RidleyReport: Yet another alternate currency arises in New Hampshire

[dalebert]

Are the nickels still made of nickel?

At the rate of inflation, before long they'll be minting coins out of monkey poo. OMG! Cartoon idea!

[Dave Ridley]

oh...another cartoon idea: 

make some kind of a mousetrap designed by washington to catch terrorists.  and show like 15 average civilians caught in the trap while the terrorists do baggage screening or wander around free.

[Pat K]

[dalebert]

oh...another cartoon idea: 

make some kind of a mousetrap designed by washington to catch terrorists.  and show like 15 average civilians caught in the trap while the terrorists do baggage screening or wander around free.

Hmm... I'll have to tumble that one around in my mind a bit. Could be a challenging but also fun one to draw. I like the basic idea.

[David]

http://www.independent.org/pdf/working_papers/64_somalia.pdf
Somalian Money
During the late 1980s the Somali central bank expanded the money supply while
attempting to gain seigniorage revenue for the government. The amount of currency in
circulation expanded from 3.8 billion Somali shillings (SoSh) in 1985 to more than 155.7
billion SoSh in 1990.7 During this time the difference between the official exchange rate
and black market rate was as large as 275 percent (Little 2003: 7). The Somali central
bank and the rest of the state-owned banking system disappeared with the collapse of the
central government. Demand deposits disappeared, and inside money contracted by 54
percent. Despite the collapse of the central government, Somalis continue to accept pre-
1991 Somali shillings. The collapse and continued absence of the central government
have not shaken people's expectation that the currency has an exchange value.
Since 1991 no central bank has existed to issue currency. Since the collapse four
currencies have been introduced in Somalia. The system that has emerged does not reflect
the type of private competing monies envisioned by theorists like Hayek (1976),
however. The Na' shilling was first introduced in north Mogadishu in 1992 and then
again reissued in 2001. A distinct note that does not resemble the pre-1991 notes, it has
failed to gain widespread acceptance and circulates mostly within a single clan. The
region of Somaliland has established its own central bank and issues a currency intended
to circulate as the exclusive currency in its territory. A south Mogadishu leader issued
Balweyn I bank notes in 1997. These notes are widely accepted forgeries of the pre-1991
central bank notes. Similarly, the Puntland administration has issued its own forged pre-
1991 Balweyn II SoSh. By 2003 new bank notes and forged currency accounted for
about 80 percent of all currency in circulation.
23
Although the Balweyn notes can be distinguished from pre-1991 SoSh, the
Somalis have treated them all as the same currency. Unlike a competitive banking system
with distinct currencies in which competition could limit the amount of inflation and
seigniorage individual issuers could achieve, the competition in Somalia is for
seigniorage in the same currency. One would expect this competition to lead to an infinite
level of inflation and ultimately public abandonment of the currency. Somalis, however,
refuse to accept denominations larger than those that existed in 1991. This has
constrained inflation and actually allowed for a relatively stable monetary system to
emerge.Mubarak (2003) estimates that it costs $0.03 to print and import new bank notes
to Somalia. When the first Balweyn notes were printed in 1997, the largest denomination
SoSh (1000) traded for about $0.12. By late 2001 competition for seigniorage had driven
the SoSh 1,000 note down to about $0.04. At this exchange rate printing SoSh 500 notes
was no longer profitable, and the SoSh 1,000 notes were down to nearly their commodity
cost, making further printing of them no more profitable than other investments. After
the initial bout of inflation, Mubarak reports that "there is no sign of significant inflation
let alone an infinite one," and that "Since July 2001... consumer prices have stabilised. If
the market exchange rate movements are an indication of price stability... the Somali
shilling has appreciated slightly since the importation of new reprints slowed" (2003:
323). Though very different than the currencies advocated by those who advocate 100
percent commodity backed currencies, the effect of the competition for seigniorage
coupled with the Somalis' failure to accept new, higher denominations has led to the
creation of a stable 'commodity currency' worth its paper, ink, and transport costs.
7 This section draws on Mubarak (2003). Statistics come from this source unless otherwise cited.
24
While such a currency provides some stability, it is not without its problems. To make
purchases of any significant size, large bundles are needed. For this reason the SoSh is
used alongside U.S. dollars in Somalia. The SoSh is used for small transactions while the
dollar is used for larger ones. The Somali people's continued use of the SoSh in absence
of a state monopoly is testament to the currency's relative success, as is the fact that it
circulates with easy convertability 50km inside the Ethiopian border while the Ethiopian
Birr has little circulation in Somalia (Little 2003: 144).

