Crucifying Americans on a Cross of Paper

The Feds officially announce: using the Liberty Dollar--a privately minted silver coin--is against the law. Liberty Dollar minters Norfed vow a fight,

arguing it has never claimed Liberty Dollars were official money and that it has a right to offer an alternative.

"The designs and verbiage … are original and are not copies of any U.S. Mint currency," NORFED Executive Director Michael Johnson said in a statement.

Previous Liberty Dollar blogging here. I've seen people use Liberty Dollars in stores (while attending a libertarian conference, natch), very explicitly explaining what they were--half the fun of these, to most people who use them, is the chance to explain free-banking theory and the lie of the Federal Reserve to store clerks.

Comments

[Lamar]

"The designs and verbiage ... are original and are not copies of any U.S. Mint currency"

Except, of course, for the word "dollar."

[ChicagoTom]

Except, of course, for the word "dollar."

What is Canadian currency called ??

Or the money that circulates in Australia ?

[kevrob]

..or are accepted unknowingly by clerks who are unaware they are not receiving real money.

Waitaminute. Cupro-nickel slugs produced by the mint are "real money" while silver coins are not? I guess the gubmimt has officially arrogated to itself the right to amend the English language.

BTW, the Constitution gives Congress the power [Article I (5.)] To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures:....

Nowhere does the document give the Congress power to outlaw competing private coinage, though it does restrict the states:

[I (10)]No state shall.... coin money; emit bills of credit; make any thing but gold and silver coin a tender in payment of debts; [or] pass any....law impairing the obligation of contracts...

So the Feds might be able to regulate the value of free market coinage, e.g. making sure that if you claim your coin has 1 gram of Au @ .999 fine that it damn well does, and it probably can legally define the dollar. They won't do that, of course, because that undermines the very idea of fiat currency. That's why they got the courts to invalidate the "gold clauses" in private contracts, even though that is an explicit Article I violation. Must be that governmentally mutated "English" again.

Seriously, is anybody surprised that this hammer finally came down?

BTW, "dollar" is not an invention of Thomas Jefferson. The name goes back to 15th Century Germany, and was originally spelled thaler, taler and, yes, daler.

See: http://www.bartleby.com/81/5183.html

Kevin

[SR]

"Except, of course, for the word 'dollar.'"

When did the US Mint acquire the exclusive rights to that word? There are quite a few countries that call their currency the "dollar" (see, e.g., Canada, Australia, etc.). Is it counterfeiting or fraud to offer a Canadian dollar to someone if you don't claim it is US currency?

[Stevo Darkly]

(Tried to post this earlier, but the squirrels weren't havin' any.)

"The designs and verbiage ... are original and are not copies of any U.S. Mint currency"

Except, of course, for the word "dollar."

If the U.S. government owns exclusive rights to use the word "dollar," then I would expect the U.S. to take legal action against the international counterfeiters who make the Australian dollar, the Canadian dollar, the Zimbabwean dollar, and a whole bunch of Carribean-area "dollars."

Not to mention the many U.S. companies that offer "flexible benefits" ("cafeteria-style" employee benefit plans that offer choices) and claim to provide their employees with "Flex Dollars" to help pay for them.

[tarran]

Of course, the dollar is named after the Count Joachim's thaler in an attempt to cash in on its cred as a reliable, high quality currency.

The Norfed dollar, made of silver as the thaler was, has a better claim for the name than the pieces of paper printed by the Federal Reserve.

[kevrob]

More Constitutional carping:

There is also the curious fact the Constitution mentions the dollar, without defining it, as if it were a common term of measure for money, such as "Year" is for time. It was, as the colonists, ever short of ready currency, used the Spanish Milled Dollar (8 Real coin) long before 1776, and well after.

[Amendment VII] In suits at common law, where the value in controversy shall exceed twenty dollars,...

[I(9)] 1. The migration or importation of such persons as any of the states now existing shall think proper to admit, shall not be prohibited by the Congress prior to the year 1808, but a tax or duty may be imposed on such importations, not exceeding 10 dollars for each person.

So, how can the Congress define "dollar" with ordinary legislation? Wouldn't it require a Constitutional Amendment? Relying on a federal agency to write administrative rules on the subject would be an even weaker reed to lean on.

