Monetary Liberty is NOW!

The Money Problem

The Money Problem
by Alex Merced

 While people like me definitely see the virtue of a gold standard, even a gold standard in any of it's historical incarnations still have one fundamental problem, they are a monopoly. I can discuss how the gold standard restrains government which promotes peace and limited government, or that the problem with previous attempts at the gold standard was allowing fractional reserve banking which many see as fraud.

 Although, all of this is only a band aid on the greater problem of money traditionally being a monopoly product of a government, and like any legally protected monopoly results in drops of quality and increases in prices, in this case the increases cost being the extra labor needed to earn enough money to retain purchasing power as the currency is devalued by it's monopolistic issuer.

 Money, like any good needs to be allowed to have a market and competition. While many think you have competitions between nations, politics of government leads to a race to the bottom like you see now where every government compete to see who can provide the worst product instead of the best like when enterprise competes.

 An important aspect of developing such a market is the ability to use multiple currencies and goods as legal tender, instead of the ultimate legal control of legal tender laws which even on it's worst day force people to have some level of demand for some currency. If people could have multiple goods that they could use as legal tender, they could diversify their monetary portfolio like one diversifies their stock portfolio.

 For example, if the US dollar were to collapse owning other currencies and goods would be meaning less since they can't be legally used to tender debts. So at the end of the day, a sound money is great but would probably naturally occur in a competitive market for currency separated from politics (business issued money, not government issued).

What Does a Free Market Banking System Look Like? by Alex Merced

1. No Federal Reserve: The Central Banks fixing of Interest causes malinvestment causing long term projects to be undertaken employing many, but those jobs are lost when those projects are shown not to be in line with the actual savings to complete the project(half way built houses) or to purchase the finished products (empty condo units).

2. NO FDIC/SIPC: There would still be private deposit insurances, and the costs of insuring deposits at a bank that takes on excessive risk will keep prudent investors in safe banks, also since the cost of insurance is spread out among many insurance companies depositors won't have to wait years to make their claims.

3. No Central Regulator: Instead of a government funded regulation monopoly which is subject easily to regulatory capture, consumers would pay for private firms who'd represent their pooled interest and establish rules for banks who want to deal with these firms clients. Since these firms are paid for by the consumer, not the government (political conflicts of interest), not by the industry (industry conflicts of interest), the interest of the clients/investors will be in line with that of the firm/regulator. This also allows for different regulatory frameworks to co-exist so people wanting to take on more risk can go to different regulator allowing more risk and allows alternatives if one regulator becomes corrupted by regulatory capture. These firms would require banks to meet their requirements, they'd rate securities, and other services which the investors might want.

4. A return to Sound/Constitutional money: Gold and Silver would be money once more and banks would be able to create their own money substitutes (redeemable pieces of paper), and can only participate in fractional reserve banking with depositor consent eliminating the fraud concerns.



Although in this environment we still have one issue: While even with private deposit insurance and private regulation a bank can conceivably go bust and frightened remove deposits from all banks, to prevent this government can use it's enumerated power to set standards...

The Government would establish standard units (ex. $1 = 1/40 ounce of gold) and standard reserves terminology, so consumers, businesses can determine the quality of the bank that issued the note/dollar...

Class 1 Banks: Reserves of 75% -  100%
Class 2 Banks: Reserves of 50% - 75%
Class 3 Banks: Reserves of 25% - 50%
Class 4 Banks: Reserves of 0% -25%

So if a Class 4 bank were to go bust people won't rush to pull money out of higher class banks. Also, Gresham's Law (bad money will crowd out good money) will kick into place...

Good Money - Class 1 Banks - People will put their savings in the Class 1 banks since to keep such high reserves a bank would have restrict withdrawal but the extra safety would be great for long term savings such as retirement. Lower yields, but higher purchasing power.

Bad Money - Class 4 Banks - In order for these banks to survive they need liquidity, so these banks would work like the banks of today issuing credit cards, checking accounts, way to get money instantly and quickly. Higher Yields but lower purchasing power.


While there'd be no rules that these banks would fall into these roles, it'd be logical that they would over time. Also businesses can ask for different quality of money, a store that only accepts class 1 money would have lower prices than that accepts all the way to class 4 money yet people who don't want to be subject to all the inflationary pressures of class 4 can have the option to only bank with class 1 banks and use the money at stores that only accept class 1 dollars.

Overall, a monetary/banking system like this is transparent, the only role of government is to set some standards and maybe a reporting system to have a database which private companies can develop systems to check class status of banks and notes, yet no government rules on how these standards should dictate behavior, that would be left to the people and private regulators.

This, is a free market system, transparent, versatile, and flexible

How the Government destorys real democracy

When we think of democracy or a democratic process we really think of several individuals acting on their preferences and values, and when this happens large commonalities would steer society. So while any value or preference held by a large number of values and individuals would steer the ship, this only works if everyone else is free and able to voice and act on their opinion, and more important able to form one.

