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Competing Currencies


bernorange
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I guess it was on the old site (or maybe all the way back on HF) where I had started a thread on this subject, but I have talked about it tangentially in other threads over the years.  Ron Paul used to introduce legislation session after session for a competing currencies bill.  You can find details on it here:  Ron Paul's competing currencies bill

I remember discussing the issue with @Bozo_Casanova and others, but it was all abstract or theoretical.  Now there is a real world case of it in action (sort of).  I somehow missed this story up until now...

October 2022 (emphasis mine):

Quote

The introduction of gold coins by the Reserve Bank of Zimbabwe (RBZ) to mop up excess liquidity in the market and halt runaway inflation seems to be bearing fruit, at least for now. Individual buyers had taken up 35% of the bullion, with 65% being snapped up by corporates. As at 22 September 2022, a total of 9,516 gold coins had been sold to both individuals and corporate buyers, according to the Reserve Bank of Zimbabwe Governor, Dr John Mangudya. The gold coins are minted by the RBZ-owned Fidelity Printers, the sole buyer of gold in the country. Their price is determined by the international market rate for an ounce of gold, plus five per cent for the cost of producing the coin. Each coin weighs one troy ounce and has a purity of 22 carats. The Zimbabwe government took the unprecedented step of introducing gold coins as legal tender after inflation spiked from 191% in June to 257%. Currently, the central bank has been supplying the market with one-ounce coins, which hit the market at US$1,884.80, which saw fewer ordinary people participating because of the elevated price. The RBZ will in November introduce lower denomination gold coins to enable the participation of ordinary citizens. The smallest, a tenth of an ounce, will be made available to the public through banks and approved dealers.

https://www.africa.com/imf-believes-zimbabwes-gold-coins-are-a-missed-chance-to-build-the-nations-gold-reserves/

December 2022:

Quote

An International Monetary Fund (IMF) team led by Dhaneshwar Ghura conducted a visit to Zimbabwe from December 1 to 15.

At the conclusion of the mission, Ghura issued a statement, which, among other things, encouraged the Reserve Bank of Zimbabwe (RBZ) “to wind down the use of gold coins”.
...
The Monetary Policy Committee and the RBZ never viewed gold coins as a silver bullet, but a necessary intervention at the time. It was an idea mooted to contain and reverse the accelerated depreciation of the local currency.

The product worked, as we had imagined it would. Immediately after introduction, gold coins drew away attention from the United States dollar. In our books, the effect was very impactful.

Gold was seen as the best product to contain local currency volatilities, as it offered a viable alternative to the United States dollar.

There has been some misconception, with some referring to gold coins as a currency. For the record, gold coins are not a currency. By design, the RBZ did not intend to issue them without limit.

The authorities’ intention and logic were very clear.

They sought to achieve major gains in exchange rate stability from a limited number of gold coins.

This is why, as of November 2022, the RBZ had only issued 14 200 gold coins worth Z$13.6 billion.

The target was always to issue a maximum of 15 000 gold coins; this is why the IMF agreed with the authorities to wind down their issuance.

The next step, after achieving a measure of stability, is now on attractive local currency investment instruments to anchor our currency.

By Persistence Gwanyanya- Member of the RBZ Monetary Policy Committee

https://insiderzim.com/zimbabwe-gold-coins-have-done-their-job/

Details on the actual coin can be found here:

https://numismag.com/en/2022/07/28/2022-gold-coin-mosi-oa-tunya-from-zimbabwe/

 

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6 minutes ago, Celery Man said:

pmbug seems very texags

The site has been invaded by a lot of peeps that fit that description.  It's been a slog to set an expectation for intellectual honesty in discussions.  [serious].

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I just realized that the link to the pmbug for the Ron Paul Competing Currencies bill is in the Politics forum which has been hidden from guests (search engines) and only visible to logged in members.  Sorry about that.  Here's some direct links for those interested...

 

Bill text for HR1098 (from 2011):

http://www.govtrack.us/congress/bill.xpd?bill=h112-1098

Introduction statement:

https://www.govinfo.gov/content/pkg/CREC-2011-03-15/html/CREC-2011-03-15-pt1-PgE483-3.htm

Prof. Lawrence H. White testimony:

https://financialservices.house.gov/uploadedfiles/091311white.pdf

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I must be missing something, and would appreciate any clarification.

Right now, and for years up to now, the Mint has been producing gold and silver coins that they sell at a premium because demand is high. OK, that's probably not the point.

Scanning Paul's bill, I take it to mean that he wants all those gold and silver coins, and maybe ingots etc., to be legal tender (which I believe they already are in the Constitution, but eh) so if I see a fully-restored Triumph TR-6 sitting on the corner, I can grab a sock full of gold coins and clink it at the owner, and it should be the same as using a check, credit card, or wad of cash. Even if the car owner doesn't want gold. But hey, he could spend it anywhere so no harm no foul.

(I think for some while similar laws have been in place in various states, /csb)

Here's the rub-- if I own a sock full of gold coins, why would I spend it on anything? The fact that I own it, assuming I bought it myself, means I think it'll get more valuable over time as opposed to a non-gold-backed currency.

Now, if Paul wants to peg the dollar to gold again, and I missed that, OK.

But even if, gold is always the last thing you spend. In the Civil War, even in the North far from the battles, gold disappeared and they went with paper.

 

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You almost got the full picture.  The FRN's legal tender monopoly is just one of the issues.  Currently gold and silver are treated as commodities - subject to sales and capital gains taxes.  The legislation would remove those barriers and allow gold and silver to function as money in concert with the FRN (as opposed to pegged to the FRN)  The practical effect of Gresham's Law would serve as a de facto restriction on central bank malfeasance (devaluation of the dollar or inflation) while also providing us plebes an honest alternative for saving/storing wealth without counterparty risk.

Edited by bernorange
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42 minutes ago, bernorange said:

You almost got the full picture.  The FRN's legal tender monopoly is just one of the issues.  Currently gold and silver are treated as commodities - subject to sales and capital gains taxes.  The legislation would remove those barriers and allow gold and silver to function as money in concert with the FRN (as opposed to pegged to the FRN)  The practical effect of Gresham's Law would serve as a de facto restriction on central bank malfeasance (devaluation of the dollar or inflation) while also providing us plebes an honest alternative for saving/storing wealth without counterparty risk.

Yeah, the tax on selling bullion was a real pain. Has been done away with in several states, I guess some still tax it.

I don't get how allowing gold and silver as legal tender would help the dollar if they aren't pegged to a dollar amount. So long as the value fluctuates, as it does now, an ounce of gold remains an ounce of gold whether it's worth 1900 dollars or 190000 devalued dollars.

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That bill and Ron Paul’s speech are nuttier than a squirrel jamboree 

