This article, and the concept of Liberty Dollar are interesting to compare with BitCoin.
Whereas the head of the created currency is looking at hard prison time (20 yrs), there is no real one entity involved in BTC.
My next question: will BTC be popular or threatening enough that the US treasury take hold and launch lawsuits on counterfeiting as they did in the Liberty Dollar case? And if so, how might they go about it?
No, they'll go after the exchanges and, failing that, users of the currency.
I think any assault on Bitcoin would have a lot more in common with the tactics of the copyright cartels, than this. The decentralized nature of peer-to-peer sharing and Bitcoin is more relevant than the fact that the Liberty Dollar and Bitcoin are both 'currencies' depending on who you talk to. Numerous lawsuits, harsh penalties bordering on unconstitutional (not that it really matters), and selective media exposure of same.
Bitcoin is clearly not a counterfit. It is not at all similar to us currency. I doubt any us attorney will even launch a suit against bitcoin. They only file suits they are pretty sure they can win. So bitcoin is very different than the liberty dollar in this respect.
Good thing, then, that gold is very easy to convert into US dollars.
"the fluctuating value of the dollar makes it very hard to gauge whether oil prices themselves are rising or falling… Oil today at 2 grams, is about the same as it was in the early 1950s; but if you measure the price in US dollars, you would get the impression that it is about 30 times more expensive today!"
Sure, show me anyone who will consistently convert big macs to US dollars, and I will happily show you the division button on your calculator.
In case you need it spelled out, there is, and has always been, a liquid market for the conversion of gold into US dollars. There isn't one for converting Big Macs into anything. They're worthless for trading the second they cross the counter at McDonald's.
For someone lashing out at "illiterate college students playing at economics", you're not exactly showing off your deep insight.
It's also wrong. Yes, the spot markets are priced in dollars, but for an example, almost the entire Saudi production is sold directly to large clients. I'm sure they'd be happy to negotiate settlement in whatever currency or commodity they can use.
Iraq converted its petro trading to the Euro back in 2000, but that didn't last too long and is one of the reasons the US invaded, or so the story goes. This is the gist of a theory called "petrodollar warfare"[1].
Saudi Arabia is an ally hence they trade in dollars; there was quite a stir the last time there was a rumor related to them dumping the dollar[2]. I don't think them switching to another currency is quite that easy.
Those links doesn't address the fact that most Saudi oil isn't sold on the spot market. They can be fully committed to maintaining the dollar as the currency of the spot market, while negotiating their sales to long term clients in whatever medium they feel like.
Convert your dollars in gold. Wait 10 years. If all goes well you will have gained a good percentage of US dollars once you decide to sell your gold to buy stuff again. It's difficult to predict the future value of Gold, but there's no way a paper money, backed by inflationary FED, is not going to lose value against something as solid as Gold.
Well, first of all, gold can be confiscated from you. It happened in the 30s, it can happen again.
Second, unless you are very well equipped and knowledgeable, it is not easy to buy gold - you may buy a bar, but it might be tungsten, with increasing probability as time passes (and I wouldn't be surprised if the probability is already non-negligible; most trade does not go to great length to verify real goldness).
And third - if you managed to hold on to real gold,, in 10 years, you would have gained a good percentage of US dollars when you convert it -- and the tax man will be waiting to take 35% (federal) + 13% (state, if you live in NYC) off your profit. (Capital gain taxes are very low at 15% - don't expect them to stay that way for commodities, perhaps not even for job-generating investments)
1) In the 30's more people owned gold. Now people are dishoarding gold (cash4gold). Going after gold hoarders won't yield much. Also no one in the 30's went to jail.
2) Coins from a reputable mint are pretty easy. The tungsten forgeries are only cost effective for the bigger bars
3) If you purchase coins then they can be redeemed for the currency of the day at under the radar levels. I don't see why I should pay tax when trying to preserve purchasing power of my savings.
> Going after gold hoarders won't yield much. Also no one in the 30's went to jail.
I agree with that premise - unless hoarding gold becomes a little more popular. It is in e.g. India; It might come to the US as well, especially if Ben & friends keep devaluing the dollar.
I don't remember reading about anyone going to jail, but I do remember reading about federal agents forcibly opening bank safes and such to look for gold. If you have a nontrivial amount, home storage might be problematic.
> Coins from a reputable mint are pretty easy. The tungsten forgeries are only cost effective for the bigger bars.
For now, true, as far as I know.
> If you purchase coins then they can be redeemed for the currency of the day at under the radar levels. I don't see why I should pay tax when trying to preserve purchasing power of my savings.
Well, I was restricting the discussion to a law-abiding regime. If you are willing to break the law, I would expect that there are more lucrative ways to do that, with lesser eventual punishment if caught.
Note that I completely agree with you that this kind of tax is unfair and unethical. Unfortunately, that IS the law. And even more unfortunately, the vast majority of the population in the world does not understand that they pay income taxes of (however much, 20-60% in the western world depending on your income) - and and additional of 2%-5% of their savings every year in currency devaluation.
It's funny, but the government works like a hedge fund: 20% of profit, plus 3% of capital. Except there's no watermarks. And you can't really take your money someplace else that offers better terms (at least not when you area US tax payer, and increasingly in other countries as well)
As an aside I wonder what percentage of the population had boxes back then - compared to now. I mean no one I know has them now - almost everyone saves in currency/stocks etc.
Why so anti gold then if you are aware of the perils of saving in currency. Silverbug? :)
Banks have essentially stepped out of the safe business (virtual storage is easier and more lucrative). Those that still offer such services keep raising the prices in an attempt to drive customers away.
My business backups were stored in such a bank safety deposit box between 2002 and 2006, at which point they stopped offering the service.
> almost everyone saves in currency/stocks etc.
"saves" is not the word I would use in this case; I'd use "attempts to store value" for currency and "gambles recklessly" for stocks.
But even if we accept "save" - the reason is, of course, the government - think about how hard it has become to keep your gold: try taking delivery of bullion, then try selling it back; you'd probably take 10-20% spread hit if you succeed at all; now try with 10 bars, and you'll likely not succeed at all.
