Sunday, September 2, 2012

Coins Without Realms

Hayek suggested an end to monopoly banking and an open market in monetary media.  The national governments of the world did not take his advice - at least not directly.  However, innovation continues, of course. Bitcoin is well-known today as the latest in line of development perhaps originating with cryptographer David Chaum, as public-key cryptosystems such as RSA and PGP made it possible to validate anonymous transactions.

Americans have an uneasy love affair with money.  Benjamin Franklin's Way to Weatlh (available here) was quoted at length by Max Weber in The Protestant Ethic and the Spirit of Capitalism.  If we had kept to the capitalism of Benjamin Franklin and Adam Smith, Ayn Rand could not have written Atlas Shrugged

When polled on the paper dollar versus dollar coins, Americans overwhelmingly decline the coin and demand paper.  This is nothing new.  For an entire generation, men's wallets have lacked coin purses.  That is why this item from Gizmodo about a portable safety razor, the "Carzor" startled me.  Perhaps a European, this man's wallet is bulging with coins. 

The Carzor fits into your wallet 
but coins may not ... or need not...
Today, even though Americans demand paper, the US Mint strikes dollar coins, currently, the Presidents series. Congress directs the Mint.  The result is in your wallet (or maybe not). 

This past April, the Royal Canadian Mint asked developers to submit proposals for "MintChip" a digital currency.  Responses were thick and the Monnaie Royale Canadienne quickly closed its request.  Forbes commentator Jon Matonis cogently noted: "The point of digital currency, and especially free-market digital currency, is to broaden the avenues for issuance and adoption of alternative nonpolitical monetary units. Most electronic cash systems already expand and revolve around the State-issued currencies although they don’t have to." (Article here.)  
Be that as it may, the winners of the Mint Chip Challenge (Le Défi Cybermonnaie) will be announced September 12, 2012. (Link in English here au en francaise ici.) 

The Royal Canadian Mint has been pushing the limits of its products and markets for over 20 years.  They launched a commemorative 25-cent coin program which the US Mint copied.  The MCR offers coins in 5-Nines gold, .99999 pure, which the US Mint does not copy.   So, their testing the markets for digital currency perhaps indicates the maturity of this medium.  

Cryptographer David Chaum suggested digital currency in the early 1990s, as an application of public key cryptosytems.  Despite - or perhaps because of - interest by IBM and other large entities, nothing came of that.  However, less formally, over the past 20 years e-gold and flooz also appeared and then collapsed, both, in fact, as a result of law enforcement investigations.  While e-gold was ad hoc, flooz actually seemed like a possibility.  I sold essays on numismatics to a libertarian website.  They paid me in e-gold which I used to buy a facsimile of Noah Webster's 1828 Dictionary of the American Language from a Christian bookseller.  Before my next transaction, the markets were closed.  

One form does seem to have be working.  People do use their iPods to transfer money.  I have seen people buy coffee at Starbucks.  When I mentioned this to a co-worker majoring in physics at the University of Texas, he said that his bank let him transfer money to a friend's credit card when they were out to dinner.  

My interest in numismatics only came late in life and as a direct consequence of my having read Atlas Shrugged long ago.  I have been a member of the Michigan Token and Medal Society (Mich-TAMS); and I have exhibited both coal mine tokens and Bay Bucks community currency at conventions of the Michigan State Numismatic Society.  Hayek only called on governments to recognize that competitive markets in monetary media always have existed and only will continue to evolve. That said, I factor in a memorandum of caution.  Chatting in a coin store, a Mich-TAMS officer reminded me that one foot outside the doorway of a video game parlor, my video game tokens would be deeply discounted.  In other words, theories are nice, but reality is more conservative.   So, with digital cash, we must wait and watch.

Also on Necessary Facts
Numismatics: the Standard of Proof in Economics
Money as a Crusoe Concept
Electronic Money: Coins without Realms

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