Freedomain Radio

Can anyone provide any resources or thoughts on how we would transition to a free market monetary system, whether it's gold, paper, or some form of electronic currency.

I was discussing with a statist coworker who surprisingly advocates getting rid of the Federal Reserve but believes the government itself should issue the currency (I guess similar to colonial script or greenbacks). I argued that it would be better for the market to handle that job but he said it would never work.  

His argument is that there would be no way for one person in California to know if the currency a person was using in Pennsylvania was worth anything and centralized standard source of money would be easier. He argued that Europe had a problem with too many currencies and exchange rates so they switched to the Euro to standardize it. Oddly enough when I asked him if a single world currency would better he said "no". So yes there are holes in his logic (like a typical statist).

Anything I show him will probably be a waste because he's already made up his mind but it would be nice to show him a clear concise plan of how transition will work. Keep in mind his understanding of economics is extremely limited, so this transition plan will have to be written as if it were for a 5 year old. 

TL;DR - I need a possible transition plan showing how we could switch to a free market money supply. This will be used to help explain it to a statist coworker.

People could just start transacting in gold and silver coins (possibly even copper), and keep no holdings in paper currency.

Of course, the problem is that the State could simply make it a crime. They've done it before.

Privatized businesses would have to arise and compete with currency, i think the REAL currency of the future is going to be electronic, backed by precious metals / commodities.  So most of the "exchange rates" will be moot. That being said in this day and age competing currencies shouldn't be a big deal.

One example that should be easy for your statist coworker to understand is Visa/Mastercard. Those are not issued by any government, yet are more universally accepted than any fiat currency.

A replacement for government money could be notes bearing either the Visa or Mastercard (or, of course, any other generally-acceptable firm) logo, and indicating a fixed quantity of gold into which the note is convertible upon demand.

In practice, just like today, most transactions will be conducted electronically.

Thanks for the replys everyone. The Visa/Mastercard concept is perfect and should be an easy enough for him to grasp.

I think sufficient explanation is something like this:

1) Stop shooting people for not accepting governments money.
2) Stop shooting people for producing competing currencies.
3) People will start using currencies they like the most.

Edit: If you'd like to read about ways of monetary reform more, I'd recommend an article of Philipp Bagus.

What will happen is that people stop using fiat currency as it becomes more useful for toilet paper than for buying toilet paper.  They will then barter and some commodities will become a de facto standard of value and hence a currency.

Economics 101: Money and Prices | Murray N. Rothbard

 http://www.youtube.com/watch?v=OACpTWBWseY

Best lecture on money and price I've ever come across.  Rothbard proves money has NOTHING to do with the social contract.  Money come out of the problems that arise from barter (I want the hat-makers hat, but the hat-maker dosn't want my eggs). 

Good stuff