Privatizing the US Money Supply, Essay Example

The privatization fo the U.S. money supply would involve the government contracting the control of currency to an independent party.  “Along with creating strong incentives that induce productivity, privatization may improve efficiency, provide fiscal relief, encourage wider ownership, and increase the availability of credit for the private sector.” (Filipovic).  Governments often contract to private individuals or companies, as it can save money, and be more efficient in the long run.  However, there are issues involving both stability and trust.

In the short term, countries can benefit from the privatization of their resources.  This includes not only the supply of money, but basic services such as trash disposal, police and safety, and educators.   However, these needs are constantly add odds with notions of social, political, and ideological goals, which “enable us to examine empirically how political patronage becomes constrained by pressure from taxpayers.” (Lopez-de-Silanes p. 2)  While it is often cost effective to outsource, dedication to one’s own country makes it difficult to give full control to private individuals.  For this reason, it is not possible to fully implement the privatization of the U.S. money supply.

The primary obstacles in implementing the privatization of the U.S. money supply would be stability as well as confidence. Without some central authority to control the money supply, there is no longer any way to maintain the currency’s value.  In this case, the only other way would be for it to be valued based on private distributors. “The dollar must then be linked to some single good or a combination of goods and services.” (Yeager, p. 2) Trust in those who control the supply is as important as stability.  When trusting this to the government, it is not such an issue, as the government exists for the purpose of serving people.  However, if the supply is privatized issues of trust can arise between citizens and those in control.

References

Filipovic, Adnan.  (2005). Impact of Privatization on Economic Growth. Furman University. Issues in Political Economy, Vol. 14.

Lopez-de-Silanes, Shleifer, Vishny.  (1997). privatization in the United States. RAND Journal of Economics. Vol. 28, No. 3 pp. 447-471.

Mackenzie, G.A..  (1997). The Macroeconomic Impact of Privatization. IMF Paper on Policy Analysis and Assessment. International Monetary Fund. Fiscal Affairs Department.

Yeager, Leland B.  (2010). privatizing Money. Cato Journal. Vol. 30. No. 3. Cato Institute