The democratic process occurs in several places, not just government. Eveytime you participate in market transactions and purchase a good or service you are expressing your value or preference for that good or item. When a large group of people purchase the same product, be sure that it will effect whether more or less of that product will be produced. Although our money isn't the only resource we have demonstrates our values and preferences. An individual ca also donate their time to join different groups such as religious groups, activist organization, militias, or any volunteer association.

So you can DIRECTLY effect the the dialogue of values and preferences in society through how you allocate your money and time. Although the less money and time you have then the less your able to DIRECTLY participate in this true democratic process.

- As resources are used for the Government Agenda, taxation occurs and resources are taken from individuals meaning they have less money to DIRECTLY participate

- As the money have shrinks cause of taxation they may have to work more time to make up it allowing them less time to volunteer and DIRECTLY participate

Several laws create other ways in which your money and time is taken from you, which reduces you ability participate democraticly such as the issue with sugar tariffs and corn subsisidies which create for an unhealthy culture and higher healthcare costs. Since the cost of health is higher, once again more time must be worked to make up the rising costs of healthcare meaning less time to participate in the democratic dialogue outside of government. Other rising costs in healthcare, energy, food, and more also put more pressure on your time and money.

After these effects take place then people begin to become dependant on Government as the sole method of expressing values and preferences in society since only a few have the time and money to do it elsewhere. People begin to proclaim the acts of elected officials as "The Will of the People".

First off, the people is made of several individuals all with slightly different views, so there can't be any collective "will of the people". Accepting this, each individuals votes for their elected official for different reasons, so while an official may win an election it's impossible to tell if they had a majority vote cause of a particular view or in spite of it. More than likely they pieced together a majority vote based on several different issues and sometimes votes just to spite the opposition. So winning an election does not determine, "The will of the people".

The only way to have a true to democratic process is for people to have the time and resources to participate in the community, and this can only happen by rejecting government as the sole tool for democratic action and accepting sound economic principles (Austran Economics) for people to have the time and money to participate.

Why Money Doesn't Matter

Why Money Doesn't Matter

by Alex Merced

If you spend enough time reading and listening to the media at Mises.org put out by the Mises Institute it becomes quite apparent that the supply of money doesn't change anything fundamentally in the economy. The market always adjust prices in the economy to the supply and demand of goods, so money being a good like anything else will adjust it's prices when the supply of it changes but nothing has fundamentally changed. The way we subjectively value all our goods and services haven't changed, all that has changed is how we value it relative to the changing money supply.

Although prices don't change immediately with any change in supply in demand, a period of price discovery must occur. During this period through trial and error of human action people will overvalue and undervalue goods and services in the search for the “market price” of money and the goods and services relative to it. When this market price is found the overall subjective value of things will not have fundamentally changed, although this allows an opportunity for arbitrage. Arbitrage is the act of taking advantage of over or under evaluations in market prices. Those who best take advantage of this are those who get the new supply of money first or understand this process, cause they have the best knowledge of the undervaluation currently in the economy before prices adjust. This arbitrage of those in the know is the effect that economist feel can benefit or hinder the economy, and they advocate a ever changing money supply to keep this state of arbitrage constant to never let the true “market price” of money and goods be found.

How would prices eventually adjust?

If the money supply increases: If the money supply (inflation) then initially all goods and services are undervalued relative to money, so then a consumption binge occurs which pushes prices up to the market price. Some people may still advocate this course of action cause it'll devalue one money versus another money increasing the purchasing power of the second money to buy goods denominated in the first money, which is temporarily the case during the adjustment. Another consideration though for those using the second money is that while the purchasing power for consumers has increased so has the purchasing power of producers in that money which means that domestic goods in that currency will be cheaper to produce offsetting the increase in the value of the currency overtime. To truly have a sustainable increase in transactions between currencies one must have a true competitive advantage in the goods and services they offer.

If the money supply decreases: If the money supply decreases (deflation) then initially all goods and services are overvalued relative to money, so then some people will prefer to sell assets to take advantage of the overvaluation which will push prices down to the market price. Once again is argued to have a negative consequence between different currencies cause as the first currency increases in value other currencies will depreciate relatively. Only looking at consumer purchasing power it seems that it'd be expensive for foreign consumers to buy domestic goods, although we often forget the purchasing power of domestic produces increases which will lower the price of their goods offsetting the increase in value. So after the adjustment once again a country with a true competitive adjustment will always succeed.

If the money supply is constant: If the money supply is constant then there is no adjustment, instead things are always priced relatively to supply and demand versus a known money supply. If prices want to go higher then the money supply can handle, then prices of the supply chain will be pushed down to operate in the current supply of money, always relative to the changing subjective values of people.