Liberty Coins Lead to Potential Loss of Liberty

A pair of Buffalo-area men face charges of attempted petit larceny and misdemeanor criminal impersonation for trying to use the private hard-money backed currency the Liberty Dollar to buy beer at a Buffalo Sabres game. (The original felony charges were dropped.) The U.S. Treasury Department, while stressing they are not legal tender U.S. of A cash money, does not think there is anything illegal about using them if your partner in the transaction wants to. See here for more accounts, with happier endings, of using, or trying to use, Liberty Dollars in everyday transactions.

Douglas Rushkoff writes of the "dangerous idea" of what he calls "open source currencies" (though he's mostly talking about localized labor-backed scrip, not Liberty Dollar's hard-money experiment) here.

Comments

[Kwix]

In the SCA we have used self minted coinage as a way to preserve the "look and feel" of the whole middle ages thing. It is backed by US currency not silver but the idea is the same. A specific coin is guaranteed by the minter to be worth $x in US Currency upon redemption by a participating vendor. Because of the highly variable quantities / easy counterfeitability of these coins they are quite often only used at a single event and anybody keeping them afterwards does so as a souvenier.

[Phillip Conti]

Maybe I am missing something, but why is it a crime to 'offer' a coin for payment?

[thedifferentphil]

I too see no problem with offering a coin for payment. But if I had a business, I would fire any employee who accepted these as payment for more than the market price of an ounce of silver. Anyone who thinks that it is a good idea to pay $20 for $9 worth of silver, and then thinks that this is better than US currency is (to quote Julian Sanchez from last year) Bat Shit Insane and has drunk at the well of craziness for too long. One can criticize the monetary policy, but a $20 bill is worth ... $20. Meanwhile this huckster is selling "$20" liberty coins for $16 to "associates." If you really want to use metal-based money, buy US mint silver eagles with the same amount of silver in them for 12 bucks. This whole thing is a scheme to rip people off who don't know any better with a bunch of am radio fear mongering.

[Rhywun]

"My name is Bernard von NotHaus and I am NotCrazy."

Maybe if we round up enough Libertarians, they'll respond to customer demand and create a special line WITHOUT the "Trust in God" inscription...?

[John]

There is an endless supply of idiots who just can't get the concept of floating currency. "But this is just a piece of paper. It ain't worth nutten."

[joshua corning]

I want a liberty coin!

God, I guess I am a coin nerd.

This of reminds me of the guy who makes all his own money, as an artist. Each bill is unique and original. Some are sort of sci-fi like one with a date of 2030 and a picture of the first black president on it.

[Rich Ard]

From the Liberty Dollar site:

"Click here to hear Paul Harvey's comments on the Liberty Dollar"

I think I'm going to go find gaius marius and start drinking - if that can even be used as a hook, something's gone wrong.

[dhex]

"But this is just a piece of paper. It ain't worth nutten."

first of all, the proper spelling is "nuttin'"

second of most, u.s. dollars are just a piece of paper. my favorite drunken bar trick is to take a dollar bill and ask whomever i'm messing with to tell me how much it's worth. then i rip it in half. i ask em to tell me how much it's worth then. then i tape or otherwise stick the two back together, and it's magickally a dollar again. funny how that works.

i did the same thing with a 20 once, to try and prove a point to someone i know about the stupidity of worshipping money. he refused to take the other half until i insisted for nearly half an hour.

money has a strange, stupid power over people above and beyond the bare necessities it can provide.

[eb]

If people want to play with self minted coins, who am I to complain. I know every time I turn on talk radio somebody is trying to convince me in advertisements that I need to convert all of my savings into gold and silver, so these silver money makers must be on to something. Right.

After reading the story, it sounds like the Buczeks were arrested not for casually trying to pawn off a useless coin, but for being assholes, to several vendors.

Next time you're jonesing for a beer at a ball game, try handing the vendor your watch as payment and when he refuses, yell, "But it's worth $200!"

[eb]

If people want to play with self minted coins, who am I to complain. I know every time I turn on talk radio somebody is trying to convince me in advertisements that I need to convert all of my savings into gold and silver, so these silver money makers must be on to something. Right.

After reading the story, it sounds like the Buczeks were arrested not for casually trying to pawn off a useless coin, but for being assholes, to several vendors.

Next time you're jonesing for a beer at a ball game, try handing the vendor your watch as payment and when he refuses, yell, "But it's worth $200!"

[John McVey]

In Australia, at least, it would be undeniably illegal to create any instrument intended to be used as a medium of exchange. In the Currency Act (Cth) 1965 it says

Section 11

(1) Every payment that is made shall, unless it is made according to the currency of some country other than Australia, be made according to the currency of Australia provided for by this Act.

