This seems to be catching on. Some towns use money called 'hours' where each is worth 10 dollars. It keeps spending within one's community. Is this a legitimate solution to the inflationary fed notes?
Alternative currencies
This seems to be catching on. Some towns use money called 'hours' where each is worth 10 dollars. It keeps spending within one's community. Is this a legitimate solution to the inflationary fed notes?
Not as they're currently designed and implemented. Regardless of the "hours" designation, their values are pegged to fed notes and they behave more like gift certificate coupons than anything.Originally Posted by BAllen
Typically, local currencies, like Berkshares, Ithaca Hours, etc., and those based on a "LETS" system fix the price of an "hour" (of labor) arbitrarily at $10, as if that was an universal price for labor, which is a fatal flaw for a number of reasons. All have varying levels of acceptance and success. Not all merchants honor them, and those that do usually only honor them as partial payment for goods and services. You can't just go into a store and pay with nothing but the local currency in most cases. Their continued exchange values are based on promises and trust, with no way of tracking, backing or maintaining that exchange value in any meaningful way that assures that people the fundamentals are sound enough for people to continue to want to honor them.
I am extremely encouraged by the rise of local/parallel/alternate currencies, however, for a number of reasons. For one, it gets people used to the fact that they are legal, legitimate, and can even exist. They also get across the idea that their currencies are "complimentary" alternative currencies, and avoid the problems associated with being perceived as "competition" to the fiat currency monopoly of the Fed system.
Secondly, their existence is generally supported by people across a broad political spectrum (everyone generally likes and supports the idea of "local" control). That's very important. Thirdly, and very important, their recent rise has set precedences on state and federal levels that give more sophisticated local currencies a foot in the door.
One of the worst things that can happen to a currency, I think, is that it gets thought of as a "Tea Party" solution for libertarian or survivalist nutjobs only. Lose local political support and acceptance, and you might as well not even try, IMO.
Privately issued scrip was ubiquitous in the wake of the Great Depression. That was a deflationary depression, but what most people don't realize is that currency shortages are also an extreme risk, and comes in waves, in a hyperinflationary environment. The fact that you might need much more of the inflated currency to buy the same goods and services doesn't automatically mean that you have more, or that inflated currency is coming to everyone in steadily truckloads (even electronically, nobody's pushing any buttons to make your account grow nominally). It only means that people no longer trust the exchange value stability of the currency, and that those goods and services are no longer priced in response to a typical demand curve--they won't be sold for any less, whether there are any buyers or not.
The one thing local currencies currently lack is any tangible backing that would enable them to be considered a stable store of value. But that is not to say that it is not possible within the realm of what is already established as a matter of precedence. I have been working for some time on a novel design for a special kind of local currency that is 100% backed, as bailment holdings only, of locally vaulted and protected hard commodities (not just gold and silver). I intend to implement that currency as part of a not-for-profit service in New Hampshire communities (starting with one), as part of the Free State Project there. There are a lot of legal issues involved, but none that are insurmountable, and the system I am working on now would most definitely be a legitimate solution to inflationary Fed notes.
If you REALLY want to implement longstanding competing currency - find a local smelter/refiner and begin a project with them to smelt 3 primary metals:
Cooper
Silver
Gold
In various denominations - listed by WEIGHT.
"Like an army falling, one by one by one" - Linkin Park
I couldn't agree more. Even if there is no local smelter, and you have to become one. It's not as hard as many might think. The ability for the average person to cheaply and efficiently convert any holdings, including scrap, into currency, is key--an absolute must.
I'm using the following, that I consider the Big Seven:
Precious:
Gold
Silver
Platinum
Palladium
Base:
Copper
Nickel
Aluminum
Each denominated in GRAINS, common units of MASS that are integer convenient to convert from market prices in any other currency (480 grains to a Troy ounce for precious metals, 7000 grains per avoirdupois pound for base metals)
Furthermore, since we live in a tech age - one other business platform that is viable and important: honest holding companies who integrate themselves with various banks and credit card companies.
This way, metal need not be carried around but held in deposit accounts and ownership moved around digitally. No different (COSMETICALLY) then the way the market works now - but simply with a more stable (and HONEST) underpinning.
Of course this also leads (can) to the sequestration of accounts into both savings and deposit accounts. This would allow for interest rates to be locally driven based on the supply of savings that commercial banks and credit unions can attract into their coffers.
This, of course, challenges the entire world order. But ahhhh well - so is the plight of the revolutionary thinker.
"Like an army falling, one by one by one" - Linkin Park
If your community is small enough, you might as well barter.
Barter is better than debt slavery.
Mind you; unleveraged currencies are even better than barter.
"Like an army falling, one by one by one" - Linkin Park
That's actually one of the things I want to defy, at least with my model--an absolute and complete separation of currency issuance from any connection to banking and finance. Not that banking and finance couldn't deal in the currency, mind you--they probably would--but only as another kind of user. And the integration would be handled externally (think BitInstant with the new bank cards it wants to issue for the bitcoins it does not and cannot control).
Fiat currencies could be treated as vehicles only (like a Paypal account that remains empty, but transfers instantly from some other source as needed), with holdings that are the only store of value. Aside from the bank cards, holdings could as easily transferable as Bitcoins (and using similar technology, sans the 'data mining' functions). All with no usury, no demand deposits, no credit, no interest paid out or accepted. A "run" on such a facility would be as much of a concern as a "run" on valet parking, or a coat-check closet at a club.
