In Lew’s post today, he discusses the need to end the Central Bank. No news there, but this particular paragraph made me pause:
“There is also a chance for dramatic monetary reform. A gold-coin standard would be ideal. Absent that solution, a repeal on the restrictions on private money production and banking would be a huge and important step. We still have time to disable the power of central banking, ruining it before it ruins us.”
Does anybody have insight into the specific restrictions on private money production and banking that Lew is referring to? It’s my understanding that only the following laws regarding private money have been enforced:
The manufacture of private coinage
Federal anti-counterfeiting statutes
FDR’s gold clause cases until their repeal in 1977
From the research I’ve done, I believe there is room within the current federal law to have local alternative currencies working alongside the existing federal notes. And based on what state you’re in, there may need to be some creativity in ensuring no existing state laws are broken, but seems doable.
lol, the liberty dollar has been under a bit of trouble recently with the Fed’s, I wouldn’t recommend using it.
Personally, I think a competing system of labour notes, on the local level, would be a good option (see: The Anarcho Jessie Labour Note here http://www.youtube.com/watch?v=dtREMZbRG9E )
The fact that such options are viable in NH (with a free stater community of 600 something, plus probably around a few hundred more in native NH’ers that will probably be interested in said currency) makes me want to get up there before the economy tanks.
From my understanding, there are dozens of local currencies operating at this time around the country. They not only have not been shut down, they are public enough to have articles written about them in their local newspapers. Ithaca HOURs and Berkshire BerkShares are two that come to mind at the moment.
Mind you though, these are not precious metal-backed currencies. To attempt to launch yet another fiat currency that happens to be local is pointless when we already have the Fed doing a fantastic job of inflating. Here’s the catch though:
Given the laws I came across posted earlier, it’s specifically coinage that isn’t allowed to be created. That’s probably where the Liberty Dollar came into trouble. Local scrip is legal in most areas of the US as long as it’s not created by states themselves. Why not make a private local scrip that is 100% reserved and backed by precious metals, but use paper instead of coin? Just because it’s paper doesn’t mean it can’t be backed by a gold standard and thus protected by inflation and other fiat woes. Heck, that’s how our monetary system used to operate in this country, with reserve notes.
And this doesn’t even take into account the possibilities of enabling private electronic transactions, requiring no paper or coinage at all.
So, avoid coinage, ensure it can’t be reasonably confused for a federal reserve note, and ensure it’s backed by precious metals (now that the gold clause acts have been repealed). Is this breaking any federal laws that anybody can think of? So far I can’t find any, and I’ve been researching this for months.
I’m under the impression that trading in scrip backed by precious metals would still fall under capital gains, so you’d be taxed for doing it. Trading scrip would be the equivalent of transferring ownership of whatever precious medals were backing it, which would count as capital gains..
For a for-profit issuer, I could see capital gains tax being an issue. However, non-profit issuers are exempt from registration and disclosure requirements of the 1933 Securities Act, listed as
“any security issued by a person organized and operated exclusively for religious, educational, benevolent, fraternal, charitable, or reformatory purposes and not for pecuniary profit, and no part of the net earnings of which inures to the benefit of any person, private stockholder, or individual.”
And apparently almost all of the state-level jurisdictions have a similar exemption status for non-profits.
This would imply that capital gains would not be an issue either, being a non-profit entity.
The point I’m trying to get at is that ideas without action are of little worth. How would you put together an alternative local currency if you were tasked with it, knowing what you know about Austrian Economics?
I’ve never put much serious thought into this before. I have heard of local currencies before, and I think I recall seeing a wikipedia page with a long list of them in the U.S.
The idea of a non-profit to work around the capital gains is a good one, but I so loathe the idea of dealing with all of the government nonsense to setup a non-profit or any other type of organization for that matter. I’m unaware of the measures that would need to be taken to organize a business for the currency without getting caught ignoring any state regulations and taxes, or how severe any consequences might be for the various “crimes” committed when doing so. In my ignorance of the possible risk, I lean towards the black/gray market way, but I’d prefer to understand some of the relevant risks before acting on it.
I’d love to build a system to allow for electronic transactions with a local currency, though. A web based interface could be created (I’d lean towards building it on Drupal or Django, but there’s many other options), similar to current online banking, as well as a debit card like system (that might be a bit trickier…it would need cards and devices to scan/swipe them at whatever locations that are willing to participate).
Also, about the capital gains tax thing…the non-profit that organizes the currency (assuming it’s backed by gold) may not have to pay a capital gains tax, but what about all the other individuals and businesses that trade with the currency?
I completely agree about the tedium of dealing with government regulation, but it’s almost like you have to play the game in order to offer an alternative.
Regarding your last question, I assume that for-profit companies using the alternative currency will still have to deal with handling that income as taxable income. Today, companies who barter for goods and services, under IRS code must also claim that income as taxable, at a fair market value.
How you determine fair market value for bartered goods is another matter.