Private currency: Difference between revisions
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[[Category:Privacy]] |
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[[category: Free economy]] |
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[[fr:Monnaie privée]] |
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[[ru:Частная валюта]] |
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Revision as of 11:16, 10 March 2009
 | It has been suggested that Alternative currency be merged into this article. (Discuss) Proposed since May 2008. |
| It has been suggested that Complementary currency be merged into this article. (Discuss) Proposed since May 2008. |
A private currency is a currency issued by a private institution. It is often contrasted with fiat currency issued by governments.
In many countries the issue of private paper currencies is severely restricted by law. [citation needed]
Today there are several privately issued electronic currencies in circulation, such as digital gold currency, that function as money. Transactions in these currencies represent an annual turnover value in billions of US dollars.[citation needed]
History
 | The examples and perspective in this section deal primarily with the United States and do not represent a worldwide view of the subject. |
In the United States, the Free Banking Era lasted between 1837 and 1866, when almost anyone could issue paper money. States, municipalities, private banks, railroad and construction companies, stores, restaurants, churches and individuals printed an estimated 8,000 different monies by 1860. If an issuer went bankrupt, closed, left town, or otherwise went out of business the note would be worthless. Such organizations earned the nickname of "wildcat banks" for a reputation of unreliability; they were often situated in remote, unpopulated locales said to be inhabited more by wildcats than by people. Yet according to Lawrence H. White's article in The Freeman "it turns out that 'wildcat' banking is largely a myth. Although stories about crooked banking practices are entertaining—and for that reason have been repeated endlessly by textbooks—modern economic historians have found that there were in fact very few banks that fit any reasonable definition of wildcat bank." The National Bank Act of 1863 ended the "wildcat bank" period.
In Australia, the Bank Notes Tax Act of 1910 basically shut down the circulation of private currencies by imposing a prohibitive tax on the practice. Many other nations have similar such policies that eliminate private sector competition.
One example of a currency that lost government support but retained use amongst a community is the Iraqi Swiss dinar.
Ithaca hours
The city of Ithaca in Western New York State has experimented [1] with barter [2] in which participating workers exchange services for Ithaca Hours which are used to buy goods and services forming a subprivate currency for a small locality. The system has been ruled legal provided all transactions are taxed and all currency is redeemable in United States Dollars.
Liberty Dollars
Currency backing
Today many private currencies are backed by a commodity to increase asset security and nullify inflation, which can be caused by an issuer increasing money supply. Some use established and historic forms of money, such as silver or gold, as in the case of digital gold currencies or the Liberty dollar.
It is possible for privately issued money to be backed by any commodity, although some people argue that perishable goods can never be used as currency, other than in bartering.[citation needed] One criterion that is regarded as critical for any currency backing material is its fungibility. Alternative views suggest paper money backed by energy (measured for example in "joules of electricity" or "joules of oil"), transport (measured in kg·km/h), or food for instance, may be used in the future.
Private Currency vs. Private Money
Private Currency is the opposite of the fiat currency while private money, in monetary economics, is the money supply created by private/commercial bank; in business, is the finance source other than bank.
Resources
- Hayek, Friedrich A. Denationalization of Money: An Analysis of the Theory and Practice of Concurrent Currencies 1977. ISBN 978-0255360876