Kevin

[R C Dean]

I guess the gubmimt has officially arrogated to itself the right to amend the English language.

See, also, Congress shall pass no law . . .

[Warren]

I like the idea of the Liberty Dollar. I would have invested in them if they had more than fifty cents worth of metal in them. Kinda takes the starch out of the whole thing

NORFED: The FED is ripping you off.
ME: Yes but so are you.

[Warren]

This case looks to me like it parallels the government's persecution of JSG BOGGS, the artist that painted his own money. If I remember correctly he eventually won in court but had to preserver through all manner of time, trouble, and expense.

I think the same will happen here. I suspect NORFED would like nothing better than the opportunity to take on the Feds in court and all the publicity that goes along with it. However, gubment doesn't have to win in court. They just have to make it costly enough.

Reminds me of the case against Marc Emery the Canadian Marijuana activist. Having succeeded in destroying his source of funding, he's no longer a priority.

Which now brings to mind Philip D Harvey. You should all read his book
The Government Vs Erotica. A great book describing government persecution via abuse of judicial process, and how our hero not merely endured but triumphed.

[Don Coyote]

You better order quickly. They just raised the one time limit from 5 to 25 per costumer.

[silver lining]

woohoo!

another law i can break.

[tarran]

Now that I think about it, I am not surprised.

A fiat currency like the modern U.S. dollar lacks the intrinsic value of a commodity based currency. For example, if I were to accept gold coins as currency in payment for the food I grow, I am guaranteed that, at a minimum, the value of the gold coins will not fall below that of the gold metal within them. If that were to happen, I could melt the coins and sell the gold bars. Additionally, it is hard to inflate commodity currencies. Again, in the case of gold, one has to mine the stuff out of the ground to add to the money stock. And last but not least, there will likely be a demand for the commodity for reasons other than its usefulness as money. For example, gold is a useful metal for a variety of industrial applications primarily in the eletronic industry.

Fiat currencies, defined as currencies whose value is established not by free trade but by coersion on the part some authority, lack these stabilizing influences. While there have been some stable fiat currencies that have kept their value over centuries (the rocks used by the aboriginal people on th island of Yap come to mind), generally the authority cannot resist the temptation to engage in inflation, to create additional money out of thin air.

Of course, this is in itself no problem, so long as people are free to reject to pick and choose which currencies they do business in. The act of printing additional dollars is not different from the act of mining gold out of the ground and forming it into gold coins. Both expand the monetary base and cause monetary inflation. However, a commodity money requires the production of the commodity, whereas the fiat currency requires minimal production. Obviously, though, it is easier to inflate a fiat currency than a commodity one.

The key difference in fiat currencies and commodity currencies lies in the freedom to adopt or abandon them. Let us go back to the gold example. Let's say that I was a prudent manufacturer who instantly converted all my profits into gold-coins which I locked up in a warehouse. Then one day, a major gold strike is announced, and a new gold coins start flooding the market, and the value of gold relative to the stuff I make starts to drop. I can convert my gold holdings into some other currency. Now, as the value of gold bullion falls, the dmenad for it, for industrial uses will increase, simply because uses that were uneconomical in the past will now start becoming economical. So, as its usefulness as a money decreases, the demand to use it in production or consumption increases, and I can sell my gold coins to the people who want it consisting of the decreasing pool of people who use it as money, and the increasing number of people who use it for industrial purposes as its price (relative to other commodieties) drops.

Let us contrast this with a fiat currency. Since the fiat currency is not a commodity, it has no use for consumption: there is no factory that uses dollars as a material for manufacture. So, as the perceived value of a dollar decreases relative to commodities, the demand for it decreases.

So, once the fiat currency is not perceived as a good store of value, if left to their own devices, people will abandon it very quickly for safer alternatives. Thus, those who force the fiat currency to be used for exchange in an economy must work to prevent competing forms of money from establishing themselves, especially if they wish to enjoy the benefits of running the printing presses.

In the past two decades the Federal Reserve Bank has dramtically expanded the supply of dollars, far more quickly than real wealth has been produced (in the form of capital goods, commodities, consumer goods and the like). Fortunately, many central banks from other nations have been purchasing these excess dollars, and pulling them out of circulation. Additionally, the insistence of most major oil producers that people pay them in dollars for oil had granted the dollar a portion of the confidence in future value afforded to commodity currencies.

