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Source link: http://archive.mises.org/16399/the-crime-of-private-money/

The “Crime” of Private Money

April 7, 2011 by

NotHaus made it easy for the government to prosecute him, but the message is still clear: no competition with the dollar. FULL ARTICLE by Robert P. Murphy

{ 42 comments }

Jon Matonis April 7, 2011 at 8:46 am

Excellent article, Robert. Even more reason to consider a decentralized bitcoin. Make the State monetary infrastructure irrelevant.
http://bitcoin.org
http://mises.org/Community/forums/t/9853.aspx

Charlie April 7, 2011 at 10:07 am

Bitcoin is indeed a cool project. Skimming over the forum thread on it, much ado seems to be made about the fact that bitcoins are not “backed” by anything physical. Now, the regression theory of money that Mises puts forth is logically indisputable for the case of natural monies like gold and silver. You have exchange value progressively piled on top of use value and natural scarcity, but the root properties of use value and scarcity are never entirely eliminated — that is, until they are wiped out by coercive fiat. But as long as the property of scarcity is not relaxed catastrophically, the currency will persist. Thusly, use value has been entirely severed from the currency while exchange value is retained. It will continue to persist, too, as long as the scarcity property does (not in any way excusing the structural problems and redistribution caused by even gradual inflation — these are bad things). I don’t think that this theory entirely rules out artificial monies coming into existence without having original use-value, however, it only makes them unlikely. Once exchange value is attained (leaving out the question of how this could theoretically happen, for now), it can persist as long as the property of scarcity is preserved. These things being said, a cryptographic money like Bitcoin is very interesting due to its decentralized and pseudononymous nature, driving appeal due to privacy and low transaction costs.

Scarcity April 7, 2011 at 1:17 pm

Scarcity doesn’t create value by itself, it only concentrates it. But a concentration of nothing is still nothing. The use value of the dollar (and gold, the historical fiat money) is in paying taxes with it. That creates an artificial value. Bitcoin has no use value.

Scarcity April 7, 2011 at 1:31 pm

If Bitcoin does have a use value, what is wrong with increasing the supply of Bitcoins? It’s wrong to increase the amount of useful goods? Or is it because Bitcoins are not useful goods? Let’s play this game with bushels of wheat instead. So people use bushels of wheat as a medium of exchange. Why is it wrong to inflate the supply of wheat? Does increasing the supply of wheat cause malinvestment in the corn industry?

Anthony April 7, 2011 at 7:27 pm

Wheat would not make very good money at all. The supply of wheat is so variable that it would be almost useless as a medium of exchange in the long term (say, anything grater than one growing season). If wheat were money that would indeed lead to huge distortions in all sorts of markets, since people would be unable to engage in long term economic calculation to avoid malinvestments.

That is why the best choice for money is something that is difficult/impossible to reproduce and is not likely to undergo rapid increases (or decreases) in supply.

Inquisitor April 7, 2011 at 7:59 pm

Gold is valued independently of whether one pays taxes with it.

Freedom Fighter April 9, 2011 at 6:35 pm

Pope shit is very very scarce, only one human being among 7 billion.
By itself, pope shit is still shit. It stinks, it’s disgusting, it’s gross and it carries all sorts of diseases.

Yet, I’m sure that if somebody were to sell a pound of pope shit on ebay and it was certified to be genuine pope shit by a Vatican appraiser, that it could sell for $40,000 LOL !!!
And if the face of the virgin Mary appears in the crevasses of the turd, like it did for someone’s grilled cheese, it could be worth as high as $80,000 !!!!

It would be canonized as genuine holy shit.

When millions of fans are ready to buy a turd at the price of gold, this goes on to show that value is SUBJECTIVE.

Robert April 10, 2011 at 12:35 pm

A nasty but effective comment on value being subjective!

Frank Craft April 7, 2011 at 9:18 am

We will see who the criminals are when this entire country is robbed of all it’s wealth via inflation and government insolvency. Two inevitable near future consequences of nearly 100 years of progressive government hubris that will end the debates soon enough.

Freedom Fighter April 10, 2011 at 3:55 pm

North Korea went through much worse than that in the 1990′s when millions of it’s citizens died of starvation. Yet it still stands today. Chances are that the USA as a government entity will not be destroyed by the coming hard times, only the little people will.

Ned Netterville April 7, 2011 at 9:41 am

Wonderful article, Robert Murphy, but you failed to state some unavoidable conclusions that are obvious from the facts in this case, to wit:

1. The government of the United States is a criminal organization whose agents are vicious thugs.

2. A principal object of the prosecution was to steal NotHaus’ $7 million in silver (which is probably worth closer to $8 or $9 million at today’s higher price of silver due to the falling value of the dollar. The object of every criminal gang is to plunder the property of others by force or fraud. Because of the recession, the money that can be stolen from taxpayers is insufficient to sustain the thugs in the manner to which they have become accustomed, so they are resorting to methods that can loot all of a citizen’s wealth rather than just some of his or her income.

