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Source link: http://archive.mises.org/5619/there-will-be-no-private-coinage/

There will be no private coinage

September 15, 2006 by

N.J. Hoffer sent in this incredibly fascinating story of a Fed crackdown on a group called NORFED that markets the Liberty Dollar. Now, I’ve never been much for these attempts to create an alternative money. They seem to falter on the problem highlighted by Mises, namely, that the money used in a society emerges from exchange of commodities, and remain money even if the government has robbed it of its commodity backing. So absent sustained hyperinflation, there will be no getting rid of the dollar. Instead it must be reformed and denationalized.

At least that’s what I get from Rothbard’s piece on this issue.

Still, that doesn’t mean it should be illegal to try. A free society should permit every manner of private coinage and any kind of monetary competition. If it really could happen that a private money could replace government money, that would be great and every libertarian should celebrate the attempt (provided the producers are not using force and fraud).

Thus does this story turn out to be very revealing.

“The United States Mint is the only entity that can produce coins,” said the spokesman for the Mint.

In fact, the feds are prosecuting some guy who tried to buy a beer with the Norfed coin!

Here is the press release.

{ 26 comments }

Mark Brabson September 15, 2006 at 2:56 pm

At least I only have $20.00 in the Liberty Dollar warehouse receipts in my possession, so I won’t be out too much. I have always taken great care to only spend the things at Liberty merchants, never at regular merchants, just for fear of what happened in the above mentioned article.

From the statute:

-STATUTE-

Whoever, except as authorized by law, makes or utters or passes, or attempts to utter or pass, any coins of gold or silver or other metal, or alloys of metals, intended for use as current money, whether in the resemblance of coins of the United States or of foreign countries, or of original design, shall be fined under this title (!1) or imprisoned not more than five years, or both.

It would appear to me, that the statement “There will be no private coinage” would be quite correct.

Manuel Lora September 15, 2006 at 3:01 pm

Why am I not surprised. Every little experiment in search for an alternative way, even if it has some of the problems mentioned above, are stamped out by the overlords.

George Gaskell September 15, 2006 at 3:13 pm

The Mint’s press release asserts that:

under the Constitution (Article I, section 8, clause 5), Congress has the exclusive power to coin money of the United States and to regulate its value.

This is what the actual text says:

The Congress shall have Power … To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

I do not see the word “exclusive” anywhere in this clause.

The drafters of the Constitution clearly knew how to use the word “exclusive,” and could have inserted it if they felt the need to do so. Only a few lines later, Congress was granted the power “To exercise exclusive Legislation” within the District of Columbia.

But the power to coin money? Not exclusive. Therefore, there is no power to ban private coinage.

Not that I expect the US government to follow its own chartering document, of course.

Mark Brabson September 15, 2006 at 3:24 pm

George Gaskell:

You do bring up an interesting point, the word exclusive is not used. The STATES are prohibited, further down, from coining money, but it doesn’t make any further prohibitive statement.

Unfortunately, I don’t think, if this was taken to Federal appellate court, that you would be able to find a sympathetic court to invalidate the statute.

Phil R September 15, 2006 at 3:33 pm

I have mixed feelings about this. I applauded their effort, but I thought that in some places they appeared to be encouraging people to spend them by implying that they were official government currency.

Dan September 15, 2006 at 3:43 pm

What an excellent opportunity for some civil disobedience. Let’s go get some Liberty Dollars now. Even if the mint folds, you still will have a chunk of precious metal.

Mark Brabson September 15, 2006 at 3:43 pm

Phil R.:

Now that would be a legitimate complaint, if folks were indeed trying to pass them off as geniune U.S. currency, rather than as Liberty dollars. That would be a legitimate case of fraud. And that is possibly what might have been happening with some people. But if they were being passed as Liberty dollars, I don’t see a problem, since the merchant would be free to accept or refuse to accept them.

And option, I should, oh so cynically add, that the merchant doesn’t have with “geniune” U.S. money. If he/she refuses to accept that inflated garbage, he/she gets sent straight to jail.

