Re: AltInst: One World, One Money

Robin Hanson, <hanson@econ.berkeley.edu>, writes:
> The Economist has an article on the idea of a World Currency:
> http://www.economist.com/editorial/freeforall/current/index_fn7485.html

Another argument for multiple currencies is to stabilize the money supply.
With one monopoly currency, the issuing body has the power to set the
money supply level, and it is often to its advantage to issue new money
for its own spending. This increases its own wealth at the expense
of everyone else, causing inflation and in effect laying a tax on all
holders of the currency. With multiple currency issuers, if one of them
does this then its currency loses value with respect to others, which
drives people away from the use of its currency and punishes the issuer.

This control is not perfect but I think it has helped historically
to limit currency inflation. At least, I've seen that the negative
international consequences are often cited in policy discussions about
the consequences of inflation.

George Selgin, in "The Theory of Free Banking", even suggests going to
multiple currencies per country. He argues that allowing banks to freely
issue their own currency will provide this discipline at a smaller scale.
His theories even show that the money supply will automatically adjust to
money demand under such a system, without the dangers and instabilities
of monopoly currency issue.

Hal Finney
hal@rain.org

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Received on Tue Sep 29 21:57:43 1998