How to Transition to a Free Market in Money and Banking

Abstract

In this chapter, I discuss how to transition from the current monetary and banking system to one with gold and 100-percent reserves backing all checking deposits and banknotes. I discuss why the gold dollar must be defined with a sufficiently small quantity of gold (or, alternatively, the “price” of gold must be sufficiently high) as a part of the transition. I discuss how the government can make the transition quicker and easier by facilitating transactions in gold, such as by not taxing capital gains from the appreciation of gold. I also discuss how the government must hand over all minting responsibilities to private minters and hand over all gold it possesses (except that which will back the money the government possesses at the time of the change). Additionally, I discuss how the transition can take place without a financial contraction. I also discuss many other issues that must be grappled with in the transition to gold. Finally, I critique a number of alternative plans to transition to a gold standard or monetary systems that incorporate gold in some way.