Is a Free-Market Monetary System Stable?
The issue of stability centers on the question of the controlability of a currency’s value under a “perfectly” competitive scheme. This is sometimes framed, inversely, as the problem of “infinite” levels of money prices presumably resulting from a laissez-faire regime. Boris Pesek, for example, expresses the belief that in the long run a competitive paper currency system would generate a situation in which “money is so ‘abundant’ as to sell for a zero price and be a free good,” producing a “regression into full-time barter since free money is worthless money, incapable of performing its task of facilitating exchange of goods among persons.”74 Benjamin Klein, as noted earlier, has demonstrated that such a result depends on improperly specified or protected property rights in the currency industry, and would emerge in any market in which brand names could be counterfeited. In such a market, producers and consumers lack a signaling mechanism by which to identify the outputs of different f
