I understand that legal tender laws force everyone (including non-government) entities to ACCEPT federal reserve notes for goods/services, but what law punishes anyone (including private banks) who tries to issue a competing currency?
The law of the government agents who come to take your stuff.
Your understanding is wrong.
Judging by existing local currencies there is not any.
Good luck sifting through U.S. code.
I believe they make it clear that notes of exchange and coin can not resemble U.S. currency. That is broad enough to accuse minters of making coins in the U.S. therefore they resemble U.S. coins.
I do believe a private minter could produce fine quality coin un-mass. Make the coins in squares(or stars etc), without patriotic images and just have the weights? A creative minter I believe would find success. The U.S.C. forbids states from coining money, but it does not forbid individuals from doing so.
I wonder if entrepreneurs could start full reserve banks anywhere in the U.S.? With hard money, I could also see a demand by consumers and investors in full reserve banks.
Despite what is just; governments covet with wrath their monopolism.
The problem is the courts will only uphold contracts in FRNs so it’s not appealing to risk exchanging in another medium.
Clearing houses and insurance, should clear that.
What would get a business to pay not in check, but in hard money?
One such law is the income tax.
Here is an example: Your raw materials cost $15 and you sell for $20. You owe income tax on $5 at 50%. Your total tax is $2.50.
Same example, except you use on ounce of silver; suppose the spot price of silver is $20 to avoid rounding. Now, this is a barter transaction. Each party owes tax on 28% of the value of the transaction. The total tax is $20 * 56% = $11.20.
The income tax is a huge disincentive to use alternative currencies. If you use alternative currencies for an on-the-books transaction, you owe income taxes at a higher rate than if you used State paper money.
Income taxes must be paid on every economic transaction. Only Federal Reserve Notes are accepted as valid for paying income taxes.
Another example is E-Gold and the Liberty Dollar. The founders of both of those alternate monetary systems faced criminal charges. The founders of E-Gold pled guilty. The Liberty Dollar trial is pending.
The answer is not “The free market discredited the gold standard.” The reality is that government violence discredited the gold standard. If you set up an alternate monetary system, and it’s widely used, you’ll find your operations raided by terrorists.
Like everyone said there is alot of government legal code and a convoluted response from the government (some say liberty dollars are legal, others no), but something that might interest you is:
http://www.usmint.gov/pressroom/index.cfm?flash=yes&action=press_release&id=710
“Under 18 U.S.C. § 486, it is a Federal crime to pass, or attempt to pass, any coins of gold or silver intended for use as current money except as authorized by law. According to the NORFED website, “Liberty merchants” are encouraged to accept NORFED “Liberty Dollar” medallions and offer them as change in sales transactions of merchandise or services.”
I’m no legal expert and just quickly found this link, but it seems to be that according to this, if a currency is trying to “act” as legal tender, then it is in violation of U.S legal tender laws. Of course what constitutes counterfeiting and trying to “act” as legal tender in competition with the federal dollar is completely subjective and arbitrary according to the government.
The Liberty Dollar made a tactical mistake when they made their money look sort of like government-issued money.
If you’re going to use gold and silver as money, you should use generic gold/silver rounds and value them based on the spot price. If you want to use gold and silver as money, you have to work off-the-books, because of the way gold and silver transactions are taxed.
It’s silly the way the Liberty Dollar stamps $20 on $12 of silver. (at the time, the spot price was $12) That trick only works when a terrorist organization forces people to use your money.
Yup and made a tactical mistake trying to illustrate how spendable it is compared to FRN’s. Doesn’t mean what they did is illegal but the tactical mistake brought down the wrath of government.
Look into time dollars.
I hate fiat currency but if you are going to compete with FRN’s don’t use something that can be stolen like a commodity until legal tender law is repealed. Use a signature system just like they do and couple that with contract and private arbitration.
Don’t sell it as FRN’s. Solicit it as something completely different from FRN’s so there is no possible way the two can be confused.
The US legal situation is rather unclear and arbitrary, right now. Surprise, surprise, right? Really, the US is just a horrible jurisdiction to do business in at all.
Liberty Dollar had a business plan, and a successful business plan, based on the conscious decision to do some of the things you guys are saying are wrong: inflated face value to encourage spending rather than hoarding, similar look to US mint coins to encourage spending, face value in terms of the familiar dollar to encourage spending, a tiered marketing/distribution system, etc. Everything was geared toward growing the system as quickly and easily as possible into a viable substitute for the dollar you could use for real-life transactions at local merchants. It was growing and it was working. It still is working, to an extent. You see, the only metal the gov’t stole was what was in the warehouse, backing the paper bills Liberty Dollar issued, and a bunch of coins about to be shipped out. The vast majority of Liberty Dollar currency is still in circulation, held by private invididuals throughout America and the world. A lesson, one could say, in the benefits of taking physical delivery. If the goons are going to steal your gold or silver, make them come and get it from you, personally. Another lesson: do not ever, ever, ever locate your warehouse within the US! That was a really bad mistake, one they had been advised against, but had heedlessly and naively continued (“This is America, a free country! They couldn’t do that”).
e-gold had the gold stored overseas, but their personnel, operations, and, most stupidly, their servers, all physically located in the US. Did I mention the US was a bad jurisdiction for business, especially this kind of business? It was also mentioned to e-gold, but they did not listen, and when the gov’t came calling, they caved. The gold was all safely in Switzerland or whatever, out of the US gov’t’s reach, and I think they should have stonewalled forever, but alas they did not. Lesson: don’t have your servers or people in the US either.
The local currencies mentioned succeed in part because there’s no $100 million dollar pot of gold crying out to the gov’t: steal me, steal me! They are just primitive and naive copycat fiat paper money systems that pose no threat to the existing monetary system. Things like Liberty Dollar and e-gold, on the other hand, do.
For a system that has done things right where e-gold didn’t, check out http://www.pecunix.com . It’s quite good. Although much smaller than e-gold volume-wise it has a lot of sophisticated features. It’s completely off-shore, with good jurisdictional arbitrage, and so very well-insulated from attacks by the D.C. Gang.
http://www.ustreas.gov/education/faq/currency/legal-tender.shtml
Actually, the US Dept of Treasury’s number ONE FAQ answers that question,
AND it says QUOTE all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor. There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services
IIRC, according to US legal tender laws, you may issue your own currency as long as it is backed by the USD.
well, we don’t want the federal government to mandate that we must accept any currency, including federal reserve notes.
I believe that Somali, Zimbabwe and other nations have printed so much of their fresh paper currencies that the Somali Shilling and the Zimbabwe’s Dollar have reduced in purchasing value to roughly the costs of the paper and the ink that used to produce the currency. This might be the furure of the USA.