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Thomas M. Miovas Jr.
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1. The US dollar is not forced on by anyone. Please visit your friendly Forex site for details.

2. I don't know what "backed by the force of taxation" is.

3. I'm not sure why that is relevant.

4. Ditto.

1. The US dollar is the only legal tender in the United States.

2. Which part don't you understand? Do you want the concept of taxes explained to you, or the notion of "backing a currency"?

3. Because it's a fundamental difference that you don't seem to know about.

4. Ditto.

Edited by Nicky
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Ever since gold has been completely de-coupled from the Dollar Bill (Federal Reserve Notes), yes, sometimes there can be future speculations between the Dollar vs Gold. That's basically what we have going on now. Many people are frightened that we are going to have a currency collapse, given that the Federal Reserve recently printed out something like *one trillion* dollar bills with nothing to back them up; so yes, gold is going to skyrocket relative to the dollar. But this does not indicate a future value of gold, but rather a future devaluation of the dollar -- i.e. there is a real potential that the dollar could go belly-up.

However, there have been many studies that have shown that the price of goods in terms of gold has remained extremely stable throughout the decades and even longer. I remember one such study that showed that the equivalent of a hamburger for lunch in Ancient Rome is about as much as a fast-food hamburger in modern America, in terms of gold ounces. But it is the power of Congress to coin money and to regulate its value and the way modern economists screwed it all up that has made it so bad. If we could get rid of the Central Banks (legal tender by force) and return the coinage of money to private banks, we would see very stable prices and long-term benefits of having money backed by real commodities.

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1. The US dollar is the only legal tender in the United States.

2. Which part don't you understand? Do you want the concept of taxes explained to you, or the notion of "backing a currency"?

3. Because it's a fundamental difference that you don't seem to know about.

4. Ditto.

1. Correct, but from an investment standpoint (which is the overt danger in terms of debasement) you are free to trade in and out of dollars any time you feel like it, viz. 25 milliseconds before you need to pay for something with it. The dollar's legal tender status does not constrain you in any realistic way.

2. I know what taxes are. I know what currency is. I don't know how or why they are related except that you pay your taxes (presumably) in that currency? The poster above seemed to imply before that taxes somehow forced dollars upon us. I don't see how.

The two others which are insults which will be ignored...

Edited by CrowEpistemologist
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If we had a free society and the government was out of the business of the "anything" standard, are you absolutely certain the market would choose gold? You are absolutely certain that Visa (and others competing with them) wouldn't create a hedged instrument which many of the world's financial experts dubbed very safe and diversified and free of run-ups (viz. like the one we're currently having in gold) and thus making it far more stable than any one particular commodity?

Are you sure? Is this a judgement in the realm of philosophy? Is this incontrovertible?

I guess what I'm saying is, the decision to pick gold or whatever is a business decision and when I see a whole bunch of folks without deep business credentials making those decisions as if they are unassailable, that makes me uncomfortable. Philosophy doesn't make you an expert in every imaginable realm or any realm per se. The right one helps, yes, but it doesn't do the work for you.

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So, you being "uncomfortable" means that I am wrong....sure..whatever.

But here's the point. Yes, under capitalism Crow Epistemologist Bank (CEB) would be free to develop a currency based upon whatever assets it had, so long as that currency would state clearly on the face of it what that Bank Note is redeemable for upon demand on the bank. That is, the BN is just an easy to carry stand-in for the assets so the assets do not have to be carried around --i.e carrying around gold dust is inconvenient, as it would tend to get lost in the folds of one's pockets, so carrying around a paper receipt stating that the bearer of the Note is entitled to one thousandths of an ounce of gold upon demand when presented to the bank that issued it. But let's say CEB decides to monetize any or all of its assets (real estate, FB Stock, weeds growing in the back yard, whatever) and the CEB Note states, "The bearer of this CEB Note is entitled to one thousandths of the total assets of CEB holdings." When taken to a grocery store to use as cash for grocery shopping, why would the grocery accept such a Note as payment, when he wouldn't have a clue as to what he is going to get when he goes to CEB and demands the exchange of a paper receipt for those assets? Is he going to get a pencil? a sheet of printer paper? a flower from the back yard? or what? You see, it isn't clear versus him receiving a Note stating that, "The bearer of this Bank Note is entitled to one thousandths of an ounce of gold." Because so long as it is clear what he is getting for the Note from the Bank, then he can decide if he wants that or not. If it is not specified, it doesn't mean a damned thing and he will reject it, if free to do so.

