I have a question on the legality of private currency issue in the US. There are several legal assertions I frequently read on mises.org and lewrockwell.com that I have been unable to substantiate with amateur research:
Private coinage is illegal. When I’ve researched this, it appears that it’s only private coinage that is similar enough to that issued by the US Mint to be potentially used as counterfeit that is illegal.
Private issue of paper currency is illegal. There seems to be no legal basis for this assertion whatsoever. The current federal law nowhere prohibits issue of private paper currency that I can find, again, except for counterfeit money.
Gold-denominated contracts are illegal. I don’t know if this provision of the 1934 Act was ever repealed, but when I search the relevant federal statutes I can find nothing prohibiting denominating contracts in units of gold.
Now, I know that the US Treasury Dept. has been using the Secret Service as a leg-breaking service to intimidate anyone impertinent enough to issue coins or paper notes which compete with Federal Reserve Notes. But if I’m right that the above items are not actually illegal, then it should just be a matter of holding sufficient capital to fight and win the legal battles with the US Treasury monopoly in order to create a competitive private currency.
Can anyone substantiate the above assertions with a reference to the relevant federal statutes or case law? Thanks.
The government doesn’t start fights it knows it can lose. They won’t charge you with a crime. They’ll confiscate your gold and silver, charge it with a crime, and when your gold and silver fails to defend itself, they’ll keep it.
Ah, thank you. You’re right, that’s a gold-as-currency killer. That just goes to underline the absurdity of taxation. If I trade an ounce of gold for its fair-market value’s worth of goods and services, who had “income” from that transaction? The person who got the gold coin, or me? The IRS tax rules on barter specify that both parties of a barter transaction are to report the full fair market value of each item exchanged as “income.” In this case, a $750 gold coin traded for roughly $750 worth of goods and services somehow generates $1500 worth of taxable income in the fairy-tale land in which the tax code resides.
Well, but as long as it remains only in the black or grey markets, its use will not be widespread enough to be a medium of exchange (money), unless we live in a true tyranny/anarchy… which I hope to never see. [:(]
How would you deal with noncash transactions with a private coinage system? For me it is a hassle to physically carry change. I much prefer to use the bank debit card for as many purchases as possible. Would you still be able to carry out electronic transactions with zillions of different issuers of private currencies?
The same way these companies do it under the state?
At least wtih a totally new private banking system, people can just write in ruby or some other language rather than relying on old technologies that has been built up over the decade(and thus practically ireplacable).
Why wouldn’t you? If anything, credit/debit cards and the like would make this even easier than it was before. And i think ‘zillions of different issuers’ is a huge exaggeration. I can’t imagine there being more than a few currencies whose use was widespread and generally accepted.
Standards will always be reached when people find a product that they think is the best out of the rest of its competitor’s. Just like there is no reason to fear that there will be too many movie formats to choose from- and how would you go about choosing which DVD player to buy since there are so many formats. In reality- some will lose like HD-DVD and Betamax- and some will win like VHS and Blu-Ray.
Good timing! I just recently asked a similar question. Instead of copying all the responses here, I’ll link to it.
Also, if you want more information on the legality of what you can and cannot do, I highly recommend you download Chapter 7 of the book "Rethinking Our Centralized Monetary System: the Case for a System of Local Currencies". A George Washington University professor spent a summer grant doing comprehensive research on the legality and viability of local currencies. He outlines an incredible amount of detailed information, including dozens of court cases outlining what is and isn’t legal. You can find it here:
According to that book, I find nothing stopping anyone from launching a non-coin, paper money system, except for one small detail. It is a criminal act to offer paper money worth fractions of $1. This means that you can’t offer paper money that holds value better than a dollar, so essentially you’re bound to the inflation of the dollar by the Fed.
Admittedly, I haven’t read the rest of the book yet, and there is one chapter in particular that describes how to deploy a local currency that is not pegged to the dollar. I’m very interested to read what the author has to say about non-pegged local scrip.
Private currencies are dangerous and are outlawed. I think Thomas Jefferson explains it best..
“Certainly no nation ever before abandoned to the avarice and jugglings of private individuals to regulate according to their own interests, the quantum of circulating medium for the nation — to inflate, by deluges of paper, the nominal prices of property, and then to buy up that property at 1s. in the pound, having first withdrawn the floating medium which might endanger a competition in purchase. Yet this is what has been done, and will be done, UNLESS STAYED BY THE PROTECTING HAND OF THE LEGISLATURE. The evil has been produced by the error of their sanction of this ruinous machinery of banks; and justice, wisdom, duty, all require that they should interpose and arrest it before the schemes of plunder and spoilation desolate the country.” –Thomas Jefferson to William C. Rives, 1819. ME 15:232
If a currency was privately owned and was purchased by the people, then anyone could easily abuse their powers and destroy the value of that currency, stealing the wealth from the people.. The whole idea of privately owned currencies is an idea of counterfeit.