I think that there is a growing awareness amongst some that benefit from the Federal Resrves policies that there is a huge risk that the dollar will collapse in value as people abandon it. So they must prop it up by preventing people from using alternatives.

[Robert]

"Seriously, is anybody surprised that this hammer finally came down?"

I am very much so. The hammer never came down on Gold Standard Corp. in the 1970s. It has been speculated that Treasury is confronting this because of the symbolism of the hard money movement, in connection with patriot-sovereign type stuff...but that was a much bigger movement a quarter century ago.

Just spec on my part this minute...it was said that a quarter century ago, when conservatives swept into power in the USA, they immediately cracked down against the extreme right wing (in the form of organizations like the KKK & The Order as well as tax protesters). Maybe this is similar Republican hegemonism -- trying to make themselves the exclusive face of the American "right" by cracking down on the extreme right. However, by now the violent racist and tax protest element has been so routed that they think they can turn against movements which are not as far out there.

[kevrob]

Robert:

I'm not up on the "patriot movement" except when it has poked its head up as so nutbar extremist that we libertarians can look down our snoots at it. (Ex: the Posse Comitaus encampment in "Tigerton Dells," WI., the Michigan Militia that OKC bombers McVeigh and Nichols unsuccessfully tried to join.)

I see the crackdown on private coinage as part and parcel of the Feds' increasing demands that all significant financial transactions be traceable. First we got the money laundering laws, then reporting requirements for cash transactions of $10K+, the Expatriation Tax, restrictions on offshore banking and credit cards, etc., etc. Some of this is supposedly motivated by The War On Some Drugs, but I'm sure many reading here would accuse Washington of trying to maximize control and revenue, Drug War or no, not the least me.

I do think that the NORFED folks night have designed their dollars to look less like official U.S. non-precious-metal wafers. I also would have gone with a motto that Ben Franklin has been said to prefer on coins: Count Your Change. 🙂

Kevin

[Warren]

Robert,
I think you are right. This isn't a case of cracking down on the competition. It's the resemblance to government minted coinage that's sticking in their craw.

If it the threat Liberty Dollars pose to the US Dollar was at issue, then surely warrants would have been issued for the population of Ithaca NY and the Ithaca Hours, Inc. Board of Directors would all be facing charges.

However, a straightforward forgery case doesn't explain this quote:
"The government Thursday warned consumers and businesses that it is illegal to use alternative money known as "Liberty Dollar" coins, which organizers promote as a competitor to the almighty dollar."

I just can't believe the Feds are really going to try to claim it's illegal to trade in "alternative" money. If they do, the ensuing coverage of litigation could result in exactly the widespread awareness about the 'lie of the Federal Reserve' etc. that the Liberty Dollar was intended to promote.

[dhex]

ayn randian, if you are reading this thread, do you see what i meant a while back when i said money is magick?

[dhex]

ayn randian, if you are reading this thread, do you see what i meant a while back when i said money is magick?

[oncogenesis]

I can't find a close-up picture, but the $1 coin appears to bear the motto "Trust in God". No thanks.

Is there a non-theistic alternative currency out there?

[James Anderson Merritt]

1. Norfed makes "paper money," too, redeemable in its gold and silver "rounds," if/when you wish. These bills look NOTHING like Federal Reserve Notes, and resemble multi-colored foreign currency more than anything else. As far as the US government is concerned, the Liberty Dollar is a "foreign currency." If NORFED were smart, they would get some small nation to declare Liberty Dollars as official, legal currency there. We once used Spanish pieces of eight as currency in this country. What's keeping us from using foreign currency in the modern era?

2. While it is possible for the front-side of the rounds to look less like "official" US coins, note that the backside of the round clearly does not resemble any US coinage. The government is really stretching to suggest a harmful resemblance.

3. Some of the "markup" inherent in a Liberty Dollar pays for production costs. The rest compensates the distribution network. Do you think that "real money" doesn't have corresponding costs also? Perhaps the US minimizes those costs through volume, but there is definitely SOME cost. Ask yourself: who pays this cost, and how? At least the NORFED plan is upfront and straightforward. The distributor "profit" for circulating the currency is in plain sight, as opposed to being hidden as interest on new money or taxes that support the Fed and the Mint. How else would one pay for a private currency?