> Why so anti gold then if you are aware of the perils of saving in currency. Silverbug? :)
Oh, you've got me completely wrong. I'm not anti gold. I'm completely anti fiat money and QE. Its just that I've spent a considerable amount of time trying to figure out how to maintain the value of any assets I have, and am unconvinced that I can use gold for that purpose; not because it's not a good store of value (it is, as are silver, and potentially even platinum and rhodium), but because the logistics are such that I'm unlikely to be able to execute it.
Sure, a few coins here and there are easy to manage. But when I sell my apartment, and want that chunk of cash to maintain its purchasing power, a few coins won't cut it.
I normally lurk so I don't know why I can't reply to your most recent, so replying here.
Agree on your criticism of my loose word of the term saves. I don't agree with your reasons on why people don't buy gold though - most would have no idea what spread is and how it works. From my experience of trying to convince my friends and family to save something in gold - they just find the idea totally foreign of buying a metal that doesn't earn income...even if said income is not keeping up with inflation.
Interesting perspective on the boxes. I only have one so don't know about increasing/decreasing availability - I know there is a waiting list for the ones at my bank in the city. I find the price very reasonable for the value I obtain from it (150/year).
So what are your thoughts on storing that apartment cash then? I am a goldbug but am interested in other thoughts on preservation of purchasing power.
> I normally lurk so I don't know why I can't reply to your most recent, so replying here.
The deeper the response is in the thread, the longer you have to wait from posting until you can reply.
> From my experience of trying to convince my friends and family to save something in gold - they just find the idea totally foreign of buying a metal that doesn't earn income
My grandma kept a stash of gold and jewelry, and she knew why - she had to run away on the eve of WWII, with a small suitcase. My mom knew that she needs to have such a stash, but gave up building it because it was becoming increasingly hard to do. I know I need one, but it's becoming impossible to do at the volume I need.
> So what are your thoughts on storing that apartment cash then?
I'm frustrated, but I have no acceptable solution so far. I'm diversified over foreign currencies and some non-bubblish commodity futures (that are likely to clear even if there's a run; the COMEX gold futures reflect more than the available gold, and if trading stopped tomorrow, it could not settle and there would be huge defaults). But it's still all backed by fiat and lies.
Interesting. I've asked my grandma how she saved given she was in the USD=42oz period but her response was we never had enough to save (postwar period really).
My mum would rather believe a nobel prize winner rather than me :) As with evertthing, views on these matters depend on ones life experience.
>> impossible to do at the volume I need
Ha! a good problem to have!
>>if trading stopped tomorrow, it could not settle and there would be huge defaults
Exactly right! but if you trade in comex futures then you are still trading in paper - albeit paper gold. When the musical chairs stop then those holding the real physical metal will be ok imho.
I don't want to be a christian missionary trying to convert but you may find the concept of freegold and the fofoa blog worth a read. In a nutshell, freegold is about thinking through the transition when the USD/paper gold market collapses and looking at what the giant players (central banks) are doing. If you subscribe to that theory then there are some good arguments why there would be no tax on gold in the future (a black market would arise to ship the gold to any region where it is not taxed). YMMV.
Your Mom should listen to the right Nobel Prizes (Hayek) and not the phony ones like Krugman (in the same league as Stiglitz).
Krugman said after the Internet Crash of 2000s: "To fight this recession the Fed needs . . . soaring household spending to offset moribund business investment . . . Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."
Creating a new housing bubble was certainly GENIUS, and he got a Nobel prize in Economy in 2008 following what happened, while he was at the root of this model of thinking. Nobel Prize in Economy means nothing nowadays. My dog knows more than Krugman.
> Exactly right! but if you trade in comex futures then you are still trading in paper - albeit paper gold.
I'm not trading gold. I wrote "non bubble futures" (which includes gold - it's definitely not a bubble), but what I wanted to write was "non fictional futures" (gold and silver are fictional in the sense they cannot be settled). Many other commodities actually have a chance to settle most of the open interest should trading stop tomorrow.
I'd agree with your last sentence if you substituted 'goldbugs' for 'paperbugs' :)
Some history for you:
A USD until 1971 represented a thing. It was redeemable for a specific weight of gold. After Nixon shock it become a concept. It is now only backed by the 'idea' that someone will exchange their goods or services in the future for the paper you hold - or the full faith and credit of the USG if you prefer. The value of the USD is only in the prices placed on the goods. If someone refuses to trade an item with you for your USD then what value is the dollar? If you also read up on Triffin's Dilemma, you will understand why the US must run a perpetual trade deficit - to provide lubricating dollars for world trade. So there are many many many more dollars in circulation than can lay claim to physical goods in this world. Eventually all paper money returns to its intrinsic value (Voltaire!). When it happens to the USD, it's going to be a doozy!
Today USD has no tangible value. A currency, to be efficient, has to be :
1) in limited amount or cannot be produced easily
2) represent high value per space (value density)
3) be exchangeable for tangible goods
The USD has lost on 1) after removing all equivalency to Gold, and we saw that 2) its value has been dropping versus a number of commodities and precious metals over the past 50 years.
I agree the 3) may be challenging if you carry only Gold, but the day the USD will crash, Gold will become a new currency of exchange again. Paper remains paper, and Gold remains gold. It has a value that paper will never have.
"you still need US dollars to buy oil"
well as long as the oil producers are happy exchanging the world's economic lifeblood for paper IOU's which Ben Bernanke is devalueing as fast as he can. I wouldn't bet the current situation will continue much longer.
>>Barrel of oil yesterday was $X today it's $X+Y
So as a vendor of goods, you won't mind if you are continually repricing the goods you sell today because the paper you received for the goods sold yesterday doesn't cover the value you expected? As a vendor I think you would start looking for a different medium of exchange. You most certainly would use a different store of value.
Downvoted, eh? Yeah I suppose we can compare the struggle of an entire race to break free from systemic and institutional oppression and exploitation, to a bunch of illiterate college students playing at economics.
"All the perplexities, confusion and distresses in America arise not from defects in
the constitution or confederation, nor from want of honor or virtue, as much from downright ignorance of the nature of coin, credit, and circulation."
