If the United States were to allow a free market in money, I am fairly certain that gold would indeed become the most widely adopted material for exchange; however, I have not been able to wrap my head around how businesses would profit from money production. After the gold was mined, would the mining companies sell it to private mints? If this was the case, what would the mining companies receive in return? Or would the mining companies simply use their newly mined gold to purchase additional capital resources, and let the dispersion of gold trickle through the economy that way? If my questions are unclear I can try to rephrase them.
I am trying to figure this out so I can explain this to other people. I have full confidence that solutions to this problem would be worked out by the market, but without having at least a semi-plausible "plan" as to how this might work, it will be impossible for me to make a case to others about private money production.
Forget about money in the sense that you're used to. Think of it as a commodity. If you produce too much of it then its value will fall. If you don't produce enough then the price goes high, but you make no profits because you're not selling enough.
If all the gold mines turned into becomming producers of money then they would compete against each other for profits, while not producing too much to make a glut in supply. Make too much, value goes down, revenue falls.
I think the key here is that supply will come to market at a moderate rate. Maybe the volume on the market will increase only a few percent per year. This rate of inflation may be acceptable with gradual increased in factory productivity of consumer & producers goods. The key thing is that you can't creat billions of dollars worth with the stroke of a key. You also can't create something out of thin air from nothing, and then hand it over to your wall street banker buddy in favor for contributing to your election campaign.
Basically what bearing01 said, if it helps just think of it as an IPO for a company's stock, flood the market with too many and the value of your stock goes down and less people will buy it, etc.
"Trickle through" ..."disperse". These are strange words to a believer in free markets and private property. Here's how to explain it to your friends who want to know how it would work. Here's how: you voluntarily trade your productive output (your private property) for a medium of exchange (money) that is acceptable to you. Gold, silver, platinum...whatever you like. You and other traders will likely have a preference for money that you can readily exchange for others' productive output that you want to be transferred to your private property holdings. I'll bet that Walmart would be among the first to come up with a reliable coin of reliable purity. But there would be plenty of dealers (think ebay, or pawn shops or Money Store type places) that would trade whatever you've got for Walmart coins. Think of the glorious piece of mind you would have that the government is out of the money business! You don't have to lie awake at night thinking that a slimy politician is going to lean on the Federal Reserve to print more money for him to spend --- and slowly make your money holdings worthless. And don't worry about the "trickling" or "dispersing". Good tradable commodities (money) will go to those who are providing productive services to their fellow humans. That's the only way people will be able to get rich in the future! Isn't that fantastic!? The government role will be limited to making sure nobody hits you over the head to steal your private property.
Bonus gift: the little story I wrote this morning to help my kids understand the Austrian business cycle theory. Cheers:
The Three Little Pigs and the Federal Reserve CrisisIn their later years, they bought a yacht and sailed the seven seas. The three little pigs each had a bag of gold coins to spend at the various ports of call. The good life. No wolves, no Federal Reserve, no worries.Or so they thoughtOne dark and stormy night, they were shipwrecked on a deserted tropical island. They spluttered ashore each with their coin purses clutched greedily...ONE YEAR LATER...No one came to rescue them and after some trial and some error, they had established a common sensedivision of labor: each pig specialized in doing one thing so their combined output was more than if each had to do everything for himself. And they were able to trade with each other using their gold coins. Itwasn t what you d call the good life anymore, but it was pretty good and it worked. Here is how: One pigcut down trees and fashioned them into good square lengths of lumber stored flat in his lumber shed. He became the Lumberpig and worked day and night making one good square-cut length of lumber everymonth (he only had one simple stone tool). Another pig, the Fisherpig, specialized in fishing from a smallraft and offering fresh seafood for sale on the beach every day before lunch and surfing all afternoon. The third pig used a small bucket that had washed ashore to go back and forth to