Freedom, Society, and State - Ludwig von Mises Institute

In shor t, 1 i ber tar ians do not bel ieve that money
requires thesuper.vision of government. Far from free
banking leading to hyper-inflation, the libertarian bel
ieves that the reverse is true. The money monopoly,
says James Rolph Edwards, "has the defect of all monopolies,
that one must use their product even if it is
unsatisfactory." It is only with "currency substitution·,"
i.e., competition between alternative monies,
that "money of stable and reliable value" can be
insured.(63)
Since private mipters could not force people to
use their money, they could stay in business only by
developing a reputation for honesty. The more sterling
one's reputation the more willing individuals would be
to use a minter's coins or a printer's certificates.
The lib e r tar ian poi n t s to his tor y to bo1st e r his ca s e •
Private coins circulated widely throughout the world,
inclUding this country. During the Civil War, for example,
the federal government took coins out of circulation
to help relieve the metal shortage. This in
turn produced a shortage of coins, which was alleviated
by the appearance of private mint-masters. It is reported
that possibly 10,000 varieties of private coins
circulated during this time. In the 1830's an individual
named Christopher Bechtler entered the minting
business and within nine years minted nearly two and
one-half million dollars. HIS coins received such wide
circulation that as late as 1920 the Bechtler dollars
were st ill be ing accepted in parts of this country at
par with "official money."(64)
Finall y, how rna nycur r en c i e s w0 u I d beex pe c ted t 0
e mer g e ? Lib e r tar ian sadmit t hat therei s no wa y t 0
know for sure. But given the transaction costs inherent
in currency conversions, Edwards argues that the
"public would not permit more than three or four currencies
to circulate widely at anyone time."(65)
Wha t can be sa i d abou t such a proposal? At the
least, it is certainly ingenious. But is it pure fantasy?
I think not. Not only is the argument presented
logically but a wealth of historical examples are also
introduced to demonstrate its feasibility. But quest
ion sst i I I r ems in. W0 u 1d the con c ern for 0 ne 's reputation
be enough to prevent fraud, or at least hold it
to a minimum? To this the libertarian might respond
that whatever fraud would occur would no doubt be less
than that perpetuated by the government through its
dollar monopoly. And is fra·ctional-reserve banking
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