Section 22

A person shall not make or issue a piece of gold, silver, copper, nickel, bronze or of any other material, whether metal or otherwise, of any value, other than a coin made or issued under the repealed Acts or under this Act or a British coin as defined by the repealed Acts, as a token for money or as purporting that the holder is entitled to demand any value denoted on it.

Penalty: One hundred dollars. [1965 dollars, that is]

Given that anti-gold types are considerably more vicious, and have a larger say, in the US than Australia, would there not be an equivalent of these sections in the US law somewhere?

JJM

[jw]

[There is an endless supply of idiots who just can't get the concept of floating currency. "But this is just a piece of paper. It ain't worth nutten."]

Isn't a "floating currency" something like a floating craps game? Or am I thinking of a floating shell game?
Paper money that is not redeemable for a FIXED amount of goods or services, preferably commodities, is nothing but an outright scam and an empty promise. Its value is determined by how much of it there is in circulation (or extended as credit) AND by the amount of goods and services actually extant. The latter is not under anyone's direct control, but the former is controlled by the banking and financial system. It is free to expand the supply of money and/or credit whenever it so chooses thereby diminishing the value or purchasing power of that which was previously issued. It is THIS that is inflation, and it is just another kind of counterfeiting.
It is justified by the claim that the money is backed by the productive capacity of the People of the United States. There is just one minor glitch with that view,...the aforementioned productive capacity does not rightfully belong to the thieves that are issuing the currency.

[MAS]

dhex says:
second of most, u.s. dollars are just a piece of paper. my favorite drunken bar trick is to take a dollar bill and ask whomever i'm messing with to tell me how much it's worth.

I say:
Easy- The "half" with more than 50 percent of the paper is worth a dollar; the remaining part is worth nothing. The gov't will replace a damaged bill if you have more than half of it. It has nothing to do with having both serial numbers as I've often heard.

[MAS]

Oops...add the then i rip it in half. part to the dhex quote.

[Phil]

Q: I have some currency that was damaged. My bank will not exchange it for undamaged currency. What can I do?

A: You will be interested to know that the Bureau of Engraving and Printing (BEP), through its Office of Currency Standards, processes all reimbursement for damaged United States currency. They decide the redemption value of torn or otherwise unfit currency by measuring the portions of the notes submitted. Generally, they reimburse the full face value if clearly more than one-half of the original note remains. Currency fragments measuring less than one-half are not redeemable.

. . . anyhoo, I can generally be certain that any website which has to resort to using cute little neologisms and acronyms like "FRAUDs" is probably not worth reading, much like people who routinely use "Dumbocrats," "Rethuglicans" and "Libertoids" are not worth listening to.

[Warren]

As my father always said, "It's worth whatever people are willing to pay for it". I would prefer putting the dollar back on the gold standard. But a floating currency isn't worthless. The US dollar is one of, if not the most respected currencies in the world, redeemable for goods and services at virtually every market and trading post on the planet.

I like the idea of a competing currency too. Perhaps we'd get sounder fiscal policy if more Liberty dollars were changing hands. But as thediffernetphil said, paying 20 for 9 is a scam. Ironically, the currency most able to diminish the US dollar is the Euro, which rests on even more hocus-pocus. But a lot of people will accept them and that is what it means to have worth.

I like the idea of the Liberty dollar, but it bears too close a resemblance to the Franklin Mint to my eyes. Oh and screw that "Trust in God" crap too, were talking about what belongs to Caesar here.

[Dan T.]

Let me add that the only reason Gold or Silver is worth anything is because people think it?s worth something, just like paper money. They can print more paper money, and they can mine more gold.

[MP]

Let me add that the only reason Gold or Silver is worth anything is because people think it?s worth something, just like paper money. They can print more paper money, and they can mine more gold.

What a shoddy argument. Gold and Silver have properties that make them useful and thus worth having. Printed currency does not. There is also an almost incomparable difference between the cost of mining $20 worth of gold and printing a $20 bill.

[amazingdrx]

Hmmm it appears that Winston Smith has been at work on the various threads here overnight. The ministry of truth rules! Hehehey.

[MP]

But a lot of people will accept them and that is what it means to have worth.

A lot of people accept God too. I've always found the word "faith" in "Full Faith and Credit of the United States Government" rather appropriate.

[captrespect]

Let me add that the only reason Gold or Silver is worth anything is because people think it?s worth something, just like paper money. They can print more paper money, and they can mine more gold.

That's not true. You can't just go out and dig up some gold, but the government can just go out and print some more money. There is pretty much a finate amount of gold in the world, and gold will last for a long time. This is why it holds it's value. Most civilations would start out using gold, till they get tired of carrying it around. Then they decide to switch to paper slips, backed by gold. Then government comes along and decides not to back the paper slips by gold anymore and just print them with a law stating that that the paperslips are legal currency.