At his federal trial, witnesses testified to the Liberty Dollar’s criminal similitude to standard American coins. They said his coins included images of Lady Liberty and cheekily reversed “In God We Trust” to “Trust in God.” Then again, his coins were made of real gold and silver, as American coins are not, and came in different sizes and unusual denominations of $10 and $20.
They may be similar to US coin, which is, if nothing else, dumb. But if they're made from gold and silver, wouldn't they be more valuable than the coins they were confused with? Is that not solid proof against mens rea? Gold is $55/g, silver is $32/g. A US dollar coin is 8.1g, a quarter 5.6g.
After doing a tiny bit of research (google and wikipedia), it seems mens rea does not apply if said crime is considered a strict liability crime. Examples are selling alcohol to underage, or statutory rape. Counterfeiting is another strict liability crime.
His real crime is, of course, competing with the government. You will lose, unless you take up arms. The government has no problems using excessive force to stop you.
This is one of the few times I'd ever say that government crackdown is a good thing. One country having multiple currencies at the same time could become a big logistical headache. It would definitely have political and social implications.
[EDIT: I welcome downvotes on comments that are not constructive. If you think this is totally off the wall, please give a good explanation why.]
The logistics aren't different from accepting payment with any one of a dozen different credit cards (each of which might be settled in literally hundreds of currencies) or cheques. Or bartering.
Yes, it would have political implications because politicians can't devalue the loans they've made abroad by devaluing the currency, effectively (but opaquely) taxing savings. I'm not sure what social implications it would have?
This is a bit of a straw man - these are either all financial products or local currencies.
The point is that they all convert into dollars and I will certainly never use BerkShares for as long as I live. I only take US dollars.
Also, the banking structure around these things is really inconvenient. I worked a short stint as a teller at Bank of America and never once have I seen anything but greenbacks. This was in Santa Cruz county as well, where people would definitely be willing to try such crazy ideas.
In many places around the world, several currencies exist and are used simultaneously.
It's only a problem for the weak currency, which according to Greshams Law, everyone tries to get rid of, while hoarding the stronger currency.
The reason the government doesn't want competition in the currency business is because they like to weaken their currency. The government currency would be discarded quickly, while the competing currency would be hoarded.
> In many places around the world, several currencies exist and are used simultaneously.
You need to back this argument up with a good reference.
[EDIT: multiple currencies in the same country. Argentina is a beautiful country but it has had some severe issues over the years. You need to have one currency before you can do things like local currencies. URVs in Brazil were a genius way of pulling this off.]
Okay, yes - technically speaking, there are countries out there who have more than one official currency.
But with every single listing of a country that has more than one currency, there is a political reason why (see Ecuador) and it has real implications for the society to use a currency that you don't control.
You use the phrase "technically speaking" pejoratively as though there is some special set of rules that make these countries multi-currency. There isn't. It's very plainly correct that many countries in the world use multiple currencies.
I assume one of the implications you refer to is that the people have a choice of currencies and hence protection against government sponsored inflation.
So there's cause and effect: Are countries unstable because they have multiple currencies, or are people using multiple currencies because the country is unstable.
You seem (correct me if I'm wrong) to be arguing for the former, "gold bugs" will generally argue the latter.
No, you're right, I am saying it is destabilizing for a country to have more than one currency. It does weird things to culture.
Look at why Europe is so messed up right now - they adopted a single currency without a real government to match. Much as I might not like her, Margaret Thatcher was right when she said that "single currency is a federal Europe through the back door". It's either that or big trouble down the line.
I see you're from Denmark, so think of Legoland (in Billund, I assume you've been - it's silly!). Yes, they take all kinds of currency there, but it's very isolated and localized. At a broader national level, there is just the (sic) kroner. I've never once paid with US dollars at a pølsevogn in Copenhagen. :)
The full argument is quite long, but at heart, yes - I believe that the gold standard was a bad idea and remains a bad idea. Going back to it will not solve any of our current economic problems, it's a waste of time.
Thanks for sticking with the conversation btw! It was fun. :)
You can actually usually pay with euros in most establishments catering to tourists, including pølsevogne. Like most casual cash transactions in Denmark, it's unlikely to go on the books, though.
Also, I'm not arguing for (or against, for that matter) the gold standard, just that if people feel they're better off transacting in a different currency than the single, nationally sanctioned one, they should be able to do so without incurring a forceful response by the government. For the record, I don't think that freedom extends to producing coins that are easily mistaken for those belonging to a different currency.
> Thanks for sticking with the conversation btw! It was fun. :)
Look at why Europe is so messed up right now - they adopted a single currency without a real government to match. Much as I might not like her, Margaret Thatcher was right when she said that "single currency is a federal Europe through the back door". It's either that or big trouble down the line.
We adopted a single currency, which is the new government-enforced legal tender. You're right that it caused plenty of problems, but it's hardly relevant as an example of destabilization caused by many currencies.
Many places have more than one official currency. Many more have more than one unofficial currency. The USD is unofficially used as a currency in many, many countries around the world, as an adjunct to the local currency.
In the days before the Euro, it was quite common for places to accept multiple currencies in the one location, especially in border areas or smaller countries with lower floats.
It's not such a big deal. Just about every international traveller works in two currencies by converting the 'away' currency into their 'home' currency in their head with each purchase. I have actually been offered the opportunity to pay with my home currency on visa POS machines while travelling.
There are undoubtedly efficiencies to having a central currency, but when the central government is systematically destroying the unit of value, inefficiency of multiple currencies is a very small price to pay for being able to escape that. That's why Zimbabwe has the highest number of currencies on the list that was linked above [Edit: position is relative, the list that ianb linked]
If that was the case, than the last thing this person would want to do is make his currency similar to a dollar. Because the US dollar is the weaker currency you see. Why would he then call his currency the liberty dollar, use dollar signs on it, use designs similar to US coinage, etc. Why would he want to be so similar to the weak currency?
The truth is that the US dollar is the strong currency and his one the weak; and he basically made money by having his coins confused for US dollars.
By the way, there are alternative money (such as bitcoin) that are actually honest about being an alternative. The government has not gone after bitcoin yet.
I agree that this guys competing currency is odd. It seems to be more of a political statement to me, than a genuine currency. If he had called it something else and convinced people to use it, then I wouldn't see the problem.
