Calling all economists...

[lordmetroid]

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.

The only thing that makes a currency accepted is taxation in that currency. Which will force the citizens to use that currency.

Hopefully it would not be backed up by such a scarce resource such as gold or metal. This because such resource could be easily manipulated, it is about the same as demanding a currency to be backed up by former presidents personal properties. I don't see any practical use for a currency to be backed up by a resource that is hard to get by and high valued.

Backing a currency up has no value in itself. It's the mere thought of being able to trade with anyone for anything thru the use of a common currency. The mere circulation of the currency use for taxation is enough to make the currency work as it's value becomes stable to the market. However this requires that the citizens has control over the publishing of the money thru the government. If the bank starts manipulating the amount of money on the market the system will experience the same unstable trends that todays current system does as it is forced to raise taxes like mad.

As long as it is not war the system works. If war breaks out the government will press money to buy supplies and the values drops with the expenses of the government and so after a war time the government need to restrain the amount of money again in circulation. However this will be very painfull for the common citizens economy. Hence why war is bad for the economy.

[FrankChodorov]

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.

The only thing that makes a currency accepted is taxation in that currency. Which will force the citizens to use that currency.
Hopefully it would not be backed up by such a scarce resource. This because such resource could be easily manipulated. I don't see any practical use for a currency to be backed up by a resource that is hard to get by and high valued. It is not what makes a monetary agenda tick. What makes it tick is the circulation of the currency in use there need not to be anything to back a currency up as long as the citizens has control over the publishing of the money thru the government.

I generally agree...just allow the backing of the money be real but not redeemable and put an end to the foggy notion that money is some kind of store of value.

the US currency is backed by the assets of the federal government which includes a number of different tangibles like land and buildings.

[AlanM]

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

I disagree, interests on loans and manipulation from the central bank on the amount of currency in circulation makes the market non-free as well. Therefore it is important that unlike with the federal reserve it is not a private owned bank that publish the currency.

Government regulations skew the marketplace, also. As do licensing requirements, which limit competition amongst other things.

[lordmetroid]

One could make a system of private army like the english company "east-indian freight" or whatever it's called in English(only knows the name in Swedish) had. Than pressing additional money in wartime will not be necessary. But then you get thr problem of fascism from the other actor of power, the companies.

[FrankChodorov]

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

I disagree, interests on loans and manipulation from the central bank on the amount of currency in circulation makes the market non-free as well. Therefore it is important that unlike with the federal reserve it is not a private owned bank that publish the currency.

Government regulations skew the marketplace, also. As do licensing requirements, which limit competition amongst other things.

yes and corporations WANT these types of regulations AND PRIVILEGES to continue in order to protect their profits and to keep labor in their place...

[Brock]

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

I disagree, interests on loans and manipulation from the central bank on the amount of currency in circulation makes the market non-free as well. Therefore it is important that unlike with the federal reserve it is not a private owned bank that publish the currency.

Government regulations skew the marketplace, also. As do licensing requirements, which limit competition amongst other things.

yes and corporations WANT these types of regulations AND PRIVILEGES to continue in order to protect their profits and to keep labor in their place...

Regulation and licensure are systems of domestic quotas.  They specifically maintain that goods and services not produced via certain methods and certain persons are not to be brought to market.  I second Frank's notion, but go much further: corporations, their employees, municipalities, communities, families, friends, and nation want them in place to temporarily protect their profits and jobs.

Alan: your point is perfectly true and well taken, but, just as a matter of style, everything "skews the market".  There wouldn't be a need for a market if supply and demand were not constantly skewed.  Changes in technology, moon phase, theft, breakage, loss...everything skews the market (and are not necessarily undesireable).  Perhaps a more apt term would be to say that regulations and licensure "artificially restrain" the market.

Lordmetroid: I apologize, but something about your post is causing me some subject/verb confusion.  For clarification:

- Are you saying that all interest interferes with free trade, or just interest charged by the central bank?

- How does currency manipulation interfere with free trade (assuming any increased administrative transaction costs can be offset by arbitrage gains)?

