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The Denationalisation of Money is a book by Friedrich Hayek , in which the author advocated the establishment of competitively issued private moneys. According to Hayek, instead of a national government issuing a specific currency, use of which is imposed on all members of its economy by force in the form of legal tender laws, private businesses should be allowed to issue their own forms of money, deciding how to do so on their own.
Hayek advocates a system of private currency in which financial institutions create currencies that compete for acceptance. Hayek makes the assumption that competition will favor currencies with the greatest stability in value since a devalued currency hurts creditors, and an upward-revalued currency hurts debtors. Hayek suggests that institutions may find through experimentation that an extensive basket of commodities forms the ideal monetary base.
Institutions would issue and regulate their currency primarily through loan-making, and secondarily through currency buying and selling activities. It is postulated that the financial press would report daily information on whether institutions are managing their currencies within a previously-defined tolerance. Economist Milton Friedman was critical of Hayek's writings of the s on monetary reform.
Noting Hayek's vigorous defense of "invisible hand" evolution that Hayek claimed has created better economic institutions than could be created by rational design, Friedman pointed out the irony that Hayek was then proposing to replace the monetary system thus created with a deliberate construct of his own design. Moreover, Friedman noted, there is nothing in the current law of most developed economies to prevent voluntary bilateral exchange via any medium freely accepted by two parties. In a review of the book, economist David H.
Howard also noted that Hayek neglected to address the extent to which existing monetary institutions evolved to meet real economic needs. Furthermore, Howard states, Hayek's regime of competitive moneys may result in the establishment of a new monopoly similar to the existing system.
According to Howard, Hayek did not consider the real costs and other inefficiencies of a system of competing monies that might lead to such an outcome.
Austrian School economist Lawrence H. White was critical of Hayek's assumption that the most stable currencies would win market acceptance. According to the European Central Bank , the decentralization of money offered by bitcoin has its theoretical roots in Denationalisation of Money: The Argument Refined.
From Wikipedia, the free encyclopedia. Literature portal Economics portal. Washington Times. July 18, Retrieved 28 January The legacy of Friedrich von Hayek, Volume 1. Edward Elgar Publishing. New York Sun. It has never been proposed on the ground that government will give us better money than anybody else could.
Instruments in Art and Science. Walter de Gruyter. Stephen; John A. Galbraith European Journal of the History of Economic Thought. Has Government Any Role in Money? University of Chicago Press. Journal of Monetary Economics. Retrieved 31 January Library of Economics and Liberty.
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Denationalisation of Money