economically required.
answered Apr 10 '13 at 13:58
Kyle Haight ♦