3. Americans’ servile acquiescence to theft by taxation has encouraged the thugs to drop any pretense of legitimacy.

4. Such desperate and palpably vicious measures to protect the government’s fiat currency from even rather frivolous competition implies that dollar devaluation may be imminent.

El Tonno April 7, 2011 at 12:37 pm

You missed the one about the Jury being composed of people that must be dumb as socks.

I suppose that silver will come handy when hard money has to be shifted to “our terrorists” bombing and maiming in the borderlands of Iran, Lybia, Syria etc.

Ned Netterville April 7, 2011 at 5:14 pm

Thank you. It was going to be first on the list but I simply forgot. And socks are too mild a comparison for that jury. My Smartwool socks are smarter by a mile then the dopes on the jury that convicted NotHuas.

From what I understand, he was selling his coins at a sucker’s price relative to the price of silver bullion and also relative to the the price of other, non-monetary silver coins and medallions. It is also possible if not likely that NotHaus’s Liberty Dollars business engaged in disingenuous if not dishonest sales practices, but counterfeiting and terrorism are quite different than what plenty of low-life businesses do. Furthermore, since the sucker who overpaid for Nothaus coins gave U.S. dollars for silver coins, and since the dollar has plummeted in terms of silver (silver’s price has about quadrupled since Von Nothaus started selling his coins; it has risen–the dollar has fallen–from below $9 in June of ’06 to about $40 today), a nifty profit can be had by turning those NotHaus dollars back into the counterfeit money the US government distributes. So, who are the suckers?

Shay April 7, 2011 at 9:56 am

This power was delegated to Congress in order to establish a uniform standard of value.

They’ve done great at that.

Along with the power to coin money, Congress has the concurrent power to restrain the circulation of money not issued under its own authority, in order to protect and preserve the constitutional currency for the benefit of the nation.

This guy was attempting to provide a currency that truely had uniform value, so they got rid of him. Another victory for the benefit and protection of the nation!

DW April 7, 2011 at 11:55 am

It’s cases like these that make me think about getting a passport, leaving the country and renouncing my citizenship. Of course, as I mention this there are probably federal agents reading our postings for signs of “domestic terrorism”.

Wanda Ruhr April 7, 2011 at 7:47 pm

There’s nowhere to go, anyway.

Hard Rain April 8, 2011 at 6:15 am

DW, sorry to say, but they now claim the right to tax you for 20 years, even if you renounce. Also, the process to renounce citizenship has become less expedient and more expensive. Oh, and all your current taxes have to be in order too.

In other words, the USA has effectively become a Hotel California nation: You can check out any time you like, but you can never leave.

GSL April 7, 2011 at 4:27 pm

One point you didn’t note: the absurd notion that someone with $7 million worth of metals could’ve possibly created enough money to undermine the U.S. monetary system.

I haven’t heard of Bitcoin before. What do people think of digital gold currencies like e-Cache or Pecunix? They seem promising to me but I know little about the practicality of using them.

El Tonno April 7, 2011 at 5:09 pm

They have a problem: If people don’t trust the paper dollar, why should they trust a thin-air money that needs a national computer infrastructure to actually be usable, even if turns out that it cannot be counterfeited.

After all, the dollar was once convertible to gold, being just a stand-in for the actual metal.

Scarcity April 7, 2011 at 6:21 pm

Obviously it can be counterfeited by the same process that created the initial Bitcoins. Some Bitcoin central banker printed bits and gave them to himself. No reason why he can’t do it again.

Mashuri April 7, 2011 at 6:31 pm

You obviously don’t know how Bitcoin works. I’d suggest reading up on it more before commenting.

Scarcity April 7, 2011 at 6:34 pm

You really believe the creator of Bitcoin didn’t leave a backdoor of some sort to print as many bits as he wants?

Shay April 7, 2011 at 11:29 pm

You assume the limitation is via trust in the system, rather than via cold, hard math. Again, read up on Bitcoin before making further assumptions about it.

Scarcity April 7, 2011 at 6:41 pm

Does that mean Wal Mart gift cards are illegal?

GSL April 7, 2011 at 6:33 pm

Fair point. Though my understanding is that Pecunix is backed 100% by gold. You just can’t transact it easily outside the system. As far as the “national computer infrastructure” thing, that doesn’t seem to have held Paypal back.

Scarcity April 7, 2011 at 6:38 pm

Paypal is backed by dollars which are backed by the government (guns). Bitcoins are backed by what again?

GSL April 7, 2011 at 8:02 pm

That’s sort of my point. The only way of funding a Pecunix account is by buying gold through an exchange provider, so it seems to get around the “fictional money” problem. I’m the guy who hadn’t heard of Bitcoin until just now, not the guy defending it.

Iain April 7, 2011 at 5:46 pm

Mr. Murphy you should look at coins from various times and places. They all have a very similar basic design. From Rome to India, same basic design.

Scarcity April 7, 2011 at 6:47 pm

I don’t see the long term viability of “digital currencies” that aren’t backed by bandwidth, processing power, storage capacity, etc.

Freedom Fighter April 9, 2011 at 6:49 pm

They could be backed by the resources pool: goods and services, held by members of a bartering association.

