Chile Forum

I don't know how that would work in practice.
You'll see it work in practice very soon in the USA just like it always has everywhere in history where fiat currency becomes abused and inflated. After our fiat paper/electronic/magnetic 'dollar' finally dies other items will be used as currency in free or 'black' markets. It emerges spontaneously, that's how it works - from people in a marketplace who dont need a government to force them or tell them what to use as currency. Fiat = by decree or force. Given a disgraced paper dollar people will revert to what they have always used where they have had no or little government interference and coersion. Honest money. Probably pre 1965 US 90% silver coins will be most readily accepted. Copper will have its place in very small transactions. I think you maybe don't understand that money is not the invention of government, and requires no political authorization for its use. All governments can do is f*ck it up. Proven many times over.


First, it's a grant of power in the US Constitution to print currency and set the value thereof.
I'm not sure what you mean by grant. The elected representatives (the Framers) were granted the power by the people to establish a currency for the USA. That currency was equivalent to what was already being used in commerce. Namely Spanish milled dollars. "...as the same is now current..." The Framers knew better than to try to force a new unit on the people. And in their wisdom modeled the new dollar after what was already being used.


So, you'd have to amend the Constitution.
I'm suprised you said that. The constitution does not need to be amended The Coinage Act of 1792 and the consitution already defines the dollar as: DOLLARS OR UNITS--each to be of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure, or four hundred and sixteen grains of standard silver.

Bouvier's Law Dictionary, 1856 Edition
DOLLAR, money. A silver coin of the United States of the value of one hundred cents, or tenth part of an eagle.
2. It weighs four hundred and twelve and a half grains. Of one thousand parts, nine hundred are of pure silver and one hundred of alloy. Act of January 18, 1837, ss. 8 & 9, 4 Sharsw. Cont. of Story's L. U. S. 2523, 4; wright, R. 162.

According to the Constitution and the Coinage Act of 1792 it is a specific weight of silver: 371.25 grains of fine silver – the silver dollar. No need to amend the constitution, just follow it. Novel idea!


We did have alternative currencies in the 19th century when banks printed their own currencies,
Those were not 'alternative' currencies. Tthe use of money is either between two private individuals, or between the government and private individuals. The first case differs significantly from the second. Legal tender in private exchanges is the medium that the law recognizes as the means of payment a creditor accepts from his debtor, as the means of payment of his debt. However, private individuals can accept any means or type of payment mutually agreed upon in a written contract – Acceptance of that medium constitutes a contract in contract law. The 'dollar' itself (the regional or local banks printed paper) is the contract. i.e. a warehouse receipt. It in itself is not a dollar. The silver is the dollar. No problem so far. But when the government desires a monopoly on the creation of money we have a big problem. And when that perogative is used to defraud as it inevitable will be by greedy men who have no oversight or competition we have a disaster in the making. See the 6 o' clock news for that.

Re: issuance of money I'll quote freely from Nelson Hultberg:

"To clarify this issue better, let's refer to Edwin Vieira, seeing that he is the nation's foremost scholar in regards to the legality and constitutionality of monetary issues. In a paper titled, How to Restore Constitutional Money, that he presented to the Conservative Caucus Foundation in Washington, D.C. on January 13, 1997, he states:
""Article I, Section 8, Clause 3; Article IV, Section 2, and the Fifth, Ninth, Tenth, and Fourteenth Amendments... guarantee individuals free entry into private
banking." They also guarantee that private banks can, if they choose, "issue their own non-fraudulent notes and securities, and deal in deposits of silver, gold,
foreign currencies, or any other monetary medium." In other words, these sections of the Constitution "grant a complete free market to money."Thus (even though the federal and state governments CANNOT), private banks CAN issue paper notes as long as such paper instruments do not breach the
laws of fraud, i.e., as long as the issuing banks provide in Vieira's words, "complete disclosure of their operations and are fully responsible civilly
(and a fortiori criminally) for the same." [Email to this writer, February 3, 2005.]""

So we're looking at INTENT. As in intent to defraud.
"Without a government central bank to back up the commercial banks, all banks would be independent and on their own. This would force them to remain very liquid in order to avoid runs and bankruptcy. This would be their number one concern -- remaining liquid. Thus they would have to attract their customers with solid banking practices, rather than the inflationary practices of a central government backed system."
In the 1840's individual banks had runs and were bankrupted due to bad banking practices or outright dishonesty and fraud on the part of their operators. Better that than systemic fraud. Once they were bankrupted they were done. No government central bank to bail them out. i.e. Moral hazard or risk avoidance. Survival of the fittest (and most honest) in all its glory.