If he had just minted gold and silver coins with a stamped weight on them, then they would stand a chance of being actively traded. But then maybe he knew they would be hoarded. To be honest, I don't know the ambitions of an aging hippie with links to the 'bunker' movement.
From what I have read on this case (and I haven't read much) the coins do actually contain precious metals as a backstop to their value. Not so the US currency - although I hear the nickel now has a higher metal content than the face value.
This is a misunderstanding of Gresham's law which only applies for multiple currencies that are nominally of the same value. Meaning, if there is a $1 silver coin and $1 gold coin, everybody would be hoarding the gold coin and "getting rid of" the silver coin.
Also, a currency is not something you hoard, it's something you "get rid of" by giving it to someone else in return for goods and services. In your example, the "weak" currency would become the standard medium of exchange, while the "strong" currency would for all practical purposes disappear from circulation.
No, Greshams law says nothing about things nominally of the same value. It just states that bad money drives out the good money - meaning that for anything that is falling in value, it will be discarded. For anything that is falling slower, or not falling, it will be hoarded.
Currency is definitely something you hoard. It's called savings, and plenty of people still do it.
"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 other words (from the same article): "Bad money drives out good if their exchange rate is set by law."
I think the logistics argument is better than it sounds. It's not just the logistics of payment. It's also about contracts, contract law, clearing processes, the cost of managing risk, hedging, fighting fraud, and ultimately the transparency of the entire system.
Even where there is complete freedom of choice like in commodities markets, one currency is usually chosen and then used by everyone. Otherwise things would simply get too complicated, too costly and too risky.
The argument that governments force a single legal currency onto everyone so they can more easily expropriate us through devaluation doesn't hold water at all. After all, everyone is free to use whatever they like as a store of value and trade it.
>This is one of the few times I'd ever say that government crackdown is a good thing. One country having multiple currencies at the same time could become a big logistical headache.
You think governments should crackdown on and seek to imprison people because they engage in activities that cause logistical problems for the government? And you think this is one of the few times that a government should intervene? Seriously?
> It would definitely have political and social implications.
This sentence is empty of information. Every action has an implication. I would have upvoted you if you'd described what kind of implications rather than implying that having "implications" is something that governments should intervene in.
> You think governments should crackdown on and seek to imprison people because they engage in activities that cause logistical problems for the government? And you think this is one of the few times that a government should intervene? Seriously?
Yes, 100%.
> Every action has an implication. I would have upvoted you if you'd described what kind of implications rather than implying that having "implications" is something that governments should intervene in.
So if I organize a nationwide fun-run where people in every city are encouraged to run a mile for charity you believe the government should seek to imprison me for causing a logistical problem?
Since you've deleted your other comment stating roughly the same thing, I'll repeat my question here:
Why should you lock people up for being "a big deal politically"? Rosa Parks and the movement she was a part of was a big deal politically who had huge social and political consequences.
It's all well that you know economic theory, but you might find it useful to share the bits of it that's relevant here.
I think we can safely say that bitops is a product of 'all government is good, more government is better' thinking.
I agree with your statement - logistical headaches? Wow, just wow.
Anyone who has even a passing familiarity with John Law and the Mississippi bubble would never say such things like centrally controlled currencies are important for political and social reasons.
> But if they're made from gold and silver, wouldn't they be more valuable than the coins they were confused with?
Sort of, but not really. The issue here is mixing the ideas of "a dollar" with "a piece of gold worth a dollar" or "a piece of silver worth a dollar". They are not the same thing.
There's an abstract notion of 'Value: $1.00' that both a piece of paper and a piece of gold links up to.
No, I get they're not the same thing, that's why I stated that it's dumb they've been issuing coins that resemble dollars. But it would appear that the counterfeit coins are actually worth more than the real coins - that's usually not the point of counterfeiting, and that makes it unclear who the victim of this crime really is.
> that makes it unclear who the victim of this crime really is.
Ah, okay - sorry, I missed this. There isn't really "a victim" here per se; it'd be hard to point at a person and say that they were hurt by what this guy was doing. Rather, it's a crime because it has the potential to destabilize the rules of how our financial system works. And, by implication, how our political system works. Money and politics go together, everyone accepts this.
Government rhetoric (I guess) requires them to label it terrorism, but that's really stupid. They could have used it as an opportunity to explain how our economic system actually works. Of course, if you explain how the system works, people may ask deeper questions, etc.
You make an 8 gram silver coin and call it a "One Liberty Dollar". It will cost you $256 in silver alone.
You then trick a bank into accepting it, so they deposit it into your account with a value of $1.
The coin isn't a real US dollar, so you're guilty of counterfeiting currency. In reality, however, you've lost significantly more than you've gained, and the bank should be able to recover most of the lost dollar by selling the silver.
It's clearly criminal to pass off something that isn't a real coin as a real coin, and the you should be punished for that. But it seems logical to me that charges of conspiracy and terrorism should be weighed against the fact that any conspiracy certainly wasn't to your financial benefit - as counterfeiting conspiracies very much tend to be.
Other comments have suggested that the coins were indeed worth less than they were accepted for, so that makes it more clear cut. I still think the quoted paragraph is poorly phrased - it would have made sense to include that very simple fact.
> It's clearly criminal to pass off something that isn't a real coin as a real coin, and the you should be punished for that. But it seems logical to me that charges of conspiracy and terrorism should be weighed against the fact that any conspiracy certainly wasn't to your financial benefit - as counterfeiting conspiracies very much tend to be.
I agree that the government's choice of language was extremely poor and wrong-headed. They certainly didn't do anyone any favors by just labeling the guy a terrorist and saying that's it.
I don't think it matters whether or not you lost money on going through with the act. If you want to throw your hard-earned money away to make a point, I suppose that's a privilege.
He did not use pure gold or silver. The coins had less gold or silver than their respective face value.
By the way, there are gold and silver american coins that are still legal tender. There are many different legal tender gold and silver us coins that have a woman on them and the word liberty and they are often referred to as liberty dollars.
One side of his coin is especially similar to a silver coin called the peace dollar (but also often referred to as the liberty dollar).
> He did not use pure gold or silver. The coins had less gold or silver than their respective face value.
