Calling all economists...

[mr.apathy]

I don't pretend to know much of anything about building a nations economy. However, I would love to hear ideas of how a Free NH would fund itself.

What would a true free trade policy mean for an economy?

Would it affect the value of currency?

How much self sufficiency be needed to float a Free NH?

I like the idea of a GDP based currency. The harder we work and the less we rely on other countries, the more the unit of currency would be worth, to us anyways. And, no I'm not talking about socialism, no sharing of wealth, or any of that crap. What do you think? Let's discuss this stuff a little.

[Brock]

Free NH leaves too many open-ended questions, so please permit me to deal with your questions as a generic nation-state (with, presumably, a sufficient military and internationally-recognized status) and not answer the last question.  For discussion sake, let me use as interchangeably "money" and "commodities".

What would a true free trade policy mean for an economy?

Only three things can make trade "non-free" (both domestic and foreign).  Tariffs, quotas, and bounties.  First, though, some background:

An economy's resources can only be used for four things: agriculture (including mining), manufacturing (including all artisan trades), foreign trade, and the carrying trade (transportation of another economy's goods to a third economy for sale).  An expansive economy is marked by its foreign trade IF the home trade is satiated by the economy's production.  The home trade must be satisfied by the economy's production before foreign trade represents an expansion.

For example: if US consumers and manufacturers required X amount of corn to live and carry on their trades, any corn production over and above that amount would be considered expansive.  There is no case (in a free market) where corn producers would receive a higher profit in the foreign trade than they do at home because of transport costs.  If a foreign market were to bid up corn, two distinct things would happen; first, the home market price would rise to the foreign market price less transport costs, and second, the corn producers would place lower-yield lands into production with the domestic surplus earmarked for sale in the foreign economy.  That surplus is the economic expansion.

MERCHANTS lobby for (and routinely receive) tariffs, quotas, and bounties on commodities (both domestic and foreign).  The justification is always for the greater economic good, however, the reality is that any tariff, quota, or bounty benefits only the merchant and is ALWAYS hurtful to the domestic consumer.  To continue the example above, let's assume the merchants lobby for a bounty on corn exports under the premise that the foreign trade represents an expansion - a 3 cent per bushel bounty would not only put the taxpayers (consumers) on the hook for 3 cents per bushel exported, but would also raise the domestic price of corn up three cents.

Contrarily, tariffs and quotas drive up the price of imports.  While that benefits merchants, domestic producers still receive market rate, and the domestic consumers pay more per unit for the commodity.  So, in other words, tariffs, quotas, and bounties all transfer buying power from the consumers (sometimes through manufacturers) to the merchants (who, increasingly, may be the producers and manufacturers themselves).  As the consumers have no organized lobby, they are always on the pointy end of the stick.

Back to your question: free trade benefits all (consumers, producers, merchants, and manufacturers) by allowing resources to seek their highest and best use.  If China can make alarm clocks cheaper than the US, then it is in the US's best interest to buy the clocks from China and use the difference to buy, save, or invest otherwise.  Certainly, US clock makers would disagree, until they can divert resources to other endeavors which favor them, but that is the magic of the free market - diversion of an economy's resources to the highest and best use through the action of each individual player seeking to maximize personal gain (Adam Smith's invisible hand).

Would it affect the value of currency?

Only one thing effects the value of currency.  The ratio of currency available domestically to the domestic production.  Any amount of currency is optimal - it is a placeholder for the exchange of resources.  Any domestic currency held in foreign markets but not made available domestically (such as China holding US dollars) is not included, but also not an asset to that country until made available to the currency market. 

When a country imports goods, their currency flows out, decreasing the domestically-available currency to goods ratio.  Therefore, the value of the goods in that country decrease nominally, while retaining their real value.  In what is called the "balance of payments" the domestic currency will flow back into the country either to buy the now-cheaper goods or to invest in real estate, government bonds, or corporate equities denominated in that currency.  The exact opposite happens when a country exports goods.  The difference between the two is called "net exports" and has no bearing on the value of the currency.

...

