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I can't help but think that it is advantageous for a general population to have government regulate currencies, be they physical objects, promissory notes, or d

by nerme 16y ago

I can't help but think that it is advantageous for a general population to have government regulate currencies, be they physical objects, promissory notes, or digital representations. If you follow the history of currency from a piece of gold of unknown purity, to gold coins produced by governments, to the establishment of central banks, to outlawing privately issued banknotes, to fiat currencies... ...you'll notice that all of these are created to keep up with the demands of a technologically driven advancement in the state of economic affairs. If I showed up to your store with a lump of gold for trade, we would have to go find someone we both trusted to figure out how pure it was. That takes time and money. That inhibits commerce from taking place. Having the government get involved and eventually come to manage the digital exchange of currency would be no different than these analogous historical transitions. It doesn't make sense to completely rely on private companies for a type of economic transaction that has already become the dominant way that value is exchanged. Especially when those private companies require the full backing of nation-states and their currencies to even have any sort of business model to begin with. Why else would Visa and MasterCard have not yet created their own currencies? You can't have a free market if you don't have a viable marketplace to begin with.

vrotaru 16y ago
> If you follow the history of currency from a piece of gold of unknown purity, to gold coins produced by governments, to the establishment of central banks, to outlawing privately issued banknotes, to fiat currencies... You trust governments way to much. Especially here "... from a piece of gold of unknown purity, to gold coins produced by governments". If nothing else, because governments in general were (and still are) famous for debasing the currency, not for keeping it honest. The story of taler coin is telling in this regard. It was just a coin issued by a specific mint, which win international recognition through competition with currencies produced by other mints. So.. not even close.
david 16y ago
>> If I showed up to your store with a lump of gold for trade, we would have to go find someone we both trusted to figure out how pure it was. That takes time and money. That inhibits commerce from taking place. It's the same with paper. If I show up to your store with a note and tell you it's worth x amount, a third party who we both trust has to back up that that note is indeed worth that value. You're solution, which isn't really a solution at all, is to just have the government take the place of that third party. This is replacing a free market with a coercive monopoly, and carries with it the same repercussions as any other type of anti-free-market regulation. Now we both still agree to treat my note or gold as having x value because it is endorsed by a third party, but now we choose this third party not out of trust, but because there really isn't much of a choice. So now that there aren't any competing currencies, innovations like the ones you mentioned will happen much slower, and since maintaining our trust is no longer needed, the criteria for ensuring that a certain paper note or gold piece actually has it's claimed value will be much less strict. Now the currency-regulator can do things like print too many paper bills, devaluing bills individually, while putting the value of the newly printed bills right into their pocket--and without repercussion. And I think that's only the tip of the iceberg. Regulating currency is no different than regulating telephone lines or corn. You said "You can't have a free market if you don't have a viable marketplace to begin with", but government regulated currency isn't a viable marketplace at all, and you really can't build a free market on top of an unfree one anyways.
- nerme 16y ago
  Well, there WERE competing currencies in place for a time. The advent of paper currency comes from privately issued banknotes, which were legal in the UK until the Bank Charter Act of 1844. The reason they pushed for it? Basically, private banks were printing too many banknotes and causing bouts of inflation. This was in a time when currencies were still backed by gold. Here is the speech by Robert Peel that convinced Parliament (as well as myself) that this was a good course of action to follow: http://www.historyhome.co.uk/polspeech/bank.htm http://www.historyhome.co.uk/polspeech/bank.htm If you made a papery currency, what is it backed by? A big pile of gold? Do you have a lot of men with guns defending that big pile of gold? What is backing a fiat currency like the $US? Trust that the country will continue to exist? The might of the armed forces? It is a number of things, but the conditions are very difficult to reproduce without a lot of cold, hard steel moving around at high speeds through land, sea, and air.
  - david 16y ago
    >> The reason they pushed for it? Basically, private banks were printing too many banknotes and causing bouts of inflation. Good to know we don't have to worry about that anymore... IANAEconomist, but I think what the banks were doing then couldn't really be considered free-market either, since they were engaging in a type of fraud by telling people they're notes were backed by so much real gold, when that wasn't the case at all. But then how regulating that sort of fraud fits in with free market vs regulation might be getting a little deeper into the issue than I really want to go right know so take that with a grain of salt :)

by nerme 16y ago

vrotaru 16y ago

> If you follow the history of currency from a piece of gold of unknown purity, to gold coins produced by governments, to the establishment of central banks, to outlawing privately issued banknotes, to fiat currencies... You trust governments way to much. Especially here "... from a piece of gold of unknown purity, to gold coins produced by governments". If nothing else, because governments in general were (and still are) famous for debasing the currency, not for keeping it honest. The story of taler coin is telling in this regard. It was just a coin issued by a specific mint, which win international recognition through competition with currencies produced by other mints. So.. not even close.

david 16y ago

>> If I showed up to your store with a lump of gold for trade, we would have to go find someone we both trusted to figure out how pure it was. That takes time and money. That inhibits commerce from taking place. It's the same with paper. If I show up to your store with a note and tell you it's worth x amount, a third party who we both trust has to back up that that note is indeed worth that value. You're solution, which isn't really a solution at all, is to just have the government take the place of that third party. This is replacing a free market with a coercive monopoly, and carries with it the same repercussions as any other type of anti-free-market regulation. Now we both still agree to treat my note or gold as having x value because it is endorsed by a third party, but now we choose this third party not out of trust, but because there really isn't much of a choice. So now that there aren't any competing currencies, innovations like the ones you mentioned will happen much slower, and since maintaining our trust is no longer needed, the criteria for ensuring that a certain paper note or gold piece actually has it's claimed value will be much less strict. Now the currency-regulator can do things like print too many paper bills, devaluing bills individually, while putting the value of the newly printed bills right into their pocket--and without repercussion. And I think that's only the tip of the iceberg. Regulating currency is no different than regulating telephone lines or corn. You said "You can't have a free market if you don't have a viable marketplace to begin with", but government regulated currency isn't a viable marketplace at all, and you really can't build a free market on top of an unfree one anyways.

nerme 16y ago
Well, there WERE competing currencies in place for a time. The advent of paper currency comes from privately issued banknotes, which were legal in the UK until the Bank Charter Act of 1844. The reason they pushed for it? Basically, private banks were printing too many banknotes and causing bouts of inflation. This was in a time when currencies were still backed by gold. Here is the speech by Robert Peel that convinced Parliament (as well as myself) that this was a good course of action to follow: http://www.historyhome.co.uk/polspeech/bank.htm http://www.historyhome.co.uk/polspeech/bank.htm If you made a papery currency, what is it backed by? A big pile of gold? Do you have a lot of men with guns defending that big pile of gold? What is backing a fiat currency like the $US? Trust that the country will continue to exist? The might of the armed forces? It is a number of things, but the conditions are very difficult to reproduce without a lot of cold, hard steel moving around at high speeds through land, sea, and air.
- david 16y ago
  >> The reason they pushed for it? Basically, private banks were printing too many banknotes and causing bouts of inflation. Good to know we don't have to worry about that anymore... IANAEconomist, but I think what the banks were doing then couldn't really be considered free-market either, since they were engaging in a type of fraud by telling people they're notes were backed by so much real gold, when that wasn't the case at all. But then how regulating that sort of fraud fits in with free market vs regulation might be getting a little deeper into the issue than I really want to go right know so take that with a grain of salt :)