[AnarchoJesse]

I heard some other dude did it before me (and failed because he didn't keep his end), but I'm going to distribute about 100 hours worth of labor in the form of "Labor Notes". If you have them, they're redeemable to have me serve you in some manual or general manner for the time stated on the notes. Dale will be doing the artwork on them, and I'll have 1, 2, and 5 hour notes redeemable at any point of mutual agreeance (if you have them, I won't tell you "no", but I won't just drop everything I am doing at that moment to provide the labor).

Come this winter, I forsee me shovelin' many a driveway.

[hydrodog]

Alternate currency..... gold silver palatinum .... or other precious metal........ if everyone would withdraw at least half there savings from there low interest savings accounts and buy precious metals..... if merchants were educated to accept them..... then the inflation taxing tool of big brother would end...... and the federal reserve would be impotent.......
  and year to year the price of these metals are going higher and higher..since 2002..... so the individual would win and it would be a huge step toward true freedom......

[John Edward Mercier]

Lots of commodities can be used as inflationary hedges.

[BillKauffman]

I heard some other dude did it before me (and failed because he didn't keep his end), but I'm going to distribute about 100 hours worth of labor in the form of "Labor Notes". If you have them, they're redeemable to have me serve you in some manual or general manner for the time stated on the notes. Dale will be doing the artwork on them, and I'll have 1, 2, and 5 hour notes redeemable at any point of mutual agreeance (if you have them, I won't tell you "no", but I won't just drop everything I am doing at that moment to provide the labor).

Come this winter, I forsee me shovelin' many a driveway.

See Josiah Warren "Cincinnati Time Store"

http://en.wikipedia.org/wiki/Cincinnati_Time_Store

"In the store, customers could purchase goods with "labor notes" which represented an agreement to perform labor. The items in the store were initially marked up 7% to account for the labor required to bring them to market with the price increasing the longer the time that a customer spent with the shopkeeper, as measured by a timer dial; later this markup was reduced to 4%. Corn was used as a standard, with 12 pounds of corn being exchangeable with one hour of labor. The result of the system was that no one was able to profit from the labor of another --every individual ostensibly received the "full produce" of his labor. Adjustments were made for the difficulty and disagreeableness of the work performed, so that time was not the only factor taken into consideration. Warren also set up boards on the wall where individuals could post what kind of services they were seeking or had to sell so that others could respond, and trade among each other using labor notes."

[BillKauffman]

I would say it is ridiculous to print currency with no backing out of thin air, but apparently the concept is already in wide circulation.

My understanding is our currency is backed by the assets of the federal government like gold certificates, land, etc. but that they are just not redeemable.

[John Edward Mercier]

Just 'Full faith and credit'. Sort of like me giving you an IOU based on my reputation, and ability to raise the funds (taxation, economic growth).

[hydrodog]

The US dollar is backed by the taxing power of the government..... but it has no physical backing..... if the country taxed everyone 100% for the next three years it still could not get out of debt.... and with the mortgage bailout bill just passed by house and senate your government has just raised the debt ceiling by another 800 million
Our government has proven to be deceitful and a liar..... why does anyone trust the currency.........if a dollar was worth a dollar in 1913 at the birth of the federal reserve.... its worth 2 cents today in 1913 dollar purchasing power......
Hell in 1981 it was 32.000 to by my first house..... 2002 when I bought my last one 190,000
So what if inflations gets you higher wages .... it only feel good wages increases.... because ya you get a wage increase but it isn't as much as the costs go up........
1950's a man could support a family on a 40hour week.... today... it takes two incomes to support a family.....
wake up people get mad and change it ..... take the power of inflation away form the federal reserve....... for you and your long term future put your money in things other than dollars...

[John Edward Mercier]

The power to value the US dollar lies with Congress. It delegated this authority to the Federal Reserve with specific instruction laid out in the enacting law. It did so to remove political pandering from effecting valuation. The US dollar has been devalued by Congress since its first issuance... redeemable in a small and small amount of precious metal until being complete fiat.

The current US debt/GDP ratio is 66%. Meaning a flat 66% tax across the board could erase the debt in one year. The lowest it has been since WW2 would be at the end of the Carter Administration (roughly 33%).

Housing valuation though partially inflationary is mostly locality and contractual. Housing in high income areas has a greater degree of demand... and valuations were immensely increased with the declining down payment. Had the previous 20% down payment been with us continually, housing prices would not have inflated as greatly. The two income household increased income, thus allowing for housing inflation... and both of these would have occurred with a stable dollar.

[Pat McCotter]

But Congress doesn't have power to print money, so they can't delegate it to anyone!

[John Edward Mercier]

Actually Congress has the power to coin money... and print debt notes. It delegates this to the US Mint, an agency of the US Treasury.