I for one, if the legal tender laws were repealed, would speedily turn in all my “official” dollars and deal only in geniune commodity money.

Person September 15, 2006 at 3:55 pm

Good point, Mark. That’s like “Hey!!! You gave me fake fake money, I wanted REAL fake money!” :-P

But on a more serious note, could NORFED avoid such problem in the future by doing this thing solely through debit-type cards? Then when you come to redeem them they give you non-coined bullion. Then you’re not “coining money”.

M E Hoffer September 15, 2006 at 4:09 pm

What’s even more interesting, at least to me, is that earlier in NORFED’s history, their 1 Oz. Ag “coin” was denominated as 10 “dollars”, as opposed to the current 20 “dollars”.

On a different note, the Legal Tender laws have to be the greatest subsidy of all time.

Mark Brabson September 15, 2006 at 4:10 pm

That is a possible option. OR, you could circulate the warehouse receipts, in lieu of the actual money.

Mark Brabson September 15, 2006 at 4:21 pm

M E Hoffer:

Some months ago, Liberty Dollars went to a 20 Dollar base.

The mechanics of which are irrelevant to this discussion. Visit their site to learn more.

http://www.libertydollar.org

M E Hoffer September 15, 2006 at 5:03 pm

MB,

I hear ya. I know my post was scant, and, thereby, could have been interpreted (too)many different ways.

I was trying to illuminate at least two different things: 1. NORFED has been around for awhile, and 2. the decline of the purchasing power of the U$D v. (at least) Ag.

Tim Swanson September 15, 2006 at 6:15 pm

Ironic quote of the day:

“We don’t want consumers to be fooled,” U.S. Mint spokeswoman Becky Bailey says, noting U.S. Attorneys offices across the USA have noticed a marked increase in inquiries about the coins.

The usage of “consumers” presupposes a market for specific goods. And as shown above, the Federal Mint – through legislation – has outlawed competition, so in reality, by default: no legal alternative exists.

Thus, when minting is outlawed, only outlaws will mint.

I wonder when a Deparment of Shoes will be erected? That way consumers can be protected from the confusing marketplace filled with pumps, stilettos, straps, velcro, rubber and shoe string.

George Gaskell September 15, 2006 at 6:53 pm

We don’t want consumers to be fooled …

They have a “customer service” department at the IRS, too.

Peter September 15, 2006 at 8:19 pm

FWIW, the word “coining” doesn’t mean “minting”; it means putting an official stamp on the thing – i.e., declaring it “legal tender”. NORFED doesn’t do that.

http://www.moneynetnews.com/articles/32/1/Liberty-Dollar-says-no-to-US-Mint-allegations/Liberty-Dollar-says-no-to-US-Mint-allegations.html

Peter September 15, 2006 at 8:27 pm

Oh, and on this:

Now, I’ve never been much for these attempts to create an alternative money. They seem to falter on the problem highlighted by Mises, namely, that the money used in a society emerges from exchange of commodities, and remain money even if the government has robbed it of its commodity backing.

That seems entirely wrong, to me. Money arises from exchange of commodities, fine; but then money is not a government construct – it’s not something “backed by” the money commodity, it is the money commodity. Then what does it mean for government to “rob it of its backing”? That means government saying “OK, gold no longer going to be money; now you’ll use these pieces of government-issued paper” – and that falls afoul of Mises! Someone issuing gold coins is then still issuing real money. The way the government forces the paper to be used is by stealing all the gold and making it crime to use it — and somewhat cleverly tricking people so that most don’t even realize what has been done. But that’s beside the point. What these people are doing is not “attempting to create an alternative money” – that’s what the government did – what they’re doing is giving people real money back; and I can’t see that Mises’s theorem has anything negative to say about it.

banker September 15, 2006 at 10:24 pm

I am curious what would happen to all of those contracts based on dollars. What would happen to debt, stocks, and all sorts of financial contracts if there were a massive change in currency? I suppose this could be easily dealt with and already has sort of been dealth with when Europe changed to the Euro.

billwald September 16, 2006 at 12:45 pm

The violation is in using “American” govt symbols on their money. In this case, the govt is correct

Artisan September 16, 2006 at 2:03 pm

billwald, Hopefully liberty is not just an American symbol… I think the mistake is to write USA on it though. If it’s “real” money why bother about the frb government under which it’s been created? Call it “Full Reserve Banking Medal” or something… but not USA!