Real_Money_VS_Crap.jpg

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... Is this a judgement in the realm of philosophy? Is this incontrovertible?... ...

I guess what I'm saying is, the decision to pick gold or whatever is a business decision... ...

No, the choice of gold is not in the realm of philosophy any more than the choice to eat bacon vs. oat-bran. Has someone in this thread claimed that it is? Even the much broader ideas about what makes a good money ("money is a matter of functions four: a medium, a measure, a standard, a store") is Economics, not Philosophy.

With that said, there are good objective reasons why certain commodities make good money. Of course someone might come up with a better idea that fulfills the functions of money better than any one commodity of mix of commodities. As long as it is free people making free-choices, an Objectivist would not oppose such an innovation primarily on philosophical grounds.

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It hasn't been mentioned in this thread, but due to the voodoo economics taught today, many people think that the value of money is what you can buy with it -- i.e. a loaf of bread, or a car, or a book. However, this is certainly not what the Founders meant when they said the government could set the value of money, and it is not what was meant pre-Greenback days (1933). The value of money is what one can get for it at face value from the issuer of the money. So, prior to 1933, all paper bill Bank Notes stated up front what the Note was worth in terms of some commodity (gold, silver, oil, etc.). So that when you went into a grocery store and offered your money to the cashier, he could look at it and decide if that is what he wanted in exchange for the groceries or not. Gold is accepted most anywhere for very good reasons, and so gold was used as money and the BNs where only handled like a pre-written check from the bank. These days, you take a dollar bill to the bank and ask them what you get for it, and they will look at you very strangely because they have all accepted the voodoo money BNs of the Federal Reserve (by force, I might add, since it is the only legal tender recognized by the Federal government).

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By the way, Yaron Brook and ARI have done a video and a blog entry on this issue (top two entries via this search). Fractional Reserve Banking doesn't necessarily mean that the bank is printing out more Bank Notes, as I said, but rather how they handle deposits versus loans. But the central issue is the same: It is not fraudulent so long as each side of the party to the contract of a deposit /loan understand what he's getting into, and realizes that the depositor may not have immediate, ready access to his deposits in total -- without some wait time for the bank to catch up with the new withdrawal vs deposit ratio. I think in neither case is there inflation, as long as the Bank Notes is clear on what it is a demand of from the bank and so long as the overall amount of the commodity (gold) does not change much over time. And, as I pointed out earlier, when FRB was left up to private banks on their terms, there was less than a 1% inflation rate. Any bank that wants to stay in business is not going to overextend their demands / payments schedule; but if they do, they go out of business, so buyer beware.

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It hasn't been mentioned in this thread, but due to the voodoo economics taught today, many people think that the value of money is what you can buy with it -- i.e. a loaf of bread, or a car, or a book. However, this is certainly not what the Founders meant when they said the government could set the value of money, and it is not what was meant pre-Greenback days (1933). The value of money is what one can get for it at face value from the issuer of the money.

It depends on the context, and value is contextual.

By the logic above, all US dollars are absolutely worthless and thus the dollar price of gold should be $infinity per ounce. This is absurd.

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Note: After further review, I have decided to delete my recent essay "Fractional Reserve Banking revisited." I think I was confusing a couple of things, like bank lending versus money coining. I see no problem with a customer depositing cash (gold) into a bank, the bank loaning it out, reducing the access to that customer's money by the customer, making it a fractional reserve bank. So long as the customer knows that he may not have ready access to his cash (because it is being loaned out), and other terms are mutually acceptable by the bank and the customer; what's the problem? In essence, my essay made the situation more complicated than it actually is.

However, I do stand by my statements about proper money and the necessity to have it back by an appropriate commodity that is stated clearly on the face of it. And I see that Crow is finally seeing the light about why gold has gone up so much relative to the dollar due to the de-coupling of the dollar from gold.