Spoiler
Mr. PAUL. Mr. Speaker, I rise to introduce the Free Competition in 
Currency Act. Currency, or money, is what allows civilization to 
flourish. In the absence of money, barter is the name of the game; if 
the farmer needs shoes, he must trade his eggs and milk to the cobbler 
and hope that the cobbler needs eggs and milk. Money makes the 
transaction process far easier. Rather than having to search for 
someone with reciprocal wants, the farmer can exchange his milk and 
eggs for an agreed-upon medium of exchange with which he can then 
purchase shoes.
  This medium of exchange should satisfy certain properties: it should 
be durable, that is to say, it does not wear out easily; it should be 
portable, that is, easily carried; it should be divisible into units 
usable for everyday transactions; it should be recognizable and 
uniform, so that one unit of money has the same properties as every 
other unit; it should be scarce, in the economic sense, so that the 
extant supply does not satisfy the wants of everyone demanding it; it 
should be stable, so that the value of its purchasing power does not 
fluctuate wildly; and it should be reproducible, so that enough units 
of money can be created to satisfy the needs of exchange.
  Over millennia of human history, gold and silver have been the two 
metals that have most often satisfied these conditions, survived the 
market process, and gained the trust of billions of people. Gold and 
silver are difficult to counterfeit, a property which ensures they will 
always be accepted in commerce. It is precisely for this reason that 
gold and silver are anathema to governments. A supply of gold and 
silver that is limited in supply by nature cannot be inflated, and thus 
serves as a check on the growth of government. Without the ability to 
inflate the currency, governments find themselves constrained in their 
actions, unable to carry on wars of aggression or to appease their 
overtaxed citizens with bread and circuses.
  At this country's founding, there was no government controlled 
national currency. While the Constitution established the congressional 
power of minting coins, it was not until 1792 that the U.S. Mint was 
formally established. In the meantime, Americans made do with foreign 
silver and gold coins. Even after the Mint's operations got underway, 
foreign coins continued to circulate within the United States, and did 
so for several decades.
  On the desk in my office I have a sign that says: ``Don't steal--the 
government hates competition.'' Indeed, any power a government 
arrogates to itself, it is loathe to give back to the people. Just as 
we have gone from a constitutionally-instituted national defense 
consisting of a limited army and navy bolstered by militias and letters 
of marque and reprisal, we have moved from a system of competing 
currencies to a government-instituted banking cartel that monopolizes 
the issuance of currency. In order to introduce a system of competing 
currencies, there are three steps that must be taken to produce a legal 
climate favorable to competition.
  The first step consists of eliminating legal tender laws. Article I 
Section 10 of the Constitution forbids the States from making anything 
but gold and silver a legal tender in payment of debts. States are not 
required to enact legal tender laws, but should they choose to, the 
only acceptable legal tender is gold and silver, the two precious 
metals that individuals throughout history and across cultures have 
used as currency. However, there is nothing in the Constitution that 
grants the Congress the power to enact legal tender laws. We, the 
Congress, have the power to coin money, regulate the value thereof, and 
of foreign coin, but not to declare a legal tender. Yet, there is a 
section of U.S. Code, 31 U.S.C. 5103, that purports to establish U.S. 
coins and currency, including Federal Reserve notes, as legal tender.
  Historically, legal tender laws have been used by governments to 
force their citizens to accept debased and devalued currency. Gresham's 
Law describes this phenomenon, which can be summed up in one phrase: 
bad money drives out good money. An emperor, a king, or a dictator 
might mint coins with half an ounce of gold and force merchants, under 
pain of death, to accept them as though they contained one ounce of 
gold. Each ounce of the king's gold could now be minted into two coins 
instead of one, so the king now had twice as much ``money'' to spend on 
building castles and raising armies. As these legally overvalued coins 
circulated, the coins containing the full ounce of gold would be pulled 
out of circulation and hoarded. We saw this same phenomenon happen in 
the mid-1960s when the U.S. government began to mint subsidiary coinage 
out of copper and nickel rather than silver. The copper and nickel 
coins were legally overvalued, the silver coins undervalued in 
relation, and silver coins vanished from circulation.
  These actions also give rise to the most pernicious effects of 
inflation. Most of the merchants and peasants who received this 
devalued currency felt the full effects of inflation, the rise in 
prices and the lowered standard of living, before they received any of 
the new currency. By the time they received the new currency, prices 
had long since doubled, and the new currency they received would give 
them no benefit.
  In the absence of legal tender laws, Gresham's Law no longer holds. 
If people are free to reject debased currency, and instead demand sound 
money, sound money will gradually return to use in society. Merchants 
would have been free to reject the king's coin and accept only coins 
containing full metal weight.
  The second step to reestablishing competing currencies is to 
eliminate laws that prohibit the operation of private mints. One 
private enterprise which attempted to popularize the use of precious 
metal coins was Liberty Services, the creators of the Liberty Dollar. 
Evidently the government felt threatened, as Liberty Dollars had all 
their precious metal coins seized by the FBI and Secret Service in 
November of 2007. Of course, not all of these coins were owned by 
Liberty Services, as many were held in trust as backing for silver and 
gold certificates which Liberty Services issued. None of this matters, 
of course, to the government, who hates to see any competition.

[[Page E484]]

  The sections of U.S. Code which Liberty Services is accused of 
violating are erroneously considered to be anti-counterfeiting 
statutes, when in fact their purpose was to shut down private mints 
that had been operating in California. California was awash in gold in 
the aftermath of the 1849 gold rush, yet had no U.S. Mint to mint 
coinage. There was not enough foreign coinage circulating in California 
either, so private mints stepped into the breech to provide their own 
coins. As was to become the case in other industries during the 
Progressive era, the private mints were eventually accused of 
circulating debased (substandard) coinage, and with the supposed aim of 
providing government-sanctioned regulation and a government guarantee 
of purity, the 1864 Coinage Act was passed, which banned private mints 
from producing their own coins for circulation as currency.
  The final step to ensuring competing currencies is to eliminate 
capital gains and sales taxes on gold and silver coins. Under current 
federal law, coins are considered collectibles, and are liable for 
capital gains taxes. Short-term capital gains rates are at income tax 
levels, up to 35 percent, while long-term capital gains taxes are 
assessed at the collectibles rate of 28 percent. Furthermore, these 
taxes actually tax monetary debasement. As the dollar weakens, the 
nominal dollar value of gold increases. The purchasing power of gold 
may remain relatively constant, but as the nominal dollar value 
increases, the federal government considers this an increase in wealth, 
and taxes accordingly. Thus, the more the dollar is debased, the more 
capital gains taxes must be paid on holdings of gold and other precious 
metals.
  Just as pernicious are the sales and use taxes which are assessed on 
gold and silver at the state level in many states. Imagine having to 
pay sales tax at the bank every time you change a $10 bill for a roll 
of quarters to do laundry. Inflation is a pernicious tax on the value 
of money, but even the official numbers, which are massaged downwards, 
are only on the order of 4 percent per year. Sales taxes in many states 
can take away 8 percent or more on every single transaction in which 
consumers wish to convert their Federal Reserve Notes into gold or 
silver.
  In conclusion, Mr. Speaker, allowing for competing currencies will 
allow market participants to choose a currency that suits their needs, 
rather than the needs of the government. The prospect of American 
citizens turning away from the dollar towards alternate currencies will 
provide the necessary impetus to the U.S. government to regain control 
of the dollar and halt its downward spiral. Restoring soundness to the 
dollar will remove the government's ability and incentive to inflate 
the currency, and keep us from launching unconstitutional wars that 
burden our economy to excess. With a sound currency, everyone is better 
off, not just those who control the monetary system. I urge my 
colleagues to consider the redevelopment of a system of competing 
currencies and cosponsor the Free Competition in Currency Act.

But this part sums up the gist of his argument for gold 

Quote

A supply of gold and silver that is limited in supply by nature cannot be inflated, and thus serves as a check on the growth of government. Without the ability to inflate the currency, governments find themselves constrained in their actions, unable to carry on wars of aggression or to appease their overtaxed citizens with bread and circuses.

Gold Standard people are kooks. All of them. 

If you actually look at the history of the GS, inflation and volatility were nearly twice as worse during its 53 year run. There was a recession every 3 years as opposed to the now average of 6. The arguments of limited supply and anti-counterfeiting are nonsense. Not to mention, with the GS, the central bank couldn’t adjust monetary supply to combat inflation or help sluggish demand. 
 

 

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...unable to carry on wars of aggression...

Wow.  I didn't realize there were no wars of aggression in the world when it was mostly on the gold standard.  Who knew?

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4 minutes ago, 27-25 said:

...unable to carry on wars of aggression...

Wow.  I didn't realize there were no wars of aggression in the world when it was mostly on the gold standard.  Who knew?

My favorite thing about goldbugs is all their nonsense has been disproven by history since we've actually tried their ideas before and they just refuse to learn anything about it. They really are just like "oooooooooooooooooo shiny thing must be great!"

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3 hours ago, bernorange said:

You almost got the full picture.  The FRN's legal tender monopoly is just one of the issues.  Currently gold and silver are treated as commodities - subject to sales and capital gains taxes.  The legislation would remove those barriers and allow gold and silver to function as money in concert with the FRN (as opposed to pegged to the FRN)  The practical effect of Gresham's Law would serve as a de facto restriction on central bank malfeasance (devaluation of the dollar or inflation) while also providing us plebes an honest alternative for saving/storing wealth without counterparty risk.

how are you getting at a competing currency based on physical silver and gold (that is really just using minted gold and silver coins) being used as an alternative to current fiat as serving as a check on central bank activities via gresham's law.  gresham's law would say that everyone would just hoard the (presumably undervalued) gold and silver coins and utilize as much (overvalued) fiat currency as possible in commercial activity.  just because the federal reserve undertakes cooling or heating policies with usd...if that has the effect of increasing the value of the competing gold currency, gresham's law says that you're going to see a higher use of usd.

i recognize you have been heavily invested in gold/silver for a very long time and would like to see their prominence and value increase...and along with your inherent distrust of central banking, that's why you are constantly rooting against the dollar as reserve currency and as petro trading basis but what do you honestly think would have happened in the spring of 2020 to the u.s. and global economy if we were still tied to gs or if the prevailing means of currency was just a bunch of finite gold coins?  do you think the outcome would have been preferable to the 5-10% inflation that was endured for the last year?

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You almost got the full picture.  The FRN's legal tender monopoly is just one of the issues.  Currently gold and silver are treated as commodities - subject to sales and capital gains taxes. 


So, move some retirement plan stock holdings to gold right before take a distribution and cash in with no taxes due? Cool.
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16 hours ago, sidis said:

how are you getting at a competing currency based on physical silver and gold (that is really just using minted gold and silver coins) being used as an alternative to current fiat as serving as a check on central bank activities via gresham's law.