Pertains to the above paragraph.
http://www.financialsense.com/editorials/loeffler/2008/0718.html

often not recognized by other banks (or, even the bank that printed it).
More Hultberg: "This would be THE PARAMOUNT ISSUE with all potential depositors! The first thing they are going to want to know about a bank before they leave their life savings with that bank is how solid, how liquid is it. How susceptible to bankruptcy is it? ..."

"The slightest doubt among the depositing public as to a bank's trustworthiness and liquidity would put that bank out of business. Thus banks, more than any other business in the marketplace, would be very dependent upon maintaining a sterling reputation..."

"... and full disclosure every quarter, full disclosure and the competition for reputation. is what would make them do this because the biggest concern a depositor would have in an independent banking system is the bank's integrity and liquidity."

"Under our system of government regulated banks today, no one is concerned with a bank's portfolio and its liquidity
because they know that the Fed will always be there to back up that particular bank (Moral Hazard) if it gets into trouble. But in a free-market system of banking (where all banks are independent and on their own), then all depositors will very quickly become extremely concerned with the bank's integrity, its liquidity, its reputation. No one is going to put money into a bank that is top heavy with outstanding loans in excess of gold reserves. In a free-market system of banks, there would actually spring up private watch dog reports (somewhat like our present day Consumer Digest) that would give out quarterly ratings of all banks on a nation, state, and city-wide basis - rating the quality of their policies and their portfolios. To be rated high on these listings would be of extreme importance to every bank."


So, I'm not sure why a modern people would want to go back to that "laissez faire" experiment.
Well, because people like freedom? Because they would want to return to constitutional money? Because they don't want their life savings to be stolen through the hidden tax of currency inflation. Because it's better to risk local banks going out of business from bad practices and outright fraud than the reductio ad absurdum of 'moral hazard' where the entire system is rotten. Because this "laissez faire" experiment resulted in the most personal freedom and highest standard of living in human history? That is until criminals derailed the free market competitive basis of our country. Are those enough reasons?


The gold standard seems like a lot to do about nothing. Anyone can buy gold with their illiquid cash. They can invest in the stock market for even greater long-term growth. The only thing at risk of dilution (with non-commodity currency) is their liquid cash.
??
I don't care about the stock market that's a different scam. Using gold for speculation or get rich quick purposes is counter to its historical use as a vehicle, a store of value, to transfer wealth through difficult times. i.e. fiat meltdowns.


I often get the impression gold bugs want their cake and eat it too.
I agree. if you mean a gold bug as someone who advocates a 100% gold standard. i.e. Rothbardians and Mises followers. A 100% gold standard is not practical for a modern society. But that would take us into a discussion of real bills and credit. As outlined above, the creation of money and credit by banks is constitutional, the intent to defraud or monopolize on the part of individuals or governments is the problem.


As for government being the problem, that's easy to say as you benefit from building codes, zoning laws, social-creation of corporate entities, food and drug quality laws, regulation of the stock market, and banks.
All of those items have better free market solutions. Have you ever tried to build an addition on your house?


Usually when someone makes the bald statement that "government is the problem" they do so while firmly attached to one or more teats.
I can see that. Human nature. Certain personality types always want a free pass.A human impulse as old as dirt. I'd go so far as to say that is the basic human division. Producers vs. Parasites.
However myself, I have as little to do with government as humanly possible. I don't receive any money from them. I haven't ever cashed my income tax checks for the last three years. Doing so, in my view, constitutes agreement with the scam. They can steal from me, (against my will) but they can't bribe me to play along with their theft by returning a small portion of it.

Did you ever wonder why an entity that can print all the money they need wants
some of yours back every year?

Chuck J 3.0 wrote:You'll see it work in practice very soon in the USA just like it always has everywhere in history where fiat currency becomes abused and inflated.

And, you'll see the gold standard abandoned just like it always has everywhere in history where the standard is too constraining for reality (such as the need to fund wars, pay reparations, etc.).

That is the bottom line. If you don't trust government to exercise its monetary policy reasonably, tying dollar supply to factors such as population, gross domestic product, etc. (things that are more concrete than the cost of digging your favorite metal out of the ground, which your nation may or may not have any in the ground), then there's no reason to believe that same government will remain on the gold standard.

History has proven that to be true. A metal monetary standard isn't a panacea.

Chuck J 3.0 wrote:Given a disgraced paper dollar people will revert to what they have always used where they have had no or little government interference and coersion. Honest money.

But, this is another flaw in your reasoning. We're constantly told the paper dollar is disgraced now. It's lost 80% of its value over 100 years. Nothing prevents individuals from exchanging metal currency now. But, they don't.

