Utah Sound Money Act - interesting!

[Original_Intent]

I haven't researched the details, but this looks VERY promising! I invite everyone to research and contact your representatives!

http://www.youtube.com/watch?v=W308bqz3 ... r_embedded#" onclick="window.open(this.href);return false;

Facebook Page: (I see Connor Boyack has "friended" it - a good sign!

http://www.facebook.com/pages/Utah-Soun ... 280?v=wall" onclick="window.open(this.href);return false;

Website:

http://utahsoundmoney.org/" onclick="window.open(this.href);return false;

[Jason]

The video ignores the basic creation mechanism and blames it all on the government and our latest president. I can create money tomorrow by going out and buying stuff on credit.

Swiss angle is even more propaganda....might explore WWII involvement.....or the fact that its home to the BIS! Should work for the ignorant though!

Question - where do you get the money to buy the gold/silver to create the "new" money? At today's prices? Isn't that extremely deflationary? Doesn't that open us up to even more manipulation by the money changers?

All that pessimism said....I'm all for it! It basically amounts to insurrection and separation from the union....let the fireworks (and hyper-deflation) begin!

[Original_Intent]

I'm not sure I understand what Switzerland being the home of the BIS has to do with whether Utah should support a statewide, CONSTITUTIONAL money system.

As far as creation mechanism and where to get the money - that is a good question, and I spent a couple hours thinking about it. Not sure if this is what they have in mind, but here is what I came up with. Feel free to shoot it full o' holes.

State buys the silver off the open market, right now spot is around 28.50 an ounce. Now, the law doesn't say the coin has to be valued at it's precious metal content, they could make a 1 oz coin be a $50 coin or even a $100 coin if they wanted.

Let's say they went with $50 (again realizing they could make it whatever they wanted.) So people trade $50 of FRNs for a on ounce pure silver coin that also has a face value of $50 - they would be completely interchangeable at no charge. And the coins would be legal tender at face value within the state. Let's say there is a $1 per coin production cost, so with the silver, labor and other let's say at current price it costs $30 per coin,

Which would YOU want? A paper $50 FRN or a 1 oz silver coin? And the state makes a REVENUE of $20 over their cost of production for every coin "sold" into circulation. Need some FRNs to pay out of state debts? Again, it would be freely exhangeable for its face value in FRN's. Heck, if there was a problem, it would be that it would be TOO successful, and demand could not be met. Now the STATE would not be allowed to charge a premium, but if supply could not meet demand (a likely problem) then if you could not get any from state institutions, then a free competitive exchange would come up and the silver money would APPRECIATE. i.e. mechants would be giving discounts something that normally cost $75 they might sell for $50 of "Utah coinage". Also, there would have to be safeguards in place that every person in Utah had equal access to the supply (so that rich people didn't get them all immediately and hoard them. If the price of silver went up too much to make it worth making a fifty dollar piece, you make another 1 oz coin with a FACE VALUE of $100, (or any value that made sense based on the market price of silver) it wouldn't matter that the %50 piece and the $100 piece both had an ounce of silver, because the FACE value need not be based on the metal value. Again, if there was a problem it would be that it was too popular, I can;t imagine anyone that wouldn't prefer money with real value to paper. The state would be rolling in revenue (which even though just FRNs would still be good for payment of debts, public or private. (because the government says so.) But can;t you see that this is one of those REAL solutions that could unmask to the guy on the street what a FRAUD the Federal Reserve is?

You're a smart guy so I expect you will be able to find some problems with the idea. And I know you have always been anti PM - which is fine - but I really think you are letting your bias get in the way of trying to see the positive side and the possibilities here.

Huge revenues for state - keep us one of the few states solvent and taxes could probably be eliminated.
FRN Dollar would quickly become irrelevant in intrastate commerce.
Backed explicitly by the Constitution.

Logistics of getting it into circulation and making sure everyone (UTAH CITIZEN's FIRST!) had equal access tot he money - I haven;t given it a lot of thought but I can't imagine something couldn't be worked out.

And honestly, I think the first state to do this is really going to do amazingly well, as other states jump on the bandwagon, silver and or gold would just go though the roof, the state that moves on this first would likely prosper immensely!

