Fed Monopoly Cracking?

|

The state of Nevada contemplates its own silver coinage.

NEXT: Attention Title IX Fanatics

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Gary: mark the day, I agree with you on your post.

  2. The *Insight* articles are interesting, but I lost a bit of respect for the writer when she referred to “the scrap between Alexander Hamilton and Andrew Jackson.”

  3. Maybe they can replace that creepy pyramid thing with a pair of dice.

  4. Heh. I look forward to a return to the halcyon days of competing currencies. After all, who wouldn’t want a railroad dollar economy. Like frequent flyer miles, but more transferrable.

  5. Steve –

    You telling me there’s $20 worth of silver in a crackpot Nevada coin?

    Others –

    I love Reason and respect libertarian ideas. God knows we can use them. But this is crackpot silliness and you all should be bright enough to see that.

    Next we’ll be talking about whether Texas is really a state or whether sidewalks should be privatized. Crackpot, crackpot, crackpot. Harmless, sure, but still crackpot. Maybe the gold standard was better, but having Nevada issue $20 “coins” is really quite…I need a thesaurus…crackpot.

  6. It can be argued that WWII was partly started as a result of government insistance on its monopoly on money (and that the Depression was prolonged unnecessarily). Roosevelt outlawed local scrip amid various and sundry (and unconstitutional) Bank “reform” acts. Same with the Austrian gov’t outlawing ‘Worgl’ currencies. Maybe now the long dark nightmare experiment of “full faith & credit in gov’t” (curse Nixon) will be coming to an end, but i’m not holding my breath. Buy gold.

  7. Long nightmare? Jesus, I feel like I’m in high school again. The Randroids are out in force today. Buy gold and guns! Let’s start a successionist movement before the feds start building concentration camps! Yeah!

  8. Jesse Walker,

    Ha ha ha. ๐Ÿ™‚ Jackson was in the Congress from 1796-1798 (he was even a Senator for a short while), but I don’t recall him duking it out intellectually with Hamilton, who was long dead before Jackson burst onto the national scene during the War of 1812. I wonder if Jackson met Hamilton though during their forays into the capitol (Philadelphia).

  9. Stretch Cannonbury,

    Gold is a religion to some people.

  10. Pretty smart – sell an ounce of silver for $20 (in coin form) that is worth less than $5 for the metal. $20 slot machines here we come!

    http://www.technicalindicators.com/silver.htm

  11. Exactly! That’s called (if I remember correctly) signorage…seignorage…something like that. The difference between what bills and coins cost to make, and what they’re sold for. Nevada is about to get into the seignorage business.

    (Memo to self…after work, buy thesaurus and dictionary)

  12. This is a very weird initiative, if it’s true. The Fed is arguably unconstitutional, but Nevada’s minting of its own currency would be also. See the Constitution, Article 1, Section 10: “No state shall…coin money.” They acknowledge this, but I’m not sure why the Fed’s desertion of Section 8 frees Nevada to ignore section 10 but not from its obligations under the Constitution entirely.

    And Cannonbury: you should really do some reading on the history of fractional reserve banking, the Federal Reserve, and specie in the US. Before 1933, all our paper money was directly redeemable for gold. (The Fed had inflated the currency by issuing more notes than they had backing for, true, but the principle was there.) That’s why they’re called “Federal Reserve _Notes_”; a note is, legally, a promise to pay. (See the Uniform Commercial Code, chapter 3, section 104(e).) In ’33, the convertibility of notes into gold was suspended, but they didn’t stop calling them notes, which is why people say our money is “worthless” – they’re now officially a promise of nothing. Specie is thousands of years old, and convertibility into specie is hundreds of years old, whereas “notes for nothing” are about 70 years old (in this country, anyway). One of these ideas is crackpot, alright, but I don’t think it’s the same one you think it is.

  13. JD Weiner –

    First, I’m a coin collector, so I know plenty about the history of coinage. Second, I’m an economist, so I also know plenty about the Federal Reserve.

    My point clearly is not that gold-backed money or notes are crackpot, but specifically the notion of NEVADA making TWENTY DOLLAR silver coins backed by…what?…should be some sort of libertarian cause, is totally and irredeemably crackpot. No two ways about that, chester.

    Everybody knows the history of the gold standard in the US. But this ridiculous libertarian chestnut – this sense that there’s some kind of urgent need to get back to a gold standard right quick because any minute now the global economy is going to crash – is also utterly crackpot. I personally wish we’d never left the gold standard, but I’m also observant and intelligent enough to see that the Federal Reserve works well enough, and that attempts by libertarians to undo it make them all look like a bunch of loony wacko crackpots.

