Monday, December 27, 2010

Monetary Revolution Begins With Competing Currencies

Mich. Man Buys $25 Gas with Ron Paul Silver Coin
Eric Blair
Activist Post

In recent interviews, Congressman Ron Paul has been promoting the idea of legalizing competing currencies in the process of diffusing the Federal Reserve's monopoly over money.

As the Fed's strongest political critic, Paul will now be in a position as the new Chairman of the House Subcommittee on Domestic Monetary Policy to enforce more transparency and push for alternative currencies to compete with the dollar.

Already, his unprecedented measure to audit the Fed was passed in the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Despite being a watered down version from the original with 300-plus cosponsors in the House, it will still accomplish more transparency of the Fed. Paul has also introduced a lesser-known piece of legislation that he says is vital to reforming monetary policy and restoring economic freedom: the Free Competition in Currency Act of 2009 (HR 4248).

The premise of this bill is that private or public monopolies are naturally destructive to freedom, especially when that monopoly can legally counterfeit the nation's currency with little oversight.  Paul says during his floor statement to introduce the bill that the Federal Reserve is a "dangerous organization" that "does not allow competition because they know they can't compete."

Bill HR 4248 will essentially do three things: 1) repeal legal tender laws to remove the monopoly control of the Federal Reserve, 2) legalize private mints to issue coins to be controlled by anti-fraud and anti-counterfeit laws, and, 3) remove taxes from precious metal coins to ensure fair competition among new currencies.

Paul adds that it will provide a smooth transition away from the Fed, pointing out that "if nobody wanted to use them (competing currencies), they wouldn't have to, and everybody could be happy with the Federal Reserve. But if the situation gets so chaotic that the people are looking for an alternative, they can go over to start operating in another currency."

Obviously, coins made with precious metals will maintain, or increase, in value should the world reserve currency, the U.S. dollar, continue its decline.  It is this store-of-wealth component and Constitutional obligation to pay all debts in silver or gold coinage that drives Paul's monetary philosophy.  And although he prefers the private production of coinage, his proposal to de-monopolize the Fed through competition does not discriminate against paper or public alternative currencies.

Some regional paper currencies have already been in circulation for years such as Ithaca HOURS and BerkShares.  According to the HOURS organization, local currencies are perfectly legal "as long as it does not look like dollars, as long as denominations are at least $1.00 value, and if it is regarded as taxable income."  In other words, they are essentially tied to U.S. dollars and must be taxed the same.

Ithaca 2 HOUR Note
Ithaca HOURS, based in Ithaca, N.Y. were one of the first local currencies founded in 1991. HOURS are considered "local tender rather than legal tender, backed by real people, real labor, skills and tools" and are based on one hour of labor valued at $10. With around $100,000, or 10,000 HOURS now in circulation, they've been used for millions of dollars in trades by over 500 businesses and organizations.

The organization offers one-year, interest-free loans to local businesses.  The supply of HOURS increases with these short-term loans, by issuing grants for local nonprofit organizations, a 5% annual operating/printing fee paid to a local printer, and when members sign up or renew memberships where they receive 2 - 4 HOURS for doing so. HOURS are not redeemable for dollars in banks in order to encourage local commerce.

In contrast, BerkShares, used in western Massachusetts, are directly redeemable in dollars at several participating banks.  Their official website describes them as:
BerkShares are a tool for community empowerment, enabling merchants and consumers to plant the seeds for an alternative economic future for their communities. Launched in the fall of 2006, BerkShares had a robust initiation, with over one million BerkShares having been circulated in the first nine months and over 2.7 million to date. Currently, more than four hundred businesses have signed up to accept the currency. Five different banks have partnered with BerkShares, with a total of thirteen branch offices now serving as exchange stations.
BerkShares Being Printed
Anyone can purchase 100 BerkShares for $95 at partner banks.  These 100 BerkShares are equal to $100 purchasing power at participating shops and restaurants.  These businesses can then either spend the 100 BerkShares back in the marketplace, or convert them into $95 at the bank.  Therefore, they give a 5% discount to BerkShare customers to encourage local consumption.  The program is so successful that other cities like Baltimore are modeling their BNote currency after it.

Although Ron Paul specifically mentions allowing private coinage of precious metals, these regional paper currencies provide an important alternative exchange structure should the dollar collapse.  It is said that these competing currencies are backed by local relationships and labor, but it seems it was their peg to the dollar that may have helped early skeptics trust their value.  Now that the motivation for creating currency alternatives to the Federal Reserve note is rooted in the instability of the dollar, it will be interesting to see if these communities maintain faith in their value should the dollar fail in dramatic fashion.

Western Michigan is one region that has been increasingly accepting silver or gold as a competing currency for local goods and services.  A man even paid for $25 of gasoline with a half-ounce silver "barter medallion" bearing Ron Paul's likeness:

Another benefit of using gold and silver as a regional competing currency is that their value is border-less, whereas a new paper-currency may have difficulty expanding trust in times of lost faith in the fiat dollar.  However, the established infrastructure for alternative paper currencies may prove to be a quicker regional solution should a dollar crisis unfold rapidly.

Ultimately, the principle of competition is of utmost importance for monetary reform. The argument is that when free market principles take hold, the most stable and trustworthy alternative currencies will likely grow in scale and coverage, yet their competition will continue to keep them honest.

This article may be re-posted in full with attribution.