[Jason]

I'm not sure I understand what Switzerland being the home of the BIS has to do with whether Utah should support a statewide, CONSTITUTIONAL money system.
Well they were touting Switzerland as the model when its the home of the central bankers....the central bank of central banks.....just a little ironic....and Switzerland's real history isn't the facade put into the text books.

As far as creation mechanism and where to get the money - that is a good question, and I spent a couple hours thinking about it. Not sure if this is what they have in mind, but here is what I came up with. Feel free to shoot it full o' holes.

I'm game....

State buys the silver off the open market, right now spot is around 28.50 an ounce. Now, the law doesn't say the coin has to be valued at it's precious metal content, they could make a 1 oz coin be a $50 coin or even a $100 coin if they wanted.

So are they starting right off the bat to dilute the money?

Let's say they went with $50 (again realizing they could make it whatever they wanted.) Ahh the joys of being the printer!!!So people trade $50 of FRNs for a on ounce pure silver coin that also has a face value of $50 - they would be completely interchangeable at no charge. No charge to whom? Someone always bears a risk and a cost? If its the state....isn't that really the people?And the coins would be legal tender at face value within the state.the insurrection part - which I love! Let's say there is a $1 per coin production cost, so with the silver, labor and other let's say at current price it costs $30 per coin,okay - $30 to put $50 coin into circulation

Which would YOU want? A paper $50 FRN or a 1 oz silver coin? If it buys the same amount of goods....does it matter? If it doesn't then isn't there a burden or cost on the interchangeability issue?And the state makes a REVENUE of $20 over their cost of production for every coin "sold" into circulation.If you call getting a $50 FRN note in exchange for silver and labor a profit.... Need some FRNs to pay out of state debts? Again, it would be freely exhangeable for its face value in FRN's. Heck, if there was a problem, it would be that it would be TOO successful, and demand could not be met. Now the STATE would not be allowed to charge a premiumWhere does the premium come from if they buy the same amount of goods?, but if supply could not meet demand (a likely problem) then if you could not get any from state institutions, then a free competitive exchange would come up and the silver money would APPRECIATE. sorry that never happens....there's speculation and there's depreciation of fiat currency but the metal doesn't appreciate....stays the same for better or worse....i.e. mechants would be giving discounts something that normally cost $75 they might sell for $50 of "Utah coinage". How's that going to work with sales taxes?Also, there would have to be safeguards in place that every person in Utah had equal access to the supply (so that rich people didn't get them all immediately and hoard them. How do you do that? That's been occurring since the beginning - "take gold/silver buy up armies, false priests, popes, tyrants...blood/horror"If the price of silver went up too much to make it worth making a fifty dollar piece, you make another 1 oz coin with a FACE VALUE of $100, (or any value that made sense based on the market price of silver) it wouldn't matter that the %50 piece and the $100 piece both had an ounce of silver, because the FACE value need not be based on the metal value. Back to the dilution issue....as pointed out on the video.Again, if there was a problem it would be that it was too popular, I can;t imagine anyone that wouldn't prefer money with real value to paper. If they are exchangeable straight across and purchase the same amount of goods....I don't see what difference it would make.The state would be rolling in revenue (which even though just FRNs would still be good for payment of debts, public or private. (because the government says so.) But can;t you see that this is one of those REAL solutions that could unmask to the guy on the street what a FRAUD the Federal Reserve is?Ummm....I can see stormtroopers and IRS agents knocking on the capital doors (beautiful vision by the way)...I can see $30 of tax money tied up (savings in a way) in the currency that has to come from the people - i.e. budget cost that wasn't there prior....do we sacrifice some roads or raise taxes in order to get sufficient currency into circulation....then what does the state do with the FRNs???

You're a smart guy so I expect you will be able to find some problems with the idea. And I know you have always been anti PM - which is fine - but I really think you are letting your bias get in the way of trying to see the positive side and the possibilities here.
Perhaps....

Huge revenues for state - keep us one of the few states solvent and taxes could probably be eliminated. even after you obtain all the silver and get the currency in circulation....I'm not catching the scope of your vision
FRN Dollar would quickly become irrelevant in intrastate commerce....not quite catching the vision....how much of people's FRN's (percentage) are spent via cash? credit cards? checks? wire transfers? debit cards?
Backed explicitly by the Constitution.

