(8) Expand alternative currencies &
Today, in the United States there is only one medium of exchange universally recognized as money and that is the Federal Reserve Note, called the dollar. By law nothing else is allowed to compete with it.
However, this has not always been the case.
Before 1836 Banks issued their own currency with little or no regulation. 1836-1862 is called the free banking period by some, even though it was a period of increased regulations. During this time banks could still issue their own money.
As late as 1848 private concerns were allowed to issue their own gold and silver coins which were allowed to be used as money.
Things have changed. Banks no longer create their own monetary notes, but they are allowed to create money that is registered on a ledger. Their loans are mostly fiat money, an amount determined by a multiple of their deposits.
Privately coined or printed money is strictly forbidden in today’s world as Bernard von NotHaus has discovered. He started a company called “Liberty Services” and created a new coinage called Liberty Dollars, which were minted out of gold, silver platinum and copper.
Von NotHaus claimed his coins were not supposed to be competing U.S. currency, but coins to be used for barter exchange. Unfortunately for him the Feds did not accept this and considered him in violation of 18 U.S.C. § 514.” as well as 18 U.S.C. § 486:
Whoever, except as authorized by law, makes or utters or passes, or attempts to utter or pass, any coins of gold or silver or other metal, or alloys of metals, intended for use as current money, whether in the resemblance of coins of the United States or of foreign countries, or of original design, shall be fined under this title or imprisoned not more than five years, or both.
After a lengthy period of investigation he was convicted in 2011 of conspiracy and counterfeiting charges for making and selling the currency, which he promoted as inflation-proof competition for the U.S. dollar. He could serve up to 15 years in prison.
Even more troubling is that the government is seeking to confiscate for its own use $7 million in gold and silver from his company. I haven’t seen a good explanation as to why they can legally take the possessions of a private citizen, even if he is convicted of a crime.
This serves as a warning to those who desire to engage in the exchange of anything competing with Federal Reserve notes to make sure all their i’s are dotted and t’s crossed to make sure they are in violation of no laws.
The United States has some of the most restrictive laws in the world concerning competitive currency. Even so, there are legal ways to create something like currency that can be used legally. The main thing von NotHaus did wrong was to give his currency intrinsic value and give it the appearance of real federal money. A person looking at his coins might wonder if they were minted by the government and this is something that will not be tolerated.
Even with this Sword of Damocles hanging over the head of anyone involved in alternative currency quite a few versions have surfaced. Those who have ventured forth have adhered to two guidelines in an attempt to stay legal. The first is the alternative currency must not be coined as was the case with the Liberty Dollars. The second is the alternative money must not resemble any accepted United States currency.
In 1991 Paul Glover of Ithaca, New York created the most well known and longest lasing alternative currency called the Ithaca Hours. Notice that he cautiously called them “hours” rather than dollars. The value of an “hour” was an hour of labor or $10.00.
Ithaca hours has inspired other alternatives to spring up across the country such as the Bay Bucks in Michigan and BerkShares in Massachusetts.
Another alternative which has been around in several incarnations since 1983 is the Local Exchange Trading Systems (LETS). Wikipedia gives this explanation of how they work:
1. Local people set up an organization to trade between themselves, often paying a small membership fee to cover administration costs
2. Members maintain a directory of offers and wants to help facilitate trades
3. Upon trading, members may ‘pay’ each other with printed notes, log the transaction in log books or online, or write checks which are later cleared by the system accountant.
4. Members whose balances exceed specified limits (positive or negative) are obliged to move their balance back towards zero by spending or earning.
LETS is a fully fledged monetary or exchange system, unlike direct barter. LETS members are able to earn credits from any member and spend them with anyone else on the scheme. Since the details are worked out by the users, there is much variation between schemes.
Because of federal restrictions and taxation of commercial use many of these attempts come and go within a year or so. Ithaca Hours is the exception.
However, during the Great Depression various forms of alternative currency surfaced in communities all over the country. If our economy sinks much lower this demand is likely to surface again.
It is interesting to note that many media of value are used today like they are money even though they are not considered currency. Here are a few:
These are not considered money, even by the IRS. Yet if you use a $5.00 coupon on the purchase of a $20.00 item you receive the same value as a $5.00 bill – assuming that the merchant didn’t jack the price up $5.00 before giving out the coupon.
2. Frequent Flyer Miles.
These are being exchanged for all kinds of purchases just like they were money.
3. Companies are issuing their own form of monetary credits that are used like money. For instance, a manufacturer may give out certificates of value as bonuses to employees that can be used to purchase anything the company sells. If the employee doesn’t need any items then he can trade it with outsiders for money or something else of value.
4. Promissory notes or contracts of sale. These are often discounted 20% or so but the remaining 80% is as good as gold.
5. Virtual currency. These are on the drawing board by a number of internet companies. Currently Facebook has “virtual credits” which are headed that direction.
6. Gold and Silver Coins
Utah, Virginia and other states are taking a cue from the Liberty Dollar idea and are seeking to make gold and silver coins legal tender. The hard times are causing different state governments to explore the idea of an alternative sound currency as a backup for a faltering dollar.
Barter suffered a major setback in the Eighties when the IRS insisted barter gains are taxable, but with the rise of Craig’s List it is becoming popular again. I have heard though that the IRS combs through Craig’s list seeking patrons who may be avoiding paying taxes on barter.
Far beyond this is the use of bartering with large companies and nations. Instead of paying with cash, gold or silver there is an increasing amount of exchange of various products where credits are accumulated and used like cash.
We are definitely headed toward a cashless society where almost all money will be digital. Even so, it would be wise to leave the door open to experiment with multiple forms of alternative currency, virtual and physical. Hopefully new legislation will allow diverse currency evolution to proceed.
Read This entire series. Here are the links.
- The Economy – One Last Chapter
- Creating Sound Money
- The Gold Standard, Part 1
- The Gold Standard, Part 2
- The Gold Standard, Part 3
- The Gold Standard, Part 4
- The Gold Standard, Part 5
- The Gold Standard, Part 6
- The Gold Standard, Part 7
- The Fed and Common Sense
- Additional Points
- Alternative Currency
- Giving Away Our Power
- Parable of Money Systems
- To Fiat or Not Fiat
- Fiat Money of the Past, Part 1
- Fiat Money of the Past, Part 2
- Fiat Money of the Past, Part 3
- Fiat Money of the Past, Part 4
- Fiat Money of the Past, Part 5
- Fiat Money of the Past, Part 6
- Examining Fiat Money
- A Flawed Money System
- The Ideal Money
- A Time for All Things
- The New Greenback
- Narrowing the Focus
- People Taking Charge
- Creating Wealth
Copyright 2011 by J J Dewey
Copyright by J J Dewey
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