It probably has something to do with the fact that, even though a dollar purchases 1/20th the amount of bread that it did 100 years ago, more people earn vastly more than 5x than the people 100 years ago (increased middle class). And, their dollars buy things that weren't imaginable 100 years ago. Including medical treatments that didn't exist even for the richest person who lived 100 years ago.

That's the problem with trying to assign one interpretation of "value" to currency. The value may be its elasticity and flexibility which contributed to the economic growth (and relative stability) over the past 100 years. The very properties absent in metal, which always forced governments off the gold standard.

Chuck J 3.0 wrote:The elected representatives (the Framers) were granted the power by the people to establish a currency for the USA. That currency was equivalent to what was already being used in commerce. Namely Spanish milled dollars. "...as the same is now current..."

That's false. The constitution was a grant of power to establish a currency, and "regulate the Value thereof." The phrase you quote appears nowhere in the Constitution. Likewise, it would be redundant to grant the federal government the power to "regulate the value" if they expected the value to be regulated by a free market because "government's the problem" (as you asserted earlier). If the Founders felt government was the problem, why would they create a *larger* government than they had for the prior 10 years (under the Articles of Confederation)? And, grant a power to regulate the value of currency?

Chuck J 3.0 wrote:So, you'd have to amend the Constitution. I'm suprised you said that.

You've forgotten what I replied to. You said money should be privatized. I said you'd have to amend the Constitution because it contains a grant of power expressly for that purpose.

I don't believe there is anything preventing private entities from establishing private currencies. I.e., there's nothing holding back your ideal -- except for a lack of popularity. And that lack of popularity probably stems from the fact that private currencies existed in the 19th century when banks issues their own notes, often not recognized by other banks -- or even the bank that printed it!

To me, that's the bottom line. There is nothing preventing individuals today from using metals as a store of value. Or, other investments (stocks) for even greater growth. It's not like we're forced *not* to use metals. It's not like an either/or proposition. It's just a question of how much the official currency should be based upon those factors (reserves of metal, collective capitalization of the nation's marketplace, annual product of the marketplace, etc.).

Also, I could be wrong about nothing prohibiting private currencies. The founding generation granted a power to the federal government to prohibit states from printing money. That could easily extend to individuals within any state.

Chuck J 3.0 wrote:We did have alternative currencies in the 19th century when banks printed their own currencies, Those were not 'alternative' currencies.

Sure it was. Banks issued currencies. These were notes that could be passed to another individual, and that individual (in theory) could redeem the note at any bank (for that bank's notes, or federal currency). The problem is, banks issued more notes than they had reserves for. Usually, only the bank that issued the note would redeem it because other banks didn't want the liability of being stuck with the other bank's notes. Over time, it became impossible to redeem a note at the issuing bank.

That's why I questioned your assertion that money should be entirely privatized. Although government isn't perfect, having oversight over banks (reserve requirements) has been a positive outcome from that libertarian experiment in the 19th century. I don't know why anyone would want to go back to it.

Chuck J 3.0 wrote:So, I'm not sure why a modern people would want to go back to that "laissez faire" experiment. Well, because people like freedom?

Evidently not. If people liked freedom (in the absolute sense you imply), the Founding generation would have kept the Articles of Confederation instead of embracing a vastly larger and more-powerful federal government with grants of power to suspend habeus corpus, conscript individuals, invade states to put down insurrections (which, may be one man's legitimate "cause"), and set the value of currency while prohibiting states from printing their own.

Everything over the past 220 years has followed that path established by the Founding generation: ordered liberties. Which comes at a cost to liberty in the absolute sense. That cost can be the devaluation of currency in return for greater economic growth and stability which an elastic currency provides.

Chuck J 3.0 wrote:Using gold for speculation or get rich quick purposes is counter to its historical use as a vehicle, a store of value, to transfer wealth through difficult times. i.e. fiat meltdowns.

I'm detecting a pattern where you use definitions that only serve your purpose. "Value" means what you say it means. "Investment" or "speculation" means only what you say it means.

When gold has been a metal standard, there is still speculation about the government's willingness or ability to remain on that standard. That's when you have "flights to safety," driving up the value of that country's currency. Value isn't just the amount of effort it takes to dig the metal out of the ground. It is also whether the country has any in the ground (to dig up). Whether the country has intentions to dig up more. And, whether the country is believed to have an intention to continue to use the metal.

It was this kind of volatility (in addition to inflexibility in the face of wars, or the aftermath of war) that makes metal something less than a panacea.

Chuck J 3.0 wrote:I often get the impression gold bugs want their cake and eat it too.
I agree. if you mean a gold bug as someone who advocates a 100% gold standard. i.e. Rothbardians and Mises followers. A 100% gold standard is not practical for a modern society.

