Hayek and the Denationalization of Money

Discussion

Stefan Eich:

“EM: Hayek’s 1975 address at a London free-market think-tank – expanded into a remarkable brochure titled The Denationalization of Money ¬– made a case for the complete removal of the state from the process of issuing money. Money issuance would, thus, be completely privatized, in order to “protect money from politics.” Before we discuss the influence of this essay on the proponents of Bitcoin and other crypto-currencies, could you give us some context to Hayek’s intervention? What were the historical conditions (e.g. the demise of Bretton Woods, skyrocketing inflation) that made him take such a position – something of a departure from his earlier stance, which still granted the state some authority over monetary matters?

SE: It’s in the context of the Great Inflation of the 1970s that Hayek gives up his prior acceptance of central banking and essentially becomes radicalized. In his 1974 Nobel speech and in his correspondence, one can find him making grand pronouncements about how inflation will lead to the collapse of Western civilization and the loss of the Cold War. For him the perceived stakes could not have been higher!

As important as his change of mind is, however, the change in perception among his audience is probably equally important. By 1976, these kinds of pronouncements – which would have been shrill beforehand – had arrived in the mainstream. In the fight against inflation, politicians had gradually adopted a military language of combatting a skilled enemy and the ground was prepared for Hayek to launch a radical missive that would have been shocking a decade earlier.

All that happens, of course, in the wake of the collapse of the Bretton Woods system and a disorienting new global economic world in which exchange rates are now freely fluctuated. This uncertainty was further compounded by attempts on the part of first OPEC and then the G77-backed New International Economic Order (NIEO) to fundamentally alter global economic relations. Finally, on the level of theory, there is the rather violent breakdown of the postwar Keynesian consensus, which opens the door to radical ideas in economics, such as monetarism, that had been seen as crude and fringe beforehand. Hayek is able to capture all that anxiety and uncertainty when articulating his proposal to rob states of their ability to issue money.“

(https://the-crypto-syllabus.com/stefan-eich-on-hayek-and-money/)

More information

• The Arusha Initiative for the Democratization of Money at the Global Scale