[Warren]

Re:Gold vs Paper
It isn't just that it's hard to dig up the gold, or that you can't spin lead into gold. It's that gold (and other metals) have industrial and artistic applications. They have value beyond their use as currency. Gold is valuable because it doesn't corrode, because it's malleable, because it is a good electrical conductor, a good thermal conductor, and because it's yellow and shiny.

[Obvious Troll]

captrespect,

Dan is right - there may be only a finite amount of gold and silver in the world, but that isn't what gives them their value. What gives them their value is that people *want* gold and silver. If people didn't believe gold and silver were valuable, they wouldn't *be* any more valuable than tin or aluminum.

[amazingdrx]

For a clue to what happens to currency under a kleptocracy, that prints money at will to fund a huge national debt, look to the russian peasants whose pensions are payed out in rubles.

All the upper crust in russia now use dollars.

Since corporate citizens here in bushed land have a get out of paying pensions free card, granted by their new special rights under corporatist governance, there is no reason for bailouts or bankruptcy to avoid their obligations.

Look to beleaguered (by the war on terror contractors with america debt load)cities and states to follow the lead of corporate citizens by simply denying former employees their pensions with zero legal consequences.

While the moronic media helped dupe we the people with prattling about gay marriage and roe vs wade, roberts and alito, corporate lawyers who live to defend the rights of corporate citizens, have been appointed to expand the rippoff of pensions and benefits of retirees.

But go ahead with your "cross of silver" debate libertarians! By all means!! The devolution of politics continues under reactionary corporate feudalism.

But when you are growing (radioactive) turnips to survive, like a russian peasant around cherbobyl, don't say you weren't warned.

Thanks to corporatist contractors successful attempt to bankrupt the USA (bush is a bankruptcy expert, it's what he did in the oil patch), the dollar will soon buy less square inches of toilet paper than the equivalent area of the bill, just as the ruble does.

And chinese and saudi princes of the divine right of capital will own vacation palaces in all the (former) national parks.

Bushwacked energy and "free" trade policies are selling out real US assets at the rate of 2 billion dollars per day.

New Orleans cannot be rebuilt, but Iraq can? Well not really, the huge amounts of cash squandered on Iraq mainly go to contractors with america like halliburton. No actual rebuilding is being acomplished.

Another 6 billion per month stolen from we the people by corporatist kleptocracy.

[Swillfredo Pareto]

You can't just go out and dig up some gold, but the government can just go out and print some more money.

It's a tad bit more complicated than that dude. The money still has to be put in circulation and put on the balance sheet. The Fed has far less power over real rates of interest and prices than people think. Mostly what they control are nominal numbers, and rational expectations mitigates a lot of that influence.

[Mr. Nice Guy]

To all you doodz who think our currency is worthless paper wrappers, then, by all means, please send them to me. Franklins, Grants, Jacksons.. hell, even Washingtons. I'll take them off your hands.

As far as those Sacagawea dollars.. forget it.

[R C Dean]

Money, all money, including "hard currencies", is a consensual hallucination.

I say that as a purely empirical observation, and not to denigrate the value (in any sense of the word) of money.

[R C Dean]

For a clue to what happens . . .

Somebody needs to adjust their meds.

[Dan T.]

Sure, it?s true that gold has some useful applications and there is a finite amount of it in the world. But that?s true of all metals.

What I?m getting at is that if somebody offered us a brick of gold for $20, we?d all buy it. But not because we plan to put it to pragmatic use, but because we?d plan on selling it to somebody else for more.

[MP]

To all you doodz who think our currency is worthless paper wrappers, then, by all means, please send them to me.

An illusion works as long as everyone buys into it. As I see the odds of our monetary illusion being dispelled as quite low (due to the obvious ramifications of this event), I'll be keeping my paper pals.

[dhex]

mr. dean: thank you for making my point more eloquently - and more cheaply - than i used to.

money is magic.

"Easy- The "half" with more than 50 percent of the paper is worth a dollar; the remaining part is worth nothing."

and if they're divided evenly using a ruler and an xacto?

[thoreau]

Didn't some of the Mexican civilizations prior to Spanish conquest use chocolate as currency?

I propose that we go to a chocolate standard. Put Willie Wonka's face on the currency.

[jw]

"If people didn't believe gold and silver were valuable, they wouldn't *be* any more valuable than tin or aluminum"

Actually, tin and aluminum ARE pretty valuable, as is copper. It's just that there is so much more of those than gold. Anybody checked out spot commodity prices lately?

