Let There Be Money

The free market has its own brand of fiat
by ROBERT P. MURPHY
Robert P. Murphy
Jan. 08, 2015

For more than a century, skeptics of government power have rightly focused on the damage caused by interventions in money. As the market’s classic commodity moneys have been displaced by unbacked State-issued paper, libertarians — particularly those versed in Austrian economics — have disparaged fiat currencies and championed commodity-based money, especially gold and silver.

Unfortunately, the complaints against State fiat money can be imprecise at times, leading libertarians to form a faulty understanding of how money works. “Fiat money” is not unique to a coercive State. Neither does the State have the power to force its citizens to use something as money. In other words, it takes more than guns and cages. Until we’re clear on the market’s role in establishing the commonly accepted medium of exchange — that is, until we understand how the community of buyers and sellers gets to decide what counts as money — we will continue to muddy the waters with talk of fiat versus free-market money.

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