It was always the mixing and creative blending of mints, banking and finance that has always gotten currencies into deep trouble. Originators (mints, which are not even the original source of the wealth they coin), have vaults and become bailees. Then lenders double as bailees, and circulate their fiduciary media, to the point where promises to pay are deemed every bit as good as payment itself, because the net effect is the same--for a time. So we accept bank notes as the equivalent of hard specie, and that becomes complicated by FRB, demand deposits, fiduciary media and other derivatives, and a whole clusterfuck rat's nest of contradictory counter-party claims, and a lot of unnecessary and complex obfuscation. Unnecessary to the currency holders, that is.
Holding titles originating from a private, independent, community run NON-bank, NON-financial institution, with zero ties to credit, promises, or usury of any kind, would be in a currency class all by itself.
I want a hard-asset backed local currency, with the motto CAVERE FAENERATIO ("avoid usury"), the original source of which is not EVER a bank or financial institution, and which takes no part in fiduciary media of any kind. As Amish in its core foundational principles as it is high tech in its implementation. No glass wall, no assurances, no trust, no MF Global-style promises that bailments won't ever be treated as deposits. None of that is even required, and only because there are no deposits to begin with--only holdings, and only as bailments of private property, not subject (even for an instant) to artificial inflation by any mechanism, contradictory counter-party claims, or promises of any kind.
Disney was once told by a theater-owning friend, "Your problem is that distribution companies don't know what sells until the public tells them what they want." Disney's ultimate response: Buena Vista Distribution. From that standpoint, a currency that is already valued as current money would be treated as a special kind of finished good by banks, but only AFTER the banks observed (as Congress did prior to 1792) what the public actually valued -- an asset that it did not create, cannot counterfeit, and has absolutely no control over whatsoever, beyond whatever notes happen to be its own particular holding titles.
As such, banks could borrow that currency from users, and lend it out at interest. They could even fractionally reserve lend it -- but with its own notes only, not the title notes created by the original core system. Meanwhile, the nominal value of each holding steadily increases relative to the fiat currency. But it's not a fake "peg". It's reflects a real nominal value loss of the currency relative to the underlying assets of each holding. So the local currency itself couldn't be loaned out as a derivative without an equal promise that the derivative will keep pace with the increasing nominal value of the local currency. No bank can fractionally reserve that; it would be a losing proposition for them.
But that does not mean that banks could not profit from a 100% backed lending of holdings. Whatever they are loaning out, however, would have to be the actual tangible holding titles themselves--which are based on percent of metal ownership, not some pegged nominal fiat value. To loan it out, they would have to transfer actual title. Those holding titles would increase in nominal fiat currency value over time, and that increase could then be paid back to the bank in fiat notes as interest.
To make an legal distinction, it is very important to refer to them as "holdings", and avoid the use of the terms "deposit" and "account", which have definitions tied to lending institutions. As to all the rest, you're exactly right. The metal need not be carried around, and in fact COULD BE LEAD OR MERCURY (or even salt!). It weighs the same on paper and electronically, and so long as there is a real market for it, and the underlying assets are really there, there is no reason why it cannot serve as an underpinning for currency.This way, metal need not be carried around but held in deposit accounts and ownership moved around digitally. No different (COSMETICALLY) then the way the market works now - but simply with a more stable (and HONEST) underpinning.
And the currency itself requires no special printing presses. You print your own currency in any denomination desired.
Verified and authorized at point of sale like any other card.
With what I'm designing, that will be someone else's concern, independently and absolutely separate from the currency itself. The de facto sequestration occurs naturally because there is no credit/lending/usury arm to the institution to begin with...and never will exist within that institution.Of course this also leads (can) to the sequestration of accounts into both savings and deposit accounts. This would allow for interest rates to be locally driven based on the supply of savings that commercial banks and credit unions can attract into their coffers.
Barter is extremely inefficient in any size community. If your community was small enough, and your aim was for a truly local currency, you could measure, weigh, assay, certify, etc., and vault anything from flatware to jewelry to scrap metals of all kinds, the "FUNGIBLE BAILMENT" holding titles of which (all managed electronically) could be theoretically divisible to the atom, and transferable as circulating currency, with underlying assets that are essentially bailed on a more or less permanent basis -- with no in-out privileges. The only way to get at the underlying assets would be a forced dissolution of the entire exchange, in which case the assets would be liquidated en masse, and the proceeds distributed in proportion to private holdings (all of which would be known to the atom).
Last edited by Steven Douglas; 12-03-2012 at 07:56 PM.
How would you trade with metals? Say I went to a store with an ounce of silver. The previous day, the closing value was 33 dollars. So, I buy 33 dollars worth of goods. The next day, it goes down to 30 dollars/ounce. Would the merchant lose money from my purchase?
Last edited by BAllen; 12-04-2012 at 11:54 AM.
Something like Ithaca Hours isn't. Something like Shire Silver partly is. We need multiple currencies that make it big. So something like Shire Silver needs to make it big. Something like donttreadonmeme needs to make it big. And so on.
http://shiresilver.com/
http://donttreadonmeme.com/silver-dime-cards/
Lifetime member of Gun Owners of America and the New Hampshire Liberty Alliance. Member of Young Americans for Liberty and Campaign for Liberty. Free State Project mover and many year Free Talk Live AMPlifier.
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