4. It is completely legal for people to barter for anything they want, using anything they want in exchange, including Liberty Dollars. Legal tender laws only say that someone who offers "legal tender" in payment of a debt satisfies his obligation to the lender, and that the lender cannot count on government enforcement of the debt if he refuses "legal tender" in payment.

5. On the paper bills, Norfed prints an actual "petition" for the restoration of value-based currency, and declares that use of its private money is an exercise in the right to petition the government for redress of grievances.

It seems to me that the only -- and very weak -- case that the government might have against the Liberty Dollar is the alleged confusion between it and offical US coinage. This is very easily rectified by changing the design of the "rounds." If inflation continues apace, the automatic value-adjustment mechanism for Liberty Dollars -- the "moveup" process -- will require a change in the rounds anyway: Currently, the 1-oz round is marked with a $20 face value. If the price of silver rises and is sustained much over $16, then the LD will "move up" to a "$50 dollar base," meaning that the ounce of silver will be stamped with a face value of $50. At that point, a complete redesign of the artwork could render the government's case moot without causing any unanticipated disruption for the LD.

I agree with others here that the government's move seems to emphasize intimidation over a solid legal case. The point seems to be to undermine confidence in the LD. As if so-called "real money" were anything but a confidence game itself.

[James Anderson Merritt]

I found NORFED's response to the Mint allegations at one of their affilliates' websites: http://www.hchq.biz/ld_us_mint_response.html

The affiliate in question is the "regional currency office" for the San Jose CA metro region.

Here seems to be a modern day illustration of Gresham's Law, with "bad money" literally chasing out "good," because the latter only has value, while the former relies on the force of government. Watch and learn, kiddies.

[Lamont A Cranston]

Just when I think that libertarians could not be any more out of touch with the American public, I get to see ranting about the gold standard. And here I thought that argument was done 80 years ago.

It's almost as good as the completely unremarked upon equation of eminent domain and rape in a recent thread.

And y'all wonder why the LP can't make any progress in national elections.

[tarran]

Yup, Lamont, that's right the issue was settled long ago.

You see, the U.S. government decided to threatten anyone who tried to use gold with jail time in a bid to stabilize the currency and end recessions.

And it succeeded so well, since then we've only had two of the most serious depressions in history (the first one being lengthened to nearly 20 years by the govenrments "assistance"), and rather than savings of money appreciating in value at about 30% every 100 years, they now depreciate 95% per 100 years.

Clearly what a greeat leap forward!

[MainstreamMan]

Jonny,
I agree.

more on the issue of alternative currency.
http://arts.envirolink.org/arts_and_activism/SusanWitt.html

[PapayaSF]

half the fun of these, to most people who use them, is the chance to explain free-banking theory and the lie of the Federal Reserve to store clerks.

I suspect that this is not as much fun for the store clerks.

[kevrob]

Notice how the Feds claim that 18 U.S.C. ? 486 - originally the Act of June 8, 1864, a Civil War measure perhaps justified by the necessities of fighting an insurrection, if unconstitutional in peacetime - gives them the power to forbid all but their own coins from the market. As I said above, the Constitution gives Congress the power [Article I (5.)] To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures:...., but not the exclusive power. [Note to JAM: declaring Liberty Dollars to be the coin of a foreign government brings them right under Congress' guns.] Now, perhaps someone wants to make the case that the Framers were ignorant of the idea of privately issued money, and that prohibiting the states from coining encompassed everyone, as no private actor could ever issue coins. That's historically ridiculous, but when has that stopped a federal court from doing something stupid?

The LD folks get silly about this, though, trying to claim that their metal discs aren't "coins" for the purposes of Federal Law, and by using terms of art other than the ones prohibited in the USC they can somehow escape being suppressed. I don't recommend fighting tortured language with more tortured language.

Paradoxically, but not surprisingly, the Feds will claim that the Constitution defies common sense for the purposes of granting them powers the document doesn't mention, while taking a common sense view of the meaning of "coins" and "money" in order that the LDs fall afoul of the federal code. Yeah, I know, SOP for the last ~75>~145 years. One wonders how the LD folks didn't anticipate this.