[Phil]

thoreau, I don't want to have to use any money that I might accidentally eat before I get to spend it on other stuff. Paper doesn't have that danger. Unless you suffer from pica.

Besides, we can't take the risk that our money is sweetened with corn syrup.

[thoreau]

Phil-

Obviously the currency wouldn't be actual chocolate, it would just be a piece of paper that can be redeemed for a fixed quantity of chocolate from the Federal Reserve headquarters in Hershey, PA.

And aluminum is actually quite valuable. You can use aluminum foil to make a traditional libertarian head dress.

[Jennifer]

Money, all money, including "hard currencies", is a consensual hallucination. I say that as a purely empirical observation, and not to denigrate the value (in any sense of the word) of money.

Yes, but some hallucinations have more staying power than others. There have been many historical instances of paper money becoming worthless, but never a case where gold became worthless.

After the Civil War, when the "Confederate States of America" ceased to exist, Confederate paper money was only good for toilet paper, whereas Confederate gold and silver coins were just as valuable as they ever were.

[MAS]

drx:
and if they're divided evenly using a ruler and an xacto?

It's *more than half* and it obviously must be more than half of the same note, so grinding for example 51% of a note into powder won't cut it.

If down to exactly half were exchangeable then that bill could be exchanged twice. Therefore, each precise half is worthless on its own.

[amazingdrx]

"You can use aluminum foil to make a traditional libertarian head dress."

Yep!! http://zapatopi.net/afdb/

[SR]

"Given that anti-gold types are considerably more vicious, and have a larger say, in the US than Australia, would there not be an equivalent of these sections in the US law somewhere?"

Maybe some states have laws against it, but there's no problem with private currencies at the federal level as long as you pay taxes (in US currency, of course) on revenues earned in them.

[MAS]

Sorry, its "dhex:" not "drx:".
Second time today I've corrected myself.

[thoreau]

Hmm, my chocolate standard would mean that Cocoa Puffs would become considerably more valuable. Maybe they'd become so valuable that nobody would dare use them as mere breakfast cereal any more. Which means that kids wouldn't become as fat.

Somebody call John Banzhaf. Here's a way to combat obesity while returning the US to commodity-backed money!

[MP]

If down to exactly half were exchangeable then that bill could be exchanged twice. Therefore, each precise half is worthless on its own.

Which was dhex's original point...that when you tear it exactly in half, it becomes worthless.

[dhex]

and yet if you tape them back together, they're magically delicious yet again.

i happen to believe the emotional attachment to paper money is sort of sick and twisted; getting hammered and fucking with those beliefs is one of the better things about weekends. really, it is a neat trick, and i recommend you all try it sometime. (not with 20s though, as that proved to be a waste on multiple levels)

[MAS]

MP, I know, but I took that to mean the usual, imprecise, drunken bar trick "half". How likely will it be that you will precisely divide a note in half under those conditions?

[R C Dean]

Some hallucinations have more staying power than others

I would nominate the money hallucination as being the all-time champ for staying power. I would further hazard that we are in approximately zero danger of abandoning the concept of money and going back to barter.

The fact that certain currencies have crashed does not mean that the money hallucination has been called into question - it just means that people (all of whom maintained their belief in money) made a perfectly rational decision to start using different money.

This happens with hard currencies also, by the way. The gold and silver markets in Europe were very volatile in the 1600 - 1800s. Discoveries of new sources (or, actually, the belief in the discovery of new sources) moved the markets dramatically.

[Eric II]

Considering that this is the Buffalo Sabres we're talking about, they should've been willing to accept payment in wampums if offered.

[Jennifer]

I would nominate the money hallucination as being the all-time champ for staying power. I would further hazard that we are in approximately zero danger of abandoning the concept of money and going back to barter.

Yes, "money" in general will stick around, but that doesn't mean our own money will. Under the right conditions (or the wrong ones, depending on how you phrase it) our fiat currency could become almost as worthless as Confederate paper money.

[amazingdrx]

Or as worthless as rubles. Given the kleptocracy of the contractors with america.

Actually isn't confederate money in grade A condition worth a lot as rare currency?

[Phil]

It's worth bringing up Gresham's Law in context, I think. For our money to become as worthless as Confederate paper money, it would probably take either an accompanying catastrophe, or something even more worthless coming into common circulation and being legally accepted/promoted.

[amazingdrx]

http://www.csanotes.com/

Yep, cash in those CSA notes you all...neeehaaaaw!!

[quasibill]

"Under the right conditions (or the wrong ones, depending on how you phrase it) our fiat currency could become almost as worthless as Confederate paper money."