So, in short, free trade (domestic and foreign) benefits a particular economy unilaterally, without a need for reciprocal trade agreements.  It is true that certain producers and manufacturers may benefit from tariffs, quotas, and bounties, but the economy as a whole is necessarily stunted by these measures.  The value of currency is determined by it relation to production, not by trade of any sort (over the long run).

[Dave Ridley]

Nice to have you here brock!

[Brock]

Dave:

I'm not kidding when I say the reason I'm here is to read of your exploits!  So, for God's sake, get out there and have more exploits!

See, it's easy when you're not the exploiter!

Keep up the good work, bra!

[d_goddard]

for God's sake, get out there and have more exploits!

Indeed... that's very good advice.
The more exploiters, the more fun & rewarding it is for everyone.
Very... .good.... advice

[mr.apathy]

Wow! Thanks Brock.  That's an awesome breakdown of free trade. I'm kind of on the fence about it. The only examples of existing free trade that I know of is the NAFTA, CAFTA, NWO bullshit.  Are there any real life examples of a free trade economy?

Now, about this...
^{Only one thing effects the value of currency.  The ratio of currency available domestically to the domestic production.}

If NH wanted to secede, there would be need for a new currency. So based upon that quote, wouldn't it be possible to introduce new currency and only trade it domestically amongst those that agree to use it. (Hypothetically, I know it's illegal).
It would certainly gain "value" if a group of people recognized it, right?

[citizen_142002]

Number one private currencies and mints aren't forbidded in the Constitution, and number two, if NH left the US, then there wouldn't be a law about currency unless Nh made its own.

I suppose that we could just pass the US and Canadian dollars or the Euro, or any currency we wanted. I'm sure one or two currencies would emerge as the trade standards. The US dollar would probably be a favorite since a lot of trade would go on with US states. Canada would be a good hedge partner in case of an embargo or heavy tarrifs by the US.

NH could create its own currency, which would hopefully be backed by silver or gold.

[Brock]

The only examples of existing free trade that I know of is the NAFTA, CAFTA, NWO bullshit.  Are there any real life examples of a free trade economy?

NAFTA and CAFTA are not free trade agreements in anything but their names.  They set specific "acceptable" quotas and tariffs for all signatories.  Unilateral free trade is far preferable to any international agreements.

Real life example: Hong Kong

[Michael Fisher]

I don't pretend to know much of anything about building a nations economy. However, I would love to hear ideas of how a Free NH would fund itself.

What would a true free trade policy mean for an economy?

Would it affect the value of currency?

How much self sufficiency be needed to float a Free NH?

I like the idea of a GDP based currency. The harder we work and the less we rely on other countries, the more the unit of currency would be worth, to us anyways. And, no I'm not talking about socialism, no sharing of wealth, or any of that crap. What do you think? Let's discuss this stuff a little.

Gold and silver, and certificates thereof, should be the only currency in a country unless someone comes up with an even safer currency with a stronger track-record... which they can't. Slight deflation can occur with gold and silver if less is mined and more people are born, but the market will correct itself without intervention, despite even some Austrian economists who believe otherwise.

However, short of banning all global fiat currencies from the country, there's no way to stop more worthless currencies from taking the place of real money.

True free trade would be the complete absence of artificial market distortions of foreign trade. It is the most efficient and rapid method of the market correcting itself. Anything else will slows down market communication of inefficiencies and will thus slow down economic recoveries after a recession.

If New Hampshire becomes an independent country, if its economy is to set an example to the world, there should be a complete separation between currency and state. It's more ideal if there is no state, but if there must be one, it cannot issue a currency, it cannot issue bonds as they are used to manipulate interest rates, it cannot artifically insure or guarantee loans, and it must not ever touch, tax, track, or seize currency transactions for any reason.

Unfortunately, with a complete separation of currency and state, at least in theory, outside fiat currencies could not be banned, as that would be a violation of the separation of currency and state.

Any other type of economy will be filled with market inefficiencies, repeated depressions, bubbles, extreme inflation or deflation, mass financial collapses of banks, international anger and financial trade wars (in the case of tariffs), and worse.