BTW, there's a term for the revenue a government mint gets for coining money: seigniorage. Merriam-Webster points out in the etymology that the French it comes from means the right of a lord. The Wikipedia entry has this link:

http://www.cbo.gov/ftpdocs/62xx/doc6271/hr902.pdf

where it is claimed that the mint made $5 billion on the "50 state quarter" releases.

Poor peasants like ourselves obviously aren't meant to have any benefit from that.

Kevin
(IANAL)

[plunge]

I'd be more excited about liberty dollars if they weren't directly tied into the wacky, nonsensical gold standard rantings.

Alternative currency is cool and interesting. Thinking that all our problems as a nation come from our currency not being tied to the price of a commodity like gold is not.

[Lamar]

Chicago Tom: The fact that other countries have dollars doesn't mean that the "verbiage" of the liberty dollar isn't exactly the same as the US Dollar it claims not to resemble.

SR and Stevo Darkely: Did I make a Copyright or Lanham Act argument? No. The company says it is entirely original, yet it took the name of the currency already in circulation. Then it claims that its "verbiage" was original, which it is clearly not.

[kevrob]

I used to be adamant about the gold standard, until I read some Mises. Now I prefer free market currencies, on whatever basis the customers will support. Paper, coin or bytes could be backed by anything - precious metals, petrochemicals, RAM chips, labor - that the issuer thinks the public will like. Monopoly fiat money is at heart immoral, though, for it is only backed by the bullet and the bayonet.

Even if the courts allow some wiggle room for a perhaps revised private coinage/warehouse certificate-style currency to compete with FRNs, the IRS will no doubt treat transactions done that way as taxable, just as they do any other barter arrangements they get wind of. If, as claimed, the LD promoters aren't in the game to avoid or evade tax, they shouldn't bitch about that, except the way all of us using DC's funny money do.

Kevin

[MUTT]

in a related matter (i think) the various Federal Mints no longer publish how much currency they are printing. (A "cost cutting" move)
I believe such an acct'ing goes back to the early '30's.
nothing good will come of this

[Jesse Walker]

This case looks to me like it parallels the government's persecution of JSG BOGGS, the artist that painted his own money.

Read about it in Reason!

[juris imprudent]

A fiat currency like the modern U.S. dollar lacks the intrinsic value of a commodity based currency.

Amazing that here at Reason the unreasoned worship of commodity (read gold) endures. Any system of money is arbitrary. It is an abstraction that simplifies exchange and facilitates investment and accounting. Or, to put it another way, gold (or any other commodity sufficiently scarce) is only valuable because people believe it is valuable - just like that damn fiat money.

The classic example of real value versus perceived value is water or air contrasted with gold. The former have actual survival value that gold utterly lacks. The difference is that they tend not to be scarce and gold is; plus it is shiny. Shiny is very important.

[tarran]

Juris,

there is a crucial difference: people trade with commodity currencies because they choose to do so.

With fiat currency, they trade with them because they are forced to do so.

And when people are forced to do things that they would not voluntarily choose to do, they ain't exactly left better off.

Or, to put it another way, gold (or any other commodity sufficiently scarce) is only valuable because people believe it is valuable - just like that damn fiat money.

Really, if people believe dollars are valuable in and of themselves, why does the government have legal tender laws? Why did the government feel a need to prohibit private ownership of large quantities of gold for a few decades? Is it perhaps because the only perceived value for federal Reserve notes comes at gunpoint?

Support of commodity money is not some form of unreasoned gold-worship. Hell, gold does not even have to be the currency of choice. Here is a list of other commodities used as money that I know of: sea shells, tobacco leaves, cigarettes, silver, platinum, whiskey, salt, and even beaver pelts. People used these things because they perceived them as the most fungible commodity that met their needs for trade at some particular time and place. When something better came along people then swithced to using the new thing.

I find it very interesting how the fiat money lovers immediately started with name the name calling - gold bugs and the like, and yet haven't advanced any rational reasoned arguments other than appeals to historicism to justify their position.

So I ask you, why are you paper-bugs so scared of letting people exercise free choice?

[kevrob]

Looking at it another way, the U.S. dollar does have a fixed value. It equals 11 minutes + ~39 seconds of the least valuable labor on the market. One could trade your dollars for more labor of this sort, but it would be against the law.