Those conditions are fast approaching - all it will take is for the Chinese, and to a lesser extent the Japanese and S. Koreans, to stop lending us money. And that will eventually happen, if current policies continue.

You see, the monetary supply last year just happened to increase by the same amount that our tax revenues fell short of our expenditures. Coincidence? Maybe. But there is little doubt that we're monetizeing our debt. Sooner or later our creditors are going to demand guarantees that they won't be paid back with inflated currency - perhaps as soon as the Chinese economy becomes #2 in productivity (right now, I think they're #5 or #6).

It's just rational thought - if you know your borrower is going to pay you back in inflated bills, you're going to take that into account in setting terms. If you know your borrower can just inflate more to meet higher rates, you'll demand guarantees that it won't inflate anymore, or you won't lend to them in the first place.

Right now, we're taking advantage of the Chinese government's ignorance of economics. It can't last forever.

[Swillfredo Pareto]

Gold topped out a little over $600 dollars an ounce in the early 1980s. If you did as Paul Harvey says and took all your money and invested it in gold, today you could get back about $.91 cents on the dollar.

Conversely you could have taken all of your money in 1981, put 99% of it in a bag and tossed it off a cliff. You could then put the rest under your mattress for 5 years, and in 1986 buy shares in a company called Microsoft. Which one do you suppose is a better deal? If I did my math right the second option is still about 4 times better than buying gold.

Obviously this is hyperbole, but any reasonably diversified investment outperforms gold for any period of time the economy is reasonably stable. Purchasing gold is speculative, not an investment.

Of course you could have bought Enron...

[amazingdrx]

"we're taking advantage of the Chinese government's ignorance of economics."

Not exactly. By financing our debt they are keeping the price of their products lower than the cost of production here.

Thus sustaining their growth rate.

When will this house of cards all come tumbling down? When Chinese investors own the majority stake in corporations like Walmart?

We need renewable energy policy to head this off, or else!

[quasibill]

Phil, I think you're turning Gresham's law upside down.

Bad money is defined as money that has no value outside of a legal mandate. Since bad money (fiat currency) has already, in effect, chased all good money out of the market, it does not require money of even less inherent value (if that is even possible) to reveal the truth that our current currency is inherently valueless.

Gresham's Law describes what happens when bad money is introduced into a market. It makes no attempt at describing what is required for a monetary crash. See the Weimar Republic for a good example of how fiat currency can lose value at a precipitous pace only based on supply and demand (which of course is what sets the value of even fiat currency).

[R C Dean]

Well, US currency isn't going to collapse without either (a) a catastrophe gutting the US economy and government or (b) the establishment of a better currency on the global market.

Various governments will stop lending us money when there is a better store of value than US bonds. This, really is just a different version of a better currency showing up on the global market.

Now, what would make a better currency is an interesting issue. Which institution is in a better position to provide a world currency than the US government? The EU might, but all the structural problems that people point to in the US, the EU has in spades. Any other serious players? I can't think of any.

Jennifer: all currencies are "fiat" currencies because currency is merely a specific instantiation of a consensual hallucination. Goldbugs like to call paper money "fiat" currency, but only because they are ignorant of the economic history of hard currencies.

[Jennifer]

Jennifer: all currencies are "fiat" currencies because currency is merely a specific instantiation of a consensual hallucination.

The fact remains that if I have silver or gold, it will have value anywhere in the world, whereas any form of paper money is only valuable in places which have decided to honor it.

[quasibill]

"Gold topped out a little over $600 dollars an ounce in the early 1980s."

Of course, that's the point in time that makes your point.

Why don't we go back to say, 1969-1970, before we left the gold standard completely? Amazingly, the average price of a house in gold in 1969 is almost exactly the same as the average price of a house in gold today (in fact, the current price is slightly cheaper). Meanwhile, in dollars, the average price of a home in that period has increased 10 fold (if not more).

You are right that gold is an investment. But it is also useful to measure long-term value, because over the course of centuries, gold's value has remained relatively constant. Not a perfect benchmark, to be sure, but better than most. And definitely better than fiat money.

[amazingdrx]

I'm going to have a cookout in the woods, go skiing, and go in the sweat lodge and jump in the river, you people are no fun.

It's going to be 38 degrees here today, an early spring thaw!!

(Moderator: please delete all my posts, thanks!!)

[mediageek]

"Obviously this is hyperbole, but any reasonably diversified investment outperforms gold for any period of time the economy is reasonably stable. Purchasing gold is speculative, not an investment."

True, but I think you're making the mistake of assuming one would buy gold for the same reason they would buy shares in a mutual fund.

Gold tends to retain it's value with little fluctuation, which makes it a good bet in the event of imminent economic collapse.

But no one would buy gold thinking that they'd be able to get any sort of return on the investment.