the spring in the middle of theisland to collect water for sale to his brothers. They started calling him Bucketpig, or Buck for short. Buck would often join Fisherpig in the evening for drinks and fish feasts on the beach in front of a roaring fire oflumber pieces. All work and no play made Lumberpig a dull pig although he had saved up a respectablepile of lumber. Not huge, but respectable. THE CAPITALIST PIGS DREAM...Like many a businessman over drinks after work, Buck and Fisherpig would brag and tell lies to each otherabout the expansion plans they had and how they were going to hit it big. The truth was, they did each have a pretty good plan: Fisherpig was planning to plough his savings into new lumber to build a fishing boatwith oars and a mast so he could get out to where the big hauls were. That way he could be finished gettinga daily supply of fish for the island in the morning and start a tool making business on the side. For his part, Buck had in fact already drawn up plans for a simple lumber aquaduct to bring water in from the spring. Hethen would be free to work on his wind power idea (he was planning to stay specialized in Utilities). Each dreaming pig just needed 100 lengths of lumber. Each pig just had one problem: Lumberpig charged 1 coin per length and each pig only had about 50 coins in their piggy bank in a good month. Who could everseriously save 100 coins anyway? Ah well, they each thought before going to sleep, At least dreaming isfree. FREE MONEY! REAL OR A MIRAGE?One evening, their stories spent, Fisherpig and Buck gazed in silence over the blue green span of thelagoon. Something caught their eye. Do you see what I see Buck? Buck was already up on his hind trotters and half-way thereIt s a treasure box washed ashore and filled with 200 gold coins!!...If you promise not to tell Lumberpig,I ll split it with you 50/50.Sure. You and I have just inflated the island s money supply. Yeah! I just love inflation, don t you? Especially when you get the new money first and nobody elseknows about it!They laughed and feasted deep into the night. Each secretly planning to rise early the next morning to start working on their dreams! Dreams that would unfortunately turn into nightmares because of the treasurebox's evil inflation that they didn t yet understand.LUMBERPIG STARTS SELLING OUT OF INVENTORYDay and night weren t enough time anymore for Lumberpig to keep up his inventory levels. In the past few months both his brothers had been placing about four times the usual volume of lumber orders. Moremoney was good all right, but what he hadn t told them was that at this rate, he was running out of lumber!He kept his lumber shed locked up and no one knew the actual respectable quantity he usually had in inventory but him. Truth was, it was normally only about 100 lengths. And as hard as he worked, hecouldn t work fast enough to make more than one length a month. He was down to 20 lengths left andstared up at the ceiling at night, What should I do? Fisherpig and Buck are each buying about 2 lengths a month. How many surfboards and bonfires do they need? In less than six months I ll be out of stock!!" Hethought of raising his prices. "Hmmm. That would stop frivolous buying wouldn t it? Then the pig who needed the lumber most would pay the higher price, right? Sounds fair and even more extra money for me would be nice. No. I can t do that. I m not a greedy pig. I ll leave my prices where they are .maybethings will work out somehow if ..but..." zzz zzz. And he fell asleep.Meanwhile, Buck and Fisherpig were each 40% done on their respective projects and going full steam. Little did they know, that in 5 months, Lumberpig was going to hit them with news that would have theimpact of a 2x4 between the eyes.FREE MONEY WASN T REAL AFTER ALL. IT WAS A MIRAGE. IT DIDN T CREATE NEW RESOURCES IT WAS EVIL INFLATION EVIL INFLATION THAT CONFUSED CAPITALIST PIGS INTO STARTING PROJECTS THAT COULD NEVER BE FINISHEDSorry Buck. Sorry Fisherpig. See for yourself, Lumberpig opened the shed door wide. The lumber is allgone. I m sold out.AGGHHHH!!! NO!!! said Fisherpig. I m ruined! I used the raft lumber in my new boat construction that is only half done! Now I have nothing to fish with to make a living!! And Lumberpig, you made itworse! Why didn't you raise your prices right away to stop one of our projects sooner -- especially Buck's harebrained water slide!! So much extra WASTE!! -- just because you couldn't bring yourself to begreedy!!!...If only that phony inflation box had never appeared!!! , he sobbed.I m hungry, said Buck thoughtfully. And you know what? I screwed up too. I ve built a water bridge to nowhere. And, Fisherpig, you know what s funny about all this? If we hadn t been fooled by that box ofinflation, you and I could have pooled our savings and actually completed one of our projects.There was no fire on the beach that night. Not even a meager fish dinner. And three thirsty little pigs. Later they burned the inflation box to keep warm for a while.**THE END**Rev.1 Feb.24/09
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