I support free banking, if it is kept in the free market and restricted to the free market. As a Libertarian, I support the separation of commodity markets and state. This is one of many reasons why I am against the idea of gold as legal tender. My same reasoning applies to free banking. I support the separation of free market banking and state. I support the separation of free market currency and state.
The use of free market currencies and free market banking, whether based on full, partial, or no reserves, and whether based on hard currency, legal tender, or other collateral, should be allowed. However, I do not believe the government should declare any free market currency, including gold, as legal tender. For the government to declare any free market currency, including gold, legal tender for payment of debt and taxes, is to make it fiat, corrupting the free market in that currency, including gold.
The use of gold to store wealth should be supported. However, my support ends when the fake “Royal Libertarians” want the gold to be used for the payment of taxes and debt. Any bank should be allowed to use gold. However, it should never be used to coin or issue legal tender for payment of debt or taxes, unless of course it is for debt originally loaned in that particular currency or with a specific form of collateral.
Free banking is useful for local communities to promote local business and as a poor man’s form of credit. It is also useful to store wealth or to provide a back-up to the legal tender if for some reason there are problems with the legal tender.
As Adam Smith pointed out in 1776, the problems of colonial currency and use of foreign currency as accepted legal tender was prone to money market manipulation. Financial institutions and other interests would dump certain currencies and buy up other currencies. Some governments and their citizens would be left with deflation while others would be left with inflation. The usurers would profit at the expense of the states and their citizens.
You can also look at the history of the U.S. Dollar. The Congress was having to change the laws every few years to use gold as legal tender. Free market currency should remain in the free market if you do not want the corrupting hand of government manipulating the value. The government should provide it’s own legal tender so that the government can stay out of free markets.
The government’s legal tender would be commonly accepted if it is well-regulated, if government pays employees and contractors in the currency, and if governments only accepts the currency for taxes and debts originating in the currency.
I support free banking, but my support ends when you want free banking currencies to be corrupted by government accepting it as legal tender. Free markets cannot be free if the government corrupts free banking and free market currency. Free markets cannot be free without a government legal tender.
Excellent!
The Government must end the ridiculous situation of creating a monopoly with Legal Tender laws and then handing it over to some private vultures (aka (central) banks).
Govt must reclaim it, and allow competition to it’s own interest free currency from the market place.
God forbid they’d force us to repay fiat credit debts with Gold.
Gold won’t circulate in the free market, btw: Gresham’s law tells us why.
See my discussions with the Daily Bell and Gary North on the issue Gold in the free market.
http://realcurrencies.wordpress.com/2011/12/29/discussing-interest-and-gold-with-the-daily-bell/
http://realcurrencies.wordpress.com/2011/12/23/gary-north-on-interest/
Reblogged this on Recovering Austrians and commented:
Interesting article on how a free market for currencies might work: by not making any of the free market currencies legal tender, there will be no unfair competition