So far we have obtained the following picture of money in a purely free economy: gold or silver coming to be used as a medium of exchange; gold minted by competitive private firms, circulating by weight; prices fluctuating freely on the market in response to consumer demands and supplies of productive resources. Freedom of prices necessarily implies freedom of movement for the purchasing power of the money-unit; it would be impossible to use force and interfere with movements in the value of money without simultaneously crippling freedom of prices for all goods.

Suppose, then, that the free market has established gold as money (forgetting again about silver for the sake of simplicity). Even in the convenient shape of coins, gold is often cumbersome and awkward to carry and use directly in exchange. For larger transactions, it is awkward and expensive to transport several hundred pounds of gold. But the free market, ever ready to satisfy social needs, comes to the rescue.

The idea of private coinage seems so strange today that it is worth examining carefully. We are used to thinking of coinage as a “necessity of sovereignty.” Yet, after all, we are not wedded to a “royal prerogative,” and it is the American concept that sovereignty rests, not in government, but in the people.

How would private coinage work. In the same way, we have said, as any other business. Each minter would produce whatever size or shape of coin is most pleasing to his customers. The price would be set by the free competition of the market.

Now we may ask: what is the supply of money in society and how is that supply used? In particular, we may raise the perennial question, how much money “do we need”? Must the money supply be regulated by some sort of “criterion,” or can it be left alone to the free market?

The critic of monetary freedom is not so easily silenced, however. There is, in particular, the ancient bugbear of “hoarding.” The image is conjured up of the selfish old miser who, perhaps irrationally, perhaps from evil motives, hoards up gold unused in his cellar or treasure trove—thereby stopping the flow of circulation and trade, causing depressions and other problems. Is hoarding really a menace?

Some theorists charge that a free monetary system would be unwise, because it would not “stabilize the price level,” i.e., the price of the money-unit. Money, they say, is supposed to be a fixed yardstick that never changes. Therefore, its value, or purchasing power, should be stabilized.

Monetary policy is—aside from war—the primary tool of state aggrandizement. It ensures the growth of government, finances deficits, rewards special interests, and fixes elections. Without it, the federal leviathan would collapse, and we could return to the republic of the Founding Fathers.

Our monetary system is not only politically abusive, it also causes inflation and the business cycle. What is to be done?

Few economic subjects are more tangled, more confused than money. Wrangles abound over “tight money” vs. “easy money,” over the roles of the Federal Reserve System and the Treasury, over various versions of the gold standard, etc. Should the government pump money into the economy or siphon it out? Which branch of the government? Should it encourage credit or restrain it? Should it return to the gold standard? If so, at what rate? These and countless other questions multiply, seemingly without end.