Right. So, even gold bugs are pragmatic. They see the need for some "wiggle room." So, now it's just a discussion of balancing interests. The interest in flexibility in moderating the economy (and responding to special challenges such as wars). And, the interest in something never changing in "value" (which can't be easily defined).

That leads to whether currency should be backed by 90% commodity reserves? Or, 10%? Or, are commodity reserves an accurate gauge of the wealth of a nation? Should it be backed by the total net worth within the nation? Or, it's total annual product? (Either of which are always expanding).

And then we find ourselves where we are. You've basically admitted metal isn't perfect (because a 100% metal standard would be problematic). We need some amount of flexibility in establishing "value." Which leads to flexibility in defining "value."

So it goes.

Mark

Chuck J 3.0 wrote:I have as little to do with government as humanly possible. I don't receive any money from them.

You're using your self-serving definitions again. You don't have to receive "money" to derive a benefit from government. For example,

- If you use banks, you benefit from regulation of banks (eliminating a large amount of "caveat emptor" that would fall upon you).

- If you use the stock market and brokerage firms, you benefit from what is a social moderation that alters a market outcome in your favor (i.e., eliminating unscrupulous companies and brokers from the market place, making your choices easier).

- If you eat food or purchase medications, you benefit from the social moderation of a market place that would place the responsibility for quality control entirely on your shoulders. (This comes at the expense of limiting the body of willing buyers and sellers to those who adhere to higher standards, in the interest of the majority's interpretation of standards).

- If you own a home within a city, you benefit from zoning laws, preventing your neighbor from disposing of her property in any way she wishes (say, converting her house into a brothel or using her backyard as a smelting plant).

- If you bought your home used, you benefit from building codes that provide a reasonable expectation that the person before you constructed it to standards higher than he might have, if left to his own "liberty."

So, just because you didn't stand at a window, and someone hand you $10, you're getting an artificial benefit too. A benefit that wouldn't exist in a perfectly consensual world. You can say you don't want the benefit. Yeah, yeah. My old girl friend who always said "no, no, no" when she meant "yes, yes, yes."

Mark

The statist viewpoint that you evidently see the world through is instinctively wrong to me.

We agree to disagree, sir.

Chuck J 3.0 wrote:The statist viewpoint that you evidently see the world through is instinctively wrong to me.

We agree to disagree, sir.

Ok. But, statism is a reality. That's the problem with libertarianism. It denies that reality in a quest for a simpler world that never has, and never will exist. So, when you say you'll agree to disagree, you're basically saying you prefer to live within the comfort of your delusion.

That's ok. But, I wouldn't want others to be misled.

Mark

There are two kinds of people in the world, those who understand free markets and those who don't.

OK, now you can have the last word Mark.

Chuck J 3.0 wrote:There are two kinds of people in the world, those who understand free markets and those who don't.

OK, now you can have the last word Mark.

Again, the delusion. Free markets don't exist. They never have. We have socialized markets. Everything from society creating corporate entities (to moderate market forces, freeing officers and investors from their personal responsibility if this artificial "fall guy" weren't created) to building codes and zoning laws. The list is *endless*.

Markets are more or less free. We could debate the merits of allowing Wall St. banks to operate more freely, and then bailing them out when the expected outcome (of free[er] markets) occurs. Versus regulating them to begin with, to reduce the potential need for a bail-out. Neither is a free market process. Just a matter of degrees (or acceptance of reality).

Your approach is the typical libertarian approach. These things just don't exist. Like the gentleman on the old, '70s sitcom ("Soap") who would wave his hand in front of his face and say "I'm invisible, I'm invisible." Denying the total absence of so-called "free markets" and statism is like denying gravity exists. It's so far beyond reality that it's not even credible.

Again, that's not to say there can't be too much statism. Or, markets can be too socialized. But, that discussion is vastly different than just pronouncing everyone you disagree with as a statist, as if we're talking about an either/or proposition. That's where libertarians go wrong. They dismiss the gray areas of reality, redefine what "free" is (all the things they want it to be, with hefty doses of socialization thrown in), and pronounce everyone else (who find different usefulness in socialization) "statists." To the extent they don't do this, and honestly advocate privatization (consensualism) in everything, the more they're simply irrelevant (like the guy denying gravity).

To me, that's the irony of libertarianism. It is based upon the philosophy of objectivism. And, its beliefs are followed, it's completely unobjective. It either relies upon principled rhetoric where it's not justified (because even the libertarian knows some statism is necessary, therefore we're all statists to some degree). Or, taken to its logical conclusion, it simply never has, and never could exist in reality. (How objective is it to embrace a fairy tale as if it's reality?).

Mark