Logistics of getting it into circulation and making sure everyone (UTAH CITIZEN's FIRST!) had equal access tot he money - I haven;t given it a lot of thought but I can't imagine something couldn't be worked out.
sure....say your annual income is $100k....so you pay an extra tax of $60k this year to cover the acquisition cost of silver and coining money so we can get $100k in coinage for next year....assuming of course that the demand for all that metal doesn't send prices through the roof (not even getting into banker manipulation to shut said actions down via futures markets and the death grip they have on miners) so the coins would need constant adjustment throughout the year....and the FRN exchange becomes major problem (melt factor - see $10k fine for melting pennies and nickles due to value of metal content - http://www.coinflation.com/" onclick="window.open(this.href);return false;)

And honestly, I think the first state to do this is really going to do amazingly well, as other states jump on the bandwagon, silver and or gold would just go though the roof, the state that moves on this first would likely prosper immensely!

I like a state bank like North Dakota a whole lot more....

[Jason]

A couple more thoughts so I can shut my brain off and go to sleep -

1) If a little profit is good.....wouldn't more be better? Instead of diluting at 50%...why not 90% or 99%....paper vs. metal? Especially considering the tax burden for tying up precious resources just for the sake of a currency to circulate? Isn't that the reason fiat money is used throughout the world with relatively large success? I mean once you go down that dilution path you may as well go all the way right? If so then doesn't it become a function of faith and trust in the particular government (organization "representing" the people)? Or is 50% trust better than 90%? Is that in reality just a printing hedge for a few at the top getting a little too carried away with the printing press?

Obviously there are supply or quantity issues....but outside of flooding the market with the currency....what's the problem?

2) Since purchases are made using the face value (hence the lucrative position of being a printer) in light of #1 and you are already planning on setting a fixed exchange rate....why not go a step further and peg the currency (now paper or better yet electronic credits - little if any tax burden for creation) at say 10 to 1 for FRNs? So basically no matter what Bernanke does Utah's currency will be worth 1/10th of an FRN....which would drive all remaining businesses to Utah. As for those of us in state....do we really care if our labor is valued with a #10 for an hour or a #1? An hour is an hour is an hour right? The labor and goods are only cheap to those outside the state....to everyone inside it doesn't really mean anything since we use our own currency to exchange with each other. The only difficulty is purchasing outside resources...but with the extra production/manufacturing/investment that now will flood in to Utah....that shouldn't be a problem right?

Of course if the Bernak decides to print a million bills.....that does mean you have to print 10 million....and that's apt to cause some real inflation at home! Particularly if the Bernak gets really carried away and ALL of the printed money comes to Utah expecting to be multiplied 10 fold. Of course you could get mad and change the exchange rate to 1 to 1 or something similar.....but then all that manufacturing/production will go elsewhere and you'll be left with empty idle infrastructure. Especially if you got a bit carried away during the build up!

[Original_Intent]

I wouldn't consider it debasing - I would copnsider it going from 0% worth (current FRN) to 50% or 75%. What is the opposite of debasing a currency?

As far as my idea to make larger denominations with the same amount of PM, again that would not be debasing, that would only be done as the value of the metal (priced in FRNs) rose to the point of making it unprofitable to coin the lower denominations.

Definitely the less dilution the better, the whole point is to have something that has intrinsic value, and the more the better. The only reason for any dilution (intrinsic vs face value) would be to provide the state a profit motive to do it in the first place. Your point is taken though, and based on history more and more dilution would likely creep in. So you would need to make it part of the law that FV could not exceed a certain percantage of the market value of the silver. And yes, I know that they are a bunch of weasals, and it would take much more complicated legalese to nail that down, and even then the politicians would have to be watched like a hawk ( a good thing if followed up on.) but for the sake of concept, I still think it is a good idea.

[Jason]

I wouldn't consider it debasing - I would copnsider it going from 0% worth (current FRN) to 50% or 75%. What is the opposite of debasing a currency?

As far as my idea to make larger denominations with the same amount of PM, again that would not be debasing, that would only be done as the value of the metal (priced in FRNs) rose to the point of making it unprofitable to coin the lower denominations.

