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Real money The Lakota Sioux have a number of long time libertarian supporters amongst them so I was not totally surprised to hear about the Free Lakota Bank. This new institution is issuing 100% backed currency and supplies many normal banking services.
Unlike the Liberty Dollar effort, the Lakota will not be a pushover for the Statists. As you may remember, the Liberty Dollar facility was invaded and assets stolen by the Feds. The Lakota, on the other hand, have armed warriors for local security and if Statists invade sovereign Indian lands, it would not be the first time they got their arses sent back across the reservation line with tails stuffed up their bungholes.
It is my understanding this effort has the full support of the Free State Project. I hope we will hear more from them in the comments section. I also extend a hearty welcome to anyone associated with the Lakota bank and an invitation to drop in and give us a sales pitch. I would particularly be interested in their privacy practices.
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We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
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the Lakota will not be a pushover for the Statists
This is very much wishful thinking, and I see absolutely no reason to believe it.
…it would not be the first time they got their arses sent back across the reservation line with tails stuffed up their bungholes
Are we reading the same history books??
It was perhaps a couple decades ago, but the Iroquois sent the outside police heading back across the border after gently suggesting they do so… backed up by a number of well armed Iroquois. That would have been in New York probably. If someone else has a better memory of the details, please expound.
The answer in short is, yes, Indian reservations have told outside police to go stuff it and have made it stick.
As I understand it, the “libertarians” (Russell Means & gang) are not a very well-liked faction among the Lakota Nation tribal governments.
At the end of 2007, they announced their withdrawal from the treaties signed between the Lakota and the US, proclaimed the independent nation of Lakotah and denounced the tribal governments recognized by the US as Vichy Indians. Needless to say, that didn’t go over well with traditional tribal leaders.
I can see the Lakota tribal governments doing the feds’ bidding on this one.
I notice that while they claim US Currency is not real money, for a limited time only the Lakota Bank will be happy to accept your shinplaster fiat money, to be payed back at some future time in “minted Rounds”, which sounds like something from Altoids.
Ah, yes, the old lure of ‘REAL money – silver and gold!’
Again.
Given the real-world fluctuations in the market price of silver and gold
http://goldinfo.net/silver600.html
http://goldprice.org/30-year-gold-price-history.html
Gold fell almost $40, or 5%, in the last 24 hours – so much for ‘real money’!
I suspect that the life of the Lakota Bank will be short, and nasty, and that depositors may suddenly find that, just as the Statists have few remedies on sovereign Indian lands, so they also will suddenly be short of remedies on sovereign Indian lands.
For the umpteenth time – gold and silver have no intrinsic value any greater than any other commodity. They are not somehow magically ordained to be ‘real’ money. They are a convenient medium of exchange that is sufficiently rare and hard-to-obtain freely that they have, at times, enjoyed higher stability and confidence than, say, cowrie shells, or salt. But they are just as easy to manipulate, just as easy to devalue, as any other medium of exchange. Just look at the graphs.
Better to play blackjack at an Indian casino, where at least the rate of retrun is well-understood and not abale to be manipulated.
llater,
llamas
“I suspect that the life of the Lakota Bank will be short, and nasty….”
On the other hand, at least it won’t be British.
llamas,
which medium of exchange would you prefer to use, if you were free to choose?
While I’ll agree that gold isn’t somehow “magically real money,” it is the best-suited as a medium of exchange.
As for the Lakota defending this bank from Statists, I just have trouble seeing the US Federal government conducting a raid on sovereign Indian territory and seizing Native Americans’ assets.
Given history, I hope the intense outrage at such an act should be sufficient as a disincentive.
Dale: While the Iroquois may well have been able to tell state cops to kindly bugger off in the past, I don’t think they (or the Lakota) would have very much luck against Federal law enforcement, especially on a matter of minting money.
(Also, that WND link was horribly written and completely uninformative. It was a lot more like a Liberty Dollar press release than news. One might think WND could tell us the legal grounds presented by the Feds for their seizure… but that would involve a rather higher view of WND than the facts allow me to have.
