The Return of Money
by Jim Davies, 11/18/2011
Money is critical for a reasonable degree of prosperity; barter economies are hopelessly inefficient. "Money" however is stuff suitable as a medium of exchange, and we haven't had that in a hundred years. In its place has been a government -created and -mandated money substitute, and in the near future it seems likely to be exposed for the utter fraud that it's always been.
A true medium of exchange would essentially keep its value over time and be hard to counterfeit. The second of those requirements is obvious, but the first is vital too because of the importance of investment, which is another word for saving. Without investment (buying stuff to make stuff) there can be no growth, and without growth people get no better off. The endemic poverty of the 1,500 years prior to the 19th Century would still be in place.
Today's ersatz money loses value, so saving is hazardous. You lay aside an earned $1,000 for use in a few years after it has generated some new wealth and grown perhaps to $1,200, but find it will buy only $950 worth of useful stuff; so the saving was a waste. You'll not do it again. So investment stops. So growth stops. So poverty resumes its grip. That's why true money is important - why the currency must hold its value over time.
When "money" can be counterfeited or "created" at the push of a button, it doesn't hold its value. When its supply is doubled, other things being equal, it loses half its value. Since 1913 when government here grabbed the power to create it by fiat ("let it be!") its money-substitute has lost over 98% of its value - while in all the previous century in America, real money (gold and silver, not printable) actually gained value, by a small amount. Prices actually fell! Can you imagine?
Government, paper "money" will vanish with its maker as the coming free society emerges, because to try to pay its way government will create it at increasing rates - its value will spiral fast towards zero in what's called "hyperinflation." Then, even though the legal-tender laws will still be in place, they will be disobeyed because (a) they will be less and less enforcable as government employees walk off the job and (b) those being paid will know that before they have the chance to spend it, its value will have fallen heavily. So the store keeper will decline to accept the paper printed with words like "dollar." Then the buyer will have to use real money - so we had better have some ready.
Nonetheless, I've been wrestling with the question of whether that most desirable change can be jump-started sooner than in those final, turbulent days of the government era. Is there a way right now to foster a real-money, underground economy? - for government money does seem poised to melt down. I'd welcome some reader input here, via jimdav at copper dot net. Can anyone see a way? It would be very desirable, for then the underground economy, or "White Market", could develop more gradually and therefore more solidly, over say a decade and a half instead of during those last few frantic months.
The problem is Gresham's Law. That's a natural law, not a government one. It says "When a government compulsorily overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation" or, in a nutshell, bad money drives out good when creditors are forced to accept it. Government money (Federal Reserve Notes, or "Legal Tender Notes", LTNs) has no non-decorative value at all, yet by decree each is "valued" at 100 cents or even 100 "dollars", so the first part of that vice-grip is present in spades. Since it also undervalues alternative monies by imprisoning those who coin any, the second part prevails as well. So we're stuck. We can (and certainly should) hoard real money, but it would be unfortunately foolish to part with it when worthless paper will - by decree - buy just as much useful stuff.
I think that there may be a way to overcome Gresham's Law. Here is the idea in outline. Feedback is invited.
First, hone your skills so that whatever you do, you have an "edge" on your rivals; a reputation for delivering excellent value. Then offer them to buyers, subject to payment in gold coin. This will be inconvenient for the buyer, but if you offer the best value, he'll go that far out of his way. For your part, you'll want to trade only with those who have a good reputation for honoring their word; preferably TOLFA graduates or known hard-money advocates, but there are others too who value their good names. Then proceed to deliver what's been agreed, and collect the coins in payment.
Until today I thought that such "gold clause" contracts were not enforcable, due to the prohibition FDR signed in 1933 - but I was mistaken; in 1977, that was repealed and they are perfectly sound. However that doesn't mean it's a good idea to sue for breach of such a contract in government court - that would be a last resort. First and foremost, explain to the reluctant party how much his reputation would suffer if he broke his word - and should he persist, go ahead and publish the facts of the case much as one does in an eBay transaction report.
This idea would draw real money into the hands of those who best understand the need for it - and there are no better hands around - and teach that need in a very graphic way to all who participate as buyers. A nice way to spread the understanding and so gradually to introduce a soundly-based White Market.
Does that make sense? - and are revenues paid in gold coin reportable as taxable income?