Definitely the less dilution the better, the whole point is to have something that has intrinsic value, and the more the better. The only reason for any dilution (intrinsic vs face value) would be to provide the state a profit motive to do it in the first place. Your point is taken though, and based on history more and more dilution would likely creep in. So you would need to make it part of the law that FV could not exceed a certain percantage of the market value of the silver. And yes, I know that they are a bunch of weasals, and it would take much more complicated legalese to nail that down, and even then the politicians would have to be watched like a hawk ( a good thing if followed up on.) but for the sake of concept, I still think it is a good idea.

If it has to have intrinsic value....how have we managed for the past 100 years? Why do we have to provide the "state" a profit motive when the state is us?

You still have not addressed the primary problem which is - Say we do 50% "intrinsic" value....are you willing to spend half of next year effectively mining for silver in order to have a currency with 50% "intrinsic" value the following year? Is that the best utilization of your time and resources? What happens to the economy while we spend half the year trying to pay for our money?

[Original_Intent]

It doesn't have to have intrinsic value. As you say we have done just fine in the last 100 years with fiat? Right?

Or are you trying to prove my point?

[Col. Flagg]

Guys, me thinks you're debating/arguing semantics here - the important thing is that the states are waking up to the fraud, criminal activity and deceit emanating from Washington, DC and the Federal Reserve and are beginning to take steps necessary to separate from it! Yee Haw!!!

[Jason]

It doesn't have to have intrinsic value. As you say we have done just fine in the last 100 years with fiat? Right?

Or are you trying to prove my point?

As far as I'm concerned we've done just fine over the past 100 years....the only problem I see is the interest costs attached to the money (due to the money being printed by private banks versus the government).

[Jason]

You still have not addressed the primary problem which is - Say we do 50% "intrinsic" value....are you willing to spend half of next year effectively mining for silver in order to have a currency with 50% "intrinsic" value the following year? Is that the best utilization of your time and resources? What happens to the economy while we spend half the year trying to pay for our money?

[Original_Intent]

You still have not addressed the primary problem which is - Say we do 50% "intrinsic" value....are you willing to spend half of next year effectively mining for silver in order to have a currency with 50% "intrinsic" value the following year? Is that the best utilization of your time and resources? What happens to the economy while we spend half the year trying to pay for our money?

So, because we can't prime the fuel pump, we need to throw out the engine?

The state takes, for example $30 million dollars and buys a million ounces of silver. They mint a million 1 ounce coins that have a face value of $50. The citizen's exchange $50 million of FRNs in circulation for $50 million of silver currency that has $30 million in silver in it. It is legal tender for $50 million for intrastate commerce, just as the FRNs would have been. No change in purchasing power. I don't see how it is not win win.

From the citizen's perspective:

I got rid of a $50 FRN and now have a $50 coin that has $30 of intrinsic value. If I need and FRN for out of state commerce, it is freely convertible back to FRN at any time. Also, my state coffers turned $30 million of taxes into $50 million that they can spend on either buying more silver for further minting, OR they could just return the initial $30 million to the fund they took the money from and now they have $20 million of new money to spend on getting more silver for the next minting - at this point it is self perpetuating and self financing.

Say silver dropped in value to $15. OK the intrinsic value dropped but is still greater than the intrinsic value of the FRN = 0. Adn it is still convertible to the $50 FRN you started with. I don't see a downside from the taxpayer/guy on the street.

If silver goes up in price (likely since so much will be put to use for monetary purposes) again, wow the state made a good investment, they bought a million ounces of silver at $30 million and it now has an intrinsic value of $35 million. In other words, it doesn't matter if silver goes up or down, the value either stays the same in relation to FRNs (by fiat, if you will) or it increases in relation to it by its intrinsic value. And again, even if the intrinsic value goes down, it will always be greater than the intrinsic value of the FRN!

[Jason]

You still have not addressed the primary problem which is - Say we do 50% "intrinsic" value....are you willing to spend half of next year effectively mining for silver in order to have a currency with 50% "intrinsic" value the following year? Is that the best utilization of your time and resources? What happens to the economy while we spend half the year trying to pay for our money?

So, because we can't prime the fuel pump, we need to throw out the engine?

Is the engine worth anything if it doesn't run???