Turns out that they weren’t raided so much for “competing with the government” so much as “money laundering and fraud”.
The WND link appears to suggest that various businesses believed the LD coins to be “US currency”. That puts them in violation of 18 USC 489 as counterfeiters. (Counterfeit in the sense of looking like novel US currency without being so, rather than in the sense of being copies of extant currency.
The Lakota, however, can probably avoid that trap, as they, as a sovereign nation, can make a legitimate national currency.
That their coins do not say “dollar” and do mention “of the Lakota nation” are an important distinction between them and the LD people; the LD coin does claim to be “dollars”, and looks an awful lot like a US coin design (compare theirs to the 1924 Peace dollar). It even has “USA” on the reverse.
The Lakota presumably have better legal representation than the LD people did, or at least learned from their mistakes.)
Sorry but I will not be buying any Wooden Indians anytime soon.
The liberty dollar folk seem to have overcome their run-in with the feds and be back in business. If they are a business – I’m assuming they get rich out of it all somehow.
The Free Lakota Bank appear rather opaque, however. I was hoping the ‘about us’ link on their site might give me some names, business address, perhaps some info about the size of their metal reserves. Instead it’s got some rambling stuff about silver-lined American dreams and a Rand quote…. Hmm…..
Not to sure about the “Do you have the moral integrity and character of a person that deserves a loan from the Free Lakota Bank?” bit either.
I’m generally in favour of these private currencies. I’m sure if any became more successful they would become a giant magnet for every fraudster and forger around, and I suspect that would cause a catastrophic loss of confidence and a flight back to national currencies. But in the mean time best of luck to them.
To say that money must be backed up by tangible assets is to perpetuate an anachronistic view of what money is.
Money, at its root, is an obligation for someone else to provide you goods or services in the future. How you keep track of the debt and to what standard you peg it determines its present value on the secondary market (i.e. all of modern currency transactions), but ultimately, money is obligation between persons.
Indeed, Mises makes clear that the monetary value of a currency, as such, is that portion of its value which is in excess of its tangible worth.
I personally am a big fan of the RipplePay concept. Now if only they would move their butts and get a decent release together…
It appears to me that they have invented a way to digitally mint virtual silver coins. Somebody with a better understand of digital image creation than I have may be able to tell if that is the case.
The native Americans may be in a much better legal position than the Liberty Dollar people. There’s always a gray area regarding where tribal sovereignty ends, and they may get either the benefit of the doubt from the Feds or a sympathetic hearing in the courts.
I admit to being somewhat sympathetic to fantasy of having a commodity backed currency; what i can’t fathom is why anyone would be willing to buy into one of these private currency schemes. There exists a global market for gold and silver. Why buy overpriced coinage from a bunch of schemers who pretend that it is worth more than it is, and charge accordingly? if you want some gold or silver, go to a coin or bullion dealer and pay market price for it. Don’t pay someone $100 for a piece of silver worth $20.
Mastiff – I believe you are referring to claims to money rather than money as such? Mises calls them money substitutes, I think. Or am I mistaken?
lukas wrote:
‘llamas,
which medium of exchange would you prefer to use, if you were free to choose?’
That’s a question that’s puzzled people with a lot more economic smarts than I.
But since you ask, I will say that I would like a medium of exchange that is immune to artificial manipulation of its value, whether it be by governments or by individuals.
Failing that (and we have always failed in that) I want a medium of exchange where the inevitable manipulations are at least theoretically transparent and visible, so that the effects may be anticipated and/or understood.
I also want more sunshine, and puppies too!
For these purposes, a currency based in tangible ‘assets’ like metals fails badly, because metals are extracted resources that are randomly distributed about the earth and the supplies of which can be influenced by a whole host of factors both economic and political. A gold-based currency, for example, places a nation at the (economic) mercy of them wot has the gold – and you don’t know who those people are, or who they might be in the future.
A couple of centuries ago, it was seriously mooted to base currencies on aluminum, which was then fantastically-difficult to extract and cost (IIRC) more than gold. The thinking was that the physical difficulty of extraction would create the intrinsic value of the metal, and disconnect its value for the ownership of the ore, which is plentiful everywhere and cheap to extract.