Peter September 16, 2006 at 8:40 pm

Hopefully liberty is not just an American symbol…

Of course not: it’s a French symbol, if anything!

Paul Edwards September 17, 2006 at 8:02 pm

Hi Peter,

“That seems entirely wrong, to me. Money arises from exchange of commodities, fine; but then money is not a government construct – it’s not something “backed by” the money commodity, it is the money commodity.”

Yes, commodity money such as gold arises initially from a barter economy. The most marketable of all commodities is chosen by the market participants as the medium of indirect exchange, or money. This is correct, and the state cannot obstruct this process because it must be the market that identifies this commodity.

“Then what does it mean for government to “rob it of its backing”? That means government saying “OK, gold no longer going to be money; now you’ll use these pieces of government-issued paper” – and that falls afoul of Mises!”

Not exactly. Money substitutes are also natural market phenomenon. As people become accustomed to using paper warehouse receipts for commodity money, or titles to commodity money, the opportunity for state sponsored, central bank orchestrated bank credit expansion becomes more possible. The combination of this and state legal-tender laws, gold confiscation, and deposit insurance backed by the central bank and its ability to inflate on a whim removes these tickets from any commodity connection at all and makes the crime complete. Mises has clearly indicated that a commodity that looses all its use value that it had prior emerging as a money, could still function as money. Similarly, as is the case of the dollar, the state has removed all connection of it to the gold commodity, and yet it still operates as money.

“Someone issuing gold coins is then still issuing real money.”

Not these days, he’s not. Wherever you look, you can find the “price” of gold in terms of the dollar, just as you find the price of everything else in terms of the dollar. You will not similarly find prices of everything, or anything at all, in terms of gold ounces. Until this is the case, and you find yourself buying all your household items PRICED in terms of gold ounces at your local Safeway, gold will remain completely demonetized.

“The way the government forces the paper to be used is by stealing all the gold and making it crime to use it — and somewhat cleverly tricking people so that most don’t even realize what has been done.”

Correct. And it works. Say! Some things the government can do well: swindle and cheat the public! But it can’t take all the credit; it relied heavily on the crafty private banking industry to pull off that fantastic con.

“But that’s beside the point. What these people are doing is not “attempting to create an alternative money” – that’s what the government did – what they’re doing is giving people real money back; and I can’t see that Mises’s theorem has anything negative to say about it.”

I’m afraid it really is very much the point. People now want dollars for money, not some commodity used mainly for jewelry and electronic parts. People are used to the dollar; they have been using it, they do use it, and they do intend to continue to use it, rather than gold, for money; and this is a very plain and simple fact that Austrians cannot dispute, even though this truth is the result of a massive swindle. The swindle has happened, it worked, and the dollar is our money, like it or not. And this is consistent with Misesian theory.

adi September 18, 2006 at 3:06 am

Paul Edwards wrote;
“The swindle has happened, it worked, and the dollar is our money, like it or not. And this is consistent with Misesian theory”

So we must just wait that all governments collapse and then we have our precious gold commodity money back.:)

Peter September 18, 2006 at 9:24 am

Not exactly. Money substitutes are also natural market phenomenon.

I wouldn’t suggest otherwise.

The combination of this and state legal-tender laws, gold confiscation, and deposit insurance backed by the central bank and its ability to inflate on a whim removes these tickets from any commodity connection at all and makes the crime complete.

Well, this is the sticking point. If people are using money substitutes, and the government bans the use of the underlying money, the substitutes are either still substitutes (in which case the commodity is still nominally the money, even if you can’t use it) or they’re a new money (which Mises says can’t be!)