- Distinguishing between warehouse receipts that represent actual stored commodities, futures contracts, and bank notes deriving value purely from their acceptance as a medium of exchange - most people would label the last as "currency".  Is that a sufficient definition for the currency you mentioned?  If so, would you prefer the issuer of the note to be a public or private institution, and why?

[mr.apathy]

The only thing that makes a currency accepted is taxation in that currency. Which will force the citizens to use that currency.

Hopefully it would not be backed up by such a scarce resource such as gold or metal. This because such resource could be easily manipulated, it is about the same as demanding a currency to be backed up by former presidents personal properties. I don't see any practical use for a currency to be backed up by a resource that is hard to get by and high valued.

Backing a currency up has no value in itself. It's the mere thought of being able to trade with anyone for anything thru the use of a common currency. The mere circulation of the currency use for taxation is enough to make the currency work as it's value becomes stable to the market. However this requires that the citizens has control over the publishing of the money thru the government. If the bank starts manipulating the amount of money on the market the system will experience the same unstable trends that todays current system does as it is forced to raise taxes like mad.

Backing a currency would give it long term stability. That's why I like the idea a precious metal based currency.  I fear that in a free trade market, we would run into the same problem that the US faces now: a giant trade defecit that is dragging down the dollar. Should something like that happen, at least the value of gold (or whatever is backing it) would keep it strong.
Another problem with a currency only worth its circulation value is its borrowed value. If a population is in debt, and continues to borrow money (as today), that would also drag down the value. If it was backed by something, that strain from vast borrowing wouldn't affect the value as much.
There must be some middle ground here where a currency can be both valued by its circulation and something more concrete.

[lordmetroid]

- Are you saying that all interest interferes with free trade, or just interest charged by the central bank?

Sorry, I should have been more clear on this statement. Just interest by the central bank as it is suppose to serve the nation's citizens rather than being profitable. If one prohibit interest to be used when lending someone money, there would be no meaning to do so from any money holder and so there would only be the state left which can be good or bad because the state would not give demand any interest neither. But where would that money come from? People sometimes need a larger sum of money than they have acquired to make long term investements that can be done only with a big startup cost but is suppose to reearn such cost in a small time period. It would probably work with the state being the sole source of lending someone money for this purpose.

- How does currency manipulation interfere with free trade (assuming any increased administrative transaction costs can be offset by arbitrage gains)?

I assume you assumed that I assumed that I was talking about the central banking system and publish of moneuy ???. Because it drives up the cost of everything when the currency is cut fast. Forcing people to need more money which they can not obtain because the prices doesn't drop and hence makes everyone sell anything at bargain prices because the demand does not rise when the amount of money is cut short. So in order to survive for the present there is a need to sell to the actors which has withheld the money from the public in it's own interest and they are the ones that are the only ones interested in buying the property which there is no demand because noone can afford it.

By buying up the physical properties with the witheld money those actors on the market have obtained grand physical aquirements to a fraction of the cost which if they where smart bought companies in order to make more money. Now when the money formerly withheld from the market has been rereleased into the market those companies are now worth so much that those can not be purchased once again because the companies which was not worth anything is now on the same price as before and owners which has no interest in selling and because the company's cost rises to a normal level from the once bargain price it was at.

- Distinguishing between warehouse receipts that represent actual stored commodities, futures contracts, and bank notes deriving value purely from their acceptance as a medium of exchange - most people would label the last as "currency".  Is that a sufficient definition for the currency you mentioned?  If so, would you prefer the issuer of the note to be a public or private institution, and why?

No it's not sufficient. Anything can be used for a monetary systems, seashells and sticks has been used in the past. As long as the state only accept taxes to be payed in a specific currency. That currency will become the accepted currency, because there is a demand for it to be used which you can not escape. Public institution needs to issue, print and publish the money because a public system has no demand for it to be profitable, only demand is to serve the public. While a private does demand profit and to be profitable a private institution will manipulate the market like demonstrated above.