Putting in an amount of gold equal to its supposed monetary value would have been a losing business proposition. He'd have been losing money every single time he traded a Liberty dollar for US dollars. If the Liberty dollar is worth exactly the amount of gold that's in it, then the only way he could even break even is if the cost of minting coins were zero. He'd essentially be turning himself into an easy way for currency speculators to avoid brokerage fees, and losing his shirt in the process. (This is assuming he weren't using gold that he had previously stockpiled when it was at a lower price.)
Putting only a little precious metal in the coins is a much better business decision. Having some precious metal in there would be reassuring to members of his target demographic. Having less than the coin's stated value in there means that he had some shot at maintaining control over the market and having a viable business plan.
That, and I suspect that keeping the actual value of gold at arm's length would be an absolute necessity. Just look at what the price of gold was doing over the time that Liberty dollars were being issued. A currency that's constantly strengthening against all others at a double-digit rate is not a currency on which one could base a stable economy. cf.) Dutch disease.
this is where your US infinite detention becomes interesting. Both Obama and Romney support the infinite detention of American citizens without trial, but most people aren't worried as it's "only for the bad guys"
What happens when you get on the bad side of the gov, like this guy? Declare someone a Domestic Terrorist and you can lock them away for good. Sure, it almost certainly won't be used in this case but that's not the point; the option shouldn't event exist
anyway, good on the guy. Rosa Parks hyperbole aside, what's the problem with people trading in gold coins if they like? more power to them
I think you should be stating _which_ economic theory you claim to know.
Those who subscribe to the Austrian school of economics, for example, might argue that allowing banks to print their own currency which represents their gold holdings, is _more efficient_ and less liable to failure than the centralised fiat system we have right now.
Democracy (+Capitalism) is not working for many countries and USA is the best example, I honestly think that even monarchy would be better; there is a small chance a prince would happen to grow up to be an intelligent good person but in your system the only 2 candidates are cherry picked by the people with very deep pockets trying to make those deeper.
I'm not sure I buy the idea that this is as simple as the Federal government wanting to ban all currencies that are not the dollar. I don't buy it because there's still no sign of them trying to crack down on other alternative currencies such as Ithaca Hours. And Ithaca Hours are, I believe, older and more well-established.
It wouldn't be the implication that the alternative currency has a cash value in US dollars, because Ithaca Hours are pegged at $10 per Hour.
I wonder if it's that the Liberty Dollars were issued by a for-profit organization rather than being community organized like other alternative currencies I'm aware of. If I remember right, the "dollar monopoly" was originally enacted in response to the fracas around Civil War tokens. During the war companies had been issuing their own scrip that started to be used as currency in the surrounding communities. There were a number of minor financial catastrophes that happened whenever the issuing company would stop honoring its scrip, thus causing the currency to collapse. And the scrip issuer essentially made off with however much US currency they had received in exchange for the script. So the government decided to ban that as a form of (at the time clearly much-needed) consumer protection.
Anyone who's more knowledgeable about the applicable law and its history who can comment?
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[ 7.2 ms ] story [ 187 ms ] threadWhereas the head of the created currency is looking at hard prison time (20 yrs), there is no real one entity involved in BTC.
My next question: will BTC be popular or threatening enough that the US treasury take hold and launch lawsuits on counterfeiting as they did in the Liberty Dollar case? And if so, how might they go about it?
I think any assault on Bitcoin would have a lot more in common with the tactics of the copyright cartels, than this. The decentralized nature of peer-to-peer sharing and Bitcoin is more relevant than the fact that the Liberty Dollar and Bitcoin are both 'currencies' depending on who you talk to. Numerous lawsuits, harsh penalties bordering on unconstitutional (not that it really matters), and selective media exposure of same.
If you disagree with me you can go and convert your savings into gold (but you are probably doing it already)
Remember, you still need US dollars to buy oil.
http://en.wikipedia.org/wiki/Petrodollar
Good thing, then, that gold is very easy to convert into US dollars.
"the fluctuating value of the dollar makes it very hard to gauge whether oil prices themselves are rising or falling… Oil today at 2 grams, is about the same as it was in the early 1950s; but if you measure the price in US dollars, you would get the impression that it is about 30 times more expensive today!"
http://pricedingold.com/crude-oil/
In case you need it spelled out, there is, and has always been, a liquid market for the conversion of gold into US dollars. There isn't one for converting Big Macs into anything. They're worthless for trading the second they cross the counter at McDonald's.
For someone lashing out at "illiterate college students playing at economics", you're not exactly showing off your deep insight.
http://en.wikipedia.org/wiki/Big_Mac_Index
Saudi Arabia is an ally hence they trade in dollars; there was quite a stir the last time there was a rumor related to them dumping the dollar[2]. I don't think them switching to another currency is quite that easy.
[1] http://en.wikipedia.org/wiki/Petrodollar_warfare#Political_e...
[2] http://www.dailymail.co.uk/money/article-1218458/Dollar-rema...
Well, first of all, gold can be confiscated from you. It happened in the 30s, it can happen again.
Second, unless you are very well equipped and knowledgeable, it is not easy to buy gold - you may buy a bar, but it might be tungsten, with increasing probability as time passes (and I wouldn't be surprised if the probability is already non-negligible; most trade does not go to great length to verify real goldness).
And third - if you managed to hold on to real gold,, in 10 years, you would have gained a good percentage of US dollars when you convert it -- and the tax man will be waiting to take 35% (federal) + 13% (state, if you live in NYC) off your profit. (Capital gain taxes are very low at 15% - don't expect them to stay that way for commodities, perhaps not even for job-generating investments)
2) Coins from a reputable mint are pretty easy. The tungsten forgeries are only cost effective for the bigger bars
3) If you purchase coins then they can be redeemed for the currency of the day at under the radar levels. I don't see why I should pay tax when trying to preserve purchasing power of my savings.
I agree with that premise - unless hoarding gold becomes a little more popular. It is in e.g. India; It might come to the US as well, especially if Ben & friends keep devaluing the dollar.
I don't remember reading about anyone going to jail, but I do remember reading about federal agents forcibly opening bank safes and such to look for gold. If you have a nontrivial amount, home storage might be problematic.
