From Maria Alejandra Madi In the book Denationalisation of Money- the Argument Refined (1976), Hayek proposed the abolition of the government’s monopoly over the issue of fiat money in order to prevent price instability. In fact, his defense of a complete privatization of money supply stemmed from his disappointment with central banks’ management, which, in his opinion, had been highly influenced by politics. Thus, the ultimate objective of the denationalisation of money advocated by Hayek was related to avoid political interference on monetary policy. Therefore, the denationalisation of money would be achieved by the complete abolition of the government monopoly over the issue of fiat money. In the framework of a free market monetary regime, only those currencies that have a stable
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from Maria Alejandra Madi
In the book Denationalisation of Money- the Argument Refined (1976), Hayek proposed the abolition of the government’s monopoly over the issue of fiat money in order to prevent price instability. In fact, his defense of a complete privatization of money supply stemmed from his disappointment with central banks’ management, which, in his opinion, had been highly influenced by politics. Thus, the ultimate objective of the denationalisation of money advocated by Hayek was related to avoid political interference on monetary policy.
Therefore, the denationalisation of money would be achieved by the complete abolition of the government monopoly over the issue of fiat money. In the framework of a free market monetary regime, only those currencies that have a stable purchasing power would survive. The basic idea is that the possibility of banks issuing different currencies would open the way to market competition. Banks could issue non-interest bearing certificates and deposit accounts on the basis of their own distinct registered trade mark and the currencies of different banks would be traded at variable exchange rates. This proposal would leave the way open for a comprehensive privatisation of the supply of money.
Hayek underlined that the main advantage of the free market competitive order is that prices will convey to the acting individuals the relevant information to make decisions to adjust their activities in face of the competition of currencies. He highlighted the uses of money that would chiefly affect the choice among available kinds of currencies: i) as ash purchases of commodities and services, ii) as reserves for future needs; iii) as deferred payments, and iv) as unit of account. In his opinion, these uses are consequences of the basic function of money as a medium of exchange and the stability of the value of a currency as unit of account is the most desirable of all uses (Hayek, 1976: 67). read more