Competing currencies should be legalizedSubmitted by legalizeliberty on Tue, 04/24/2012 - 02:03
One of the chief economic problems of our time is inflation. The legalization of competing currencies, which was proposed by the Nobel Prize-winning economist Friedrich Hayek in 1976, is a remedy for this problem. If competing currencies were legalized, the government would be induced to provide Americans with a sounder, stabler currency.
The government claims that the annual inflation rate is approximately 2 percent. Perhaps this convinces many people that inflation is not an important issue at this time. Nevertheless, the economist John Williams points out that the government-reported inflation rate is unreliable because the government is under political pressure to understate inflation. In fact, notes Williams, if the annual inflation rate were calculated using the same method with which it was calculated in 1980, it would currently be over 10 percent. Furthermore, I fear inflation may worsen dramatically in the next few years. Most of the money the Federal Reserve created in recent years remains in the bailed-out financial system. When the financial sector begins to circulate the money throughout society, prices will begin to soar.
When a central bank creates more money, a few special interests benefit at the expense of the general population. Different prices rise neither at the same rate nor at the same time. Thus, early receivers of the new money, such as government contractors, government agencies and government bureaucrats themselves, get to use it before prices have risen. In contrast, late receivers of the new money only receive it after many prices have risen. Thus, they are stuck with depreciated currency. To quote the economist Murray Rothbard, “Monetary inflation is a hidden form of taxation or redistribution of wealth, to the government and its favored groups and from the rest of the population.”