> Coins from a reputable mint are pretty easy. The tungsten forgeries are only cost effective for the bigger bars.
For now, true, as far as I know.
> If you purchase coins then they can be redeemed for the currency of the day at under the radar levels. I don't see why I should pay tax when trying to preserve purchasing power of my savings.
Well, I was restricting the discussion to a law-abiding regime. If you are willing to break the law, I would expect that there are more lucrative ways to do that, with lesser eventual punishment if caught.
Note that I completely agree with you that this kind of tax is unfair and unethical. Unfortunately, that IS the law. And even more unfortunately, the vast majority of the population in the world does not understand that they pay income taxes of (however much, 20-60% in the western world depending on your income) - and and additional of 2%-5% of their savings every year in currency devaluation.
It's funny, but the government works like a hedge fund: 20% of profit, plus 3% of capital. Except there's no watermarks. And you can't really take your money someplace else that offers better terms (at least not when you area US tax payer, and increasingly in other countries as well)
As an aside I wonder what percentage of the population had boxes back then - compared to now. I mean no one I know has them now - almost everyone saves in currency/stocks etc.
Why so anti gold then if you are aware of the perils of saving in currency. Silverbug? :)
Thanks, I was unaware.
> I mean no one I know has them now -
Banks have essentially stepped out of the safe business (virtual storage is easier and more lucrative). Those that still offer such services keep raising the prices in an attempt to drive customers away.
My business backups were stored in such a bank safety deposit box between 2002 and 2006, at which point they stopped offering the service.
> almost everyone saves in currency/stocks etc.
"saves" is not the word I would use in this case; I'd use "attempts to store value" for currency and "gambles recklessly" for stocks.
But even if we accept "save" - the reason is, of course, the government - think about how hard it has become to keep your gold: try taking delivery of bullion, then try selling it back; you'd probably take 10-20% spread hit if you succeed at all; now try with 10 bars, and you'll likely not succeed at all.
> Why so anti gold then if you are aware of the perils of saving in currency. Silverbug? :)
Oh, you've got me completely wrong. I'm not anti gold. I'm completely anti fiat money and QE. Its just that I've spent a considerable amount of time trying to figure out how to maintain the value of any assets I have, and am unconvinced that I can use gold for that purpose; not because it's not a good store of value (it is, as are silver, and potentially even platinum and rhodium), but because the logistics are such that I'm unlikely to be able to execute it.
Sure, a few coins here and there are easy to manage. But when I sell my apartment, and want that chunk of cash to maintain its purchasing power, a few coins won't cut it.
Agree on your criticism of my loose word of the term saves. I don't agree with your reasons on why people don't buy gold though - most would have no idea what spread is and how it works. From my experience of trying to convince my friends and family to save something in gold - they just find the idea totally foreign of buying a metal that doesn't earn income...even if said income is not keeping up with inflation.
Interesting perspective on the boxes. I only have one so don't know about increasing/decreasing availability - I know there is a waiting list for the ones at my bank in the city. I find the price very reasonable for the value I obtain from it (150/year).
So what are your thoughts on storing that apartment cash then? I am a goldbug but am interested in other thoughts on preservation of purchasing power.
The deeper the response is in the thread, the longer you have to wait from posting until you can reply.
> From my experience of trying to convince my friends and family to save something in gold - they just find the idea totally foreign of buying a metal that doesn't earn income
My grandma kept a stash of gold and jewelry, and she knew why - she had to run away on the eve of WWII, with a small suitcase. My mom knew that she needs to have such a stash, but gave up building it because it was becoming increasingly hard to do. I know I need one, but it's becoming impossible to do at the volume I need.
> So what are your thoughts on storing that apartment cash then?
I'm frustrated, but I have no acceptable solution so far. I'm diversified over foreign currencies and some non-bubblish commodity futures (that are likely to clear even if there's a run; the COMEX gold futures reflect more than the available gold, and if trading stopped tomorrow, it could not settle and there would be huge defaults). But it's still all backed by fiat and lies.
I don't like that; I don't have a solution.
Interesting. I've asked my grandma how she saved given she was in the USD=42oz period but her response was we never had enough to save (postwar period really). My mum would rather believe a nobel prize winner rather than me :) As with evertthing, views on these matters depend on ones life experience.
>> impossible to do at the volume I need
Ha! a good problem to have!
>>if trading stopped tomorrow, it could not settle and there would be huge defaults
Exactly right! but if you trade in comex futures then you are still trading in paper - albeit paper gold. When the musical chairs stop then those holding the real physical metal will be ok imho. I don't want to be a christian missionary trying to convert but you may find the concept of freegold and the fofoa blog worth a read. In a nutshell, freegold is about thinking through the transition when the USD/paper gold market collapses and looking at what the giant players (central banks) are doing. If you subscribe to that theory then there are some good arguments why there would be no tax on gold in the future (a black market would arise to ship the gold to any region where it is not taxed). YMMV.
Krugman said after the Internet Crash of 2000s: "To fight this recession the Fed needs . . . soaring household spending to offset moribund business investment . . . Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."
Creating a new housing bubble was certainly GENIUS, and he got a Nobel prize in Economy in 2008 following what happened, while he was at the root of this model of thinking. Nobel Prize in Economy means nothing nowadays. My dog knows more than Krugman.
I'm not trading gold. I wrote "non bubble futures" (which includes gold - it's definitely not a bubble), but what I wanted to write was "non fictional futures" (gold and silver are fictional in the sense they cannot be settled). Many other commodities actually have a chance to settle most of the open interest should trading stop tomorrow.
Some history for you: A USD until 1971 represented a thing. It was redeemable for a specific weight of gold. After Nixon shock it become a concept. It is now only backed by the 'idea' that someone will exchange their goods or services in the future for the paper you hold - or the full faith and credit of the USG if you prefer. The value of the USD is only in the prices placed on the goods. If someone refuses to trade an item with you for your USD then what value is the dollar? If you also read up on Triffin's Dilemma, you will understand why the US must run a perpetual trade deficit - to provide lubricating dollars for world trade. So there are many many many more dollars in circulation than can lay claim to physical goods in this world. Eventually all paper money returns to its intrinsic value (Voltaire!). When it happens to the USD, it's going to be a doozy!
