The Denationalisation of Money

The Denationalization of Money is a book written by Friedrich Hayek, and published in 1976, in which he advocated the establishment of competitively issued private moneys.

Message

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.

Effects

Hayek advocates a system of private currency in which financial institutions create currencies that compete for acceptance. Stability in value is presumed be the decisive factor for acceptance. Competition, he suggests, will favor currencies with the greatest stability in value since a devalued currency hurts creditors, and an upward-revalued currency hurts debtors. Hence users would choose the moneys which they expected to offer a mutually acceptable intersection between depreciation and appreciation. 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. Hayek's effort has been cited by Economists George Selgin, Richard Timberlake, and Lawrence White.

In Denationalization of Money: The Argument Refined, the revised and enlarged edition published in 1978, Hayek speculated that, rather than entertaining an unmanageable number of currencies, markets would converge on one or only a limited number of monetary standards, on which institutions would base the issue of their notes. The Third Edition, with a new introduction, was published in 1990.

External links

• The Denationalization of Money, by Friedrich Hayek, at Mises.org