Bennet Cecil April 7, 2011 at 9:58 pm

States could charter bullion banks. Savers could deposit or withdraw their gold and silver along with US currency. The bullion bank could buy and sell silver and gold collecting fees as well as charge for storage and checking services. Bullion banks would not make loans and would have 100% reserves. They would be audited and have private insurance. FDIC and the Fed would not be involved at all. 

Americans could defeat the Fed and the statists by moving their money out of the fractional reserve banks into safe bullion banks. This is perfectly legal and no one can be prosecuted for counterfeiting. As the Fed prints more dollars, Americans will convert dollars into silver and gold. They will learn that the dollar is a piece of paper and not money.

Scarcity April 7, 2011 at 10:10 pm

Good luck paying your taxes in gold and silver. That’s the real reason for taxes: to force you to acquire otherwise worthless paper.

Anti-IP Libertarian April 7, 2011 at 10:17 pm

There will be no safe alternate currency. The government will take of that.

So do not fall to that illusion.

Orlando April 7, 2011 at 11:58 pm

If you fly on any COMMERCIAL AIRLINE flight and try to buy any item from the airline menu, you CANNOT use dollars, the legal tender of the USA. This is the premise of the prosecution. You must pay with a credit card, in fact we are post fiat money, a fiat substitution of fiat money must be used without exception. The lawyer for Mr von NotHaus was dumber than the jury by not putting this argument before the jury. If a high powered libertarian lawyer cannot be bought to make a decent argument for the defense, then the premise of Austrian economics is going to be extinguished from the world we live in. Depressing, really, for this is a staggering result, if it’s not reversed.

Scott April 8, 2011 at 9:29 am

A serious question for Mr Murphy and others. Other currencies have been operating for years in the US. For instance, an area of Mass uses the “Berkshare” (see link). What is different between the Berkshare and an attempt at an alternative currency like NotHaus
http://www.berkshares.org/

BioTube April 10, 2011 at 12:06 pm

Local currencies are tied to the dollar.

billwald April 8, 2011 at 11:47 am

SAY the private coinage had been in the form of small rectangular plates that looked like “Monopoly” money. They would be legal. The issuer could get a license from Hasbro.

Freedom Fighter April 9, 2011 at 6:46 pm

The government hates gold, hates silver and hates precious metals and hard currency.

The best way to provide an alternative currency, the most innovative currency would be to do without the us dollar, to do without a currency in the first place and just barter and develop a complex bartering points system redeemable in objects held by one another.

That way, when it’s time to pay your taxes, you could send 32,000 chairs to the government or 900 sofas or 90 stoves, LOL !!!!

Bartering is absolutely not illegal because there is no monetary instrument in between. It’s a service for a service or a good for a good etc. The government cannot crackdown on this because there is no currency. You can ask someone to provide the service of keeping tab and accounting for the points etc.

So many people could join a resources pool and exchange points for goods and services.

An iphone application could keep tabs among members. The government would be incapable of cracking down on that.

Patrick Barron April 10, 2011 at 9:04 am

This is indeed a chilling article. The government is throwing out the rule of law in order to force us to use an ever depreciating dollar. The Fed has been “lending” money illegally for years–to foreign banks, to non-Fed members, etc. And now it shows that it is willing to brand a peaceful American citizen as a terrorist for trying to offer Americans an alternative money. Robert Murphy has warned us. I believe the only powers that can stop the federal government from destroying the country are the states.

Anthony April 10, 2011 at 9:30 am

And then the problem of stopping the states from destroying themselves…

Freedom Fighter April 10, 2011 at 4:07 pm

Actually, it’s the states that will destroy the country’s unity. Igor Panarin stated this clearly. The prosperous states will want to secede from the welfare states. California is a big burden for Texas.

Now, states will not want to secede from the union politically nor militarily. But they will withhold monetary transfers to the fed, they will make broader use of discretionary laws and taxation powers, they will start non-cooperation on many legal matters and will take advantage of the federal government’s position of weakness to impose their state will etc.

This will create a disunity in policy, fiscal matters, legal matters that may or may not lead to more severe secession movements.

At any point, the federal government will be like a sheet ripped apart by being pulled from both sides, by prosperous states that want to keep their wealth and poor states that want to take the other state’s wealth. The federal government will lose prestige and respect and some states will start to solve litigations directly between themselves. You know you’ve lost legitimacy and standing when people start solving their own problems among themselves instead of reporting to you in case of trouble. That’s exactly what will happen in the USA.
Strong states will start to solve their problems themselves, circumventing FEMA and other federal redtape and will start to make interstate arrangements without federal consultation.

I don’t think the USA will break appart like Igor Panarin says, but I think that the federal government will lose a lot of power and that the USA will become more of a confederation than a federation.

In the end, the USA will ressemble the European Union where several interests will compete against each other under one banner instead of being into true unity.

States might actually start to mint their own state currency, state bonds, state vouchers, state coupons etc. And incorporate those as payments for employee benefits. At this point, the federal government will be powerless to stop this trend.

Dan April 14, 2011 at 3:09 pm

A bas l’etat!

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