A corollary of this rule is that when states and localities raise the local minimum wage, they are effectively revaluing the currency in the area they control. Out-of-state firms that hire at the minimum should have a comparative advantage over local ones. A federal increase is just plain old inflation.

Kevin

[paper bug]

calm down, tarran. Just tell me how you're being oppressed by being forced to use U.S. gov't money. You can still barter, you know.

This is one of the reasons I'll never register as LP again. With all the fucked-up things the government does, they spend their energy worrying about "fiat money," known to everyone else in the world as just plain "money."

[Stevo Darkly]

SR and Stevo Darkely: Did I make a Copyright or Lanham Act argument? No. The company says it is entirely original, yet it took the name of the currency already in circulation. Then it claims that its "verbiage" was original, which it is clearly not.

Lamar, you used the word "dollar," which also appears in my post. Also the words "a," "the," "not," and a form of the word "company." Stop copying my posts and use your own original verbiage.

[tarran]

paper_bug,

Well, since without the printing press the government would not have the money it needed to do the alot of the fucked up things it does, the issue is not so minor.

As for the oppression, it is pretty minor compared to the attacks on people who wish to consume marijuana, but it was there:

US government policy was harsh, and the gold coin bootleggers reign existed through the early 1960s. The process was simple: the bootlegger purchased the US gold coins in Europe where most of them had resided since 1933, and had them shipped to Canada. So far, everything was legal. Getting the gold safely across the border was the problem.

Treasury Department enforcement against the smugglers was sporadic. Most of the gold coins arrived safely, but occasionally the feds would 'send a message to the coin community' by making midnight raids and confiscating gold as if they were dealing with dangerous drugs.
....
In 1973, with the government in disarray, and a president near impeachment, a small but energetic movement to eliminate all remaining restrictions on gold ownership won a shocking victory and for the first time in over 40 years, Americans could freely own and trade gold without restriction

For the first time since 1932 gold coins, bars, and gold certificates could be freely imported. Items that, prior to January 1, 1974, were almost as dangerous to handle as heroin were part of everyday commerce.

But it took a while for a dealer to hold a Krugerrand or a Credit Suisse gold kilo bar in his hand without looking over his shoulder to see if a Secret Service agent was lurking in the shadows. Burton Blumert 2001

I am still waiting for you and your friends to explain why a fiat curency is superior.

Some of you claim that it is the same, which makes me question why governemnt officials worked so diligently to end the use of gold and silver as money (obviously they didn't think it was the same).

[Chris S.]

Well, since without the printing press the government would not have the money it needed to do the alot of the fucked up things it does, the issue is not so minor.

Huh? I have no dog in this fight, but this statement is completely bogus. Like almost every other entity, public or private, the modern U.S. government relies on debt to finance its spending. This would be true regardless of whether we reverted to hard currency.

[tarran]

Chris,

You do realize that the Fed prints the money it uses to buy public debt, right?

[paper bug]

tarran,
I really have no dog in this fight either, except to note that "fiat money" seems to work pretty damn well, and involves pretty minimal infringements on anyone's liberty. I can't understand why anyone gets worked up against it. Printing money is right up there with national defense on the list of "government functions that seem obvious and legitimate even to libertarians."

And yes, the federal govt prints the money it uses for public debt, but it prints all the money anyone uses for anything, so your argument, whatever it is, proves a little too much.

I agree, banning private ownership of gold was fucked up.

[kevrob]

As for the government "printing money", actual FRNs on paper is a small percentage of "money" created every year. They are far outstripped by money created by an entry in a bank's or mortgage company's records by the strokes of pens and keyboards. That's why I referred to bytes, coins or paper in my post above.

The amount of money created is a function of the credit an institution can extend, which is indirectly controlled by the Fed's interest rate targetting and reserve requirements, as almost everyone reading this will well know. A hard money regime that allowed fractional reserve banking would have many of the same problems as a pure fiat money system, while one where FRB was prohibited would have different ones, notably difficulties with guaranteeing liquidity in the face of recessions and/or price deflation.

Kevin
(IANAEconomist, either)

[juris imprudent]

I am still waiting for you and your friends to explain why a fiat curency is superior.

Convenience, plain and simple. That and economic activity is not limited to the market whims of a particular commodity.

