| | This quote displays ignorance in several areas.
First, the government has every reason to create its own money - as does any agent, General Motors, UBS, or you. It is convenient for even a limited government to do so. The government may not operate a central bank - lending money in commerce to banks - but it surely can operate a Mint and Printing Press. Moreover, it is perfectly free to store its money where it pleases, just as - with appropriate procedures - it can contract for painters and gardeners and pencils and battleships. And placing its money in commercial storage - versus "Fort Knox" - may result in income or expenses. These are administrative details, not ethical principles.
Moreover, the birth of "central banks" (so-called) was a consequence of the creation of government bonds in the commercial revolution of the 17th century. A government bank for government finances is no different from a government Mint or a government Library or a government Printing Office. (The alternative is to claim that the government has no right to borrow money ... and no right to keep records or to report its actions to its citizens...)
Second,historically, in the period mentioned, from the Civil War to 1913, the US government imposed the National Bank system. First, it killed off almost all private banks with a tax. Then, it required that to open a National Bank, the charterers had to deposit at least $25,000 in gold in the US Treasury for which they would receive interest-paying bonds, against which they could issue their own notes up to 90% of that value. Thus, we have the legacy of hometown "First National Bank" all over and a few "Second" and even today's 5th/3rd of Ohio. This was not laissez faire banking. Other banks were state chartered. Nowhere was banking as free and open as, say, shoe manufacturing.
I agree that the government does not necessarily need to make its own monetary media.
I just put a post on Necessary Facts my blog here about this, based on a discussion over on MSK's OL.
In two other posts on my blog (linked in that above) I point out that numismatics is the evidentiary proof of economics. It needs to be said because when it comes to the actual stuff of money, Mises was no farther ahead than Marx. (Hayek came closest, but, again, he lacked the evidence he needed because he knew noting about numismatics.)
(Edited by Michael E. Marotta on 9/30, 10:20pm)
I point to "The Changing Role of Foreign Money in the United States, 1782-1857" by David A. Martin in The Journal of Economic History Vol 37 No. 4. Dec. 1977 as being a correct summary of important facts. I caution against Murray N. Rothbard's A History of Money and Banking in the United States: The Colonial Era to World War II which is troubled by problems of fact and citation.
(Edited by Michael E. Marotta on 9/30, 10:22pm)
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In laissez-faire capitalism, the government has no function to perform with regard to money. There is no central bank. ... This is essentially the monetary system that the United States had between the Civil War and the establishment of the Federal Reserve in 1913. Under that system, the United states had an average annual rate of economic growth (over 5 percent a year) higher than any country has ever had over a similar period of time in the history of the world.
