Home > Uncategorized > On Hayek and digital currencies

On Hayek and digital currencies

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

  1. September 1, 2017 at 9:19 pm

    We had precisely that hre in the USA between the 1830s when the 2nd US Bank was not recharted and 1913 when the Fed was chartered. It did not work very well.

  2. Maria Alejandra Madi
    September 1, 2017 at 9:32 pm

    Many thnaks for your comment. I agree that the pivatization of money does not work. That’s the concern when we observe the new trends about digital currencies and banks’ partnershipos with fintechs.

    Maria

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s