How would competing currencies work?

[oneguyver]

I asked how would a gold standard work once and the gist of the answers I got was "a gold standard is not feasible, what Ron Paul is advocating is competing currencies".

To be honest I didn't give it much thought until I saw a video at the Mises Institute about privately minted currencies around 1800. What I found most interesting was that the coins were backed by another currency (British pounds). This is the same as a minting company issuing IOUs and then people trading those IOUs. It just so happened that the IOUs were in form of coins instead of pieces of paper.

So if we wave a magic wand and make it legal for anyone to produce and/or use a currency other than the dollar, how would those new currencies be created? I mean, if they're backed by dollars then they'll have the same problems as the dollar. If they're backed by gold (or silver) then you're effectively introducing the gold standard (which supposedly wasn't the goal).

So how would it work? Who would have the power to create a new currency? What would prevent them from inflating or contracting the currency for their own benefit?

Thanks,

[axiomata]

http://www.lewrockwell.com/orig/brimelow3.html
http://blog.mises.org/17896/denationalisation-of-money-the-argument-refined-in-epub/

[Carson]

Pretty much the same way they are working now, I figure.

It wasn't that long ago that we used silver coins. They have maintained their value or purchasing power even after we went off of the gold standard.

When I was young gas prices ran from about 17 to 25 cents a gallon. In todays market gasoline is still running about 20 cents.

http://photos.imageevent.com/stokeybob/morestuff/gas-20-cents.jpg


The Federal Reserve note on the other hand has been devalued since then by counterfeiting and the looting of the system. It takes about $4.00 per gallon.

http://photos.imageevent.com/stokeybob/followthemoney/RobertSahrcurrencyvalue.jpg


I think Ron Paul understands the argument that there isn't enough gold and silver to have and dollars worth of one or the other setting in a vault somewhere. A sound currency does need to be tied down in someway that it can't be easily manipulated by crooks. One way would be to tie its value to several commodities. I feel the goal should be to have a dollar that stands the test of time in that its purchasing power remains a constant that can be banked on.

When business is up and there is a swelling of goods on the marked the supply would need to expand but still hold its purchasing power. When time were tough or we used all of our million dollar bombs to blow up hundred dollar shacks the supply should contract to reflect to contraction of goods to trade.

See those little bumps during earlier times of war? Those were other times we tried to interject fiat currency into the system to finance them. Later we withdrew it and the value of the currency returned to stability.

The current system is not just bad for the economy it is also responsible for the loss of the control of our government, our war department, our borders, and all those ideals we once held high.

You do understand that no matter how much money we could possibly gather together to build our countries the way we want others can create, out of thin air, what ever it takes to dictate their way.

I think we have allowed the very demise of our countries by the siphoning off of funds from the global central banks and they've been used to create their new world order. Well that and what we openly borrow from them to donate.

http://photos.imageevent.com/stokeybob/followthemoney/Supersingle640x537.jpg

Even on a basic brotherly level of fairness, if your going to print up fake money that the citizens of this country are going to be held responsible for, they should be the ones collecting the interest. Accounts should be set up. Even then it should only be done under the strictest of circumstances. The dangers are many.

[Carson]

I asked how would a gold standard work once and the gist of the answers I got was "a gold standard is not feasible, what Ron Paul is advocating is competing currencies".

To be honest I didn't give it much thought until I saw a video at the Mises Institute about privately minted currencies around 1800. What I found most interesting was that the coins were backed by another currency (British pounds). This is the same as a minting company issuing IOUs and then people trading those IOUs. It just so happened that the IOUs were in form of coins instead of pieces of paper.

So if we wave a magic wand and make it legal for anyone to produce and/or use a currency other than the dollar, how would those new currencies be created? I mean, if they're backed by dollars then they'll have the same problems as the dollar. If they're backed by gold (or silver) then you're effectively introducing the gold standard (which supposedly wasn't the goal).

So how would it work? Who would have the power to create a new currency? What would prevent them from inflating or contracting the currency for their own benefit?

Thanks,

I suppose a shorter answer could have been that the system we had could have worked if they had of been honest and kept to a rule of holding to a set amount of inflation. Not by year. A set amount period.

http://photos.imageevent.com/stokeybob/followthemoney/Baseline2.jpg

[Carson]

As for competing currency's. It should be the more the merrier.

Could be a guy trading notes on the grain in his grain elevator. Or a note good for so much labor.

To dictate one as legal tender is dangerous. Only time may tell how much.

[Revolution9]

Pretty much the same way they are working now, I figure.

It wasn't that long ago that we used silver coins. They have maintained their value or purchasing power even after we went off of the gold standard.

When I was young gas prices ran from about 17 to 25 cents a gallon. In todays market gasoline is still running about 20 cents.

They are ripping off the consumer who pays in silver. Look a it like this. In 1962 gas was the equivalent of one quarter ounce of silver. Today with gas at 4 bucks and silver at 40 bucks then gas today is only 1/10th of an ounce of silver..so gasoline is cheap these days compared to 1962 and this guy is charging the equivalent of 8 bucks a gallon. If there are takers for the exchange then cool..but he ain't offering any bargains.

