Free-market money

Despite the overwhelming evidence that markets perform best when left alone by the government, it is still virtually taken for granted that one consumer product should be completely controlled by every government in the world. One product, so ubiquitous, that it is used by almost everyone in the world on a daily basis: money.

In "Toward Free-Market Money," author Robert Gelfond examines the role of the U.S. Federal Reserve System (the Fed) and concludes that monetary policy needs to be deregulated and finally privatised.

Gelfond recommends the following:

Repeal all laws giving the Fed monopoly power to issue currency.

Eliminate all government regulation of banks and financial institutions.

Change the tax laws so there is no preference given to transactions done in dollars (payment could still be required in dollars, but there should be no capital gains if you choose to hold your money in yen, for example).

Completely privatise the Fed through either an auction or fair distribution of shares to taxpayers.

Exempt banks and financial institutions from antitrust laws.

As with any free-market reform, Gelfond does not expect private money to lead to a perfect world. However, he says we would be better off – not just in a strictly utilitarian sense but also in a moral sense. People would be free to store the fruits of their labour however they see fit and not be forced to submit to a tax (inflation) that is not explicitly levied and voted on.

Source: Robert Gelfond, Toward Free-Market Money, Cato Journal, Fall 2001.

For text: http://www.cato.org/pubs/journal/cj21n2/cj21n2-9.pdf (requires free Adobe Acrobat Reader)
For more on Monetary Policy http://www.ncpa.org/iss/eco

FMF Policy Bulletin\15 August 2002