Wednesday, January 27, 2010

Competing Currencies?

An act proposed by Senator Ron Paul (R-Texas) would "legalize competing currencies."

I agree with Senator Paul on many issues, including his stance on the Federal Reserve. But this time...well, I just don't see how this would do us any good.

For one, it seems unconstitutional to me. Congress is supposed to print money, and regulate it. So Congress needs to take up their duties like they ought, buck up, and be men. Also, I think it would just create a lot more chaos than we have now. What happens if you go into Walmart, and they use Fed bills, but you use a different currency? What then? How do we determine exchange rates? That was one of the reasons the 'money clause' was put into the Constitution. States were making their own money, and it was causing tons of havoc.

I also think with this bill, we're asking for trouble because people will start counterfeiting, further inflating our money supply, and using this bill to justify it. We'll shoot ourselves in the foot with this thing, IMO. Letting people 'mint private money'...um, yeah, we're just asking for trouble. That would cause inflation as well, I would think. With gold, there's also the problem of exchange rates. How do we set a rate? How do we know what a certain bit of gold is worth?

I think a better, more permanent solution would be for a) Congress to do their job and start printing money- US legal tender- as they ought. b) This money should be available for exchange at any bank. This exchange would work by people bringing in their Fed bills and receiving an equal amount of USLT. (An exchange rate would have to be worked out. Right at the beginning, perhaps one for one.) Alternately, we could also just start issuing USLT, and let the Fed bills work their way out of the system, but that might also cause more problems than good

So there's just my thoughts on that. Anyone else?

11 comments:

Son3 said...
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Son3 said...

Au contraire, Libertie! (French.)

The Constitution grants the power for Congress to coin and regulate money, a power which is not specified as being exclusive except to states, and nothing but gold and silver are to be considered tender by the states.

Paper is not even Constitutionally money.

Also, the power of postal services are granted to Congress, yet Federal Express, United Parcel Service, and others offer the same services, but as private entities.

Besides, the Federal Reserve, a privately operated bank, free from congressional audit, has taken over the position of regulating and emitting the currency, therefore it is a de facto, private currency.

Liberty said...

Thanks for clearing that up about the gold thing. I really wasn't sure.

Anyway...I understand the evils of the Federal Reserve, believe me. But I don't see how allowing further private banks (which is what Dr. Paul is proposing) print more money is the solution. Look at what happened with the Fed; mayhem and rampant inflation. Now multiply that times hundreds, as other banks begin printing money. A recipe for disaster.

Christopher said...

I don't think that's constitutional either. I pretty much agree with this post.

And I don't know if you accept suggestions for topics to post on, but are you planning to discuss the Supreme Court's ruling that corporations and businesses can put money into elections?

Son3 said...

Rampant inflation is due to creating money out of thin air, backed in broken promises and unfounded faith in government and banks.

This could be opposed by a competing currency backed in, or composed of, tangible material of intrinsic value... Liberty Dollar, for example, is backed in gold and silver, and issues both coin and certificate.

Inflation in a private currency effects only those who accept that currency. Inflation trends are predictable, and a private currency could be traded like stocks (assuming the currency product is at least partially marketed in a paper form).

Small businesses would benefit from diversifying their medium of exchange, especially in times of economic distrust.

Liberty said...

Christopher- I have plans for so many blog posts, I don't know where to start. <.< I'm probably going to end up doing another multi-issue post, just to get it all done.

Son- any benefits that might come from supplanting the Fed with multiple other currencies does not change the fact that it is unconstitutional.

The Constitution states that only the Congress may print/coin/whatever money.

Son3 said...

The Constitution prohibits only states from coining.

The extensive history and use of scrip in the U.S. shows that the idea of private currency is not foreign to American economics.

Liberty said...

The first article of the Constitution states- "The Congress shall have Power...To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures"

The tenth amendment states- "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

If a power is expressly delegated to the Congress, the people/states don't have it.

Son3 said...

What about couriers?

Postal powers are granted to Congress, yet there is competition with USPS in the private sector.

Is that unconstitutional?

Liberty said...

From my understanding this, "To establish Post Offices and Post Roads"

merely means they have to provide the facilities. I could be wrong, but my understanding was that this meant they had to make a way for mail to get from one place to another (roads) and a way for people to gather said mail (a post office). Private citizens could use said post roads, so long as they were willing to move over when a more urgent messenger came along.

The thing I have with this bill though is also aside frm the Constitution, as I stated. I don't see how it will help us.

Son3 said...

When the only currency allowed in the U.S. is the Federal Reserve Note, backed in nothing but corruption, how could a currency backed in something tangible not help the economy the same way stocks or bonds do?

An interesting article, if you wish to read it:
http://mises.org/story/3158