[kevrob]

....."fiat money" seems to work pretty damn well, and involves pretty minimal infringements on anyone's liberty. I can't understand why anyone gets worked up against it. - paper bug

Inflation. I don''t know how old you are, PB, but folks tend to fixate on the economic problems that were topmost in mind when they came of age. So, "Depression babies" tend to be more tolerant of gubmint deficit spending, high taxes and a large % of GDP in govt. hands, while those of us who first started voting during the stagflation of the 1970s were scarred by the results of our elders out-of-control Keynesianism. When FDR confiscated gold, he also revalued the dollar, so that an ounce of gold that used to bring $20 now cost $35. One would have to make 75% more cash at the new valuation to buy that ounce, had you been allowed to buy it. Nixon's closing the gold window was also at the heart of the "oil crisis." Long-term contracts between the Gulf states and our oil importers were possible when the value of the dollar, at least for foreigners, was fixed. Once RN let the dollar float, and the Treasury wouldn't convert U.S. currency even at a market rate, the OPEC countries saw fit to get out of those contracts, and started selling their product at prices that reflected the new financial environment.

I'm keeping my eye out to see which economic bugbear Gen 13/X and the Millenials fixate on as something the gubmint should focus on fighting.

Kevin

[James Anderson Merritt]

It seems to me that the only value that the government gives to fiat currency is its promise to force people to discharge debts or taxes if legal tender is offered in payment.

So why should it be illegal in any way for someone to produce or use private money, if those government guarantees are not required? Surely, you could prosecute people for fraud if they led people to believe that the government was behind or would recognize or accept the private currency. But absent that, where is the basis for making private currency illegal?

Thanks to Kevrob for the interesting observation that treating LDs as "foreign currency" leaves them subject to congressional regulation. Except for abusing that power to regulate as the power to prohibit outright (not unknown in federal cases), I wonder how congress could "regulate" the LD to deny its intrinsic value, or even the "fiat" component of its face value. Say Congress passes a law that says the LD is worth nothing at all. Clearly, this is untrue, as the minimum intrinsic value of the LD corresponds to the amount of silver it contains. Say Congress passes a law that says the LD can only be valued at its silver content. This won't prevent people from distributing the LD at markup (whatever is indicated on the face), because -- like any retail product -- the cost of materials + distribution leads to a price that is greater than the price(s) of the raw material(s) alone.

I personally think that the US's only real weapon here is intimidation. Clearly, the feds can be very intimidating, but if that's all they have, there is perhaps a hope of LD victory in the courts.

[tarran]

kevrob

I want to second your comments that many of the problems we face today would still exist in an economy where a significant portion of money creation was from fractional reserve banking.

The fact is, no currency system is perfect. After all, if we were part of an economy on the sardine standard, from a monetary standpoint the discovery of new sardine fishing grounds or the development of fish farming would also have the same effect as on a fiat system when the money issuer cranks up the printing presses.

To me, the fundamental element is freedom. So long as people are choosing the currency they use, and are free to adopt or abandon currencies as they see fit, I am happy. In such a system, one finds that people tend to gravitate to money which has the optimal combination of durability, divisibility, compactness, and availibility to best facilitate indirect exchange. If people perceived a fiat currency as providing them the best value, they would use it, and I would not get worked up about it. In such a scenario, should the issuers of that particular fiat currency start printing too much money, then people would be free to abandon it when they felt in no longer served their interests.

I think fiat currencies are a bad idea, and would do business purely in hard currencies if I could (for reasons I laid out on my post on Friday), but am not upset by their existence.

What gets me outraged is the violence with which the federal reserve note was established as the dominant currency, and the fact that those who support the current system claim that it was arrived at through market forces when in fact it was political expediency to protect a cartel of banks from the consequences of their disastrous policies.

[YeahWhatever]

"What gets me outraged is the violence with which the federal reserve note was established as the dominant currency"

Violence about... FEDERAL RESERVE NOTES... makes you outraged? Do you explode with Hulk-like anger when you think about the Civil War, the Revolutionary War, WWI, WWII? Jesus.

[plunge]

"You do realize that the Fed prints the money it uses to buy public debt, right?"

You do realize that while it's possible to print money, it's impossible to print value, right?

