: The market determines the number of pounds of silver to gold, just as it does now on international markets without some "social authority." Free banking has flourished in markets where governments have not opposed it (which they typically do as a way to control the populace.) See the internet for one example, 17th century Scotland for another, the Medici banks for still another.Who, though, sets gold as the standard? If I have a lump of Gold, and a Lump of silver, what are each worth- this can only be determined by reference to a third term (say bread). Further, without a state, what is to stop me forging money- even gold can be forged for teh unwary. Further, there is a limitted quantity of Gold, much less than actually could be used in circulation (hence why we are off a gold standard).
You cannot have money without a guaranteeing authority, else it becomes meaningless- or more exactly, a return to barter.
The point of money is its universiality- it can buy anything (if you have enough of it)- without universal money we cannot have wages, for example, and without some authority deciding what the universal currency is, we cannot have one (I pay my workers in silver, because thats cheaper for me, or I pay them in cotton even...).
Markets cannot exist without authority to gaurantee them...
