How Common Has Private Currency Been?

Lawrence H. WhiteRecently, an investment advisor and Bitcoin proponenttweeted the claim that “[f]or most of human history” the “[s]eparation of money and state was the norm, even if the state stamped their ruler’s face on the coin.” Some strong disagreement (and some strong support) followed the tweet. The mostcategorical criticism asserted: “Money is and always has been a creation of government. ” A somewhat milder challenge asserted that “Private moneys have seldom been main media of exchange.”First, let ’s clarify the object of the discussion. If we define “money” the way that economists usually do, to mean any “commonly accepted media of exchange,” including bank deposits and other media of payment by account transfer, the claim that private money has been rare is obviously false. State‐ ​provided money, mostly taking the form of paper currency issued by central banks and currency boards, is a small share of money balances held by the public today. In Sweden, government ‐​issued paper currency is rarely seen, and might be phased out entirely. In the United States, 90 percent of the money held by the public (as measured by the monetary aggregate M2) is privately issued bank deposits. Federal Reserve notes and Treasury coins together comprise only about 10 percen t of M2. For the U.S. economy itself, 10 percent of M2 is actually an overstatement, because an estimated 60 percent or so of Federal Reserve Notes are held outsid...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs