Full Money Market

I remember reading that Hayek proposed a system of privately-issued, competing fiat currencies. Most libertarians I talk to have only evil things to say about fiat currencies so how does this work out? Can paper currency without any store of value actually exist as Hayek proposed?

http://en.wikipedia.org/wiki/History_of_money#Trade_Bills_of_Exchange

In theory. Theory has it that unlike government-issued fiat currency, which gets its value from being accepted by the government in payment of taxes, and the associated clout of the government, private money gets its value from the reputation of the issuing bank. Theory has it that private banks, having more to lose and less to gain than the government, will be less likely to debase the money they issue.

Going further, even if they were to tell you that their notes were backed one-for-one by gold in a vault, how could you tell if they were telling you the truth? Are you going to rely on the government to regulate them?

Of course, we have seen how responsible banks and other corporations are these days.

I for one believe that though, in theory, there is no difference between theory and practice, in practice, …

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