[jennyM]

In Scotland the three main commercial banks all print their own versions of pounds. This stuff is usable everywhere in the UK, not just Scotland, although it's sometimes an effort to get London taxi drivers to take it - "more than my life's worth, mate". There's a better explanation of all this at http://www.siliconglen.com/Scotland/1_7.html

The current Bank of Scotland 10 pound note celebrates the Scottish distilling and brewing industry.

All this is appropo of nothing, but I thought it was interesting...

[GinSlinger]

Well, there is one other function of a inelastic commodity money that hasn't been pointed out yet. If the supply of a currency is inelastic, it presents a clearer picture of a country's import/export balance and provides a mechanism for correcting an imbalance in trade. If a country imports more than it exports, the country must export currency. By exporting currency, the money supply decreases and the country experience deflation. Deflation makes a country's price level drop--thus making imports dearer and exports cheaper. Thus the country decreases its imports and increases its exports. If a country exports more than it imports, the opposite occurs--more money arrives in the country creating inflation (in the genuine sense of too much money chasing too few goods). The cost of domesticly produced goods goes up relative to imports, and a country begins to import goods and export money. MEanwhile, in a fiat, paper-based economy the central money authority undertakes a series of machinations to regulate the money supply. If the money supply remains relatively constant (or, in current thinking, slightly growing) then the market responces to import/export inequalities are disrupted.

[joe]

Admittedly, I don't know as much about the back story and political theories as y'all, but this looks like a pretty straightforward anti-conterfeit action to me.

James Anderson Merritt writes, "2. While it is possible for the front-side of the rounds to look less like "official" US coins, note that the backside of the round clearly does not resemble any US coinage. The government is really stretching to suggest a harmful resemblance."

There are people who pass, and people who accept, $200 bills. If you're calling something that looks fairly similar to something that the US mint might produce a "Liberty Dollar" - liberty and dollar being two words commonly found on US currency - then I think there's a fair case to be made that there could be some confusion.

[James Anderson Merritt]

To Joe: As long as the US government insists on changing its currency designs as often as it has been lately, it would seem practically impossible for any private-label currency to avoid being classified as a "counterfeit" under your definition of "potentially causing confusion" in someone's mind. Even official currency is now confusing. Anything vaguely coinlike or bill-like, labeled in English and denominated in "dollars," might or might not be government money.

The US needs to be clear about drawing the lines that distinguish illegal counterfeit US currency from private label currency or other instruments. As I understand the situation, NORFED went to a lot of trouble to create metal tokens and paper bills that English-speaking Americans would be comfortable using as money, but which any reasonable examination would show were NOT the US government's legal tender. I'm sure that, were the government to draw clear lines, NORFED would stay far on the good side of them. But I suspect that the point of the government's action is actually to discourage competition.

Also, it is important to realize that the reason NORFED's currency is denominated in dollars is because the Liberty Dollar is intended FOR Americans, and NORFED seeks to maintain 1-1 parity with federal dollars for reasons of convenience in exchange. This is not an attempt to pretend to be federal dollars, but it is an attempt ot make it easier for people to use LDs instead of federal dollars, where that is legal. Would a gift certificate, denominated in Euros, be very practical in the USA? No, and neither would an alternative currency. Other community currencies (e.g., the Ithaca Hour) have established fixed exchange rates relative to the dollar, for the same reason. Perhaps NORFED's currency will have to establish its own unique unit, too, but what a hassle it will be -- creating MORE confusion for the consumer in the name of eliminating confusion for the consumer. Sounds like a scheme that government would have hatched. And of course, with this latest stunt, they pretty much did.

NORFED's latest statement concerning the government's allegations is at http://www.hchq.biz/ld_us_mint_response2.html.

[James Anderson Merritt]

NORFED may have the last laugh on this one. From their webpage on the controversy (http://www.libertydollar.org/ld/press-kit/usmint-allegations.htm):

"Since the Liberty Dollar has hit mainstream media via USA Today, AOL, Reuters, etc., visits to our website have soared to almost 10 times normal traffic. Online orders have skyrocketed as well! Everything from bumper stickers to Liberty Dollars are being ordered plus new Liberty Associates are signing up... America is mad as hell and isn't going to take it anymore. The people are speaking and they want the Liberty Dollar! Comments like 'The US Mint can bite me' and 'I'm exercising my right to choose' have been included with many of the orders received."