Should America Privatise the Dollar?
Extraordinary times require extraordinary thoughts. It's very late, and I thought that I would revisit an old theme; the reestablishment of competing currencies.
My one demented reader will remember my interest in the legal nature of Scottish and Northern Irish notes, which are issued by their banks, and in scrip in the United States. That's because memory can be sharpened in a padded cell.
Really though, with the stimulus getting nowhere (though maybe it forestalled or postponed a collapse), with electronic and fiat money inflating the west and preparing us for what I still think is odds-on a nasty stagflation, why not?
In New York two hundred and fifty years ago, one could have traded in, and saved in, and lent in, any one of a choice of dozens of currencies. Colonial governments could not keep up, and banks and individuals were put to the test; if their notes were any good, and backed by something credible, people would use them. If not, not. As PJ O'Rouke noted in his commentary on The Wealth of Nations, Adam Smith didn't think that we had to reform governments to be free; only that we were smart enough not to need governments and to do better without their care than with it.
That said (and I suppose the note will give comfort to the eurosceptics) there was a more recent period of currency diversity in the US, between 1838 and 1860. That ended in a civil war. It would be somewhat daft to say fixed exchange rates between state notes, bonds, and private banks caused it, though. Honesty also draws me not to treat Smith as an altogether friendly witness; he did view private American paper money, much like Jefferson ultimately, as
The long history of nationalised currency has not been a good one. It has encouraged vast national and personal debts to accumulate. It has been a vehicle of inflation, rather than an effective store of value, and it has deluded administrations and bent policy at home and abroad in ways that bonds did not do.
So why not? Licence anyone who meets strict criteria, foreign or domestic, and allow private notes and cards back into the market on an open basis. Then let's see which investments and loans hold value and which don't. It's better than hiding behind an increasingly strained dollar, which allows Congress to get away with what it gets away with, and which concentrates in the hands of government the pretence that money and the economy has anything to do with politicians, rather than commerce. If American companies and individuals want to do foreign trade, they can do it with SDRs or chance their arm on the credit of the government. That'd concentrate minds on the dsundry debts and deficits which are ruining the republic.
As I wrote, just a night-time thought. I'll probably regret it in the morning.