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In many countries, the issue of private paper currencies has been severely restricted by law.
A private $1 note, issued by the "Delaware Bridge Company" of New Jersey 1836-1841.
In the United States, the Free Banking Era lasted between 1837 and 1866, during which almost anyone could issue their own paper money. States, municipalities, private banks, railroad and construction companies, stores, restaurants, churches and individuals printed an estimated 8,000 different monies by 1860. If the issuer went bankrupt, closed, left town, or otherwise went out of business the note would be worthless. Such organizations earned the nickname of "wildcat banks" for a reputation of unreliability and that they were often situated in far-off, unpopulated locales that were said to be more apt to wildcats than people. The National Bank Act of 1863 ended this period.
In Australia, the Notes Act of 1910 basically shut down the circulation of private currencies by imposing a prohibitive tax on the practice. Many other nations have similar such policies that eliminate private sector competition.
Today there are several privately issued digital currencies in circulation that function as money. Transactions in these currencies represent an annual turnover value in billions of US dollars.
Many of these private currencies are backed by older forms of money such as gold.
Some examples of digital gold currencies include:-
In Scotland private banks are licensed to print their own paper money by the government.
Historically money was a metal (gold, silver, etc,) or other object that was difficult to duplicate, but easy to transport and divide. Later it consisted of paper notes, now issued by all modern governments. With the rise of modern industrial capitalism it has gone through several phases including but not limited to:
A. Bank notes - paper issued by banks as an interest-bearing loan. (These were common in the 19th century but not seen anymore.)
B. Paper notes, coins with varying amounts of precious metal (usually called legal tender) issued by various governments. There is also a near-money in the form of interest bearing bonds issued by governments with solid credit ratings.
C. Bank credit through the creation of chequable deposits in the granting of various loans to business, government and individuals. (It is critical that we understand that when a bank makes a loan, that is new money and when a loan is paid off that money is destroyed. Only the interest paid on it remains.)
Perhaps the most obvious way money can be destroyed is if paper bills are burned or taken out of circulation by the central bank. But, it should be remembered that legal tender usually constitutes less than 4% of the broad money supply.
Another way money can be destroyed is when any bank loan is paid off or defaulted upon or any government bond is redeemed the money value of the contract or bond is destroyed — taken out of circulation.
Money can be destroyed if savers withdraw funds from a bank, in which case that money can no longer be used for lending. Bank savings are actually a kind of loans — savers loan their money to a bank at a low interest rate or merely in exchange for the benefit of convenience or its security. The bank then uses this loan to loan to other people, at a higher rate of interest (so it can make a profit). When this happens the money exists in two (or more) places at once, and so the money suppy increases. When a saver withdraws money, the loan is "paid off" and it can no longer exist in more than one place at once, and this "double money" disappears.
In extreme form, a bank run or panic may drive a bank into insolvency , and if uninsured the savings of all its depositors are destroyed. Such bank failures were a major cause of the tremendous contraction in the money supply that occurred during the Great Depression, particularly in the United States. In that country many banking reforms were subsequently enacted during the New Deal, including the creation of the FDIC to guarantee private bank deposits.
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