&gt; Your definition of &quot;currency&quot; is too narrow, though. It includes much more than monetary certificates for bank deposits. See the history of local currencies, Silvio Gesell&#x27;s Freiwirtschaft, etc.<p>A local currency is no different in practice than a national currency. Its use is just restricted to a particular area and thus its value is tied to a different basket of goods and backed by a different issuing authority. But all of the derivative instruments would scale up and down across both categories of currency - local bonds vs national bonds, local bank deposits vs national bank deposits, local equities vs national equities.<p>&gt; Even within a free banking system, there would be inherent limitations in that banks would have to adjust their reserves so as to make full use of their lending capacity and profit on interest, because of the clearinghouse mechanism acting as a reflux. You&#x27;re aware of the free banking theories of Selgin, White and Dowd, I presume.<p>This addresses the possible amount of risk in the system by using clearing house latency to set a cap on fractional reserve banking and ensuring that banks are marking their positions to market and not lending out too much without enough assets to back their loans. (Note that it does not eliminate risk in the system, but that banks would have to agree with one another on the latency or &quot;reflux&quot; as you call it that would keep the system somewhat safe from bank runs and the proliferation of unsecured loans.)<p>It does not address the issue of the redistribution of wealth and the creation of social safety nets that would be minimized under a free banking system as they are inefficient in a pure profit sense.<p>&gt; Once you extend &quot;currency&quot; to being much more than bank money, though, I think your concerns become severely diminished.<p>I use &quot;currency&quot; as Hayek does: <i>a generally accepted media of exchange</i>. This definition is already sufficiently broad, as it captures all money created by all central banks, as well as most forms of marketable equity and debt, which are simply first order derivatives of the money created by a central bank. I&#x27;m not sure what &quot;bank money&quot; refers to but I assume this definition covers that asset class as well. So it is almost impossible to broaden the definition I am working with, and it does not diminish the validity of my argument or concerns at all.