Backing a currency would give it long term stability. That's why I like the idea a precious metal based currency. I fear that in a free trade market, we would run into the same problem that the US faces now: a giant trade defecit that is dragging down the dollar. Should something like that happen, at least the value of gold (or whatever is backing it) would keep it strong. Another problem with a currency only worth its circulation value is its borrowed value. If a population is in debt, and continues to borrow money (as today), that would also drag down the value. If it was backed by something, that strain from vast borrowing wouldn't affect the value as much. There must be some middle ground here where a currency can be both valued by its circulation and something more concrete.

The current central bank of the states is private and demands profit and I would think it has manipulated the market of issued money in it's owner's selfinterest. The incident that happen 1730 "Stability came into the system with national Banks guaranteeing to change money into gold at a promised rate; it did, however, not come easily. The Bank of England risked a national financial catastrophe in the 1730s when customers demanded their money be changed into gold in a moment of crisis. Eventually London's merchants saved the bank and the nation with financial guarantees." - http://en.wikipedia.org/wiki/History_of_money shows just how the banks published more money than they could back up in order to profit.

The tally sticks( http://en.wikipedia.org/wiki/Tally_stick ) however which has not been backed up by anything but the market and taxation has been the monetary system that worked best and for the longest. Even the US constitution recon the importance of keeping profit out of issuing and publishing money and Franklin made sure it would as he had witnessed what the power of issuing mony means. President Jackson reconed this once again after the central bank had been grabbed again by private owners and was very proud of defeating the profit mongering central bank of the USA( http://en.wikipedia.org/wiki/President_Jackson ). So did Lincoln and published his greenbacks by a public system followed the same system but unfortunately it was hi-jacked by todays system in 1913 with the Federal Reseve Act which by bought elections handed the power back to the private banks. http://en.wikipedia.org/wiki/Federal_Reserve_Act


Being for freedom doesn't mean one is for a marketliberalism. I want personal freedom and fascism can come from two actors, the state or the corporation. Whoever get too much power doesn't matter it is just a different person in power over my life. The market isn't a solution much like communism isn't a solution. It's just a vision that does not fully work as it will be abused just like communism are abused.

[Brock]

I fear that in a free trade market, we would run into the same problem that the US faces now: a giant trade defecit that is dragging down the dollar. Should something like that happen, at least the value of gold (or whatever is backing it) would keep it strong.

A foreign investment surplus neither values or devalues the dollar.  The value of the dollar in terms of what it can buy is determined solely by the ratio of dollars available to dollar-denominated things to buy.  The value of the dollar as a trading medium is derived from its acceptance as a trade medium - IOW I will trade you my goods for your dollars, because I believe that others will trade their goods to me for those same dollars AND that I will spend those dollars for consumption or investment before too many more can be circulated and affect the amount of stuff they can buy.

"Backing" the dollar with any commodity simply restrains the number of dollars that can be placed in circulation.  The value of the underlying commodity does not transfer any new-found purchasing power to the dollar, though it may impart some psychological value.  Fluctuations in terms of what it can buy will still happen via the same mechanisms.

There must be some middle ground here where a currency can be both valued by its circulation and something more concrete.

Why?  If you can readily exchange your peices of paper for TVs and gasoline, what do you care about the backing?  I'll take a pocket full of dollars over a pocket full of concrete anyday!

[Brock]

Lordmetroid:

I'm glad I asked those questions; your original statements make much more sense to me now.

An interesting sidenote to your "taxation determines the standard currency" statement.  In the English colonies in America, hogsheads of tobacco were so widely used as currency, they were accepted as payment of taxes.  Farmers, then, naturally paid their taxes in the lowest-grade tobacco and saved the fine-grade for foreign trade (technically the black market).  Among themselves, the colonists took to using coins from the Spanish colonies since the coins didn't have to be graded when presented as payment.