In the absence of legal tender laws forcing people to accept FRNs in commerce, vendors and customers could choose to settle transactions with either FRNs or other mediums (to simplify our discussion, we can focus on just gold/silver).  As long as central bank policy is more or less steady, I would expect vendors to be willing to accept FRNs and most customers would prefer to use FRNs for transactions.  This would be Gresham's Law in action as you mentioned - no real change from how everything currently works (folks using FRNs and saving gold/silver).  Should central bank policy debase the dollar too much, vendors might stop accepting FRNs and demand gold/silver instead.  This threat, from the existence of a viable (free convertability) alternative would effect a practical constraint on monetary policy.

16 hours ago, sidis said:

... along with your inherent distrust of central banking, that's why you are constantly rooting against the dollar as reserve currency and as petro trading basis ...

Uh... No.  That is a mischaracterization.

It's not so much "distrust of central banking" as understanding history.  Fiat monetary systems always fail.  Fiat monetary systems always lead to debasement worse than sound money.  The dollar has already lost over 95% of it's value in the last century.  Recent central bank policies (QE) have blown out asset bubbles and inflation - free money for the uber rich (QE, asset bubbles) at the expense of the poor (inflation).  Our system is insane, but few take the long/helicopter view to see it.

I have been talking about monetary issues (including the dollar's role as the reserve currency, the petrodollar basis for it, etc.) for years as I believe that these issues are fundamentally important.  I'm worried about the future because I understand that fiat monetary systems are not sustainable.  I'm not "constantly rooting against".  You misunderstand me.  I'm desperately trying to wake some people up.  I hope we have the courage to change course before steering the ship into the iceberg.

 

16 hours ago, sidis said:

... what do you honestly think would have happened in the spring of 2020 to the u.s. and global economy if we were still tied to gs ...

I have posted many times in many places over the years that our experiment with fiat currency is akin to playing Shoot the Moon with a set of infinitely long rails. Central banks adjust the rails - loosening and tightening the pressure to keep the ball rolling, but eventually the ball's momentum is going to escape the pressure. It's impossible to keep playing the game forever.   We nearly went off the rails in 2007/2008.  We're still trying to recover from it.  We'd be better off if we weren't playing that game altogether IMO.  No systemic risk at all.

~~~

It's interesting what happened in Zimbabwe.  They didn't fully implement the Competing Currencies idea, but they came pretty close and in doing so, stabilized their hyperinflating fiat currency. 

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8 minutes ago, bernorange said:

In the absence of legal tender laws forcing people to accept FRNs in commerce, vendors and customers could choose to settle transactions with either FRNs or other mediums (to simplify our discussion, we can focus on just gold/silver).  As long as central bank policy is more or less steady, I would expect vendors to be willing to accept FRNs and most customers would prefer to use FRNs for transactions.  This would be Gresham's Law in action as you mentioned - no real change from how everything currently works (folks using FRNs and saving gold/silver).  Should central bank policy debase the dollar too much, vendors might stop accepting FRNs and demand gold/silver instead.  This threat, from the existence of a viable (free convertability) alternative would effect a practical constraint on monetary policy.

your simplification and your faith that the alternative currencies aren't going to follow the same volatility and debasement issues is pretty critical to your premise.  unfortunately, reality demonstrates that where there is an arbitrage opportunity, it will be exploited in the marketplace and abused.  see bitcoin.  bitcoin lost more than half its value in a few months, not 100 years.  you underestimate the non-regulated marketplace's capacity for destruction, corruption, and malfeasance leading to a true disaster.  you also ignore the fact that in the 100 years of debasement of the usd, the population has increased four times and economic activity has increased from $590 billion in 1900 to $24 trillion today.

 

8 minutes ago, bernorange said:

Uh... No.  That is a mischaracterization.

It's not so much "distrust of central banking" as understanding history.  Fiat monetary systems always fail.  Fiat monetary systems always lead to debasement worse

than sound money.  The dollar has already lost over 95% of it's value in the last century.  Recent central bank policies (QE) have blown out asset bubbles and inflation - free money for the uber rich (QE, asset bubbles) at the expense of the poor (inflation).  Our system is insane, but few take the long/helicopter view to see it.

I have been talking about monetary issues (including the dollar's role as the reserve currency, the petrodollar basis for it, etc.) for years as I believe that these issues are fundamentally important.  I'm worried about the future because I understand that fiat monetary systems are not sustainable.  I'm not "constantly rooting against".  You misunderstand me.  I'm desperately trying to wake some people up.  I hope we have the courage to change course before steering the ship into the iceberg.

it is not a mischaracterization to say you have spent the last 15 years on these sites posting every doom and gloom article regarding the relative state of the u.s. dollar..."warning" everyone of how the impending doom from the house of cards is inevitable any day now...again, all while the role of the usd has actually gained significantly greater importance and entrenchment.  jim rickards has been predicting the complete collapse of the u.s. economy every year for about 20 years running...and yet here we are.  of course all monetary systems fail in the long run...virtually all human constructs of political economy fail because the organizational dynamics of every system fail eventually.  "in the long run, we are all dead."  you have been linking one-off stories from goldbug sites about how saudi arabia is "open to discussion" about settling its trades in something other than usd with certain partners and how china is doing bilateral trade deals that exclude usd basis for years.  and again, in that same time period, this fictitious alternative "sound money" has not emerged in any material way and the role of the usd has strengthened. 

but i would like to know what you believe is "sound money" and when has it existed in a way that did not likewise fail?  what do you think will happen to that sound money in a global marketplace that is not regulated with guardrails some sort of authority.  particularly in any type of complex economy.  the fact that gold has endured as a store of value is no different than diamonds, artwork, land, etc... have persisted over the same time periods.  it is predicated on precisely the same concept as fiat.  it's a commodity.  it has a market value today that changes tomorrow based on what people are willing to accept.  and it is vulnerable to precisely the same type of debasement as fiat.  it's where the entire premise and definition stems.  what do you think you are desperately waking the sheeple up to and what alternative are you offering that is not susceptible to precisely the same potential for rent seeking (if not considerably more) that we currently roll with?

now, if you want to talk about income inequality and the political tolerance we have of it in the name of our true religion of unregulated capitalism in this country, that's another thing but acting like the federal reserve utilizing its tools to try and stay within the rails is the driving force of that and not rent seeking behavior, political corruption, and natural economic outcomes of capitalism, then you're missing the forest for the trees.

 

38 minutes ago, bernorange said:

I have posted many times in many places over the years that our experiment with fiat currency is akin to playing Shoot the Moon with a set of infinitely long rails. Central banks adjust the rails - loosening and tightening the pressure to keep the ball rolling, but eventually the ball's momentum is going to escape the pressure. It's impossible to keep playing the game forever.   We nearly went off the rails in 2007/2008.  We're still trying to recover from it.  We'd be better off if we weren't playing that game altogether IMO.  No systemic risk at all.

~~~

It's interesting what happened in Zimbabwe.  They didn't fully implement the Competing Currencies idea, but they came pretty close and in doing so, stabilized their hyperinflating fiat currency. 

i am not sure how this is responsive in any way to the question you quoted.  you didn't actually answer the question i posed to you...about how your preferred trading basis and currency paradigm would be able to respond to significant economic events like 2020.  avoiding "playing the game" is akin to sticking your head in the sand and letting the slings and arrows of fortune rule the day to day.  economic outcomes are inherently volatile...that will always be present.  keeping some guiderails to cool and stimulate has certainly led to greater stability...what do you think 2008 looks like with even less regulation and no tools to respond?  the ball escapes the pressure really, really fast without any guardrails and history has shown us that repeatedly.  tell me what happens to the economy in 2020 without the flexibility of those tools and instead, a finite set of gold value storage?

zimbabwe is an interesting event study and its effects are still tbd.  but you are also talking about a tiny economy overall, and the largest shadow/informal economy as a percentage of total economic activity in the world...more than half.  that lends itself to bit more success in alternative trade means...you are talking about a bartering economy at its core in the informal marketplaces.  here's hoping it works.  regardless of using rtgs, usd, pula, euros, rand, hyperinflation has been a mainstay for a very long time.  let's see what happens to the gold coins as they actually start to hit the non-corporate population if that is allowed to happen.  moreover, it is difficult to separate the cooling of inflation in zimbabwe as attributable to the very limited competing currency experiment to the global cooling that has occurred from its peak in the summer to now as a result of....wait for it...monetary policy and everyone adjusting to a new normal of russia's role in the global economy being mitigated.