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Anonymous said...

I agree that the PIIGS are in deep strife in 2011.
Alot of people think we are doomed, but there are still great ways to make money.

I subscribe to the FFT newsletter at that guy is calling for a bigger event to come in the next few months. His oil calls are insane, and I have been making good money with that.

Start stocking up on gold people!! Do it yesterday.

Corbett said...

Ron Paul knows that there cannot e two competing currencies -- if he doesn't, he's a fool. If there is a legal tender law requiring us to take Federal Reserve Notes, then the good currency will be forced out of the economy. If there is no legal tender law, then the good currency will drive out the Federal Reserve Note -- while causing MASSIVE inflation.

Anonymous said...

What's insane is keeping the same policy of a private monopoly with control over US currency. BTW - we are headed toward massive inflation under the current system anyways. The day the dollar is removed as the world reserve currency is the day of reckoning, and if their aren't alternatives in place, the suffering will be far more profound.

Anonymous said...

I'm not sure that I can see the logic in trading one fiat currency for another. It seems to me that the value of these BerkShares and Hours could just as easily be diluted by the creation of more notes. I think that gold and silver should be the currency that replaces the dollar, especially given the fact that it is what our constitution calls for. Additionally, the constitution says "No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility"

Anonymous said...

The Liberty dollar was used for a number of years by people all over the US and up in Canada, but they were recently shut down for their money looking to real....coins, paper money and online banking were offered. So much for that.

Anonymous said...

The alternative currencies will work, why? Because they already have and look at the facts of history. Rome did not grow strong and have a very stable economy using gold and silver. They rew strong and remained stable using a paper "fiat" currency, however it was tightly regulated and controlled by the government. When they started to loosen the laws on currency it spelled the end. Also, they are locally controlled, therefore they are tightly controlled, so the risk of counterfeit and such is pure BS. "Ron Paul knows that there cannot be two competing currencies" Why? because you say so?

King of the Paupers said...

Jct: Monetary Reform Ends with the world-wide interest-free service-charged-based UNILETS time-based currency in Millennium Declaration C6.

Anonymous said...

Paper was not available to the Romans, it was invented by the Chinese over a century after Rome fell in 410 AD. Rome used the gold aureus and silver denarius coins. The debasement of these coins with base metal, mainly copper, destroyed the finances of the Empire and was a key reason for its collapse and the following thousand year long European Dark Age.

Anonymous said...

Ron Paul is right as usual.Silver and gold should be for everyday transactions.

Anonymous said...

"Paper was not available to the Romans, it was invented by the Chinese over a century after Rome fell in 410 AD. Rome used the gold aureus and silver denarius coins. The debasement of these coins with base metal, mainly copper, destroyed the finances of the Empire and was a key reason for its collapse and the following thousand year long European Dark Age."

Before dictator Caesar took control, the Roman republic used copper and tin coins: the fiat currency of that day and age.

After Caesar took control it was gold and silver onwards. An Empire of pillage was needed to hold that up.

Get the facts straight.

Anonymous said...

The only problem with a gold and silver based alternative currency is that there is not enough gold and silver to go around any more for use as a tangible coin system.

Currently there is only enough gold supposidly in fort knox for each of the 300,000,000 Americans to hold one ounce at the most at any one time.

For gold and silver as a PRCTICAL currency we would have to find a way to use it in the THOUSANTHS of an ounce and this might require something like a paper or a plastic currency with a gild anti counterfeiting strip of the same micro ounce weight as the printed denomination on the note to work.

Steven G. Berry said...

Once again, for clarity, gold and silver are commodities not money.

If you want to buy it, it isn't really money.

The problem isn't FIAT or fractional reserve lending, it's usury. When you understand money, you'll know what I mean. Please keep trying.

The powers that be have purposely confused the issue -- inventing entire "sciences" devoted to stealing your stuff via compounding interest on a limitless concept. Industrialized theft.

QEI, QEII, QEIII -- do you get it? It's THEIR money, you pay to use it and they can print all they like. It was supposed to be YOUR money.

Google 1913. Take back the money itself to win.

Anonymous said...

HR 2990 Look it up

Steven Lawrence said...

@Corbett, who said, "If there is no legal tender law, then the good currency will drive out the Federal Reserve Note -- while causing MASSIVE inflation."

The other way around. If the Fed note is driven out of circulation by good money (Thiers Law), that would mean massive DEFLATION. Either way, we are headed toward a deflationary depression, hyperinflation, or a sequence or combination of the two. There is no escaping that inevitability.

Anonymous said...

Reply to Corbett: Re: competing currencies
If there is (and there is) a legal tender (PUBLIC) law so be it BUT this does NOT nullify the PRIVATE SECTOR LAW which enables a man/woman to barter or trade for such as items like food/gas/tires/staples or anything they need. What they (meaning the government) don’t see is any “revenue” to spend on some misfit or themselves, somewhere else. And what you don’t see is the real world that is going on right under your nose, but you will!
There is a “public” sector in this country and a “private” sector. Each is quite different and you need to know which is which as well as knowing how to live in both because soon you will not have a choice. The course of PRIVATE venue vs PUBLIC venue now is a never ending educative process and too long to go into here. The point here is “educate yourself” or else.
The old cowboy

imagingforex said...

I would say Canada dollar is strong recent years. as we know Canada is backyard of USA but very interdependent in economic.

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