Steve Diamond says:>David Friedman, the anarcho-capitalist son of Milton, has a piece arguing for private money. The problem I see with the state power/fiat money argument is that there are lots of instruments out there that should qualify as money that are not creatures of state creation. A recent article in one of the Hayekian journals actually makes this kind of argument in a discussion of money market funds - which, of course, have no reserve requirements.<
all of the near-moneys are based, directly or indirectly, on fiat money. For example, money market funds hold a lot of T-bills as assets. Without the stability that U.S. power and the power of the Fed (a government agency) provided, the MMFs couldn't get anywhere. In Marx's time, it was a country's gold reserves that formed the "monetary base," the stock of "high-powered money," upon which the whole system of money and near-money rested. Now it's dollars, which are in turn based on U.S. state power. (Other countries do hold other currencies as forex reserves, but most of these get their stability from the power of the states that issued them, which is in turn dependent on the success of the US-dominated hegemonic coalition.) -- Jim Devine.
