It generally seems to be accepted that under anarcho-capitalism inflation will be prevented either by a legal code outlawing fractional reserve banking or competitive pressures deterring banks from holding reserve ratios below 100%. However, what is to stop the development of online internet currencies, silver-backed currenies, land-backed currencies or other currencies that may become accepted because they have a commodity backing or are trusted not to inflate? Surely these extra currencies would increase the money supply (even if after their initial introduction, they don't increase further in quantity ) and therefore generate business cycles?
The business cycle does not come from inflation but from loan subsidies paid for by inflation. Simple inflation will not generate business cycles.
As for your other question, why would someone choose to change the kind of money he holds? Because his confidence in his current money supply is lower than in the substitute. As such new currencies must be less inflationary than old currencies in order to replace them.
The fallacies of intellectual communism, a compilation - On the nature of power
Inflation happens to some extent in any economy; the question is how much. What would prevent destructive inflation is the very thing that defines anarchy in the economic sense - free competition. An issuer whose currency inflates too much will go out of business, and other currencies will take over that market. Quite likely, there would be a buyout of the bad money before it collapsed.
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I'm certainly no expert but I'd guess that you'd see little pockets of inflation but for the most part they would be isolated incidents. Without a centralized government to impose a single monetary unit (and then destroy that currency) people would be free to use whatever currency they wished. If one was inflationary and the other not why continue using something that obviously isn't working? I think people would naturally progress to whatever currency didn't inflate such as gold and silver.
"It does not require a majority to prevail, but rather an irate, tireless minority keen to set brush fires in people's minds. " -- Samuel Adams.
rpj83:It generally seems to be accepted that under anarcho-capitalism inflation will be prevented either by a legal code outlawing fractional reserve banking or competitive pressures deterring banks from holding reserve ratios below 100%. However, what is to stop the development of online internet currencies, silver-backed currenies, land-backed currencies or other currencies that may become accepted because they have a commodity backing or are trusted not to inflate? Surely these extra currencies would increase the money supply (even if after their initial introduction, they don't increase further in quantity ) and therefore generate business cycles?
The money supply is only for one homogenous unit of money. When more than one unit of money exists, these money supplies compete with eachother so that when there is an increase in the supply of gold, let's say, people will shift some of their income to silver.
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Anyone can start a currency. I can just start printing money, if I want. That doesnt mean anyone would want to use my money. If I create money I have to sell it on the market, and with competing currencies, people will tend to shun away from currencies with no backing or currencies that for some reason depreciate too quickly.