Best
Rev9

[Travlyr]

I drove 1200 miles last week for less than $5 real dollars.

[Revolution9]

As for competing currency's. It should be the more the merrier.

Could be a guy trading notes on the grain in his grain elevator. Or a note good for so much labor.

To dictate one as legal tender is dangerous. Only time may tell how much.

The problem with grain is it rots or can get infested with vermin. The problem with labor is that the laborer may die. Currency should be able to continue to flow through the economy while retaining the original valuation and be capable of being redeemed for that valuation at any point in time at any point of purchase or redemption. There are not alot of physical items capable of retention of value regardless of the venue of usage. Metals are probably the best material for broad based transactional use. I could foresee a coin and paper immediately redeemable for said coinage of a variety of metals, not just silver and gold. For instance a copper and gold coin of 99% copper and 1% gold at one ounce weight with a 20 dollar notation on it, with percentiles struck into the milled edge. Or a one ounce 10% silver 90% nickel coin with a valuation of 5 dollars. for a look at various metals and alloys used for coinage throughout history see this link..
http://www.coins-of-the-uk.co.uk/pics/metal.html#Metal

As well as having value for their substantial consideration they would have artistic numismatic value for collectors as well. A study of a US Coin Catalog will show alot of these private issue coins to be worth a great deal to collectors. If melted down they would also provide utility such as naval bronze coins being melted into ship and plumbing fixtures, cannon barrels, axeheads etc., or chromium plated or coated steel small denomination coins could be remelted into knife and sword blades, nuts and bolts. Stacking bimetallic coins of certain alloys in a one then the other sequence, immersing in acid and adding wires to the top coin of one type and the bottom coin of the other type would produce electricity. Universal utility should exist within the competing currency and the currency itself or that which it points at should not rot or deteriorate, and should be capable of long term storage. The weights of each metal in the coin should be clearly stamped into the milled edge of the coin and various private watchdogs would produce a form of certification verifying the content as stamped was correct.

Just some thoughts.

Rev9

[IDefendThePlatform]

I think the answers given so far have covered it fairly well but if you want to see a bunch more youtubes and articles about it I've got quite a few posted here:
http://www.facebook.com/CompetitionInCurrency

[Bern]

Here's the text of Ron's Free Competition in Currencies Act:

http://thomas.loc.gov/cgi-bin/query/z?c112:H.R.1098.IH:

It's about half a page - very short. Read it. It basically just allows merchants and the public to start using bullion as money if they choose without having to pay capital gains taxes as their value fluctuates relative to the dollar.

[Microsecessionist]

I think competing currencies is an excellent idea, but the Constitution just won't allow for it forever. Sure there could be an Amendment saying that the Federal government shall not declare legal tender, but then that could be overridden w/o unanimous consent of the States. it would only take an expensive war (could simply be declared by majority of both chambers of Congress), and then 2/3 (at most) of both Houses of Congress to declare legal tender again.

I think that one of many huge flaws with the Constitution is the fact that it was so majoritarian and that nothing requires unanimous consent of the States.

[brandon]

I asked how would a gold standard work once and the gist of the answers I got was "a gold standard is not feasible, what Ron Paul is advocating is competing currencies".

To be honest I didn't give it much thought until I saw a video at the Mises Institute about privately minted currencies around 1800. What I found most interesting was that the coins were backed by another currency (British pounds). This is the same as a minting company issuing IOUs and then people trading those IOUs. It just so happened that the IOUs were in form of coins instead of pieces of paper.

So if we wave a magic wand and make it legal for anyone to produce and/or use a currency other than the dollar, how would those new currencies be created? I mean, if they're backed by dollars then they'll have the same problems as the dollar. If they're backed by gold (or silver) then you're effectively introducing the gold standard (which supposedly wasn't the goal).

So how would it work? Who would have the power to create a new currency? What would prevent them from inflating or contracting the currency for their own benefit?

Thanks,


The problem with trying to advance free market theories like this is that it's impossible to say exactly how it will work. Just like I can't tell you exactly how cars will be manufactured in 10 years or how the next disease will be cured, I also can't tell you how competing currencies will work. What I can tell you, is that free people will come up with a way to make it work, and if their way isn't the best then other free people will come up with an even better system.

Maybe there will be paper money backed by gold. Or maybe a better commodity emerges as money. Or maybe people determine paper money to be completely useless and use an all digital money like bitcoin. I don't know. No one knows yet. Everyone has ideas but there is no way of determining the best ones until we can put them to the test.

[Carson]

Revolution9,

The problem with grain is it rots or can get infested with vermin. The problem with labor is that the laborer may die.

I hear your concerns about the grain or the labor, especially if you would require holding the notes for a long time before trading them through the system. I still think it possible to come to an agreement that would be mutually profitable to us.

The one that would really squeal would be the tax man. How can you tax free trade of this sort?

[oneguyver]

Since there have been different kinds of answers I'll address them by group.

- The document "Denationalization of Money" has the answers.

This is basically the case for alternate currencies backed by gold, although there's nothing stopping the alternate currencies from being backed by something else. This becomes evident in chapter V where they explain that courts can agree on what currency non-contractual obligations must be paid in. They can decide this based on the unit value of the currency they choose. That unit value being gold, silver, or whatever else the court decides.