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However, I do stand by my statements about proper money and the necessity to have it back by an appropriate commodity that is stated clearly on the face of it. And I see that Crow is finally seeing the light about why gold has gone up so much relative to the dollar due to the de-coupling of the dollar from gold.

Huh? Gold's gone up drastically in the last 10 years or so. The dollar has been de-coupled for 50 years or so.

My above comment about gold's proper priced based on your logic being $infinity/ounce was meant as a reductio ad absurdum.

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Actually, the absurdity is the continual use of fiat money not backed by anything. The only reason it still works is that it is illegal to use anything else as money. Otherwise, yes, the Federal Reserve Note not backed by anything would be rejected for sound money. And one must remember that this fraud was perpetrated onto the America people at a time when bills were more in circulation that gold coins, so few people noticed. Like today, only a handful of people really understand the proper nature of money (commodity backed money) that there is not a wholesale run from the Federal Reserve garbage. Otherwise, your attempt at reductio ad absurdum would be correct -- the value of the FRN in your pocket would be totally worthless and the value of gold compared to trash would be infinite.

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You can use anything you want as money. It's not illegal. You can trade dollars for anything and anything for dollars. Most major online retailers take a variety of currencies. Apple could decide to stop taking dollars for their computers tomorrow and demand diamonds instead. Nothing would stop them.

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You can use anything you want as money. It's not illegal. You can trade dollars for anything and anything for dollars. Most major online retailers take a variety of currencies. Apple could decide to stop taking dollars for their computers tomorrow and demand diamonds instead. Nothing would stop them.

FAlse.

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Crow, I think you are wrong about your assertion that a business can accept / demand payment in any form not related to the US Dollar. For one thing, according to US Tender Laws, anything presented with a price in terms of dollars must accept Federal Reserve Notes as payment in full. However, I do know that at times, a business can make an offer in dollars, and then say other payments will be accepted -- i.e. some Objectivist newsletters during the rising price of silver back when had a price in dollars or alternatively one could send in silver coins as payments. But I think to demand anything else (non-US Dollars) would be considered barter, and all bartering must be done in terms of US Dollar worth for the purpose of collecting taxes from those sales / trades. And if someone offered the US Dollar for those sales /trades, the business would be obligated to accept them.That is, if you have a car and want to trade it for some paintings, the individual prices must be stated in terms of dollars so that the seller can pay the taxes on it; and if someone offered the equivalent of dollars rather than paintings, then I think the seller would be obligated to accept those dollars. Someone can correct me if I am wrong, but I worked in retail for about 30 years and these types of issues came up. In short, so long as the business is operating in the USA, he must accept the legal tender (Federal Reserve Notes) of that denomination specified in the price.

In part, it is the US Legal Tender Laws that must be repealed if we are to move onto sound money that is backed by real assets. Otherwise, an equivalent offer in US Dollars must be accepted (by my understanding). Also, as Legal Tender, one can only go by the face value. So for trades or sales, it doesn't matter if one is talking about a pre-1933 one dollar bill (backed by silver) or a modern one dollar bill (not backed by anything); since both say "One Dollar" they are exchangeable and cannot be accepted at the silver value, but only at the "one dollar" value.

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You are touching on what is the move from the Federal Reserve Note (FRN) moving from a perceptually tethered concrete to a "floating abstraction"/"stolen concept". One dollar was 0.715 troy ounce silver. Honest money does not demand that silver or gold be the basis, but it does recognize that "money has to be some material commodity which is imperishable, rare, homogeneous, easily stored, not subject to wide fluctuations of value, and always in demand among those you trade with." Gold and silver are continually mined, even today. This inflates the supply of gold and silver available in the markets. Does this preclude lending gold or silver fractionally to the mining industry (or any other industry)? Or does it regulate the lender to properly assess the credit worthiness of the borrower based on the credibility of their claims?