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I wonder how bad the last gold standard would have crashed if DeGaulle hadn't said "fuck zese paper dollaires, I want my GOLD like you said I can have." We were already printing way more than we had by the early 70s when we were on the gold standard, if nobody had done the DeGaulle put-up-or-shut-up until, say, the late 80s or 90s, whooee.

I have no doubt that if we went back on some sort of gold/silver/land/etc standard tomorrow, in a couple of months our leaders would figure out how to fudge the game again.

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20 hours ago, sidis said:

your simplification and your faith that the alternative currencies aren't going to follow the same volatility and debasement issues is pretty critical to your premise. ...

Not really.  Where there is free convertability, people can choose whichever currency they prefer for storing wealth and conducting transactions.  If folks believe that volatility or debasement are real issues (or worse issues) with physical gold or silver (than the alternatives), they don't have to store or use them. 

20 hours ago, sidis said:

it is not a mischaracterization to say you have spent the last 15 years on these sites posting every doom and gloom article regarding the relative state of the u.s. dollar..."warning" everyone of how the impending doom from the house of cards is inevitable any day now...

Yes it is.  From the beginning on discussions of the petrodollar/reserve currency/monetary policy/etc. I have always held the long view.  I'll admit to being quite despondent about the potential for disaster circa 2007/2008, but I was hardly alone in recognizing that systemic risk nearly toppled the dominos back then.  I have never claimed that the dollar's reserve currency status was in immediate or imminent danger.  I have stated many times that I expected this issue to be a problem for a future generation.

20 hours ago, sidis said:

... you have been linking one-off stories from goldbug sites about how saudi arabia is "open to discussion" about settling its trades in something other than usd with certain partners and how china is doing bilateral trade deals that exclude usd basis for years.  and again, in that same time period, this fictitious alternative "sound money" has not emerged in any material way and the role of the usd has strengthened. ...

The news about Saudi Arabia happened 3 days ago at Davos.  You can find it reported anywhere.  Here's a report from noted goldbug site Bloomberg:

https://www.bloomberg.com/news/articles/2023-01-17/saudi-arabia-open-to-talks-on-trade-in-currencies-besides-dollar

I'm really not sure what you meant by the second half of the quote above (where I added italics).  You seemed to be getting into a bit of a rant about issues that aren't germane to the thread topic unless I'm misunderstanding you.  I started this thread to discuss the idea of competing currencies and specifically the fact that Zimbabwe came pretty close to implementing it. 

20 hours ago, sidis said:

but i would like to know what you believe is "sound money"  ...

https://fee.org/articles/what-do-we-mean-by-sound-money/

https://www.merriam-webster.com/dictionary/sound money

https://mises.org/library/principle-sound-money

I chopped out a bit after that question.  I'm not arguing for wholesale change of our monetary system.  That would be a ludicrous endeavor.  I do believe that allowing sound money to be freely convertible and on an even playing field with our existing FRN system would be beneficial.  If you believe that it would be harmful, I would like to know why.

20 hours ago, sidis said:

i am not sure how this is responsive in any way to the question you quoted.  you didn't actually answer the question i posed to you...about how your preferred trading basis and currency paradigm would be able to respond to significant economic events like 2020.  ...

Apologies.  Your question was (and still is) vague and I'm not entirely sure what you were asking, so I gave a general response.  If we had had a competing currency system in 2020, the government (and central bank) could have done everything exactly the same as they did in 2020. 

20 hours ago, sidis said:

zimbabwe is an interesting event study and its effects are still tbd.  ... let's see what happens to the gold coins as they actually start to hit the non-corporate population if that is allowed to happen.  moreover, it is difficult to separate the cooling of inflation in zimbabwe as attributable to the very limited competing currency experiment ...

Zimbabwe is (or did - I think they have now finished minting/selling coins that they planned to sell) selling the coins to the population.  The 1toz coins were too expensive for most citizens there from what I read and they had plans to mint/sell coins in smaller sizes (1/10 toz), but I am not sure if they actually ever did that.  Regardless, the offering of the coins encouraged investment into the coins (funds going to Zimbabwe's treasury) instead of foreign assets (currencies) and this helped stabilize their fiat currency (see December news in OP).

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5 hours ago, bernorange said:

I do believe that allowing sound money to be freely convertible and on an even playing field with our existing FRN system would be beneficial.  If you believe that it would be harmful, I would like to know why.

Apologies.  Your question was (and still is) vague and I'm not entirely sure what you were asking, so I gave a general response.  If we had had a competing currency system in 2020, the government (and central bank) could have done everything exactly the same as they did in 2020. 

What is your definition of FRN?

Competing currencies would be absolutely be harmful because people are naturally greedy and fearful cunts. It would negatively impact the implementation of monetary policy. Once the fed announced, or hell, even if there was rumored to be rate hikes. People would initiate withdrawal requests to banks, in order to convert their money to gold. There would be bank runs and liquidity issues. Since there isn’t an unlimited amount of gold, banks couldn’t fulfill all the withdrawal requests in gold. People would then hoard whatever gold they had, again, adding to a liquidity problem. Goldbugs tout the history of fiat currencies failing but at the same time ignore the history of the gold standard failing. 

Competing currencies would inject volatility and instability into a monetary system for the sole purpose of soothing the irrational beliefs of a few. 

 

 

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i find it's best not to sit and ruminate on currency overly much.

the economic cornerstone of all trade is a bullshit belief system, and has been since forever. 

it's amazing that we are still clinging to a rare-ish shiny soft rock with limited utility as a thing upon which to base this belief system.

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5 hours ago, bernorange said:

Not really.  Where there is free convertability, people can choose whichever currency they prefer for storing wealth and conducting transactions.  If folks believe that volatility or debasement are real issues (or worse issues) with physical gold or silver (than the alternatives), they don't have to store or use them. 

This seems naive from my perspective.  We saw the rise and fall of a competing currency in BTC and a few other legitimate blockchain currencies.  As expected, they simply became a speculative trading asset just like gold, equities, real estate, etc...  Why do you believe that long-existing commodities would be different.  your test case of zimbabwe itself has shown significant inflation in the value of the gold coins, wildly outside the market price for gold commodities.  That is purely trading speculation.  When you say things like this, it is hard for me to take seriously the notion that you actually want to introduce a competing currency and makes me think that @CooterBrown's post above is the real driving force here. you just want a tax free way to invest in speculative trading mediums.

 

5 hours ago, bernorange said:

Yes it is.  From the beginning on discussions of the petrodollar/reserve currency/monetary policy/etc. I have always held the long view.  I'll admit to being quite despondent about the potential for disaster circa 2007/2008, but I was hardly alone in recognizing that systemic risk nearly toppled the dominos back then.  I have never claimed that the dollar's reserve currency status was in immediate or imminent danger.  I have stated many times that I expected this issue to be a problem for a future generation.

The news about Saudi Arabia happened 3 days ago at Davos.  You can find it reported anywhere.  Here's a report from noted goldbug site Bloomberg:

https://www.bloomberg.com/news/articles/2023-01-17/saudi-arabia-open-to-talks-on-trade-in-currencies-besides-dollar

I would have thought you knew why i referenced the saudi arabia article.  I am aware of its recency but I was using it as an example of they type of article you have been linking to for a couple of decades here.

i have been going back and forth with you on these topics for long enough to know you are way above not discussing things in good faith.  that isn't an appeal to flattery fallacy...just an observation.  i know you aren't full of shit and you aren't a bad faith debater.  but when i read the above quoted comments, i feel like i am on some sort of punked or prank show.  there is no way you can possibly state with a straight face that you have held a "long" view on usd.  if you are long, then i would hate to see what the bearish case looks like.

 

5 hours ago, bernorange said:

I'm really not sure what you meant by the second half of the quote above (where I added italics).  You seemed to be getting into a bit of a rant about issues that aren't germane to the thread topic unless I'm misunderstanding you.  I started this thread to discuss the idea of competing currencies and specifically the fact that Zimbabwe came pretty close to implementing it. 

https://fee.org/articles/what-do-we-mean-by-sound-money/

https://www.merriam-webster.com/dictionary/sound money

https://mises.org/library/principle-sound-money

I chopped out a bit after that question.  I'm not arguing for wholesale change of our monetary system.  That would be a ludicrous endeavor.  I do believe that allowing sound money to be freely convertible and on an even playing field with our existing FRN system would be beneficial.  If you believe that it would be harmful, I would like to know why.

i am fully aware what sound money is in the context of currency and economics.  i wanted to ensure that when you were using it in your previous post, you were just referring to gold standard money.  my point was that there is no actual history of "sound money" that has somehow avoided the same debasement and inflation issues just the same as society-agreement fiat.  the italicized portion was a statement that this fantasy notion of incorruptible gold standard money is simply ludicrous. 

