Private competition is preferable the State monopoly
Monetary phenomena were considered by most economists as special cases of their discipline, which would justify the intervention of the State in the field of monetary and banking. This view is shared even by some of the authors of the liberal orientation. Is the case of Milton Friedman, known for his writings on the momentum of a market economy and for devastating critiques of State intervention in the economy which have been made. He comes to the conclusion that "inflation is always and everywhere a monetary phenomenon" and proposes as a solution to this issue a strict rules: broad money growth in a steady pace, equal to the rate of long-term growth of the economy. Imposing this rule Constitutional Court would enter into a Central task.
Libertarienii I'm not sure but that's monopoly domain currency (private or governmental) competition would be preferable. Their arguments are as follows:
The currency is not an invention of the State, but she appeared spontaneously, as a result of market processes. In primitive economies, people found they could more easily obtain desired products if, instead of those offered, accepted another commodity, with bigger search among their fellowmen. By acting thus, trigger a cumulative process, intermediate goods or goods gaining increasingly wide acceptance, to fulfill the function of intermediate exchanges generally accepted, i.e., the function of currency. This analysis has been confirmed through archaeological finds. Monetary instruments (small precious metal bullion) "issued" merchants, existed since the 10th century. Ch., long before the appearance of the first "State" coins in Asia minor (sec. V i. Ch.).
State intervention in monetary field was not motivated by the desire both to improve market functioning-as well as the need to collect budgetary resources. Thus, the senioriajul, i.e. the difference between the nominal value of the older coins issued by a political authority, and their intrinsic value was around 25%, and result from the partial replacement of precious metal with a cheaper metal. In other words, the first State coins were a fraud, because it had submitted an "official" value much higher. Obviously, this process is generating inflation.
Central banks are a recent appearance in the coinage (19th century), their creation with a motivation mostly politics. Convertibilitatii abandonment in gold made possible inflation rates unimaginable in the past. For example, what could be bought with one German mark in January 1922 cost 10 billion marks two years later. The biggest economic crisis (unemployment, deflation, inflation, etc.) took place after the creation of central banks. So, they cannot be considered as factors of economic or monetary stability.
What are the solutions proposed by libertarian? Their common point is, of course, drastic restriction or even abolition of the State in the field of monetary and banking and the application of "the common law of business" in this sector. Their approaches may be classified into the following three categories:
• Competitive Issue banknotes convertible into gold in fractional reserve
The inspiration of these proposals is the study of historical experiences. The reference model is the Scottish banking system (1727-1845), who worked the final 19 banks of issue, that broadcast their own banknotes convertible into gold. The system has worked very well, and the existing gap between Scotland and England has been reduced. Scottish experience of free banking was interrupted on the initiative. The reasons were not economical (Scots made petitions for keeping the system) but political (extension of London's sovereignty over Scotland). Worldwide there have been over 50 experiences freebanking or close to this model.
• Competitive Issue banknotes convertible into integral reserves
In this system, the banks are required by law to maintain reserves in gold equal to the volume of banknotes issued. Any issuance of banknotes without equivalent in gold constitutes a fraud. Authors who defend this system looks like, once banks started to issue more banknotes than reserves in gold, they became vulnerable to panicile. To avoid bankruptcy, banks have obtained the protection of State authority, i.e. the privilege-to suspend local convertibility, in Exchange for granting government loans. In the establishment of the Bank of England were exactly those stages along the way. Thus, the only way to prevent inflation, but the repetition of history would be compliance by the banks has a coefficient of reserves in gold equal to 100% of banknotes issued. In the vision of the authors mentioned, absence of State interference in monetary and political privileges granted to banks would lead to precisely this result.
• Competitive Issue banknote neconvertibile
The only case of competition between currencies is neconvertibile at the international level. There is no global monetary authority, and the participants in the transaction had to choose between different currencies. The inflationary are generally avoided in favor of relatively stable. This competition differs from theoretical ideals of libertarianism: the coins are still issued by States, they take advantage of legal tender in the country of origin and, in many cases, citizens are prevented to use currencies other than the national. It was a monetary system based on competition between several private coins neconvertibile, specific to each issuer and runing in the same space. As a legal tender coin that would force the acceptance, the issuing banks would need to win the trust of users. The initial high costs might not pay off in the long run than by maintaining this trust, meaning the buying power of the currency. For obvious reasons, the number of coins in circulation in an economic space would be limited by grant decisions. Encryption techniques have allowed the appearance of some issuers of coins, whose success was limited, however. Remains to be seen to what extent this system will be favored by technological developments.
In conclusion, there is no single point of view of libertarianism in monetary. The idea is that policy intervention in this area is at least as nefarious as in other sectors: inflation is always and everywhere a monetary phenomenon political.