The USD has lost on 1) after removing all equivalency to Gold, and we saw that 2) its value has been dropping versus a number of commodities and precious metals over the past 50 years.
I agree the 3) may be challenging if you carry only Gold, but the day the USD will crash, Gold will become a new currency of exchange again. Paper remains paper, and Gold remains gold. It has a value that paper will never have.
You can be sure they're still happy, especially producers like Saudi Arabia and Kuwait (and Canada, of course)
Can they replace it? Sure, but there may be collateral effects, the harshest ones including 'Democracy delivery missiles' to said country.
"which Ben Bernanke is devalueing as fast as he can"
No problem! Barrel of oil yesterday was $X today it's $X+Y
- John Adams in a letter to Thomas Jefferson
At his federal trial, witnesses testified to the Liberty Dollar’s criminal similitude to standard American coins. They said his coins included images of Lady Liberty and cheekily reversed “In God We Trust” to “Trust in God.” Then again, his coins were made of real gold and silver, as American coins are not, and came in different sizes and unusual denominations of $10 and $20.
They may be similar to US coin, which is, if nothing else, dumb. But if they're made from gold and silver, wouldn't they be more valuable than the coins they were confused with? Is that not solid proof against mens rea? Gold is $55/g, silver is $32/g. A US dollar coin is 8.1g, a quarter 5.6g.
His real crime is, of course, competing with the government. You will lose, unless you take up arms. The government has no problems using excessive force to stop you.
[EDIT: I welcome downvotes on comments that are not constructive. If you think this is totally off the wall, please give a good explanation why.]
Yes, it would have political implications because politicians can't devalue the loans they've made abroad by devaluing the currency, effectively (but opaquely) taxing savings. I'm not sure what social implications it would have?
Why would anyone take a gold coin worth $10 say, and try to pass it off as a normal dollar? They are losing money.
[1]: http://en.wikipedia.org/wiki/List_of_community_currencies_in...
The point is that they all convert into dollars and I will certainly never use BerkShares for as long as I live. I only take US dollars.
Also, the banking structure around these things is really inconvenient. I worked a short stint as a teller at Bank of America and never once have I seen anything but greenbacks. This was in Santa Cruz county as well, where people would definitely be willing to try such crazy ideas.
In many places around the world, several currencies exist and are used simultaneously.
It's only a problem for the weak currency, which according to Greshams Law, everyone tries to get rid of, while hoarding the stronger currency.
The reason the government doesn't want competition in the currency business is because they like to weaken their currency. The government currency would be discarded quickly, while the competing currency would be hoarded.
You need to back this argument up with a good reference.
[EDIT: multiple currencies in the same country. Argentina is a beautiful country but it has had some severe issues over the years. You need to have one currency before you can do things like local currencies. URVs in Brazil were a genius way of pulling this off.]
https://en.wikipedia.org/wiki/List_of_circulating_currencies...
But with every single listing of a country that has more than one currency, there is a political reason why (see Ecuador) and it has real implications for the society to use a currency that you don't control.
I assume one of the implications you refer to is that the people have a choice of currencies and hence protection against government sponsored inflation.
You seem (correct me if I'm wrong) to be arguing for the former, "gold bugs" will generally argue the latter.
Look at why Europe is so messed up right now - they adopted a single currency without a real government to match. Much as I might not like her, Margaret Thatcher was right when she said that "single currency is a federal Europe through the back door". It's either that or big trouble down the line.
I see you're from Denmark, so think of Legoland (in Billund, I assume you've been - it's silly!). Yes, they take all kinds of currency there, but it's very isolated and localized. At a broader national level, there is just the (sic) kroner. I've never once paid with US dollars at a pølsevogn in Copenhagen. :)
The full argument is quite long, but at heart, yes - I believe that the gold standard was a bad idea and remains a bad idea. Going back to it will not solve any of our current economic problems, it's a waste of time.
Thanks for sticking with the conversation btw! It was fun. :)
Also, I'm not arguing for (or against, for that matter) the gold standard, just that if people feel they're better off transacting in a different currency than the single, nationally sanctioned one, they should be able to do so without incurring a forceful response by the government. For the record, I don't think that freedom extends to producing coins that are easily mistaken for those belonging to a different currency.
> Thanks for sticking with the conversation btw! It was fun. :)
Likewise, although I would still appreciate a response to http://news.ycombinator.com/item?id=4697030
We adopted a single currency, which is the new government-enforced legal tender. You're right that it caused plenty of problems, but it's hardly relevant as an example of destabilization caused by many currencies.
In the days before the Euro, it was quite common for places to accept multiple currencies in the one location, especially in border areas or smaller countries with lower floats.
It's not such a big deal. Just about every international traveller works in two currencies by converting the 'away' currency into their 'home' currency in their head with each purchase. I have actually been offered the opportunity to pay with my home currency on visa POS machines while travelling.
There are undoubtedly efficiencies to having a central currency, but when the central government is systematically destroying the unit of value, inefficiency of multiple currencies is a very small price to pay for being able to escape that. That's why Zimbabwe has the highest number of currencies on the list that was linked above [Edit: position is relative, the list that ianb linked]
The truth is that the US dollar is the strong currency and his one the weak; and he basically made money by having his coins confused for US dollars.
By the way, there are alternative money (such as bitcoin) that are actually honest about being an alternative. The government has not gone after bitcoin yet.
If he had just minted gold and silver coins with a stamped weight on them, then they would stand a chance of being actively traded. But then maybe he knew they would be hoarded. To be honest, I don't know the ambitions of an aging hippie with links to the 'bunker' movement.
From what I have read on this case (and I haven't read much) the coins do actually contain precious metals as a backstop to their value. Not so the US currency - although I hear the nickel now has a higher metal content than the face value.
Also, a currency is not something you hoard, it's something you "get rid of" by giving it to someone else in return for goods and services. In your example, the "weak" currency would become the standard medium of exchange, while the "strong" currency would for all practical purposes disappear from circulation.
Currency is definitely something you hoard. It's called savings, and plenty of people still do it.
"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 other words (from the same article): "Bad money drives out good if their exchange rate is set by law."