If I followed you correctly, you argue for a public institution to issue currency because it does not have a profit motivation for manipulating the currency.  I agree that the nightmare scenario would be to base an entire system of exchange on a specific currency and then have the issuer turn around and suddenly flood the market with the currency buying all sorts of things for himself.  I would point out, however, that that is exactly what the US federal government does each and every day (not the Federal Reserve).

The Fed can only buy so much stuff.  At a certain point, it has all the staplers and tape it needs.  Contrarily, the federal government has a seemingly limitless appetite for stuff.  And, when it can't find any more stuff to buy, it hands out dollars to other people to buy their stuff.  While it does this by selling bonds to the Federal Reserve, it could just as easily do it by direct transfers to people and companies from the various mints.

On the other hand, there is a thriving system of private companies that issue paper.  The profit motive is what keeps it straight!  These companies issue currency (we normally call them stock certificates) and billions of dollars worth of this currency is traded daily (on and off stock exchanges).  The stock market (even with SEC intervention) rewards holders and issuers of the paper that inspire the highest investor confidence.  It punishes holders and issuers of the paper that are not confidence inspiring or (the nightmare scenario) attempt to dump paper on the market.

It is also worth noting that the stock market works very efficiently despite almost total asymmetrical information, despite every player seeking to manipulate it for his own profit, and without any guarantee (or even probability) of being a winner for having played the game.  As an individual investor, trader, user, or whatever you want to call it, you never actually buy and sell on the open market.  Your broker sells you stocks from their holdings, buy it back from you, loan it to you for margin and short sales, and settles the accounts at the end of the day. 

There is no reason to believe that similar brokerages would not exist if there were multiple issuers of currency.  Rather, the very fact that most commodity brokers and big banks maintain currency desks today PROVES it.  The presence of multiple private currencies based on whatever system the issuer determines would provide the liquidity and "concrete"ness that Mr. Apathy desires.

Before I'm challenged by the fact that stock certificates are "backed" by ownership in the issuing company, I challenge you to take your certificate to Redmond and demand your 1/4,000,000th of the Microsoft campus in return.

[lordmetroid]

If I followed you correctly, you argue for a public institution to issue currency because it does not have a profit motivation for manipulating the currency.  I agree that the nightmare scenario would be to base an entire system of exchange on a specific currency and then have the issuer turn around and suddenly flood the market with the currency buying all sorts of things for himself.

That is what has happened in the past and is probably being done on a small scale level all the time as we see the puchasing power of the currency slowly moving towards zero like it is now.

A government also goes spending-spree when in war, a government needs supply for war and so they prints as much money as they can to purchase as much equipement, personal and other means of war. That is the only flaw I can see in a public issue of currency system. Once in war the monetary system is screwed and need to be replaced after the war. The thing is the federal reserve of the USA is privately owned(If you didn't know check it up, http://en.wikipedia.org/wiki/Federal_reserve . They even stopped showing just how much money there is on the market and how much they print now, no way to have any insight means easy manipulation) and so the government needs to rely on a private institute with profit motives to get it's own money and hence indebt itself to the central bank. Totally against the interest of the people.

The stock exchange as currency is quite interesting... Though it may lack the stability that one could need. However if one has a digital system to make use of everywhere for everyday commercial interest. Like a small PDA memory stick like device that can connect to stations much like creditcard swipers and let the holder know how much his investments are worth as he is trading stocks for products would maybe solve the whole problem. War times might be problematic though. How the hell are a country suppose to defend itself when it can not buy means of war to it's liking?

[tracysaboe]

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.

They use highly stable fiat currencies though. If those currencies did become highly inflationary you can be sure they'd start slowly switching the things that held value better.

Tracy

[tracysaboe]

There is no way in Hell, I'm going to secede and then use US currency.

So don't use it. And refuse to transact with anybody who does. Certainly their would be numerous people who agree with you. But don't put a gun to my head and force me to not use it.

tracy

[mr.apathy]

There is no way in Hell, I'm going to secede and then use US currency.

So don't use it. And refuse to transact with anybody who does. Certainly their would be numerous people who agree with you. But don't put a gun to my head and force me to not use it.

tracy

I said I. There was no we in that quote.