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A. The Stock of the Money Commodity
The total stock of money in a society is the total number of ounces of the money commodity available. Throughout this volume we have deliberately used “gold ounces” instead of “dollars” or any other name for money, precisely because on the free market the latter would only be a confusing term for units of weight of gold or silver.
The total stock, from one period to another, will increase from new production and decrease from being used up—either in industrial production as a nonmonetary factor or from the wear and tear of coins. Since one of the qualities of the money commodity is its durability, the usual tendency is a long-run increase in the money supply and a resulting gradual long-run decline in the PPM. This furthers social utility only in so far as more gold or silver is made available for nonmonetary purposes.
We saw in chapter 3 that the physical form of the monetary commodity makes no difference. It can be in nonmonetary use as jewelry, in the form of bars of bullion, or in the form of coins. On the free market, transforming gold from one shape to another would be a business like any other business, charging a market price for its service and earning a pure interest return in the ERE. Since gold begins as bullion and ends as coin, it would seem that the latter would command a small premium over the equivalent weight of the former, the bullion often being a capital good for coin. Sometimes, however, coins are remelted back into bullion for larger transactions, so that a premium for coin over bullion is not a certainty. If, as generally happens, minting coins costs more than melting, coins will command the equivalent premium over bullion. This premium is called brassage.
It is impossible for economics to predict the details of the structure of any market. The market for privately issued gold bars or coins might develop as homogeneous, like the market for wheat, or the coins might be stamped and branded by the coin-makers to certify to the quality of their product. Probably the public would buy only branded coins to ensure accurate quality.
One argument against permitting free private coinage is that compulsory standardization of the denominations of coins is more convenient than the diversity of coins that would ensue under a free system. But if the market finds it more convenient, private mints will be led by consumer demand to mint certain standard denominations. On the other hand, if greater variety is preferred, consumers will demand and obtain a more varied number of coins.29
- 29. For an exposition of the feasibility of private coinage, see Spencer, Social Statics, pp. 438–39; Charles A. Conant, The Principles of Money and Banking (New York: Harper & Bros., 1905), I, 127–32; Lysander Spooner, A Letter to Grover Cleveland (Boston: B.R. Tucker, 1886), p. 79; B.W. Barnard, “The Use of Private Tokens for Money in the United States,” The Quarterly Journal of Economics, 1916–17, pp. 617–26.
Recent writers favorable to private coinage include: Everett Ridley Taylor, Progress Report on a New Bill of Rights (Diablo, Calif.: the author, 1954); Oscar B. Johannsen, “Advocates Unrestricted Private Control over Money and Banking,” The Commercial and Financial Chronicle, June 12, 1958, pp. 2622f.; and Leonard E. Read, Government—An Ideal Concept (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1954), pp. 82ff. An economist hostile to market-controlled commodity money has recently conceded the feasibility of private coinage under a commodity standard. Milton Friedman, A Program for Monetary Stability (New York: Fordham University Press, 1960), p. 5.