January 9, 2011 – Freeread

This entry is part 8 of 50 in the series 2011A

Part 2 in this Series

An increasing number of people, including economists, politicians, pundits, bloggers etc are coming to the realization that something needs done to create a sounder dollar and money system.

Here are some of the steps that are put forward.

(1) Put us back on the gold standard. Those who support this are far from being united as there are several camps on this:

(A) A purist gold standard with no fiat money.

This was the standard through parts of ancient history, the Dark Ages and attempts were made toward this goal on and off up to about 100 years ago.

(B) A gold standard with fiat money, but with redemption. This usually consists of fiat money created on a 10:1 basis. That is for every once of gold on deposit there would be ten ounces worth of money in circulation. Under this system the consumer can redeem his money for gold, unless there is a run on the system that depletes the gold supply.

(C) A gold standard with fiat money, but with no redemption. This is basically what we had from FDR to Nixon. The value of the dollar was set at an arbitrary value assigned to gold which was $35 an ounce, but a citizen could not possess monetary gold with the exception of rare coins. Other nations and some banks were allowed to exchange money for gold.

(2) Eliminate the Federal Reserve. These advocates may or may not want a return to the gold standard.

(3) A balanced budget amendment. This sounds like it should be a no-brainer, but is it? Why hasn’t Congress ever taken this seriously?

(4) If we do not have a balanced budget amendment then something needs put in place where borrowing and spending is kept within reasonable boundaries.

(5) Grow the economy through low taxes and business incentives. A healthy economy strengthens the dollar.

(6) Reduce the trade deficit. We have had a trade deficit since 1975. Should we be worried? Some are more concerned than others.

(7) Secure energy independence. This is another no-brainer but the problem occurs in execution. The Left and the Right have conflicting ideas of how to achieve this.

(8) Expand alternative currencies. These are already in play to a degree. Examples are Time Dollars and Ithaca Hours which are community currencies. Then companies are issuing their own form of monetary credits that are used like money. Many want the monetary laws changed to allow for the creation of private currencies that directly compete with the dollar. The belief is this would strengthen our currency as a whole.

(9) Barter. Barter has been sold as an alternative to authorized currency. Some claim barter strengthens the financial position of the individual. Barter companies became popular in the Sixties and Seventies. One reason for this was that many were under the illusion that they didn’t have to pay taxes on items gained through Barter. However, the IRS had different ideas and went after many of them and now there are few bartering companies left.

Here is the IRS rule on Barter: “Barter dollars or trade dollars are identical to real dollars for tax reporting. If you conduct any direct barter–barter for another’s products or services–you will have to report the fair market value of the products or services you received on your tax return.”

http://www.irs.gov/businesses/small/article/0,,id=187920,00.html

If you have to treat gain through barter as regular income then one might as well deal with cash and get more leverage with currency.

Even so Barter is far from dead thanks to Crag’s list and other internet sources. Many are now doing barter on a one-to-one basis through classified ads. Participants must be warned, however, that they are still not beyond the reach of the taxman as they comb through internet sources to find barterers who may be trying to escape taxes and do go after them.

Even though small businesses and individuals are limited today in their use of barter big business and even countries are using it on grand scale. These two entities exchange goods and services on a scale of which the average person is completely unaware.

(10) Restoring the power to create money to our elected representatives, as specified in the Constitution, instead of farming this out to private enterprise.

Next we’ll expand on some of these points and see if any of them offer hope to take us out of this financial malaise.

Read This entire series. Here are the links.