The state takes, for example $30 million dollars and buys a million ounces of silver. They mint a million 1 ounce coins that have a face value of $50. The citizen's exchange $50 million of FRNs in circulation for $50 million of silver currency that has $30 million in silver in it. It is legal tender for $50 million for intrastate commerce, just as the FRNs would have been. No change in purchasing power. I don't see how it is not win win.

Who cough's up the $30 million? The state isn't this separate entity with its own money tree....it is u and i (our labor). According to the 2010 Census the population of Utah is 2,763,885....so your $30 million works out to a cost of $10.85 per person in return for $18.09 in currency that has a fixed exchange rate of 1 to 1 with FRNs.....how in the world is this a win/win??? Why would I cough up nearly $29 dollars (FRNs) to get less than $20 back??? Why would you?

Update: 29 = cost of money ($10.85) plus cost of exchange (trading $18.09 FRNs for $18.09 in state currency) for total of $28.94 that has the face value of $18.09 or in other words only buys $18.09 worth of goods or labor despite tieing up $10.85 in intrinsic value (taxes).

I mean sure you now have $18.09 in currency with a melt hedge value of $10.85....but 40% just went up in smoke. Unless you think the state government is going to go up in smoke (hence the hedge value)....or your FRN is going to be worthless tomorrow (collapse of the government - in which case currency will be the last of your problems) in which case you better not have a fixed exchange rate...what's the point of doing this? If you think government is on the verge of collapse...aren't there bigger problems than currency and precious metals?

What's wrong with Lincoln's greenback? What happened in the late 1800's when the big bankers squeezed off the supply of gold?

From the citizen's perspective:

I got rid of a $50 FRN and now have a $50 coin that has $30 of intrinsic value. If I need and FRN for out of state commerce, it is freely convertible back to FRN at any time. Also, my state coffers turned $30 million of taxes into $50 million that they can spend on either buying more silver for further minting, OR they could just return the initial $30 million to the fund they took the money from and now they have $20 million of new money to spend on getting more silver for the next minting - at this point it is self perpetuating and self financing.

Not quite following the math here. So you are saying the state takes $30 in taxes and then exchanges with you a $50 silver coin for a $50 FRN - didn't that transaction just cost you $80 for a $50 coin with an intrinsic value (only if you melt it) of $30....and as soon as you exchange that coin for goods your intrinsic value went out the window along with your $30 acquisition cost (taxes). Why not skip the state option and go buy $80 worth of silver to stick in the safe??? Not to mention all the wheels that will be greased in that process guaranteed to bump up the cost to you....

This is just getting uglier by the post....

Say silver dropped in value to $15. OK the intrinsic value dropped but is still greater than the intrinsic value of the FRN = 0. Adn it is still convertible to the $50 FRN you started with. I don't see a downside from the taxpayer/guy on the street.

Have to go through the math again on the scenario above....but I see plenty of downside. Nothing I want to "buy" into!!! If the face value is what really matters because the drop in intrinsic value didn't effect purchasing power (face value)....what's the point again? Why would I pay for this?

If silver goes up in price (likely since so much will be put to use for monetary purposes) again, wow the state made a good investment, they bought a million ounces of silver at $30 million and it now has an intrinsic value of $35 million. In other words, it doesn't matter if silver goes up or down, the value either stays the same in relation to FRNs (by fiat, if you will) or it increases in relation to it by its intrinsic value. And again, even if the intrinsic value goes down, it will always be greater than the intrinsic value of the FRN!

Again what's the selling point if face value is what matters? How did the state make a good investment? If the state trades the coins to you for the same amount....wouldn't the increase in acquisition cost (price of silver) mean less profit? If the price of silver goes up after the state exchanges the coins for FRNs....how does that effect the state? They don't have the coins anymore....and have to use more FRNs to silver for the next batch (reduced profit for state - all on the assumption that the state is this separate entity with its own pocketbooks).

So the currency always has more intrinsic value than FRNs....so what? If the face value is what matters....who cares? Will they spend different?

Why not skip all the hocus pocus and just buy some silver to stick in the safe for the rainy day when government comes crashing down? Assuming that silver will somehow save the day....