 

5 hours ago, bernorange said:

I do believe that allowing sound money to be freely convertible and on an even playing field with our existing FRN system would be beneficial.  If you believe that it would be harmful, I would like to know why.

so again, when i read this, i am really getting the feeling that you just want to chase up the price of gold and then convert it tax free and this has nothing to do with a competing currency...you don't even seem to take seriously the notion that it would be used in day-to-day transactions.  the market confusion, the added infrastructure expense, the instant speculation and guaranteed 30-40% overvaluation of certain commodities...they are all negative effects.  

 

5 hours ago, bernorange said:

Apologies.  Your question was (and still is) vague and I'm not entirely sure what you were asking, so I gave a general response.  If we had had a competing currency system in 2020, the government (and central bank) could have done everything exactly the same as they did in 2020. 

Zimbabwe is (or did - I think they have now finished minting/selling coins that they planned to sell) selling the coins to the population.  The 1toz coins were too expensive for most citizens there from what I read and they had plans to mint/sell coins in smaller sizes (1/10 toz), but I am not sure if they actually ever did that.  Regardless, the offering of the coins encouraged investment into the coins (funds going to Zimbabwe's treasury) instead of foreign assets (currencies) and this helped stabilize their fiat currency (see December news in OP).

a monetary tool that the united states government manipulated in order to ease the economic collapse accompanying the covid pandemic was to increase the money supply which has had a consequential effect of inflation.  however, had the government not undertaken the extraordinary measures to aid businesses and lower-income individuals, the economic consequences would have been significantly more dire.  there are certainly negative consequences to what did happen (see inflation) but the alternative was catastrophic. 

in a sound money (gold-based) world, what tool would you utilize in order to stave off a calamitous, long-term collapse of the economy and society in the second quarter of 2020?

the population is taking a very minority share of those gold coins.  most of it is corporate buying and they are being used as speculative investment vehicles, not really a competing currency.  https://www.kitco.com/news/2023-01-18/Zimbabwe-s-gold-coins-now-cost-more-than-2-000-each.html

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On 1/18/2023 at 4:22 PM, 27-25 said:

...unable to carry on wars of aggression...

Wow.  I didn't realize there were no wars of aggression in the world when it was mostly on the gold standard.  Who knew?

I wanna know where the gold at

Storming_of_the_Teocalli_by_Cortez_and_H

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46 minutes ago, hayden_horn said:

shiny soft rock with limited utility

it's actually a great material for electronics.  would suck to basically reduce the money supply to make iphones. 

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5 minutes ago, elfenix said:

it's actually a great material for electronics.  would suck to basically reduce the money supply to make iphones. 

According to some random info, there's about 2 bucks worth of gold in a phone.

"WHAT EXACTLY IS IN MY SMARTPHONE?

Smartphones are pocket-sized vaults of precious metals and rare earths. A typical iPhone is estimated to house around 0.034g of gold, 0.34g of silver, 0.015g of palladium and less than one-thousandth of a gram of platinum. It also contains the less valuable but still significant aluminium (25g) and copper (around 15g)."

If price of gold doubled, it'd be 4 bucks worth.

I always thought there'd be more, like, I dunno, at least 50 bucks worth. But if you look at videos of recycling gold from electronics, it's generally some sickly dude sitting under an umbrella with a bucket of acid sloshing around his feet.

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18 hours ago, Neonmoon said:

What is your definition of FRN?

Sorry.  FRN is an acronym for Federal Reserve Note.  FRNs are denominated in dollars just as gold and silver were denominated in dollars when our country was born.  I don't wish to derail this thread on this tangent though.  I just used the acronym as a shorthand because I'm lazy and was typing enough as it is.  If you are interested in exploring the issue more, I can suggest this link and perhaps we could start a new thread to discuss it:

https://fee.org/articles/what-is-a-dollar/

18 hours ago, Neonmoon said:

Competing currencies would be absolutely be harmful because people are naturally greedy and fearful cunts. It would negatively impact the implementation of monetary policy. Once the fed announced, or hell, even if there was rumored to be rate hikes. People would initiate withdrawal requests to banks, in order to convert their money to gold. There would be bank runs and liquidity issues. Since there isn’t an unlimited amount of gold, banks couldn’t fulfill all the withdrawal requests in gold. ...

You packed a lot of assumptions into your thesis.  I don't see it playing out like you have presented.

I agree that allowing gold/silver to compete with FRNs on a level playing field would constrain central banks from abusing monetary policy.  I see that as a feature and not a bug, however.  I do not believe that the Fed would be completely hogtied from implementing any policy whatsoever though.  People do not want to transact with physical metal because it's not convenient.  There will be plenty of demand for FRNs (and their digital credit equivalents in bank accounts).  Also, banks are not obligated to become gold vaulting services (and if they choose to provide vaulting services, they definitely should not run fractional reserve schemes with them - fully allocated accounts or GTFO).  Also, the US Mint's gold/silver coin sales generate revenue for the Treasury's general fund.

I do find it interesting though that your thesis presupposes that people will recognize gold/silver as superior to FRNs.  How do you reconcile that with your desire to maintain an inferior system?

WRT the ('a' really as there have been more than one) Gold Standard- that's not what this thread is about.  Competing currencies is not equivalent to 'the' gold standard.

17 hours ago, hayden_horn said:

the economic cornerstone of all trade is a bullshit belief system, and has been since forever.

If by "forever" you mean "since 1971", yeah.  Prior to that, currencies were not 100% fiat.  They still got debased, but the systems were not based entirely on faith.

17 hours ago, hayden_horn said:

it's amazing that we are still clinging to a rare-ish shiny soft rock with limited utility as a thing upon which to base this belief system.

On 1/19/2023 at 11:00 AM, sidis said:

... the fact that gold has endured as a store of value is no different than diamonds, artwork, land, etc... have persisted over the same time periods.  it is predicated on precisely the same concept as fiat.  it's a commodity.  ...

Kids today have forgotten what used to be common knowledge.

Quote

...
Money functions as (1) a medium of exchange, (2) a unit of account and (3) a store of value.
...
But what features does your money need? Six characteristics have been identified: Money must be durable, portable, divisible, scarce, uniform and acceptable.
...

https://www.dallasfed.org/~/media/documents/educate/everyday/money.pdf

see also:

https://www.stlouisfed.org/education/economic-lowdown-podcast-series/episode-9-functions-of-money

Gold/Silver are different from other commodities precisely because they fit the 6 characteristics better than anything else.

The FRN (and digital credit bank equivalents) fail as a store of value.  They just fail slightly less than current alternatives (yea! TINA).  Competing currencies would provide a real alternative that would encourage the FRN to stop failing.

17 hours ago, sidis said:

This seems naive from my perspective.  We saw the rise and fall of a competing currency in BTC and a few other legitimate blockchain currencies.  As expected, they simply became a speculative trading asset just like gold, equities, real estate, etc...  Why do you believe that long-existing commodities would be different.  ...

BTC (and other cryptos) are unregulated markets and suffering collapses due to ponzi style fraud.  Fraud occurs in all markets and systemic risk in FRN (credit) markets (subprime mortgages, pensions, derivatives, etc.) are no different (but much, much worse as they affect everyone and not just speculators).  I'm not sure how you think physical gold and physical silver are going to be subject to the same levels of systemic risk as credit markets or the wild west of unregulated crypto - I really don't see it.  But even if I conceded that the market for physical gold/silver were somehow on the same risk level, I'm not sure why allowing people to have a choice would be a bad thing.

17 hours ago, sidis said:

... your test case of zimbabwe itself has shown significant inflation in the value of the gold coins, wildly outside the market price for gold commodities.  That is purely trading speculation.

Wrong.  The Zimbabwe coins were sold, by law, at spot + 5%.  The value of the coins has tracked the spot gold market (plus the premiums that physical gold demands over the futures 'paper' gold spot price).  It's in line with any gold coin like the Gold Buffalo or American Gold Eagle from the US Mint.

17 hours ago, sidis said:

... there is no way you can possibly state with a straight face that you have held a "long" view on usd.  if you are long, then i would hate to see what the bearish case looks like.

I appreciate that you will engage in me in good faith.  I know you to be someone who has been willing to engage in intellectually honest discussion in the past as well and that's why I chose to reply to you initially.

I think you misunderstood what I was saying.  I'm saying that my concerns with respect to the petrodollar/reserve currency/monetary policy are born out of a long term view.  I never said I was "long the dollar" as might be understood in a trading context.  I'm saying that I understand history and I'm looking at where we are today, at the news that I've been reading (and sharing) and thinking about the future (long into the future, not tomorrow or next week into the future).  When I started raising these issues (back on HF IIRC), no one could even conceive or grok what I was on about.  The event horizon was so far away that no one could see it.  I certainly didn't expect to see events play out to an end game within my lifetime.  Right now, that actually looks possible, though more probably will occur within my children's lifetime after I'm gone.