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You are touching on what is the move from the Federal Reserve Note (FRN) moving from a perceptually tethered concrete to a "floating abstraction"/"stolen concept". One dollar was 0.715 troy ounce silver. Honest money does not demand that silver or gold be the basis, but it does recognize that "money has to be some material commodity which is imperishable, rare, homogeneous, easily stored, not subject to wide fluctuations of value, and always in demand among those you trade with." Gold and silver are continually mined, even today. This inflates the supply of gold and silver available in the markets. Does this preclude lending gold or silver fractionally to the mining industry (or any other industry)? Or does it regulate the lender to properly assess the credit worthiness of the borrower based on the credibility of their claims?

You left out the crucial sentence which setup the context for that quote:

"Money is not merely a tool of exchange: much more importantly, it is a tool of saving, which permits delayed consumption and buys time for future production."

You can argue that the first sentence is partially contradicted by the subsequent ones.

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I guess you don't have access to wikipedia? It's 31 U.S.C. § 5103.

Good idea. Here's a relevant quote:

"Section 31 U.S.C. 5103, entitled "Legal tender," states: "United States coins and currency [including Federal reserve notes and circulating notes of Federal reserve banks and national banks] are legal tender for all debts, public charges, taxes, and dues."

This statute means that all United States money as identified above is 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 payment for goods or services. Private businesses are free to develop their own policies on whether to accept cash unless there is a state law which says otherwise."

http://www.federalreserve.gov/faqs/currency_12772.htm

If you think taking something besides US dollars for payment is illegal, by all means report these people. They are all presumably breaking the law:

http://www.barterquest.com/

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Good idea. Here's a relevant quote:

"Section 31 U.S.C. 5103, entitled "Legal tender," states: "United States coins and currency [including Federal reserve notes and circulating notes of Federal reserve banks and national banks] are legal tender for all debts, public charges, taxes, and dues."

You can accept another form of payment but you can't accept another common standard of payment that is recognized as money. http://en.wikipedia.org/wiki/Liberty_dollar#Federal_Government_response Edited by JASKN
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You can accept another form of payment but you can't accept another common standard of payment that is recognized as money. http://en.wikipedia....rnment_response

Well, if you charge "thirty dollars" for something, you must take dollars for that payment and not some currency somebody says are dollars. This is what the legal tender laws are trying to prevent: counterfeiting. They are basically saying that US dollars can only be made by the US government, which I would think is fair enough.

With our current set of laws, any US citizen could easily live their life never holding US dollars for any meaningful length of time.

The reason people use US dollars right now is not because they are forced to by law, it's because they are perceived as stable and useful. If that changed then there is nothing legally stopping them from changing their behavior, and technology would actually make the change fairly seamless.

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The reason people use US dollars right now is not because they are forced to by law, it's because they are perceived as stable and useful. If that changed then there is nothing legally stopping them from changing their behavior, and technology would actually make the change fairly seamless.

...Until the government didn't like that its currency has tanked because nobody uses it, whereupon enacting various laws preventing people from easily exchanging currencies. The fact is that the government controls US citizens' money and would not tolerate a sideways attempt to loosen that control via the creation of a separate currency which might be widely adopted by US citizens. Maybe our current laws were originally intended to prevent counterfeiting, but they would be used today to prevent currency creating.
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... but they would be used today to prevent currency creating.
They might well be. It would be interesting if there was a real test case where the new currency did not claim to be "dollars", "constitutional" etc..

Since money's everyday function is as a medium of exchange, people want money that other people think of as money. Widespread acceptance is a feature that people look for in money. It would be a huge hurdle to try to get widespread acceptance of some new type of money. Think of it from your own perspective: if you had something to sell and someone offered to pay you in gold would you accept? You may or may not; but if you do, it would have to be by doing a dollar conversion in your head. The gold is worthless to you as money unless you can convert it into dollars. You might be happy to hold gold as an asset, but not as money.

Except for the ideology -- the liberty dollar example -- there's no good reason to own gold etc. as money. People have little incentive to create a new money. There are things that have some features of money (e.g. trading stamps, credit-card air-miles), but do not come close to being money. I doubt we'll see a good test-case any time soon.

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I doubt we'll see a good test-case any time soon.

Probably not. I was thinking of it mainly as a way to get the government out of money, but if that is ever going to happen, I suppose currency creating would be a convoluted way of doing what should really be done with laws.
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