Liberty Dollar Raid

[Pkg Man]

Not sure if this has been posted or not, but I just saw it today and found it interesting.  Don't know the story behind it so I can't comment on whether or not he has a leg to stand on.

Feds seek $7M in privately made 'Liberty Dollars'

http://news.yahoo.com/s/ap/us_liberty_dollars_raid

[TBV]

The 1910 case of Ling Su Fan offers a similar case of the courts seizing someone's silver (the difference being that in the 1910 case the coins in question were official legal tender.)

http://www.gold-eagle.com/editorials_03 ... 13003.html

In both cases, the appearance of official US government symbols (or similarity to such symbols) on the coins seemed to have made a big difference.  One might conclude from all this that the government has a prior claim on all such coins and that owners are not necessarily free to use, enjoy or dispose of them as they wish.  Do you suppose this makes ownership of bullion safer than gold or silver coins?

[Lone Wolf]

I found it extremely interesting that they are presenting this as an instance of "counterfeiting".  I don't find the charge these tokens were represented as actual US dollars persuasive.  Imagine a cashier giving you change in completely alien silver tokens.  You wouldn't notice this?  (Considering the melt value of such tokens, if only I could be "defrauded" in this manner!)

It's striking how aggressively the government will go after a competing currency.  The government accused this guy of an act of "domestic terrorism" (!)  I think that this kind of "vulgar display of power" is an overcompensation for the weakness of fiat currencies (all fiat currencies.)  Fiat money derives its power from legal tender laws and the fact that taxes are denominated in fiat money.  Without any tie to a commodity, though, that's it.  Their remaining source of value is the government's willingness and ability to project force against violators of the legal tender laws or the internal revenue code.

I think that it's useful to note this as yet another cost that we (perhaps unknowingly) pay in order to operate under a fiat money regime.  In addition to the currency inevitably eroding in value over time, the government finds itself in a position where it has to use or threaten to use force and confiscation in order to prop up the value of the currency.

[murphy_p_t]

this is an example of the money cartel / monopoly (aka the Federal Reserve) using the force of government to crush competition.

[AdamA]

this is an example of the money cartel / monopoly (aka the Federal Reserve) using the force of government to crush competition.

That's one way to look at it...BUT

What do you think would happen if individuals were allowed to print competing currencies?  Do you really think that this game would played on an even playing field?  IMO it would be way worse and would lead to all kinds of corruption and conflicts of interest.

It's an idea that looks good on paper, but I think would be a disaster in reality.

[Storm]

Unfortunately, one of the rights granted to the government in the constitution:

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

And one thing I've learned in my short life - the government doesn't like competition! 

[Lone Wolf]

What do you think would happen if individuals were allowed to print competing currencies?  Do you really think that this game would played on an even playing field?  IMO it would be way worse and would lead to all kinds of corruption and conflicts of interest.

Remember that in such a scenario, individuals in the market choose what sort of currencies they're willing to do business in.  I'm not sure that a "shady" currency would find much place in the general market.

Beyond that, though, remember that these are literally tokens containing a certain quantity of precious metals.  I think that any currency that found success in the general market would succeed only if people have confidence that it has value (or at least scarcity.)  My guess is that we'd be looking at currencies tied to physical precious metals or perhaps down the road some kind of cryptocurrency.

[Storm]

If your goal is to have all of your currency have "inflation protection", and enough of your fellow citizens go along with it, I could easily see something like this happening using junk silver coins.  They are legal tender and the government can't confiscate them.

The true difficulty in setting up a competing currency, using junk silver coins or not, is establishing an exchange rate.  Shops would literally have to re-price merchandise daily or maybe even multiple times a day and keep track of the price of silver to do so.

[AdamA]

Remember that in such a scenario, individuals in the market choose what sort of currencies they're willing to do business in.  I'm not sure that a "shady" currency would find much place in the general market.

So it essentially becomes a business for those creating the currency...I'm not sure how I feel about that.  Do you really want the CEO of a company in charge of your currency? 

Not saying I disagree, just suspect there's more to it than letting the free market sort it out.