Doesn’t seem like such a good idea today, does it? since aluminum is trivially-easy to refine – although not cheap.
Fiat money systems are actually not that bad as currency systems go. Once we accept that everyone and every government tries to tinker with currency systems to their own transient advantage, then we need to look for systems where the tampering is at least documented and made public. When currencies are ties to tangible materials such as gold and silver, the money is worth, what the government of the day says it is worth – and governments of whatever stripe will re-value the currency at the drop of a hat if it suits their political needs. At least with fiat money, to a greater or lesser extent, the value of the money is decided by those transacting it.
llater,
llamas
Mike,
I think I confused the issue with my usage of “secondary market.” When Mises uses that term, he means things like bonds and such; whereas when I use it, I consider the “primary market” to be redeeming the money with its original issuer in exchange for services, and the “secondary market” to mean having currency circulate normally.
One of the hazards of inventing your own meanings is that you don’t get understood 🙂
If you want a commodity linked currency might I suggest ETFS?
Gold, Silver, Palladium take your pick.
“But since you ask, I will say that I would like a medium of exchange that is immune to artificial manipulation of its value, whether it be by governments or by individuals.”
I presume Llamas, you’re already familiar with Hayek’s proposal for a market in private currencies? Anyone else who isn’t ought to download that. (But briefly, market demand for stable currencies together with free competition in the supply of such, would effectively put an end to their manipulation.)
“Failing that (and we have always failed in that)”
Yes absolutely which would move the discussion on to the legal and political barriers to a real solution and how to remove them – which leads to well, everything.
Mastiff – I see, it’s clear now.
I am indeed familiar with Hayek’s treatise on the denationalization of money. And I completely disagree with his conclusions, becasue I am a solid believer in Gresham’s Law (bad/debased money drives out good money) and the inevitable outcome of a system of multiple private currencies is that bad will drive out good and many users who desperately need a system of currency will be hindered in their profitable endeavours.
This was nowhere seen more clearly than in the antebellum US, where there were hundreds, maybe thousands, of private currencies floating around. The US printed no banknotes prior to 1862. And US coin, while of excellent quality and never debased, was in chronically short supply. The result was that every tinpot bank and merchant was issuing private currency (both notes and tokens) and it was all a bewildering mess of rates and discounts – a perfect opportunity for fraud, counterfeiting, speculation and the general restraint of trade. Gresham’s Law played its full part and US coinage was hoarded, resulting in a monetary wasteland where trade was done reluctantly in a morass of currencies of dubious virtue.
This may be where the US psyche developed its fixation with gold and silver as ‘real money’.
Hayek’s model is a dream-world where any and every issuer of private currency is of equal and unimpeachable probity, every user has instant access to perfect communications and the means for instant and guaranteed redemption of both drafts and bills, and there is no crime, deceit or fraud. When that day comes, his approach will work very well. Until then, a single national currency, preferably in some form which insulates it from outside influences, is probably the best we can hope for.
llater,
llamas
See the US Constitution Article I section 10 for the US psyche’s “fixation” on “gold and silver” (should’ve been just “gold”; bimetallism fails), a lesson that had been learned from a great deal of history.
There exists a global market for gold and silver. Why buy overpriced coinage from a bunch of schemers who pretend that it is worth more than it is, and charge accordingly? if you want some gold or silver, go to a coin or bullion dealer and pay market price for it. Don’t pay someone $100 for a piece of silver worth $20.
Ben, the advantage of coinage is it takes some of the risk out of dealing with precious metals. Coins will have a known purity and weight, so you don’t have to assay them every time they change hands. While it’s probably true if you’re buying a precious metal for investment purposes bullion is the way to go, it doesn’t work as a medium of exchange.
As an aside, if you’re ever in Austria there’s a wonderful mint museum in Hall, near Innsbruck. It was really the high point of my last vacation in Europe.
“instant access to perfect communications”
You mean a blackberry? Ok, not perfect, but the theory might work better now the technology has caught up, and you can evaluate traders’ reputations in real time.