[quasibill]

"Various governments will stop lending us money when there is a better store of value than US bonds."

Ah, but that is, in itself, an illusion. The real rate of monetary growth in the U.S. is greater than 8% per annum, even after discounting for productivity growth. We use lots of deceiving terms to disguise how much value our dollars lose each year, like the CPI (which leaves out energy and housing prices, because, you know, noone actually buys those). The one good measure of how much we inflate was the M3. And guess what? That number won't be reported anymore.

Again, it's just economic reality - if you know that you're going to be paid back in inflated money, you're going to take it into account in setting terms. And if you know that the borrower controls the printing press, you'll eventually demand repayment in currency not at the control of the borrower.

As for economic downturns, you realize that we, as a nation, now spend more than we earn, right? That essentially, the last few years of economic activity have been funded by people taking out home equity loans based on the housing bubble? That once the bubble even flattens, much less pops, the demand for everything else is going to stagnate due to a lack of discretionary cash - hence Bernankes not-so-subtle remarks about dropping money from helicopters, if necessary, to stimulate demand?

We teeter on the precipice, and the sad part is that so many think that it is impossible to fall in. All it will take is for the Chinese to realize that they will get better returns investing in their own country than they get out of buying U.S. bonds. We've bet the house on the hope that they never figure that out.

[Twba]

Look to beleaguered (by the war on terror contractors with america debt load)cities and states...

How beleaguered?

[thoreau]

I see the arguments for keeping some gold as a way to protect yourself against inflation or economic shocks. But why not a Swiss bank account? IIRC, the Swiss Franc is backed by gold, and the bank account yields some interest. Maybe not much interest, but some interest is better than no interest, right?

[dhex]

"How likely will it be that you will precisely divide a note in half under those conditions?"

you've obviously never gone drinking with a man who carries a t-square with him at all times, sir.

anyway, the larger point of my exercise is that value is created consensually, with a few exceptions (like the objective value of a roof in a rainstorm, etc), and in the case of currency...it retains value out of belief. faith based economics!

[mediageek]

Thoreau, iirc, the Swiss got off the Gold Standard in the late 1970's.

[amazingdrx]

http://www.orlandosentinel.com/features/health/orl-inscityfinances06jan22,0,3262296.story?coll=orl-health-headlines

One last post to delete... sorry mods, couldn't resist! It's a good one!

[Swillfredo Pareto]

Why don't we go back to say, 1969-1970, before we left the gold standard completely? Amazingly, the average price of a house in gold in 1969 is almost exactly the same as the average price of a house in gold today (in fact, the current price is slightly cheaper). Meanwhile, in dollars, the average price of a home in that period has increased 10 fold (if not more).

I'll take your word for it, but let's be honest Quasibill, the average house today is not even remotely the same as the average house in 1969. Apples and oranges. People may well speculate in gold as a hedge against inflation, but ultimately buying a mutual fund is a far better hedge, because in the long run the stock market beats inflation, not just keeps up with it. Inflation is a monetary phenomenon, but what matters at the end of the day is our standard of living, and it is better now (in the aggregate) than it ever has been.

Gold tends to retain it's value with little fluctuation, which makes it a good bet in the event of imminent economic collapse...But no one would buy gold thinking that they'd be able to get any sort of return on the investment.

Fair enough, I can see why the Jews wanted to keister their gold when leaving Germany, but is Paul Harvey (and apparently others in this thread) seriously predicting imminent economic collapse in the United States? I'll meet anyone at a futures market on that one.

It is true that the National Debt creates a phenomenal moral hazard for the Federal government to want to keep inflation artificially high, but that is a fiscal problem not a monetary problem.

[murray]

All it will take is for the Chinese to realize that they will get better returns investing in their own country than they get out of buying U.S. bonds. We've bet the house on the hope that they never figure that out.

I get the feeling the Chinese already know this. The only reason they continue to do it is because They continue to attract industry to China, and in order to keep milking that cow without the threat of higher tariffs and reduced access to our market (which is still highly productive) is to pay some "tribute" to the capo of that market by buying those bonds. As long as we keep seeing a demand of immigrants willing to work for $2 an hour, we can compete with the Chinese. If we ever really DID close off the borders, the economy would choke - we'd have to inlfate the currency to the point where the minimum wage and welfare were completely meaningless.

[bob mologna]

Where do you find these immigrants who work for $2.00/hour? Hell, I live in Arizona and unskilled illegals cost me $12.00/hour. For skilled workers expect $15.00 to $25.00 / hour. Seriously. The thing is, when I drop in to a jobsite to check on them they are actually WORKING. I couldn't run my business nearly as well without them but not because they work for peanuts.