Despite all the negatives....I'm still all for it! Printing our own currency is what caused the Revolutionary War.....the mere threat of creating our own competing currency would bring down upon us the wrath of the bankers like nothing else!!!

I can hear the phone calls to Dugway to release the spores as we banter away about this....

[Jason]

So have I lost my marbles? Or is there something I'm missing? Or am I on the money - or lack thereof?

[Original_Intent]

Well, I like how you ended with "despite the negatives, I am all for it!" Lol. I do think you unintentionally miss the accounting, and I figured out a way to clarify it but it would be a looong post. If you are really interested I will post it tomorrow. I think I could at least illustrate my thought process about how it could work a little better. The big thing I like about it would be that if a lot of states did it, it would seriously be a step toward "ending the fed". Certainly I agree that there would be all kinds of opportunities for shenanigans - better shenanigans at the state level than at the "federal" (really international) level. And yeah I think it would bring the wrath of the Bernanke on us - good let's get it out in the open, works of darkness can;t stand the light of day etc. and again pretty explicitly the Constitution specifies a state can do this.

I'll post my example tomorrow and see what flaws you can find - you definitely have found at least some areas of concern - but I'd much prefer to keep working the ideas rather than just accept the status quo.

[Jason]

Well, I like how you ended with "despite the negatives, I am all for it!" Lol. I do think you unintentionally miss the accounting, and I figured out a way to clarify it but it would be a looong post. If you are really interested I will post it tomorrow. I think I could at least illustrate my thought process about how it could work a little better. The big thing I like about it would be that if a lot of states did it, it would seriously be a step toward "ending the fed". Certainly I agree that there would be all kinds of opportunities for shenanigans - better shenanigans at the state level than at the "federal" (really international) level. And yeah I think it would bring the wrath of the Bernanke on us - good let's get it out in the open, works of darkness can;t stand the light of day etc. and again pretty explicitly the Constitution specifies a state can do this.

I'll post my example tomorrow and see what flaws you can find - you definitely have found at least some areas of concern - but I'd much prefer to keep working the ideas rather than just accept the status quo.

Oh yes I'm interested. If I did miss the accounting (as an accountant) that would be particularly sad and best fixed promptly!

If 1 and only 1 state could successfully implement it....it would be the end of the Fed!!! Money is the foundation - you can buy anything in this world with money. Take out that cornerstone of the NWO and they are dead!

I have some ideas myself....but I'd like to work through yours first since I'm still working out the details in my head on mine.

[Original_Intent]

OK well first point - IF a state is going to offer a competing currency - I am afraid we are stuck wtih gold and metal as the Constitution forbids anything else. And I am sure the very vultures who support fiat for the Fed would be quick to destroy any competing fiat as COUNTERFEITING.

OK, now for my long example, and frankly I am not sure where it will end up, I just worked out the example that should illustrate what could happen. Numbers vastly lowered for simplification purposes, but should scale just fine - or at least .999 fine. (Sorry, it's Friday, and I am allowed a sense of humor on Friday!)

So for example we will assume 100 total Utah citizens, silver on the open market is at $30/oz. For illustrative purposes only we will pretend the citizens and the state have a dialog.

Utah: Hey citizen's! We want to offer a bond to finance a new Utah currency. (blah blah blah details) This bond will cost each of you $50, which will be used to buy the raw materials and set up the facilities and labor for minting coins. With that $50 we will be able to create 100 1 oz. pure silver coins. What say you?

Citizens: Yay for sound money! We pass the bond measure! ( not sure it would really pass or not, again this is just for arguments sake to follow the accounting.)

So at this point the state gets $5000, each citizen is out $50. The state spends $3000 to get the 100 oz of silver and spends the other $2000 on facilities labor, etc. On a larger scale the overhead should be much much less as private mints manage to sell coins for a bery small percentage over spot. So this SHOULD be a ridiculously overblown worst case scenario.)

(The state creates 100 1 oz. coins with a face value of $100.Which has an intrinsic value of $30. But within the state of Utah is legal tender for it's face value.)

Utah: The coins are made. Now, because you already paid $50 for the minting of these coins, to each person that paid the front $50, one $100 coin will be available at a cost of $50.

Citizens: We concur.