17 hours ago, sidis said:

... my point was that there is no actual history of "sound money" that has somehow avoided the same debasement and inflation issues just the same as society-agreement fiat.  the italicized portion was a statement that this fantasy notion of incorruptible gold standard money is simply ludicrous. ...

Once again, I'm not advocating for a gold standard.  I'm advocating for democratic choice.  Power to the people.

17 hours ago, sidis said:

so again, when i read this, i am really getting the feeling that you just want to chase up the price of gold and then convert it tax free and this has nothing to do with a competing currency...you don't even seem to take seriously the notion that it would be used in day-to-day transactions.  the market confusion, the added infrastructure expense, the instant speculation and guaranteed 30-40% overvaluation of certain commodities...they are all negative effects. ...

Perhaps I've done a poor job of communicating.

Should Competing currencies (as described in post #5) be enacted, I would not expect gold/silver coin to used in day-to-day transactions unless the Fed (or systemic risk in credit markets) *seriously* fucked up.  Market confusion?  Over what?  Nothing is going to change in markets unless their is a significant impetus (like credit market implosions or irresponsible Fed/Treasury/govco policy).  I'm not entirely sure what scenario you are imagining that would entail the things you are describing here.  I would expect the most likely immediate result of having Competing Currencies enacted would be for most people to allocate somewhere between 1-10% of their portfolios to holding gold/silver.  It's not going to cause a 30-40% "overvaluation" any more than people in China or India buying gold and silver does.  The price of physical gold/silver will still be set by the free (and global) market.

17 hours ago, sidis said:

a monetary tool that the united states government manipulated in order to ease the economic collapse accompanying the covid pandemic was to increase the money supply which has had a consequential effect of inflation.  however, had the government not undertaken the extraordinary measures to aid businesses and lower-income individuals, the economic consequences would have been significantly more dire.  there are certainly negative consequences to what did happen (see inflation) but the alternative was catastrophic. 

in a sound money (gold-based) world, what tool would you utilize in order to stave off a calamitous, long-term collapse of the economy and society in the second quarter of 2020?

In my initial response to your 2020 question, I tried (and apparently failed) to address my view that economic conditions in 2020 (prior to the pandemic) were just pendulum swings from 2007/2008.  2007/2008 is where the pressure to the rails got out of hand.  Had we Competing Currencies back then, I imagine that things would be very different today.  The Fed would have had to let bad debt/credit work itself out of the system instead of embarking on QE and ZIRP.  There would have been economic pain - no doubt, but it would have worked itself out and we would have been in much better condition in 2020.

That said, with competing currencies, the government is still free to attempt shutting down the country and economy and sending helicopter money here and there.  People will either accept it as necessary or not.  That's the freedom of choice.

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1 hour ago, bernorange said:

You packed a lot of assumptions into your thesis.  I don't see it playing out like you have presented.

I agree that allowing gold/silver to compete with FRNs on a level playing field would constrain central banks from abusing monetary policy.  I see that as a feature and not a bug, however.  I do not believe that the Fed would be completely hogtied from implementing any policy whatsoever though.  People do not want to transact with physical metal because it's not convenient.  There will be plenty of demand for FRNs (and their digital credit equivalents in bank accounts).  Also, banks are not obligated to become gold vaulting services (and if they choose to provide vaulting services, they definitely should not run fractional reserve schemes with them - fully allocated accounts or GTFO).  Also, the US Mint's gold/silver coin sales generate revenue for the Treasury's general fund.

I do find it interesting though that your thesis presupposes that people will recognize gold/silver as superior to FRNs.  How do you reconcile that with your desire to maintain an inferior system?

WRT the ('a' really as there have been more than one) Gold Standard- that's not what this thread is about.  Competing currencies is not equivalent to 'the' gold standard.

If by "forever" you mean "since 1971", yeah.  Prior to that, currencies were not 100% fiat.  They still got debased, but the systems were not based entirely on faith.

Kids today have forgotten what used to be common knowledge.

https://www.dallasfed.org/~/media/documents/educate/everyday/money.pdf

see also:

https://www.stlouisfed.org/education/economic-lowdown-podcast-series/episode-9-functions-of-money

Gold/Silver are different from other commodities precisely because they fit the 6 characteristics better than anything else.

The FRN (and digital credit bank equivalents) fail as a store of value.  They just fail slightly less than current alternatives (yea! TINA).  Competing currencies would provide a real alternative that would encourage the FRN to stop failing.

BTC (and other cryptos) are unregulated markets and suffering collapses due to ponzi style fraud.  Fraud occurs in all markets and systemic risk in FRN (credit) markets (subprime mortgages, pensions, derivatives, etc.) are no different (but much, much worse as they affect everyone and not just speculators).  I'm not sure how you think physical gold and physical silver are going to be subject to the same levels of systemic risk as credit markets or the wild west of unregulated crypto - I really don't see it.  But even if I conceded that the market for physical gold/silver were somehow on the same risk level, I'm not sure why allowing people to have a choice would be a bad thing.

Wrong.  The Zimbabwe coins were sold, by law, at spot + 5%.  The value of the coins has tracked the spot gold market (plus the premiums that physical gold demands over the futures 'paper' gold spot price).  It's in line with any gold coin like the Gold Buffalo or American Gold Eagle from the US Mint.

I appreciate that you will engage in me in good faith.  I know you to be someone who has been willing to engage in intellectually honest discussion in the past as well and that's why I chose to reply to you initially.

I think you misunderstood what I was saying.  I'm saying that my concerns with respect to the petrodollar/reserve currency/monetary policy are born out of a long term view.  I never said I was "long the dollar" as might be understood in a trading context.  I'm saying that I understand history and I'm looking at where we are today, at the news that I've been reading (and sharing) and thinking about the future (long into the future, not tomorrow or next week into the future).  When I started raising these issues (back on HF IIRC), no one could even conceive or grok what I was on about.  The event horizon was so far away that no one could see it.  I certainly didn't expect to see events play out to an end game within my lifetime.  Right now, that actually looks possible, though more probably will occur within my children's lifetime after I'm gone.

Once again, I'm not advocating for a gold standard.  I'm advocating for democratic choice.  Power to the people.

Perhaps I've done a poor job of communicating.

Should Competing currencies (as described in post #5) be enacted, I would not expect gold/silver coin to used in day-to-day transactions unless the Fed (or systemic risk in credit markets) *seriously* fucked up.  Market confusion?  Over what?  Nothing is going to change in markets unless their is a significant impetus (like credit market implosions or irresponsible Fed/Treasury/govco policy).  I'm not entirely sure what scenario you are imagining that would entail the things you are describing here.  I would expect the most likely immediate result of having Competing Currencies enacted would be for most people to allocate somewhere between 1-10% of their portfolios to holding gold/silver.  It's not going to cause a 30-40% "overvaluation" any more than people in China or India buying gold and silver does.  The price of physical gold/silver will still be set by the free (and global) market.

In my initial response to your 2020 question, I tried (and apparently failed) to address my view that economic conditions in 2020 (prior to the pandemic) were just pendulum swings from 2007/2008.  2007/2008 is where the pressure to the rails got out of hand.  Had we Competing Currencies back then, I imagine that things would be very different today.  The Fed would have had to let bad debt/credit work itself out of the system instead of embarking on QE and ZIRP.  There would have been economic pain - no doubt, but it would have worked itself out and we would have been in much better condition in 2020.

That said, with competing currencies, the government is still free to attempt shutting down the country and economy and sending helicopter money here and there.  People will either accept it as necessary or not.  That's the freedom of choice.

You accuse me of having assumptions. You believe the central banks are “abusing monetary policy” when all evidence points to a system more stable than at any time in history during a gold standard or at a time of competing currencies like gold/silver/pounds/beaver pelts/etc.

You ignore all liquidity issues of competing currencies, and not only ignore them, in some instances think that’s a feature of competing currencies, and a good thing. It is not. People not wanting to transact with gold/silver because it’s not convenient is not a good thing. That is a liquidity problem. People hoarding gold because they irrationally believe the government is abusing the value of FRN is not a good thing. That is a liquidity problem. If less people are able to freely and willingly transact in goods/services, that leads to a demand issue. These are all avoidable problems and increase instability into the system with the only benefit being an erroneous belief of stopping monetary abuse (or wars of aggression according to Ron Paul). 

In additional, you suggest fiat fails as a store of value, I’m assuming because of inflation, yet ignore the wild price swings of gold, which again, happen because people believe it is a hedge against inflation, and scurry to it when there inflationary winds, even though evidence has shown gold is lackluster against inflation for the most part. 

