Let me also hypothesize that to improve the safety of this unstable fully-private fiat currency system, it's likely that competing currency issuers would come to honor each others' currencies in order to facilitate customer switching and gain new ones in the event of one of them collapsing. For example, Visa and Mastercard are companies that will not be around forever, but if for some reason Visa were to implode tomorrow, practically overnight, another company (maybe even Mastercard, or Discover, or American Express, or Maestro, or whatever) would swoop down and honor that currency, thereby gaining a truckload of new customers, many of whom one can presume own firearms and wouldn't be happy about their life savings suddenly becoming worthless. :)what if rather than one government that issued a government fiat currency that we all just had to live with, we had several private money issuers that each issued their own fiat currencies that competed against one another to be the most stable? These agencies could spend the new money into existence, they could do virtual helicopter drops, or they could have a "customer's dividend" and deposit new money straight into peoples' electronic accounts. These companies would have a strong incentive to be good stewards of the currency since people could always move their money to a different issuer. But in the event that the issuers were reckless, presumably private money insurance agencies would arise to insure against the risk of a money issuer going bankrupt, or their money inflating too much, or a large number of merchants declining to accept it.
It would seem to me that we're actually pretty close to this system. Visa and Mastercard have already created a virtual electronic currency that is only denominated in dollars for convenience. They could easily make a new currency and require that those who accept credit and debit accept the new currency. If this happened, I would be using it for 99% of my transactions from tomorrow onward. And when I accumulate a PayPal balance, I am, for all intents and purposes, in possession of a private fiat currency. Same with iTunes credit, Amazon credit, tickets at amusement parks, etc.
I think one of the big reasons private companies--especially the credit card processors--don't create a new private currency is because the US Dollar is, despite its flaws, still too good to make it worth it. Occasionally I wonder if something like that wouldn't happen if there was, for whatever reason, some kind of massive monetary disaster, especially the kind that resulted in people making fewer credit and debit transactions.
To facilitate these types of inevitable market adjustments, I think another likely scenario is that companies would eventually commoditize a "standard" for their currencies that they could conform to. For example today I can buy a wireless router from any company, but they all conform to the 802.11a, b, g, and n specs. All the web browsers understand HTTP. These are voluntary specifications. The private currency issuers would probably come up with similar standards. It would be in their interest to.
So you wouldn't necessarily need to worry that your Starbucks Points might become worthless if Starbucks went belly up because you would know that your SPs were compatible with and accepted by the machines that accept iBucks and MasterCash. And even if you still did worry, you could purchase cash insurance that would, in the event your cash somehow did become worthless, replace all your old worthless cash with its equivalent value (prior to the collapse presumably) in a worthwhile cash.
I've never gotten a reassuring answer to the question of how a violent coercive property expropriator is supposed to go about satisfactorily guaranteeing property and freedom.