Llamas rejects commodity-based currency (a gold standard or its equivalent) on the basis that its value would fluctuate unpredictably with the discovery of major new deposits. That is undoubtedly true, although such discoveries are rare, and production comes on-line relatively slowly. His preference instead is for governmental fiat currencies, which history has proven will inevitably, without fail or exception, be debased by politicians. So he rejects a workable (if admittedly imperfect) system, with roots stretching back before recorded history, in favor of one which is demonstrably unsustainable and inevitably disfunctional. It is the classic rejection of the achievable “better” in favor of a theoretical but unattainable “best”.
Llamas’ system will work only in the same “dream-world” to which he relegates Hayak’s, a world in which politicians possess the “unimpeachable probity” necessary to ensure that their “tampering [with the currency] is at least documented and made public.” I can’t think of a better definition of “irrational.”
Actually, you don’t need something called ‘money’. What you need is a necklace with gold and silver 1-gram ‘medallions’, and a chart showing current prices compared to various metals. Have the chart handy, and if someone wants to pay in metals instead of dollars, who would be harmed (Except for the government). Just don’t call it money, and you might be able to slip under the radar, and undermine federal money. Perhaps the medallions could have faces of economic heroes- “This book is worth 3 Hayeks, and a VonMises!”.
Rothbard on Gresham’s law.
Llamas – allow me to quote Hayek (Chapter 6, p42):
“…Gresham’s law will apply only to different kinds of money between which a fixed rate of exchange is enforced by law.“
[Emphasis mine]
Nick Cowen makes the other relevant point.
Superautonomist! gets there before me and takes the piss, but he’s right that the chief difficulty of course is the removal of the legal prohibition on private currencies. Which is really just another way of saying ‘fuck!’
Mike quotes Hayek thusly:
‘”…Gresham’s law will apply only to different kinds of money between which a fixed rate of exchange is enforced by law.”
and I contend that Hayek is wrong in this regard. There does not have to be a rate of exchange fixed with the force of law for Gresham’s Law to operate with full force – the example of the antebellum US which I described is a perfect example. There were no rates established by law between the 1,001 private currencies andf scrips then circulating – the market sorted it out, as markets will, but to the great dertriment of many and the restraint of trade, as ‘good’ US coin was hoarded and speculated (due to the policy of bimetallism) and the value of the money in circulating was constantly fluctuating and suffering from inflation.
I have plenty of respect for Hayek, but just because he wrote it, doesn’t make it so.
Laird – you just-about completely misunderstand what I said. But that’s OK.
llater,
llamas
llamas,
in the antebellum US the government regularly suspended the obligation of banks to redeem their notes in times of war or economic crisis… which is the equivalent of setting the exchange rate of the notes against gold or silver to zero (Still wondering why they had inflation?). So even if there was no exchange rate fixed by law, the constant threat of exchange rate fixing was more than enough to convince people to hold on to their specie.
Llamas, your condesention is noted. In what possible respect have I misunderstood you? I think your position is pretty clear: you don’t like using gold, silver, or some other commodity as the foundation for money on the rather specious basis that an increase in supply would deflate its value; you don’t like private currencies because a multiplicity of them would be messy and (you think) inconvenient; so your default position is to support government-issued fiat currency with the irrational hope that the politicians’ inevitable meddling with it can somehow be controlled or at least made “transparent.” Does that about sum it up?
To my knowledge, nowhere in recorded history is there an example of a government which did not debase its currency when such suited its ends. The system you advocate can do nothing but fail, as it always has. You are like a communist who argues the true “communism” has never failed because it has never been “properly” tried, that fallible humans botched it. I think we’re all agreed that’s nonsense, but your hope of somehow constraining politicians’ debasement of the currency is every bit as much a pipe dream. It flies in the face not only of the entirely of recorded history but of human nature itself.
The value of currency must be removed entirely from the control of governments. A commodity-based currency is one workable approach. If you have another, please offer it. But a government monopoly on fiat currencies is demonstrably not the answer.
