Explain how competitive privately issued currencies would work automatically to provide consumers wi

Aug 17th, 2016
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Explain how competitive privately issued currencies would work automatically to provide consumers with protection against inflation?

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Answer-----------------On March 31, 1980, a major piece of legislation was passed by Congress to deregulatecommercial banks and other deposit-type financial institutions. This deregulation took theform of phasing out interest rate ceilings on various types of time deposits and of extendingthe type of assets thrift institutions were authorized to hold. However, this act took three stepsin the opposite direction: it required all banks, member and non-member, and all thriftinstitutions offering checkable deposits to hold the same percentage of these checkabledeposits as non-interest reserves, either in vault cash or on deposit with the Federal Reserve;it increased federal deposit insurance to $100,000 per account; and it allowed all theseinstitutions to borrow from the Federal Reserve.It is apparent that Congress did not intend to unleash the forces of competition on thefinancial system. If this had been Congress intention, it would have phased out, rather thanincreased, deposit insurance and would have left the amount and location of reserve holdingto the in dividual institutions.The purpose of this paper is to explain how a completely free banking system would operat

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