- The gold standard is the answer (or its euphemism: Alternate/replacing currencies backed by gold/silver/whatever).

There's no difference between 1 currency reliably backed by gold and 5 ones. Since the underlying is the same the currencies are effectively the same (IOUs from the issuer). I understand that you think this is the way to go, I just want to know *how* this would be done.

- The free market will provide.

I know your intentions are good but this answer simply won't cut it. How? Somehow...? Who? Someone...? Imagine someone advocating the privatization of the police and when asked how it would work his answer was "The free market will make it work somehow". Sorry but "somehow" is not enough when the stakes are so high.

btw, I'm not asking for anyone to predict the future or change the past. I'm just asking for an explanation of a viable way in which this would work. While I can't tell you exactly how cars will be made/sold 10 years from now, I can give you several likely scenarios of how it would be done.

[Erentheca]

The problem with grain is it rots or can get infested with vermin. The problem with labor is that the laborer may die. Currency should be able to continue to flow through the economy while retaining the original valuation and be capable of being redeemed for that valuation at any point in time at any point of purchase or redemption. There are not alot of physical items capable of retention of value regardless of the venue of usage. Metals are probably the best material for broad based transactional use. I could foresee a coin and paper immediately redeemable for said coinage of a variety of metals, not just silver and gold. For instance a copper and gold coin of 99% copper and 1% gold at one ounce weight with a 20 dollar notation on it, with percentiles struck into the milled edge. Or a one ounce 10% silver 90% nickel coin with a valuation of 5 dollars. for a look at various metals and alloys used for coinage throughout history see this link..
http://www.coins-of-the-uk.co.uk/pics/metal.html#Metal

As well as having value for their substantial consideration they would have artistic numismatic value for collectors as well. A study of a US Coin Catalog will show alot of these private issue coins to be worth a great deal to collectors. If melted down they would also provide utility such as naval bronze coins being melted into ship and plumbing fixtures, cannon barrels, axeheads etc., or chromium plated or coated steel small denomination coins could be remelted into knife and sword blades, nuts and bolts. Stacking bimetallic coins of certain alloys in a one then the other sequence, immersing in acid and adding wires to the top coin of one type and the bottom coin of the other type would produce electricity. Universal utility should exist within the competing currency and the currency itself or that which it points at should not rot or deteriorate, and should be capable of long term storage. The weights of each metal in the coin should be clearly stamped into the milled edge of the coin and various private watchdogs would produce a form of certification verifying the content as stamped was correct.

Just some thoughts.

Rev9

That sounds pretty awesome, and much better than what we have now.

Another advantage is that various industries could trade specifically in currencies specialized to their needs. For example, some companies might want to trade in silicon notes, notes for certain grades of plastic, metal, coal, or other raw materials. The companies who issue the notes would be liable to deliver the stored commodity when another company or individual wishes to redeem it. We already have material exchanges and holdings, so really not much would have to change, other than the fact that a 3rd party currency, ie the dollar, would not be necessary to perform the trade. Competing currency speculators would keep the commodities fairly stable, and if a particular commodity had drastically shifting value or if it was easily manipulated by collective speculating, it would be abandoned as a currency of exchange in favor of more stable commodities.

[brandon]

While I can't tell you exactly how cars will be made/sold 10 years from now, I can give you several likely scenarios of how it would be done.
And I think I gave you several likely scenarios of how money would work without government backing. Do you have a problem with those methods?

[oneguyver]

And I think I gave you several likely scenarios of how money would work without government backing. Do you have a problem with those methods?
Except you didn't.


Maybe there will be paper money backed by gold.
How would a gold standard work? How would it be implemented?


and use an all digital money like bitcoin.
How would something like that work? How would it be implemented?

Once again, the stakes are so high that "somehow" just doesn't cut it.

[Revolution9]

That sounds pretty awesome, and much better than what we have now.

Another advantage is that various industries could trade specifically in currencies specialized to their needs. For example, some companies might want to trade in silicon notes, notes for certain grades of plastic, metal, coal, or other raw materials. The companies who issue the notes would be liable to deliver the stored commodity when another company or individual wishes to redeem it. We already have material exchanges and holdings, so really not much would have to change, other than the fact that a 3rd party currency, ie the dollar, would not be necessary to perform the trade. Competing currency speculators would keep the commodities fairly stable, and if a particular commodity had drastically shifting value or if it was easily manipulated by collective speculating, it would be abandoned as a currency of exchange in favor of more stable commodities.


It also allows various forms of labor in extracting the metals or refining them from scrap to contribute directly to the money supply, similar as to why gold and silver are money. You could then take the raw processed metals to the nearest mint handling your type of coinage and they coin it and return it to you with a fee for minting subtracted..

Rev9

[Carson]

While we are toying with the concept of currency perhaps we should have a picture in the thread of what the ultimate goal might be.

It may not serve in all capacities but as a coin in the form of art, I can think of none finer.

http://photos.imageevent.com/stokeybob/morestuff/The-ultimategoal.jpg