And by the way, you constantly harp on the fluctuations in the price of gold as a reason for its rejection as a monetary base. That makes no sense, either. You express the price of gold in dollars, but a change in that price merely shows that market perceptions of the relationship between the two has changed; it says nothing about which one moved. It is entirely possible that it is the gold which held its value while that of the dollar declined. Perhaps both moved. We don’t know, because there is no absolute standard against which either can be measured. But there are very long (measured in centuries) periods of human history during which the purchasing power of gold held remarkably constant. That’s a pretty good track record, and shouldn’t be dismissed lightly.
Condescension? Moi?
It is a fatal flaw to describe the various choices as being either/or.
Every currency system is vulnerable to some of the manipulations you describe. Debasement, devaluation – metals-based money systems have had their terrible bouts with these ills, just as fiat-money and private-currency systems have. There is no money system which a politician or ruler can’t find a way to screw it up, and none are immune.
The history of silver values shows clearly that, despite your argument to the contrary, increasing supply deflates its value. But it was a very good pun, nonetheless.
You repeatedly refer to the long history of metals-based money systems, as though this somehow supports their use today them. By this thinking, we should all be lighting our homes with whale oil – it’s worked so well for centuries. But the fact is that metals-based systems worked just fine in agrarian societies where the major transactions were solely in terms of goods , international trade was miniscule and communication was poor. As we moved into the 19th and 20th centuries, the inevitable inbalances in the ‘values’ of metals over time and place ineviably led to instability. And, as rulers have found for time-out-of-mind, reliance on a (metal) standard places you at the mercy of others, who can and will manipulate the value of your money if they are able.
The same is true of all other money systems, of course. The trick lies in deciding which vulnerabilities you want to reduce and which you will tolerate.
Sure, fluctuations in the relative value of fiat money vs metals reflect an imbalance – but I don’t care which way the imbalance flows. It is the imbalance that creates the instability. Exactly whose ox is getting gored at a particular instant matters little.
Let’s be clear – I don’t like fiat money at all. It’s just that I dislike commodity-based money, or private money, even less.
llater,
llamas
Demanding that money have a “tangible” value is atavistic. As I said previously, money is a token, an accounting device, for keeping track of obligations between people.
Any such token that is acknowledged as signifying the right to claim a good from some party, no matter what the “intrinsic” value of the token, can be used as money.
Or, as John Locke put it in his Considerations concerning Raising the Value of Money:
llamas
“gold and silver have no intrinsic value greater than any other commodity”.
Trouble is the Dollar is not any commodity at all.
It is not even fiat notes and coins – as most “Dollars” exist only as bank credit computer entries.
In a fairly free market fractional reserve banking produces booms that are limited.
Not limited in the nice way the “Banking School” declared they were in the early 19th century.
But limited in the nasty way of a “bust” and the collapse of various banks and enterprises (and individuals) dependent upon the credit-money bubble.
However, if a Central Bank is created (or a “Federal Reserve” system is created) the credit bubble can be “saved” by an increase in the base money supply (the basis of the bank credit monetary expansion).
Alan Greenspan’s fan club regularly declared that he had “saved the world” (I read the tag line again and again) in the period 1987 to 2007.
Each time this “saving the world” was really just pumping in money.
True it saved the credit bubble – but each time it made the problem bigger and bigger.
Now the problem is vast.
This is not a normal bust – this is something special, something I have been waiting for, for years.
“You actually like the idea of all the suffering that is to come”.
God forgive me, but yes – part of me loves all this.
llamas
“gold and silver have no intrinsic value greater than any other commodity”.
Trouble is the Dollar is not any commodity at all.
It is not even fiat notes and coins – as most “Dollars” exist only as bank credit computer entries.
In a fairly free market fractional reserve banking produces booms that are limited.
Not limited in the nice way the “Banking School” declared they were in the early 19th century.
But limited in the nasty way of a “bust” and the collapse of various banks and enterprises (and individuals) dependent upon the credit-money bubble.
However, if a Central Bank is created (or a “Federal Reserve” system is created) the credit bubble can be “saved” by an increase in the base money supply (the basis of the bank credit monetary expansion).