Even where there is complete freedom of choice like in commodities markets, one currency is usually chosen and then used by everyone. Otherwise things would simply get too complicated, too costly and too risky.
The argument that governments force a single legal currency onto everyone so they can more easily expropriate us through devaluation doesn't hold water at all. After all, everyone is free to use whatever they like as a store of value and trade it.
>This is one of the few times I'd ever say that government crackdown is a good thing. One country having multiple currencies at the same time could become a big logistical headache.
You think governments should crackdown on and seek to imprison people because they engage in activities that cause logistical problems for the government? And you think this is one of the few times that a government should intervene? Seriously?
> It would definitely have political and social implications. This sentence is empty of information. Every action has an implication. I would have upvoted you if you'd described what kind of implications rather than implying that having "implications" is something that governments should intervene in.
Yes, 100%.
> Every action has an implication. I would have upvoted you if you'd described what kind of implications rather than implying that having "implications" is something that governments should intervene in.
Fair point, I upvoted you for it.
Such absolute certainty is nice to have.
So if I organize a nationwide fun-run where people in every city are encouraged to run a mile for charity you believe the government should seek to imprison me for causing a logistical problem?
Why should you lock people up for being "a big deal politically"? Rosa Parks and the movement she was a part of was a big deal politically who had huge social and political consequences.
It's all well that you know economic theory, but you might find it useful to share the bits of it that's relevant here.
I agree with your statement - logistical headaches? Wow, just wow.
Anyone who has even a passing familiarity with John Law and the Mississippi bubble would never say such things like centrally controlled currencies are important for political and social reasons.
Sort of, but not really. The issue here is mixing the ideas of "a dollar" with "a piece of gold worth a dollar" or "a piece of silver worth a dollar". They are not the same thing.
There's an abstract notion of 'Value: $1.00' that both a piece of paper and a piece of gold links up to.
Hopefully that is a clear explanation.
> that makes it unclear who the victim of this crime really is.
Ah, okay - sorry, I missed this. There isn't really "a victim" here per se; it'd be hard to point at a person and say that they were hurt by what this guy was doing. Rather, it's a crime because it has the potential to destabilize the rules of how our financial system works. And, by implication, how our political system works. Money and politics go together, everyone accepts this.
Government rhetoric (I guess) requires them to label it terrorism, but that's really stupid. They could have used it as an opportunity to explain how our economic system actually works. Of course, if you explain how the system works, people may ask deeper questions, etc.
OK:
You make an 8 gram silver coin and call it a "One Liberty Dollar". It will cost you $256 in silver alone.
You then trick a bank into accepting it, so they deposit it into your account with a value of $1.
The coin isn't a real US dollar, so you're guilty of counterfeiting currency. In reality, however, you've lost significantly more than you've gained, and the bank should be able to recover most of the lost dollar by selling the silver.
It's clearly criminal to pass off something that isn't a real coin as a real coin, and the you should be punished for that. But it seems logical to me that charges of conspiracy and terrorism should be weighed against the fact that any conspiracy certainly wasn't to your financial benefit - as counterfeiting conspiracies very much tend to be.
Other comments have suggested that the coins were indeed worth less than they were accepted for, so that makes it more clear cut. I still think the quoted paragraph is poorly phrased - it would have made sense to include that very simple fact.
I agree that the government's choice of language was extremely poor and wrong-headed. They certainly didn't do anyone any favors by just labeling the guy a terrorist and saying that's it.
I don't think it matters whether or not you lost money on going through with the act. If you want to throw your hard-earned money away to make a point, I suppose that's a privilege.
By the way, there are gold and silver american coins that are still legal tender. There are many different legal tender gold and silver us coins that have a woman on them and the word liberty and they are often referred to as liberty dollars.
One side of his coin is especially similar to a silver coin called the peace dollar (but also often referred to as the liberty dollar).
Putting in an amount of gold equal to its supposed monetary value would have been a losing business proposition. He'd have been losing money every single time he traded a Liberty dollar for US dollars. If the Liberty dollar is worth exactly the amount of gold that's in it, then the only way he could even break even is if the cost of minting coins were zero. He'd essentially be turning himself into an easy way for currency speculators to avoid brokerage fees, and losing his shirt in the process. (This is assuming he weren't using gold that he had previously stockpiled when it was at a lower price.)
Putting only a little precious metal in the coins is a much better business decision. Having some precious metal in there would be reassuring to members of his target demographic. Having less than the coin's stated value in there means that he had some shot at maintaining control over the market and having a viable business plan.
That, and I suspect that keeping the actual value of gold at arm's length would be an absolute necessity. Just look at what the price of gold was doing over the time that Liberty dollars were being issued. A currency that's constantly strengthening against all others at a double-digit rate is not a currency on which one could base a stable economy. cf.) Dutch disease.
What happens when you get on the bad side of the gov, like this guy? Declare someone a Domestic Terrorist and you can lock them away for good. Sure, it almost certainly won't be used in this case but that's not the point; the option shouldn't event exist
anyway, good on the guy. Rosa Parks hyperbole aside, what's the problem with people trading in gold coins if they like? more power to them
Those who subscribe to the Austrian school of economics, for example, might argue that allowing banks to print their own currency which represents their gold holdings, is _more efficient_ and less liable to failure than the centralised fiat system we have right now.
When the laws can be used to put anyone in jail for just "annoying" the "civilized and obviously good for you" status quo, you are in big trouble.
Good enough for me.
It wouldn't be the implication that the alternative currency has a cash value in US dollars, because Ithaca Hours are pegged at $10 per Hour.
I wonder if it's that the Liberty Dollars were issued by a for-profit organization rather than being community organized like other alternative currencies I'm aware of. If I remember right, the "dollar monopoly" was originally enacted in response to the fracas around Civil War tokens. During the war companies had been issuing their own scrip that started to be used as currency in the surrounding communities. There were a number of minor financial catastrophes that happened whenever the issuing company would stop honoring its scrip, thus causing the currency to collapse. And the scrip issuer essentially made off with however much US currency they had received in exchange for the script. So the government decided to ban that as a form of (at the time clearly much-needed) consumer protection.
Anyone who's more knowledgeable about the applicable law and its history who can comment?