 

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On 1/21/2023 at 11:03 AM, bernorange said:

BTC (and other cryptos) are unregulated markets and suffering collapses due to ponzi style fraud.  Fraud occurs in all markets and systemic risk in FRN (credit) markets (subprime mortgages, pensions, derivatives, etc.) are no different (but much, much worse as they affect everyone and not just speculators).  I'm not sure how you think physical gold and physical silver are going to be subject to the same levels of systemic risk as credit markets or the wild west of unregulated crypto - I really don't see it.  But even if I conceded that the market for physical gold/silver were somehow on the same risk level, I'm not sure why allowing people to have a choice would be a bad thing.

Wrong.  The Zimbabwe coins were sold, by law, at spot + 5%.  The value of the coins has tracked the spot gold market (plus the premiums that physical gold demands over the futures 'paper' gold spot price).  It's in line with any gold coin like the Gold Buffalo or American Gold Eagle from the US Mint.

I appreciate that you will engage in me in good faith.  I know you to be someone who has been willing to engage in intellectually honest discussion in the past as well and that's why I chose to reply to you initially.

I think you misunderstood what I was saying.  I'm saying that my concerns with respect to the petrodollar/reserve currency/monetary policy are born out of a long term view.  I never said I was "long the dollar" as might be understood in a trading context.  I'm saying that I understand history and I'm looking at where we are today, at the news that I've been reading (and sharing) and thinking about the future (long into the future, not tomorrow or next week into the future).  When I started raising these issues (back on HF IIRC), no one could even conceive or grok what I was on about.  The event horizon was so far away that no one could see it.  I certainly didn't expect to see events play out to an end game within my lifetime.  Right now, that actually looks possible, though more probably will occur within my children's lifetime after I'm gone.

Once again, I'm not advocating for a gold standard.  I'm advocating for democratic choice.  Power to the people.

Perhaps I've done a poor job of communicating.

Should Competing currencies (as described in post #5) be enacted, I would not expect gold/silver coin to used in day-to-day transactions unless the Fed (or systemic risk in credit markets) *seriously* fucked up.  Market confusion?  Over what?  Nothing is going to change in markets unless their is a significant impetus (like credit market implosions or irresponsible Fed/Treasury/govco policy).  I'm not entirely sure what scenario you are imagining that would entail the things you are describing here.  I would expect the most likely immediate result of having Competing Currencies enacted would be for most people to allocate somewhere between 1-10% of their portfolios to holding gold/silver.  It's not going to cause a 30-40% "overvaluation" any more than people in China or India buying gold and silver does.  The price of physical gold/silver will still be set by the free (and global) market.

In my initial response to your 2020 question, I tried (and apparently failed) to address my view that economic conditions in 2020 (prior to the pandemic) were just pendulum swings from 2007/2008.  2007/2008 is where the pressure to the rails got out of hand.  Had we Competing Currencies back then, I imagine that things would be very different today.  The Fed would have had to let bad debt/credit work itself out of the system instead of embarking on QE and ZIRP.  There would have been economic pain - no doubt, but it would have worked itself out and we would have been in much better condition in 2020.

That said, with competing currencies, the government is still free to attempt shutting down the country and economy and sending helicopter money here and there.  People will either accept it as necessary or not.  That's the freedom of choice.

this is getting long and unruly...i think i quoted the stuff that was responsive to me.

ultimately, i think it will be difficult to ever agree that this has any utility in today's marketplace.  but i want to clarify a few things above to determine if my thought that you ultimately just want to be able to speculate on the market value of gold without being taxed on it or if you are serious about an actual competing currency in the sense that hayek intended and that we had to study in econ in grad school.

you say that btc/crypto is weakened by the fact that they are unregulated markets and suffer from speculators/ponzi/fraud.  you say you don't see how gold/silver could fall prey to the same outcomes.  are you implying that the competing currency would be a regulated currency?  if so, who is going to regulate it in your world?  i really want to understand why you think this would be different.  and i further note that it was a lot of people of your ilk that were the biggest crypto cheerleaders in its early days stating that it was what would finally save us from federal reserve manipulation.  not saying you specifically but i believe you know what i'm talking about.

then you say you don't see how letting people have a choice would be a bad thing.  if it unregulated, it is super bad when people decide they want to transact everything in their shiny new gold coins and go all in on this unregulated marketplace that is subject to the slings and arrows of unregulated outcomes.  and then they lose it all.  for people who have a hard time distinguishing between currency they use for every day life and investment/hedges against other currencies, there is an enormous risk.  if there is free banking based on whatever currency that any institution wanted to issue, the market confusion would be immediate based on questions of par value, overissuance, suspension of redemption, and then all the unpleasant consequences of bank runs, etc...

you're right, i misinterpreted.  i thought you were arguing that you were "long on the dollar" and so i no longer feel like i am being punked.  again, in the long-term, we are all dead.  if you believe letting people invest in gold tax free (which is effectively what you want) is going to hedge a 23 trillion dollar economy transacted in usd and keep it on the right track for the next few hundred years, well...we are certainly at an impasse.

you are advocating for sound money...that's effectively the gold standard.  if you aren't, then you aren't serious about this being a currency.  i thought you were talking about an actual competing currency in the tradition of hayek's theories...but it's just a commodities investment you're looking for.  i was arguing against a windmill the entire time...i thought you were serious about it being a "competing currency."  currencies are used in day-to-day transactions and you say you have no expectation that this competing currency idea would lead to that.  again, it is clear now that you are just talking about investment in gold.

Quote

The price of physical gold/silver will still be set by the free (and global) market.

so is it a regulated market or is it subject to the same thing as btc?  i am confused which you are saying in your post (because it seems like you are saying both).  the overvaluation statement was referring to a tax-free commodities investment, not an actual competing currency.

as for 2020, you are still avoiding the key question by talking contextually about what you would expect the pre-incident environment to be by using "competing currencies."  i asked that in a marketplace predicated on your preference for "sound money," what specific tool could be utilized to avoid a comprehensive collapse of the economy in a case like april 2020?  i understand (and frankly don't disagree entirely) your position that a man-made economic calamity like 2008 should have been allowed to play itself out and the economic pain of the situation hopefully makes us stronger long-term.  but 2020 wasn't a man-made economic event, it was different.  how are you going to create liquidity in that environment?  or do you just let the consequences play out?

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16 hours ago, sidis said:

... you ultimately just want to be able to speculate on the market value of gold without being taxed on it ...

spacer.png

Yes, my 15+ year campaign of awareness and advocacy on the monetary issue has always been motivated just by the desire to sell all my shiny and save a thousand or so dollars in capital gains taxes.  Why bother discussing an issue directly when it's so easy to just impugn the motivations of the kooky "ilk" that thinks differently from the crowd?

I didn't realize that character assassination was an arrow in your quiver for good faith discussion these days.

~~~

If you actually want to discuss the issue at hand, I would suggest you spend ~5 minutes reading the material linked in post #5 instead of getting hung up on key/buzz words that I have used when discussing the issue.  I have really tried to be clear with my thoughts here, but since folks seem to be super confused about the issue, I'm probably not coming across clearly and I suspect it is because we do not have the same understanding of the base material (the actual legislation).

16 hours ago, sidis said:

...

you say that btc/crypto is weakened by the fact that they are unregulated markets and suffer from speculators/ponzi/fraud.  you say you don't see how gold/silver could fall prey to the same outcomes.  ...

Are you suggesting that the gold and silver markets are not regulated?  Are you suggesting that dollar credit markets are immune to dislocations from speculators/ponzi/fraud? 

16 hours ago, sidis said:

... if there is free banking based on whatever currency that any institution wanted to issue, ...

I do not believe that would be a likely outcome of the legislation as any speculations into foreign (or private issue) currencies would be subject to capital gains (and possibly sales) taxes.  The legislation really only puts the FRN, gold and silver on the same free convertibility footing.  Don't get hung up on the "Competing Currencies" title and start thinking about an open ended econ 101/Hayek theory/etc idea.  The legislation proposed (referenced in post #5 above) was specific and narrow in focus.

16 hours ago, sidis said:

...you are advocating for sound money...that's effectively the gold standard. ...

Sound money is simply commodity money (and gold/silver just happen to be the best commodities suited to the purpose).  A gold standard implies a value peg.  That is not what is on the table here.

16 hours ago, sidis said:

... you say you have no expectation that this competing currency idea would lead to that.  ...

My expectation included a very important qualifier.  The qualifier is the whole point.

16 hours ago, sidis said:

... i asked that in a marketplace predicated on your preference for "sound money," what specific tool could be utilized to avoid a comprehensive collapse of the economy in a case like april 2020? ...

42.  

In order to formulate the answer to a question, one must first really define and understand the question.  To me, your question is (still) very vague.  What precipitated a comprehensive collapse (what conditions lead to it)?  What was/were the mechanism(s) in play (ie. how did it occur)?  I'm not being flippant here.  I'm happy to explore how a world where FRNs, gold and silver have free convertibility might work in different scenarios.  But to have a constructive conversation on it, we need to have a common understanding of the issue.

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2 hours ago, bernorange said:

spacer.png

Yes, my 15+ year campaign of awareness and advocacy on the monetary issue has always been motivated just by the desire to sell all my shiny and save a thousand or so dollars in capital gains taxes.  Why bother discussing an issue directly when it's so easy to just impugn the motivations of the kooky "ilk" that thinks differently from the crowd?

I didn't realize that character assassination was an arrow in your quiver for good faith discussion these days.

