chapter  3
25 Pages

Modern money

ByL. Randall Wray

We all know the traditional answers to these questions. Our homogenousglobule-of-desire forefathers were inconvenienced by barter until they spontaneously hit upon the idea of using tobacco, furs, huge rocks, landmarks, and wives as media of exchange.1 Over time, greater efficiency was obtained as homo economicus coined precious metals, and market efficiency was enhanced by free banks, which substituted paper money backed by precious metal reserves.2 All would have been fine and dandy except that evil governments came along, monopolizing the mints, creating central banks that debased the currency, and interfering with the invisible hand of the market. This finally resulted in abandonment of commodity money, substitution of a fiat money, and central bank-induced inflation. If only we could return to that Peter Pan Never-Never Land (laissez-faire), free of Captain Hook and the Crocodile (central bank and government), with privately supplied free bank money greasing the mighty wheels of entrepreneurial commerce!