  14. Stretch may also want to read some Friedman about the concept of “money”.

  15. Russ –

    And you might want to read the newspapers and find out that society isn’t collapsing and that our economy is still functioning pretty well and that US dollars are as good as gold on every square inch of this planet.

  16. All currencies rely on a collective agreement to regard them as such. Gold would not be valuable unless we agreed that it is. It is EASIER to get people to agree that gold is valuable because it is useful for things people like other than a medium for exchange, and because the supply is more restricted (but if we could dig up new gold as fast as we could print money, we’d have the same problems with inflation.) The central political issue is one of who has the power to control the money supply, whether gold or paper. If chemists suddenly devise a substance that can perform all the functions of gold, and can be manufactured in massive quantitities for cheap, then a warehouse of bullion will be just about as good as a big stack of confederate money.

  17. During the gold rush, California produced gold coins in various denominations. They were all valued based on the statutory value of gold – $20.67 an ounce – so people using them could trust in their value.
    The Nevada coin is different. It has perhaps $5 to $6 worth of silver, but a state mandated value of $20. It might circulate in casinos, along with privately produced chips, but it is not a store of value against inflation.
    If Nevada were to issue 1 ounce silver medallions, sold at market price, there would not be a problem – they could compete with other one ounce bullion pieces issued by the U.S.,Mexico and various private mints

  18. Stretch,

    Will do.

    If that is the case, then I don’t see how a competing currency will cause any societal or economic collapse.

    OF course the idea has as much ability to fly as a lead balloon, no banks are going to buy in (though currency exchanges may bite on it). But many people used to think the earth was flat and that G.W. Bush actually gives a darn about Mohommed al-Sixpack’s self-empowerment, too.

    I just think you’re dismissing the idea as crackpot too quickly. What if the whole thing costs almost nothing to implement, even if no one buys-in to the concept? Especially in a state where casino chips practically double as currency anyway? And if you think cynically enough, this could be a clever way to circumvent national income tax, a darned noble idea in my opinion.

  19. One thing that needs to addressed here is that the price of Silver Bullion does not determine its official value as a coin because the metal has to be processed in order to become a coin. A very good example is on NORFED’s website where they explain why their currency is worth more than the price of Silver Bullion.

    http://www.libertydollar.org/madeasy.asp

    The Federal Reserve Notes are backed by nothing more than Government debt. Banks buy US Debt and hold it as reserve. Because the interest on this debt is always larger than the principle and ammount of currency issued it is mathematically impossible to pay of the debt. When this debt is paid off, fiat currency is extinguished. Its gone, until its loaned back into circulation.

    The only time Federal Reserve Notes would hold value is when Fractional Reserve Banking ends and the corrupt banking system that surrounds it is destroyed.

    I applaude Nevada for standing up to a dangerous corrupt system.

    Gold and Silver can only be mined, but fiat currency can be create just by writing IOUs to everybody.

  20. Where can I get my gold pressed latinum? ๐Ÿ™‚

    I think the Ferengi are the model Randroids should follow. ๐Ÿ™‚

    BTW, before Randroids attack, I’d like for you to explain to me Rand’s utterly moronic notions about the problem of universals.

  21. Stretch: Okay, fair enough!

    I agree that Nevada taking an amount of silver worth ~$5 on the open market and stamping it “$20” is strange and not really tenable, not if they plan on maintaining any sort of convertibility. If they do, why not buy silver outside of Nevada, take it in, and have them coin it, then exchange it back for FRNs and export the FRNs again? I assume their seignorage is not going to be 75% of the face value of the coins… Remember that “dollar” is not a fixed amount, anymore; there’s nothing that makes an ounce of silver not worth $20, theoretically. But we’re both speculating here: I’d really like to see the details of this plan.

    Whether an “urgent need” to get back onto a gold standard is a libertarian chestnut – I don’t know if I can agree with that. It’s not even mentioned in the party platform, unless you count the tangential reference to individuals being free to choose their own method for settling debts. I do think libertarians tend to like the idea of specie currency, partly because they feel it imposes some discipline on government and partly because they just like being gadflies! It’s not just limited to libertarians, though, as there are a number of more traditionally conservative types who speak in favor of it. As has Greenspan, but I’m sure you knew that. :^)

  22. close but no banana hammock ๐Ÿ˜€ gold bugs cite greenspan’s dec. 19 speech as his endorsement of the gold standard:

    “Although the gold standard could hardly be portrayed as having produced a period of price tranquility, it was the case that the price level in 1929 was not much different, on net, from what it had been in 1800. But, in the two decades following the abandonment of the gold standard in 1933, the consumer price index in the United States nearly doubled. And, in the four decades after that, prices quintupled. Monetary policy, unleashed from the constraint of domestic gold convertibility, had allowed a persistent overissuance of money. As recently as a decade ago, central bankers, having witnessed more than a half-century of chronic inflation, appeared to confirm that a fiat currency was inherently subject to excess.”

    but fail to read beyond the first paragraph! which states:

    “But the adverse consequences of excessive money growth for financial stability and economic performance provoked a backlash. Central banks were finally pressed to rein in overissuance of money even at the cost of considerable temporary economic disruption. By 1979, the need for drastic measures had become painfully evident in the United States. The Federal Reserve, under the leadership of Paul Volcker and with the support of both the Carter and the Reagan Administrations, dramatically slowed the growth of money. Initially, the economy fell into recession and inflation receded. However, most important, when activity staged a vigorous recovery, the progress made in reducing inflation was largely preserved. By the end of the 1980s, the inflation climate was being altered dramatically.

    “The record of the past twenty years appears to underscore the observation that, although pressures for excess issuance of fiat money are chronic, a prudent monetary policy maintained over a protracted period can contain the forces of inflation…”

    of course if the bernanke “doctrine” is ever ushered into implementation (as may be the case soon, and moroever, all over the world, e.g. even the swiss have adopted it!) then, uh, this would be a good time to buy gold ๐Ÿ˜€

  23. It’s crackpot lunacies like this that give libertarians a bad name.

  24. How is this crackpot? The US has a long history of competing currancies. It doesn’t appear to be unconstitutional either.

  25. Many American cities have their own currencies. Burlinton, Vt. is one that comes off the top of my head. You can exchange these local currencies for dollars as well. I also read about a similar city currency program in Oklahoma or one those other square states.

  26. The Sagebrush Rebellion is alive and well, I see.

    Fed Money has no value short of what we agree to. There isn’t $.25 of metal in a quarter. Same with the other coins. And paper money has the value of the paper it’s printed on. I’ve argued in the past that nothing really has any value unless we agree it does (diamonds are just heated, compressed coal, fer cryin’ out loud), but shouldn’t money have some universally agreed upon value? Or does the fact that we accept a Federal Reserve Note as payment give it that universal value?

    My brain hurts over this one.

  27. >>Or does the fact that we accept a Federal Reserve Note as payment give it that universal value?

  28. Lazarus Long,

    Well, I think the notion that printing more money will help out an economy has been fairly soundly defeated after much trial and error.

    Steve,

    As long you think that the dollar, Euro, peso, whatever is a sound currency, and no one else questions that, it tends to work well enough. In many ways a currency has to get over many of the hurdles that a new trademark has to. It has to build consumer confidence in itself, as a company with a mark does, it has to make sure no one is illegally copying, as a TM owner does, etc.

  29. Gary, I think those city currencies are issued privately. Not that there’s anything wrong with that.

  30. Russ –

    You said:

    “If that is the case, then I don’t see how a competing currency will cause any societal or economic collapse.”

    You misread what I said.

    John O’Hara:

    You win the prize. I never thought I’d see a libertarian defend a libertarian idea with marxism, but you seem to have done it with your defense of the marxist “labor theory of value” as applied to the minting of coins. Congratulations.

  31. That last post was by me, BTW. Damn all these fields!

  32. EMAIL: krokodilgena1@yahoo.com
    IP: 62.213.67.122
    URL: http://www.PENIS-ENHANCEMENT-PILLS.BIZ

    DATE: 12/10/2003 11:57:04
    Peculiar travel suggestions are dancing lessons from God.

  33. EMAIL: krokodilgena1@yahoo.com
    IP: 62.213.67.122
    URL: http://natural-penis-enlargement.nonstopsex.org
    DATE: 12/21/2003 02:07:38
    Give what you have. To someone, it may be better than you dare to think.

  34. EMAIL: pamela_woodlake@yahoo.com
    IP: 68.173.7.113
    URL: http://big-breast.big-breast-success.com
    DATE: 01/10/2004 03:48:50
    He who has a thousand friends has not a friend to spare,And he who has one enemy will meet him everywhere.

  35. EMAIL: nospam@nospampreteen-sex.info
    IP: 212.253.2.205
    URL: http://preteen-sex.info
    DATE: 05/19/2004 08:32:20
    We are as God made us, and often a great deal worse.

Please to post comments

Comments are closed.