Alan Greenspan’s fan club regularly declared that he had “saved the world” (I read the tag line again and again) in the period 1987 to 2007.
Each time this “saving the world” was really just pumping in money.
True it saved the credit bubble – but each time it made the problem bigger and bigger.
Now the problem is vast.
This is not a normal bust – this is something special, something I have been waiting for, for years.
“You actually like the idea of all the suffering that is to come”.
God forgive me, but yes – part of me loves all this.
Of course none of the above should be taken to mean that I trust these guys or their bank.
As for index monies – as Hayek suggested.
Will not work – but if I try to explain why in detail I will just get messed up with the “internet explorer can not show the webpage” as I always do when I take some time to type something carefully and take my time (just happened when I tried to type a decent length comment on J.P.s thread on the reaction of the Ref blog to Mr Green M.P.s arrest).
What commodity people choose to make a contract in is up to them.
If they do not like gold or silver, then make your contracts in copper (or anything else that both parties agree to).
But relying fiat money is not sensible – and relying on the present system (which is not even fiat money – as the government and its financial welfare pets, the banks, can increase the credit money supply, over and above the fiat notes and coins, as much as they feel like) is crazy.
Llamas – is it really true that there were nowhere in the US, any fixed rates of exchange between at least some of the better currencies? I could well imagine neighbouring States endeavouring to set fixed rates of exchange between some of those currencies – which I admit is not the same thing as a US-wide fixed rate of exchange. Pardon me, but just because you wrote that there were no fixed rates of exchange, doesn’t necessarily make it so.
Also, wasn’t one of the major reasons why so much private currency in the US was bad that banks were forbidden by federal law from opening different branches (thus increasing the transport cost of redeeming the money at the original bank) – thus necessarily debasing the exchange value of the currencies?
More generally, don’t you have any doubts as to whether the antebellum US monetary system really provides an historical example of free-banking?
First, I must say that this is one of the most interesting debates I have read in the comments here in some time; great arguments made on all sides.
Second, though I am at the moment quite too drunk to enter into the discussion proper, I wonder if anyone can cite any relevant information or provide speculation regarding food-backed currencies in the modern world? The daily nutritional requirements of the average human being (and therefore the value of proper nutrition) are, after all, more or less constant, and intuitively it seems that said value would carry over to the commodities which provide it.
My two cents is that the reason for a mandatory single medium of exchange being required for all transactions (beyond the obvious reasons of political currency manipulation and the hidden inflation tax) is to enable massive national taxation schemes.
It is not a coincidence that the Federal Reserve System and the national income tax waltzed in together like a couple at a debutantes ball.
Agree somewhat with koanarchy. If you want an intrinsically valuable currency, it should be something with REAL intrinsic value. So, for example, a kCal of food, or a watt-hour of electricity.
Gold and silver are valuable only when we have an economy advanced enough to sustain luxury. Which kinda defeats the point of an intrinsically valuable currency.
Like someone said, when SHTF, the most valuable metals will be brass and lead.
Koanarchy – any commodity in more or less constant demand will do, whether it be staples like rice and wheat or raw materials like timber or gold. Trying to maintain the value of your new currency against a set of such commodities, rather than just one of them will help to reduce the risks of outside manipulation. Go download the Hayek paper I linked to earlier if you haven’t already.
On Midwesterner’s point, Sciabarra might be worth a read.
(By the way, Midwesterner, did you get that article you asked me for some time ago – a critic of Rand? I came back to that thread a bit too late, but I put up directions for you anyway).
Mike wrote:
‘Llamas – is it really true that there were nowhere in the US, any fixed rates of exchange between at least some of the better currencies? I could well imagine neighbouring States endeavouring to set fixed rates of exchange between some of those currencies – which I admit is not the same thing as a US-wide fixed rate of exchange. Pardon me, but just because you wrote that there were no fixed rates of exchange, doesn’t necessarily make it so.”
No need to ask for pardon, you are quite right to ask.