[Russ 2000]

Swilfredo,

the average house today is not even remotely the same as the average house in 1969.

That only is true if you narrowly define "house". You may be calling McMansions houses, but you also have to count condos and townhouses as houses (since people take out mortgages on those, too). On a square-footage basis, housing today is similar to housing in 1969. (I sure hope this doesn't devolve into some stupid thread about sprawl.)

[murray]

bob,

Perhaps $2 an hour was an exaggeration but
"peanuts" is relative. What would an unskilled "legal" cost you?

[Swillfredo Pareto]

That only is true if you narrowly define "house".

I am not going to define anything, I am going to let the surveys do that. All I am saying is that the average house today is like the average house 36 years ago in the same sense that the average car today is like the average car 36 years ago. Too much has changed for that comparison to have any meaning.

[sulla]

All currencies are fiat?

Please, educate me on the bits of history of hard currencies that support this view.

[bob mologna]

The only two US citizens that I use for unskilled work I pay $10.00. Skilled US workers are expensive but the unskilled ones in my experience are pretty hopeless. I really don't see much difference in pay between illegals and US citizens. I suppose you could say they are paid less because they produce so much more work per hour than their US counterparts, plus they tend to show up for work even on the day after payday.

[James Anderson Merritt]

My understanding of the American Liberty Dollar is this:

1. The silver is .999 fine and the paper is 100% backed by silver and regularly audited by an independent authority to be so. Was US currency ever officially audited for value, or for the country's ability to fully redeem silver or gold-backed money when we still did that? Is it possible to accurately audit ANY major aspect of our government, and if so, how expensive is that process?

2. There is some expense involved in minting, warehousing, auditing, and promoting the currency. This expense is covered by the "wholesale" markup of the currency (over the spot price of silver) to "associates" and "merchants." Such expenses on behalf of US currency are paid by taxes and inflation.

3. The "retail" markup of the currency is intended to compensate the "last mile" distributors and promoters of the currency, similarly to how banks are compensated via interest and other fees for their transactions. NORFED's question is, "if banks can get that money for their 'services,' why is it wrong for individual Americans to do so?" The retail margin fluctuates with the price of silver, and is capped by the face value. At one point recently, I read that "associates" were making only pennies on a $10 piece, practically guaranteeing that they were stocking and circulating the ALD currency as a labor of love, much as George Bailey kept the old Bedford Falls Savings and Loan open because "it was the right thing to do." If you laugh at one, you must laugh at both, it seems to me. What kind of Potter-head would that make you? If you want this kind of operation to be a viable business instead of a crusade of faith, you have to allow a fair profit to someone, somewhere, don't you?

There is noteworthy amount of profit involved in the process of bringing out new official currency (as in, participants in the process getting paid for their efforts), but few talk about it and even fewer seem to understand it. Why do we give government a pass, yet castigate private operators whose profit structures are openly declared and above board?

4. The long-term rise in silver prices has supported the face value of the ALD, and even pushed it to double last year (under the originally established mechanism for retaining 1-1 convertibility between the USD and ALD in the presence of inflation and fluctuating silver prices). The long term value of the US dollar has fallen, inexorably. When the government assures everyone that "inflation is under control," they almost never say that there is NO inflation; rather, they are actually reporting a slow leak in the monetary-system tire, but a leak, nevertheless. While the air has ebbed out of the dollar's tire since 1998, the real value of the American Liberty dollar has held -- even if you count the bullion value of the silver alone -- and actually increased if you accept the validity of the wholesale and retail markups because you believe that people should get a fair compensation for the effort and expense they go to in producing, distributing, and promoting the private-label currency.

I dunno. Within a dollar or two on a $20 transaction, this seems like a reasonable financial model to me. About the only reasons to reject the ALD that I could imagine:

1. Some likely but so far unconsidered calamity could destroy the value of the currency, leaving people high and dry. If so, what might that be? Do we, for instance, expect the price of silver to plummet?

2. NORFED is a scam: the "warehouse" isn't real; the "backing" is illusory; the "auditing" is a sham or incompetent. Does anybody have any facts concerning such possibilities?

I question the intelligence of anyone who holds dollars in a time of even "controlled" inflation. The ALD appears to be designed to serve as a true, counterfeit-proof currency that holds value (purchasing power) better than the USD. If you doubt or flat-out dispute that the ALD can serve that function, I would be very interested to hear your reasoning and facts.

As far as the guys at the ball game, from what I can read, they did not do what NORFED advises everyone to do, when circulating the Liberty to people who aren't yet know to accept it: offer the choice of the silver liberty or the paper money and let the recipient decide, just as you might first offer a credit card, but gladly give cash if the card were not accepted. There's no misdemeanor -- or even offense -- in that. Of course, trying to pass alternative currency to those unfamiliar with it in a high-pressure situation such as stadium vending is just not a smart idea. I do think that the local authorities overreacted, and I hope the incident ultimately ends well for the ALD-users, providing some positive publicity for the currency.