[Lone Wolf]

So it essentially becomes a business for those creating the currency...I'm not sure how I feel about that.  Do you really want the CEO of a company in charge of your currency? 

Exactly right -- any successful currency is going to have to be based on a lot more than just printing a bunch of bills with a picture of some CEO on them.

Predicting these things is hard, but I think it most likely that the market would choose either the dollar, a set of commodity-based currencies, a set of decentralized cryptocurrencies (no governing authority at all), or some combination.

Anyhow, I doubt we'll have to worry very much about this, given that this guy got labeled a "domestic terrorist" for stamping out a bunch of silver tokens! 

The true difficulty in setting up a competing currency, using junk silver coins or not, is establishing an exchange rate.  Shops would literally have to re-price merchandise daily or maybe even multiple times a day and keep track of the price of silver to do so.

Right.  I see this as being similar to how the value of a currency fluctuates on a daily basis as well.  I think you'd see prices in terms of gold grams, silver grams, etc.  The value of these commodities would be fluctuating, but relative to what?  I wonder whether the final result would be a currency tied to a basket of commodities.  Who knows?  Certainly not me, this much I am sure of.

There are a lot of interesting problems that come with this.  You always have to keep in mind, though, that the current system causes a host of really, really bizarre, problematic issues.  Probably chief among these are constant currency devaluation, manipulated interest rates, and gross distortions of the economy.

[AdamA]

Probably chief among these are constant currency devaluation, manipulated interest rates, and gross distortions of the economy.

Right...so who would you rather have in charge of making these distortions...the government/fed or the ceo of enron? 

[Lone Wolf]

Right...so who would you rather have in charge of making these distortions...the government/fed or the ceo of enron? 

Yeah, this is why I don't include any kind of "private fiat currency" on my list.  The only successful privately issued currencies would (IMO) be physical or very well-audited commodity-based currencies.  Without the ability to counterfeit via open market operations (and other mechanisms), it wouldn't be practically possible to manipulate the interest rate.

As a curiosity question, let's say we occupy such a free-wheeling free currency world.  If you were selling me your Mercedes-Benz SLR McLaren Roadster, what currency would you want the transaction to occur in?  (I'm thinking the answer isn't going to be "Yenrons"!)

[AdamA]

If you were selling me yourMercedes-Benz SLR McLaren Roadster, what currency would you want the transaction to occur in?  (I'm thinking the answer isn't going to be "Yenrons"!)

No way I'd take Yenrons...maybe Renmibinsofts??? 

[Lone Wolf]

No way I'd take Yenrons...maybe Renmibinsofts??? 

Is this that new Microsoft currency backed by XBoxes, Zunes, and old copies of Microsoft Bob?  You've got yourself a deal.

I was sure you'd insist on physical uranium, so this is something of a relief.

[craigr]

I thought that banks in the US did use to print their own currency at one time?

Having competing currencies in gold or silver specie would not be a problem though. It's easy to verify the content.

Heck, even if the US removed the 28% cap gains tax on gold bullion for American Eagles and Silver dollars it would be a huge boon. They are minted by the US so why not allow them to compete on equal footing with Federal Reserve Notes?

The answer of course is that gold and silver would win. They have to keep the tax on bullion coins to make the Federal Reserve Notes competitive.

I only wish I could write off the depreciation in the dollar each year on my taxes. They are zero-interest bearing notes after all. Why couldn't you write off the losses the way you would with a bond you sold for a loss each year? On Dec 31st. I would sell off my dollars and hold Swiss Francs for 31 days. Then buy back into the dollar to lock in the losses. Yet somehow I don't think this would fly to allow all taxpayers to write-off the inflation caused by the govt.

[murphy_p_t]

Craig - thank you for getting to the heart of the matter!

and then wrap it up w/ this gem:
"Yet somehow I don't think this would fly to allow all taxpayers to write-off the inflation caused by the govt. "

of course, you are correct. There would be less incentive for the govt to inflate if the taxpayers were rebated what has been stolen thru inflation...