Thread by @GeorgeSelgin

States have been monopolizing currency of all sorts since ancient times, and they have been claiming for just as long that their monopolies are necessary to preserve the integrity of their nations' currency stocks. So necessary that threats to them were typically capital crimes.

The claims were first made w.r.t. coinage. They were never valid. Coins are standardized metal discs, and there is no reason at all why they couldn't be privately and competitively supplied, just like many other standardized products.

What's more, we know it, not just from theory, but from evidence taken from those rare instances in which govt's have tolerated private coinage. Here's a brief summary of U.S. experience w/ private gold coins: fee.org/articles/priva…

And here's a classic, older study: catalog.hathitrust.org/Record/1003273…

"Fractional" (small change) coins have also been successfully produced by competing private mints and issued by private issuers. In the U.K., it was private initiative that 1st solved "The Big Problem of Small Change." I tell the story here: amazon.com/Good-Money-Bir…

If competition encouraged the production of "good money," the Royal Mint's monopoly was a source of every sort of perverse incentive leading to its opposite. Details here: jstor.org/stable/2322655…

Nor are modern monopoly mints much better: alt-m.org/2020/07/10/whe…

So why did governments monopolize coinage if not for our own good? For the seigniorage revenue, of course! The motive was essentially the same one that once gave us gov't monopolies in soap, salt, mining, and all sorts of other stuff. All were abused. All save coining now gone.

For an overview of the seigniorage motive's role in government control of money see here: cato.org/sites/cato.org…

It was mainly thanks to official mint's crappy coins that we got our earliest banks and bank-issued coin substitutes, including banknotes, that ultimately reduced the need for coin--and gov'ts seigniorage revenues along with it. So guess what happened next?

Why, governments muscled their way into the paper currency business, eventually monopolizing it as well, with rare exceptions. But in many cases they didn't do so w/out a fight. Vera Smith's wonderful book tells that story. econlib.org/library/LFBook…

For more on the U.S. story, see my "New York's Bank," which I wrote as a corrective to both "triumphalist" or "Whiggish" accounts and crude conspiracy theories. "cato.org/publications/p…

Nor is it by any means clear that the Fed has lived up to its promises. sciencedirect.com/science/articl… (And this was written before 2008.)

So, when some central bankers or other government officials now tell you that they've just _got_ to monopolize digital currency for your own good, please don''t take their word for it. If experience is any guide, they're trying to sell you a digital bill of goods.

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