Paul Krugman, And the "Ersatz" Theory of Private Currencies

Although I’ve devoted many essays here to exploding myths about historical private currencies, there’s one I’ve yet to directly challenge. That’s the belief that such currencies only thrive in the absence of official alternatives. Otherwise, the argument goes, people would drop private currencies like so many hot rocks. Since this opinion assumes that private currencies are inevitably inferior to official ones, I hereby christen it the “ersatz” theory of private currency. Note that “currency” means circulating or (in today’s digital context) peer‐​to‐​peer exchange media: nobody denies that other sorts of private money, such as commercial bank deposits and traveler’s checks, can coexist with official alternatives. Read Full Article »