Is private money desirable?
Private money is not desirable
The aspirations of some cryptoasset is to reinvent historical ideas of private money issuance, effectively shifting the control of an alleged currency from the democratically elected officials to the unaccountable individuals in the private sector. Unless one subscribes to extreme forms of libertarianism or anarchocapitalism this is not a desirable state and the historical precedence on private money is one of repeated disasters compared to the normal issuance of money.
The so-called Wildcat Banking Era in the United States is the best example of widespread use of private money. There was no single issuer of the dollar and most banks would issue their own bank notes which would circulate in a local economy as a form of money. However these notes had no stable value and would not trade at par with each other, this introduced massive arbitrage opportunities for people to trade more valuable bank notes for less valuable ones. However none of this market for secondary currency exchange was beneficial for the end users or conducive for commerce. Shopkeepers would be forced to do unnecessary currency conversions for their customers, denominate their goods in multiple currencies and incur both price-risk and exchange risk.
Money exists as a platform to enable commerce and disparate competing currencies within one economic region undermine the project and introduce unnecessary friction to commerce. Thus private money is not desirable from a pure capitalist perspective.
References
- Steele, Graham. 2021. âThe Miner of Last Resort: Digital Currency, Shadow Money and the Role of the Central Bankâ. Technology and Government, Emerald Studies in Media and Communications, Forthcoming.
- Varoufakis, Yanis. 2021. âWhat Is Money, Really? And Why Bitcoin Is Not the Answer (Even If Blockchain Is Brilliant & Potentially Helpful in Democratising Money)â. Yanis Varoufakis (blog). 2 August 2021. https://www.yanisvaroufakis.eu/2021/08/02/what-is-money/.
- Gorton, Gary B, and Jeffery Zhang. 2021. âTaming Wildcat Stablecoinsâ. Available at SSRN 3888752.
- Hileman, Garrick. 2017. âAlternative Currencies: A Historical Survey and Taxonomyâ. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2747975.
- Diehl, Stephen. n.d. âThe Case Against Cryptoâ. Accessed 17 February 2022. https://www.stephendiehl.com/blog/against-crypto.html.
- Dini, Paolo, and Alexandros Kioupkiolis. 2019. âThe Alter-Politics of Complementary Currencies: The Case of Sardexâ. Cogent Social Sciences 5 (1). https://doi.org/10.1080/23311886.2019.1646625.
- Larue, Louis. n.d. âThe Case against Alternative Currenciesâ. Politics, Philosophy & Economics 0 (0): 1470594X211065784. https://doi.org/10.1177/1470594X211065784.
- Plant, Luke. 2022. âThe Technological Case against Bitcoin and Blockchainâ. Luke Plantâs Home Page. 5 March 2022. https://lukeplant.me.uk/blog/posts/the-technological-case-against-bitcoin-and-blockchain/.
- Canning, Tonya. 2018. â"We Donât Want Hippy Moneyâ: Contradiction and Exchange in a Local Currency Systemâ. PhD Thesis. https://dalspace.library.dal.ca/handle/10222/74190.
- Doria, Luigi, and Luca Fantacci. 2018. âEvaluating Complementary Currencies: From the Assessment of Multiple Social Qualities to the Discovery of a Unique Monetary Socialityâ. Quality and Quantity 52 (3): 1291â1314. https://doi.org/10.1007/s11135-017-0520-9.
- Hockett, Robert C. 2019. âMoneyâs Past Is Fintechâs Future: Wildcat Crypto, the Digital Dollar, and Citizen Central Bankingâ.
- Larue, Louis. 2020. ââA Conceptual Framework for Classifying Currenciesâ.â International Journal of Community Currency Research 24 (1): 45â60.
- North, Peter. 2007. Money and Liberation: The Micropolitics of Alternative Currency Movements. University of Minnesota Press. https://www.upress.umn.edu/book-division/books/money-and-liberation.
- Pacione, Michael. 1997. âLocal Exchange Trading Systems as a Response to the Globalisation of Capitalismâ. Urban Studies 34 (8): 1179â99. https://doi.org/10.1080/0042098975583.
- Petz, Marcus. 2020. âWhen Is Money Not a Currency? Developments from Finland of Proto-Community Currenciesâ. International Journal of Community Currency Research 24 (2): 30â53.
- Schroeder, Rolf F. H. 2020. âBeyond the Veil of Money: Boundaries as Constitutive Elements of Complementary Currenciesâ. The Japanese Political Economy 46 (1): 17â41. https://doi.org/10.1080/2329194x.2020.1762499.