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The Coming Private Dollar

Fighting The Government's Money Monopoly

There are two monopolies that governments are loath to let go of. And no, the Post Office is not one of them (although that may be true of the USA!). They are money and education.

The government is determined to monopolize both money and education. Why? Because these two essential elements to a civilised society represent the potential "escape route" to genuine freedom.

Education is essential to a free society. And the only possible way to keep people from becoming free is through "miseducation". That's what state education provides - education by government - for government.

But government education is under attack. On all fronts government education is failing the students. Standards are falling and parents are beginning to rebel. You can see the market response to this phenomena by the growth of after-school learning centres. You can see this in the growth of home schooling.

Because parents are intimately concerned with the outcome of education - you can't forever deliver a shoddy product, and hope that parents will swallow it. And they won't.

The government monopoly over education is soon to end. It has to. The world cannot wait any longer for failed ideas to deliver educated citizens. The pace of change in the world is so rapid that the failings of the government education system are becoming plain for all to see.

That leaves just one bastion of government monopoly - the money supply. Marx was right to make the issuance of money one of the main policy planks of his Communist Manifesto. It is the penultimate method of societal control.

So entrenched is the idea that only the government can issue money, that 99.9% of people have absolutely no grasp of how it could be done any differently.

But it was not always the case. In Scotland, between 1793 and 1845, the banking system was almost entirely free, with each bank issuing its own notes (promissory notes redeemable for gold). In other words, banks issued their own private money.

The system worked, because banks had to honour their promises. If a bank ran out of reserves, its owners (shareholders) had to pay the depositors out of their own pockets. Now, there's a sound idea!

There was no such thing as deposit insurance, or government backed banking. A bank was a business, and they had to win customer confidence by providing a stable, redeemable currency.

Such was the success of Scottish private banking, that many commentators have stated that the country's prosperity during this time, was partly due to its banking structure.

An interesting fact highlights this success. In 1841, total losses to Scottish depositors over the preceding 48 years were estimated at around 32,000 pounds. Whereas public losses in London alone were twice that amount in just one year!

Why the discrepancy? The English already had a Central Bank - and their downside risk was 24 times greater that their Scottish counterparts.

You will know we are moving closer to a genuinely free society when governments lose their monopoly of money issuance. And this is not as unlikely as it seems. In fact, this possibility is being explored in a recent Federal Reserve discussion paper.

The advent of a truly international marketplace (the Internet) is driving the demand for an international currency. The existing national currencies cannot meet the demands of this global market. And in the absence of a viable alternative, the US dollar is becoming the defacto global money of choice.

It is only a matter of time before some private organization starts issuing private money. It will no doubt start as a method of settling accounts on the Internet. And it will be based on the latest encryption technology - providing its users with total privacy. This feature alone will attract new users - people desperate to escape the clutches of their respective governments.

As soon as you can truly say your money is your own, and banking provides you with the utmost in financial privacy, then the essential ingredient for true freedom will have arrived.


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