[tracysaboe]

If NH wanted to secede, there would be need for a new currency.

Why?

Obviously you think it's obvious. But why can we let people to be free to chose their own currencies. If merchants and sellers prefer to trade in U.S. or Canadian Dollars or Euroes why not let them? If instead they prefer to trade in gold or silver or Pig Bellys, why not let them?

Tracy

[Michael Fisher]

If you do not ban all fiat currencies (sorry brass just struck last week and branded with a wretched hand), then real money will never overcome worthless paper currencies because of Gresham's Law.

If you ban fiat currencies, then you have violated the separation between currency and state.

[mr.apathy]

If NH wanted to secede, there would be need for a new currency.

Why?

Obviously you think it's obvious. But why can we let people to be free to chose their own currencies. If merchants and sellers prefer to trade in U.S. or Canadian Dollars or Euroes why not let them? If instead they prefer to trade in gold or silver or Pig Bellys, why not let them?

Tracy

There is no way in Hell, I'm going to secede and then use US currency. The main reason that I want to secede is for ethical reasons. Our government has grown too big, and swallowed up our Constitutional rights.  Remember the "starve the beast theory"? It shouldn't just apply to taxes. Giving NH monetary value of its own would also work.

As far as having infinite types of currency floating around, can we really be expected to tote around a currency conversion table everytime we make a transaction? A Free NH would have to have some sort of marketable value to have it's own currency.

I don't really know of any large quantities of NH gold or silver lying around (I could be wrong). That is why I started this thread to discuss different means of backing a recognized currency.

The reason that I'm so passionate about this issue, is because I believe it is possible to "economically secede".  If a new currency was recognized and traded by NH, it would begin to economically free NH from the US.

By the way, thanks again Brock for the link. I will dive into it and explore.

[Ron Helwig]

If you do not ban all fiat currencies (sorry brass just struck last week and branded with a wretched hand), then real money will never overcome worthless paper currencies because of Gresham's Law.

Not true. Gresham's Law refers to legal tender, which would be banned by a separation of currency and state.

In other words, since no one would be forced to accept the fiat currency, Gresham's Law does not apply.

in the absence of legal tender laws, Gresham's law works in reverse. If given the choice of what money to accept, people will transact with money they believe to be of highest long-term value. However, if not given the choice, and required to accept all money, good and bad, they will tend to keep the money of greater perceived value in their possession, and pass on the bad money to someone else

[Ron Helwig]

Slight deflation can occur with gold and silver if less is mined and more people are born, but the market will correct itself without intervention, despite even some Austrian economists who believe otherwise.

Did you mean "Chicago economists"? (Friedman et al) http://en.wikipedia.org/wiki/Chicago_School_(economics)

Generalizing, Chicago school economists believe the government is necessary to create a level playing field while Austrian school economists believe the maximum utility of government is in forbidding the initiation of force and fraud.
http://en.wikipedia.org/wiki/Austrian_school_of_economics

[Michael Fisher]

If you do not ban all fiat currencies (sorry brass just struck last week and branded with a wretched hand), then real money will never overcome worthless paper currencies because of Gresham's Law.

Not true. Gresham's Law refers to legal tender, which would be banned by a separation of currency and state.

In other words, since no one would be forced to accept the fiat currency, Gresham's Law does not apply.

in the absence of legal tender laws, Gresham's law works in reverse. If given the choice of what money to accept, people will transact with money they believe to be of highest long-term value. However, if not given the choice, and required to accept all money, good and bad, they will tend to keep the money of greater perceived value in their possession, and pass on the bad money to someone else

All popular worldwide fiat currencies would need to be eliminated, or banned in a specific state, for gold and silver to circulate openly under Gresham's Law.

Why would people in a Free NH use gold and silver bullion if the worthless U.S. dollar is accepted as valuable by most people on Earth, and is thus easily accessible for foreign trade, because of the U.S. government's fiat currency laws? In today's world, people will choose to use U.S. paper money.

Look at Somalia. As far as I'm aware, even in the absence of government, they did not use real money for personal transactions. They used random fiat currencies.