Seriously, guys, do you have any ideas for "saving" the value of the USD? If not, then why knock alternative currencies? Might we talk instead about how alternative currencies might WORK, if we're all agreed that -- absent the "full faith and credit" of the US, which may or may not last very much longer -- the slow-leak USD isn't that great a deal...?

[Russ 2000]

Mr Merritt,

Good post.

I question the intelligence of anyone who holds dollars in a time of even "controlled" inflation.

I question the honesty of anyone who even claims to hold dollars at all! Outside of having a few hundred bucks in your wallet or in a drawer for the instances where instant liquidity is of the essence, most people who claim to be saving are saving things other than dollars. Bank accounts, IRA's, etc. are not holdings of dollars. It is true that these holdings will eventually be converted into dollars, but only for the purpose of further converting them into something else (health care, homes, cars, college education, etc.).

[Russ 2000]

All I am saying is that the average house today is like the average house 36 years ago in the same sense that the average car today is like the average car 36 years ago.

And the average US $20 bill looks a lot different than the $20 bill of 1969? So I guess we also can't make any comparisons about the US economy.

[James Anderson Merritt]

"All I am saying is that the average house today is like the average house 36 years ago in the same sense that the average car today is like the average car 36 years ago."

For a great primer on comparing "apples to apples," I recommend "Time Well Spent: The Declining Real Cost of Living in America," by the Dallas Fed: http://www.dallasfed.org/fed/annual/1999p/ar97.html.

[quasibill]

"All I am saying is that the average house today is like the average house 36 years ago in the same sense that the average car today is like the average car 36 years ago."

True, but that in no way detracts from the point. In fact, it reinforces it.

The fact that houses today are much nicer than houses 36 years ago, yet cost the same in gold, but over 10x as much in dollars, shows just how much value the dollar has lost in that time. This comparison is a much better measure of inflation than any of the official numbers (even though it is not perfect either) because it can show you price increases that are not due to increased productivity.

[Jennifer]

The fact that houses today are much nicer than houses 36 years ago, yet cost the same in gold, but over 10x as much in dollars, shows just how much value the dollar has lost in that time.

I don't know if it's entirely accurate to say that houses are necessarily nicer today. There are some McMansions being put up not too far from where I am; they certainly look pretty, and they are very, very big, but they're basically made of plywood and vinyl, the insulation is pathetic (especially by the standards of a cold New England winter), and I find it very, very unlikely that they'll still be worth as much (in real dollars) in forty years. They also cost a lot more to stay livable (try heating your 20-foot cathedral ceiling when it's ten degrees Fahrenheit outside).

[bob mologna]

I'm a contractor and I'd have to disagree about houses being nicer. I build pretty nice entry level homes (1600sf, $325,000) and I don't cut corners by the standards of the industry but I can tell you that the quality of construction on the new houses is far inferior to the older ones.

For example, I live in a 1914 house that was a basic company house built for the mine workers, nothing fancy. It has beautiful details cut into the roof joists, hand carved details in the mouldings around doors and windows, cherry floors, real plaster interior walls, and endless other little details all around the house. I couldn't even guess what it would cost to build this house now but it would be massively expensive. These chicken wire and stucco houses being built today simply won't be here in 90 years. They'll be torn down and replaced long before that.

[James Anderson Merritt]

Russ 2000 says, "I question the honesty of anyone who even claims to hold dollars at all! Outside of having a few hundred bucks in your wallet or in a drawer for the instances where instant liquidity is of the essence, most people who claim to be saving are saving things other than dollars. Bank accounts, IRA's, etc. are not holdings of dollars."

Especially because of the low interest rates involved, which do not begin to mitigate inflation, I would argue that bank passbook accounts and the mandatory "minimum balances" that some checking accounts require in order to waive monthly service charges, are examples of "holding dollars," regardless of the form(s) such wealth takes while entrusted to the bank.

[Dogzilla]

I always have this problem when I try to pay the hooker with beer. Or out of the penny jar. The barter system works better if you have something to barter. What was the topic again?

[jw]

Regarding the Chinese: I do not think anyone is going to teach them much about paper money. They're the ones who invented the stuff; they're also the ones who invented the idea of issuing more of it than there were bank or warehouse deposits to back it up. Couple of thousand years ago. (if memory serves)

[jw]

"Couple of thousand years ago. (if memory serves)"

No, I'm not quite that old,...I just feel like it sometimes.