~~~

If you actually want to discuss the issue at hand, I would suggest you spend ~5 minutes reading the material linked in post #5 instead of getting hung up on key/buzz words that I have used when discussing the issue.  I have really tried to be clear with my thoughts here, but since folks seem to be super confused about the issue, I'm probably not coming across clearly and I suspect it is because we do not have the same understanding of the base material (the actual legislation).

character assassination?  it appears that you are overreacting to a perceived attack on you that you have constructed in your head.  it isn't an attack, it is a clarification of what you are seeking here.  you yourself have admitted you aren't actually seeking an outcome here that is a competing currency.  forgive my confusion that a discussion of actual competing currency theories as set forth by hayek and other economists over the last 200 years was the topic of discussion in a thread called "competing currencies."  the 2011 bill linked in post 5 that you want to make this about really have absofuckinglutely nothing to do with the economic concept of competing currencies.  that bill is simply a tax shelter on metal coins and currencies used in interstate/foreign commerce.  that's it.  period.  there's nothing remotely high-minded about it and it has nothing to do with implementing free banking/competing currencies concepts into our monetary system.  you yourself said:

Quote

I'm not entirely sure what scenario you are imagining that would entail the things you are describing here.  I would expect the most likely immediate result of having Competing Currencies enacted would be for most people to allocate somewhere between 1-10% of their portfolios to holding gold/silver. 

you have now been clear with your thoughts.  those thoughts have nothing to do with competing currencies, they have to do with a 2011 bill that never received a vote and that i simply don't take seriously that was intended to elevate certain investment types above otherse.  i don't know why you're having such an emotive response (mixed with unfounded condescension) to me clarifying what the actual outcome of this bill is and it's grand canyon sized disconnect with the notion of competing currencies (which is a real thing).

 

2 hours ago, bernorange said:

Are you suggesting that the gold and silver markets are not regulated?  Are you suggesting that dollar credit markets are immune to dislocations from speculators/ponzi/fraud? 

of course they are regulated...what i'm unclear on is whether or not when they are used as a transactional currency utilized in commerce (something the above bill doesn't actually give a shit about), whether you think that should be regulated or if it should be left to the whims of the marketplace?  if it is going to be regulated, who do you suspect would be doing it and how would it solve your federal reserve problem?  in some of your posts, you blame the volatility of crypto on unregulated marketplaces for them...in other posts, you say the market will keep gold and silver speculation in check stating "It's not going to cause a 30-40% "overvaluation" any more than people in China or India buying gold and silver does.  The price of physical gold/silver will still be set by the free (and global) market."

 

2 hours ago, bernorange said:

I do not believe that would be a likely outcome of the legislation as any speculations into foreign (or private issue) currencies would be subject to capital gains (and possibly sales) taxes.  The legislation really only puts the FRN, gold and silver on the same free convertibility footing.

that's debatable based on the thin text of the bill...

https://www.govtrack.us/congress/bills/112/hr1098/text

Quote

3. No tax on certain coins and bullion

(a) In general

Notwithstanding any other provision of law—

(1) no tax may be imposed on (or with respect to the sale, exchange, or other disposition of) any coin, medal, token, or gold, silver, platinum, palladium, or rhodium bullion, whether issued by a State, the United States, a foreign government, or any other person; and (2) no State may assess any tax or fee on any currency, or any other monetary instrument, which is used in the transaction of interstate commerce or commerce with a foreign country, and which is subject to the enjoyment of legal tender status under article I, section 10 of the United States Constitution.

you might find interesting reading what the supreme court sad about section 10 of article 1 in the farmers merchant bank v. federal reserve case.

but critically, this really cements what i said earlier...this is not about competing currencies, this is about giving special status to gold and silver investments.  and that's fine...i just don't understand why you are couching it as "competing currencies" and then getting emotional when i say this is not a discussion about competing currencies.  if we were actually talking about competing currencies, we would have to talk about all of these unpleasant outcomes because they are precisely what occurs in that context.  you don't want to and don't have to because you want to talk about the bill which has nothing to do with competing currencies as evidenced by:

2 hours ago, bernorange said:

Don't get hung up on the "Competing Currencies" title and start thinking about an open ended econ 101/Hayek theory/etc idea.  The legislation proposed (referenced in post #5 above) was specific and narrow in focus.

okay, forgive my confusion.

 

2 hours ago, bernorange said:

Sound money is simply commodity money (and gold/silver just happen to be the best commodities suited to the purpose).  A gold standard implies a value peg.  That is not what is on the table here.

again, this goes back to you deciding what you want to talk about...in the context of a competing currency discussion, you raised the notion that "sound money" acting as a competing currency that may enact gresham's law.  now you don't want to talk about gold standard money.  you're all over the map, man.  but now that i recognize that you started this thread with the intent of discussing the narrow implications of a decade old bill that no one ever took seriously that has nothing to do with competing currencies but instead simply giving special tax status to gold and silver, i now see that i have wasted our time.

 

2 hours ago, bernorange said:

42.  

In order to formulate the answer to a question, one must first really define and understand the question.  To me, your question is (still) very vague.  What precipitated a comprehensive collapse (what conditions lead to it)?  What was/were the mechanism(s) in play (ie. how did it occur)?  I'm not being flippant here.  I'm happy to explore how a world where FRNs, gold and silver have free convertibility might work in different scenarios.  But to have a constructive conversation on it, we need to have a common understanding of the issue.

it's not vague.  in a world with value pegged sound money, what monetary tools do you believe exist to deal with the type of collapse that would have occurred as a result of the covid pandemic in april 2020 without the ability to generate significant, distributable liquidity and increase the money supply?  is there anything that can be done besides debasing the value peg?

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20 hours ago, sidis said:

... it appears that you are overreacting to a perceived attack on you that you have constructed in your head.  it isn't an attack, ...

If you say so.  I'll do you the courtesy of not assuming intent in your words (especially to impugn or discredit your motivation).  Can you do the same?  Because as I read your posts, this is what you are doing.  I'd rather have honest discussion of the topic.  For the record, I've been stating and restating the same thing.  I'm not "all over the place" or moving any goalposts.  I think you are just not understanding me (perhaps because you understand certain words and phrases to mean things slightly differently than I do).  I apologize if the thread title threw you off.  I borrowed from the title of the legislation.  While my focus in this discussion has been narrow, I understand that the title refers to a more open ended idea.

So to clarify (don't really wish to get into the weeds with back and forth quoting and nitpicking), my understanding of the legislation (and the idea that I'm advocating) is that it removes taxes on gold and silver coin (whether minted by the US Mint, foreign mints or possibly private domestic mints) and removes legal tender monopoly from the FRN.  It allows Joe Public to freely convert gold and silver coin with FRNs at market rates (sans sales or capital gains taxes) for the weight and purity of the coin(s).  It gives Joe Public and Joe Vendor the option to conduct transactions in FRNs or gold/silver coin.  It doesn't impose any obligations on Joe Public or Joe Vendor - they have free choice.

As I've already stated several times, I believe that the practical effect of enactment of the above would be that people would generally save (some) wealth in gold/silver coin and continue transacting commerce with FRNs (ie. status quo) unless and/or until there was a massive devaluation or loss of confidence in the FRN.  That's an important caveat and the crux of the issue (from my perspective).

I believe that we are approaching an inevitable event horizon where the petrodollar system will break down and the FRN dollar will lose it's world reserve privilege.  I believe the wheels are already turning (slowly).  America will face a currency and sovereign debt crisis.  It might 10 years out.  It might be 50 years out.  It might be longer than that.  But it is coming.

Aside from that, I also believe that there is massive systemic risk in the credit markets.  The Fed is doing it's best applying pressure to the rails in the grand Shoot the Moon game.  Whether they can maintain the see saw action without something breaking is still an open question.

I see the freely convertible gold/silver coin idea as an option that would allow Joe Public and Joe Vendor to survive and thrive in a future where the fat lady sings, but only if it's enacted early enough for Joe Public to actually accumulate gold/silver coin capital and payment systems/infrastructure to develop/mature.

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