Posted to can.talk.guns (original link: http://groups.google.ca/group/can.talk.guns) and other groups in response to a criticism of the Libertarian Party of Canada’s monetary policy:

“We oppose any government involvement in the monetary and banking system. We propose elimination of the Bank of Canada and the termination of government power to issue or regulate currency or credit. We support the continued freedom of any individual or group to own gold or any other commodity of exchange, as well as the right to produce coinage and issue currency.”

[Response from reader]

Gotta love that! No more government-issued cash that is recognized and exchangeable around the world. Everybody gets to print their own money. Say hello to rampant inflation when there is no currency that anybody has any confidence in. George, did you hold on to that Yugoslav million dinar note?

My Response.

Re: Libertarian Party of Canada’s statement on currency

Why is government-issued cash reliable? What about Argentina? People are most likely to use currencies they have the most confidence in. In the past, banks in Canada and in the States and in Europe issued private currency, usually based on gold. Many people would tend to prefer gold-backed currencies.

I also recommend “Human Action” by Ludwig von Mises. This can be found at http://www.mises.org/

Here are quotes by Mises defending the Gold Standard and attacking government-created inflation.
http://www.mises.org/quotes.aspx?action=subject&subject=Gold%20Standard

The following article includes a lot of detail defending private currencies:  http://www.econlib.org/library/Features/feature3.html

The Library of Economics and Liberty: http://www.econlib.org/

Why Private Banks and Not Central Banks Should Issue Currency, Especially in Less Developed Countries
by Lawrence H. White and George Selgin

…

“In all but a few areas of the world today (Northern Ireland [hey!], Scotland, and for the time being Hong Kong), currency is a nationalized industry. Treasury departments issue coins; the state-owned enterprises known as central banks issue paper notes. It was not always so. Private banks were the main issuers of paper currency in the United States and Canada a century ago, and were the sole issuers in virtually every country two centuries ago.

…

“Private commercial banks are more reliable. Privatizing currency means leaving it to commercial banks to issue media of exchange that are claims to the reserve asset that defines the monetary standard, and makes the enforcement of these claims a matter of commercial law rather than of public policy. It correspondingly decentralizes the responsibility for holding adequate reserves. Outside of “crony capitalism” (where nominally private banks receive special dispensation to renege on contracts), private currency issuers face incentives for quality control that do not face government monopoly issuers.

…

“The chief weakness of central banks as currency issuers is their inability to bind themselves to their redemption promises. Their public monopoly status gives them immunity from the legal and marketplace sanctions that ordinarily prevent commercial banks from reneging on their commitments to honor their debts in full. A central bank enjoys “sovereign immunity” from claimholder lawsuits, and legal restrictions on the public’s choice in currency mean that the central bank has little fear of losing customers for bad behavior

“By comparison to public monopoly, privatization raises the quality of currency. “

http://www.libertarian.ca

(Original Post)