Analysis: Competing Currencies Reviewed

Competing private monies are legal in the US but uneven public awareness has created confusing statutes and polices that then get overturned –or sustained on technicalities by hostile jurists. Even the author seems slightly unclear on and like many Libertarian-interested  scholars even unaware of what is happening in the field led by Libertarians (banks are already emitting the currencies) but has an excellent review. For examples underway see our sister blog @

Competition in Currency: The Potential for Private Money

by Thomas L. Hogan

Thomas L. Hogan is assistant professor of economics at West Texas A&M University.

Thomas L. Hogan is assistant professor of economics at West Texas A&M University.

Published on May 23, 2012

Sans Serif

Privately issued money can benefit consumers in many ways, particularly in the areas of value stability and product variety. Decentralized currency production can benefit consumers by reducing inflation and increasing economic stability. Unlike a central bank, competing private banks must attract customers by providing innovative products, restricting the quantity of notes issued, and limiting the riskiness of their investing activities. Although the Federal Reserve currently has a de facto monopoly on the provision of currency in the United States, this was not always the case. Throughout most of U.S. history, private banks issued their own banknotes as currency. This practice continues today in a few countries and could be reinstituted in the United States with minimal changes to the banking system.

This paper examines two ways in which banks could potentially issue private money. First, U.S. banks could issue private notes redeemable for U.S. Federal Reserve notes. Considering that banks issuing private notes in Hong Kong, Scotland, and Northern Ireland earn hundreds of millions of dollars annually, it appears that U.S. banks may be missing an opportunity to earn billions of dollars in annual profits. Second, recent turmoil in the financial sector has increased demand for a stable alternative currency. Banks may be able to capture significant portions of the domestic and international currency markets with a private, commodity-based currency. Legislation clarifying the rights of private banks to issue currency could help clear the path toward a return to private money.

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