Not these days, he’s not. Wherever you look, you can find the “price” of gold in terms of the dollar, just as you find the price of everything else in terms of the dollar. You will not similarly find prices of everything, or anything at all, in terms of gold ounces. Until this is the case, and you find yourself buying all your household items PRICED in terms of gold ounces at your local Safeway, gold will remain completely demonetized.

You won’t find anything priced in US dollars in Germany, or in Euros in Australia, etc., either. You’ll find the price of US dollars in Euros, and the price of Euros in Aussie dollars, etc., just like you see the price of gold in US dollars. So US and Aussie dollars and Euros are not money? (Or what about Andorran money or something, from a country with a population of about 12?)

People now want dollars for money

Which people? I don’t.

Paul Edwards September 18, 2006 at 10:06 am

Me: “The combination of this and state legal-tender laws, gold confiscation, and deposit insurance backed by the central bank and its ability to inflate on a whim removes these tickets from any commodity connection at all and makes the crime complete.

Peter: “Well, this is the sticking point. If people are using money substitutes, and the government bans the use of the underlying money, the substitutes are either still substitutes (in which case the commodity is still nominally the money, even if you can’t use it) or they’re a new money (which Mises says can’t be!)”

Do you think present day monetary units (mu) are a substitute for a specific amount of gold? If so, why not stick with them; isn’t this what we want? If you don’t, what do you believe; that these mu’s are entirely fiat and devoid of any connection to the commodity from which they were once defined? If you, you are correct. Furthermore, this is not at all in contradiction to Mises. Perhaps you could send us a quote where Mises states that it is not possible for a state to remove the commodity basis from a money substitute if given enough time.

“You won’t find anything priced in US dollars in Germany, or in Euros in Australia, etc., either. You’ll find the price of US dollars in Euros, and the price of Euros in Aussie dollars, etc., just like you see the price of gold in US dollars. So US and Aussie dollars and Euros are not money? (Or what about Andorran money or something, from a country with a population of about 12?)”

Peter,

Surely you are grasping my point, nonetheless. I’ll admit, when I said “dollars”, I perhaps should have been more precise and termed it “non-commodity, fiat paper money”. Sure, if your currency is not dollars, dollars are not used as money. And as certain as this is the case, it is equally certain, also, that gold ounces are not used as money.

Me: “People now want dollars for money”

Peter: “Which people? I don’t.”

People want whatever currency they are comfortable with. And they are not comfortable with gold. Ask your wife to offer gold next time she goes grocery shopping or buys gas at the local chain store. LOL! If she doesn’t raise an eyebrow at you, she’ll be getting that reaction from these retailers shortly.

Paul Edwards September 18, 2006 at 10:11 am

adi,

“So we must just wait that all governments collapse and then we have our precious gold commodity money back.:)”

I prefer some version of Rothbard’s plan, which would be much more orderly. I would hate to get beaten back to the brutality of a barter economy to get back to gold as money.

Sylvain September 19, 2006 at 10:34 am

There is another attempt to alternate money: the Poenix Dollar. They have a silver disc/bullion and an electronic version.

Contrary to the Liberty Dollar who prints a dollar denomination on the coin, the Poenix Dollar does not. I do not know if it makes a difference in the eyes of the Fed if you use a dollar denomination that can be “mistaken” with a Fed issued bank note.

And about the use of gold/silver as money in our current economy, I think it is possible to ease the use of them, at least electronically. The major problem is not really to use gold but if the prices are in gold grams, you will not be able to easily evaluate if it “worth it” or not. If I say: this shirt is only 1 gram of gold! For many, they cannot know if it’s a deal or not. But electronic gold systems like e-gold or Pecunix allow you to price things in dollars (or yen, Euro, etc.) and have an automatic conversion. So the prices are in US dollars but you pay in gold grams.

So paying in gold is not different than paying with US dollars for Canadians (they will have an automatic conversion on their credit card).

Even if alternate currencies does not change the world (at least right now), they are a good way to start a conversation about money with the non-initiated ;).

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