As far as I know, in the period in question, there were no State-enforced rates of exchange for all of the various State-bank currencies. The states did, from time to time, impress and/or suspend the requirement for banks to redeem their own paper at par for US specie, which is, in a sense, I guess, something along the lines of forcing rates of exchange.
But rates of exchange were very-well-handled by the private market. There were freely-circulated newsletters – my memory throws up Goodmans, Lords, the Cleveland Reporter and Van Courts as being the leaders – which published the rates of exchange being offered and paid for a large universe of circulating currencies in various places. In this way, bankers and merchants could at least get some idea of what their currency was worth in the open market.
Bankers also formed secondary clearing-house operations among themselves, in which they undertook to back a range of other people’s bills at par or at fixed discounts. Philadelphia had an interbank clearing system in the mid-1840s which covered most of PA and parts of DE and NJ also. In the NorthEast, the Suffolk network covered more than 200 banks IIRC, all corresponding with each other and exchanging at par. These systems were not unlike the current Federal Reserve system for check clearing.
Your comment about the restrictions on branch banking are also quite correct, and have a lot to do with the difficulties of those times.
llater,
llamas
Here is another idea for an alternative currency. Sounds about as good as what we have now.
Governments (including the American government) even tried to rig (“fix”) the exchange rates of gold and silver – thus causeing all sorts of problems (to put it mildly).
There is no problem with allowing gold and silver exchange rates to move (with new supplies of one or the other comming on stream or whatever) – as the parties to a contract can simply specify what they wished to paid in (what commodity of what degree of purity).
Of course there are risks (someone may invent a magic gold producing machine tomorrow), but nothing in life is perfect.
Private contracts are the best way – the contracts that were ripped up (in blatent breach of the Constitution of the United States) by the the two Supreme Court judgements of 1935.
Almost needless to say:
If two parties make a contract that says “pay me in copper of X purity” (or whatever) that is fine.
And if two parities make a contract that says “pay in fiat notes with George Washington’s face on them” that is fine to.
Although George Washington would not have been very happy about it (to put it mildly).
As for the notes with Andrew Jackson’s face on them – Jackson would have shot dead any man who printed such a note. Not “have them shot” – he would have done it himself.
In circumstances where courts need to settle disputes, it is not always possible for them to retain the original terms of the contract. In such cases, even where courts act honorably, it is necessary to resort to alternative assessments of value measured in alternative ways. How much trust would you put in a court, if there were no commonly-adhered-to, legally-required fallback medium of exchange?
Suppose you sign a contract in which you receive some goods in exchange for obtaining a painting. You pass on such goods to the current owner of the painting, in exchange for it. The painting then meets with an untimely end, before you pass it on. You cannot fulfill the contract in its original terms. Are the courts allowed to order you to pay in canvases, brushes, or pounds of flesh, in place of the vanished painting, and your customer to receive them?
tdh, your argument doesn’t really work in a contractual setting. If the contract specifies payment in copper of x purity (Paul’s illustration), that is what a court would order unless such copper did not exist, in which case it might substitute copper of y purity. In your example, what you have is impossibility of performance, so the normal remedy would be to refund the purchase price (i.e., the goods tendered), plus damages if any can be proven. That’s where the real issue lies: non-contractual disputes where damages must be awarded (i.e., liability for injuries or property damage in an automobile accident, etc.). The is where you do need a “default” currency acceptable to all (or at least recognized by the courts).
And if, due to, say, wartime exigencies, it were not possible to procure copper? Or if the original seller’s remaining assets, including insurance, but of course not including those used to procure the painting, were insufficient to provide the specified amount of copper? Or if there were reason to believe that the price of copper were likely to drop significantly in the not-remote future? Copper is not immune from such impossibility.
I would suppose, not being a lawyer, that courts could take additional circumstances into account, where such impossibility were not a factor, but for some reason, the original terms had to be settled in some other fairly-objective way.
hi
One thing that a lot of people have missed in this recent economic down turn is the fact that in-game money for all of the massive mutliplayer online role playing games has not been effected. I guess it just shows how strong and stable the computer game industry really is.
Virtual Currency (Link)