At this point, every citizen has paid out a TOTAL of $100. They now have a 1 oz. Silver coin that is legal tender for $100 within the state. In other words, they are out nothing. The coins can also be converted back to Federal Reserve Notes at any time.

The state now has another $5000, from when the citizens bought the discounted coins. They spend $3000 for another 100 oz. of silver and $2000 goes to the state coffers as revenue.

Yes, I just inflated the money supply, as all of the original FRNs are in circulation and all of the "new money" is also in circulation. I think this would be necessary in a competing currency system. Any ideas around that? What would be the result in prices? I don't know! It seems to me that the original FRNs would still be equally usefull, minimal loss of value for commerce outside the state. It also seems to me that if there was any problem, it would be that demand for the silver money would exceed the states abililty to supply it. This would mean (I think) that in the private economy, the silver money would exchange at a premium (the state, as the collective of the people, would not be allowed to exchange money at a premium, but say the state had none available, certainly you could come to me and say - "I really prefer the silver money,a nd would be willing to give you $105 in FRNs in exchange for a $100 silver piece." In other words, individuals and even businesses would be free to exchange or price their goods any way they wanted.


So in this example, everyone spent $100 and each ends up with a $100 legal tender silver piece - no loss of purchasing power and a gain of $30 in intrinsic metal value.

The state ends up with a net 100 oz of silver (for the next cycle of coins, which would be traded into circulation at the full $100 face value price (even though cost to produce, now that infrastructure is in place would probably be less than $35) at this point most of the "profit" would go to purchasing more silver until demand for the coins was met.

If the price of silver skyrocketted due to it being used monetarily - the state would only be benefitted as the intrinsic value of their silver holdings (and the coins of the citizens) went up. It would still be able to mint coins up to about $95/oz silver at no cost tot axpayers (i.e. it would generate revenues that would pay for itself thru people VOLUNTARILY trading their FRNs for the new coins.

Anyway, that's how I see it working, it is probably over simplistic or I have missed an important step, so please point it out! I am just trying to figure out workable alternatives, and any criticism, constructive or otherwise is welcome.

Also, if silver dropped in value, there would still be no loss as it would hold its $50 face value as legally minted money. The intrinsic value is only there as a hedge against complete failure of the dollar.

My expectation is that people would flock to such a currency - I know I would. Probably the one downside is the U.S. government would probably be prompted by the Fed to put down another "Mormon rebellion".

[Jason]

OK well first point - IF a state is going to offer a competing currency - I am afraid we are stuck wtih gold and metal as the Constitution forbids anything else. And I am sure the very vultures who support fiat for the Fed would be quick to destroy any competing fiat as COUNTERFEITING.

Excellent point - since the Bank of England pulled that stunt during and after the Revolutionary War....and who knows how many times before/since. As you point out the wrath of Hades would be incurred...so no holds barred! I highly doubt the nefarious counterfeiting would be limited to fiat currency since we've had issues with gold plated tungsten bars.

Also I wouldn't necessarily use the Constitution as the be all end all. Many refer to their rights (patriot saint did that in post yesterday) as constitutional rights....when actually they are inalienable rights (natural law) and the Constitution was an imperfect effort to legally protect those rights (but doesn't guarantee those rights or grant those rights - they exist with or without the Constitution).

As I mentioned earlier in this thread, the majority of our transactions don't even involve physical handling of money - whether that be fiat or coins.

OK, now for my long example, and frankly I am not sure where it will end up, I just worked out the example that should illustrate what could happen. Numbers vastly lowered for simplification purposes, but should scale just fine - or at least .999 fine. (Sorry, it's Friday, and I am allowed a sense of humor on Friday!)

Humor is good....especially on Friday!!!

So for example we will assume 100 total Utah citizens, silver on the open market is at $30/oz. For illustrative purposes only we will pretend the citizens and the state have a dialog.

Utah: Hey citizen's! We want to offer a bond to finance a new Utah currency. (blah blah blah details) This bond will cost each of you $50, which will be used to buy the raw materials and set up the facilities and labor for minting coins. With that $50 we will be able to create 100 1 oz. pure silver coins. What say you?

Citizens: Yay for sound money! We pass the bond measure! ( not sure it would really pass or not, again this is just for arguments sake to follow the accounting.)

I assume they get interest on the money they've "loaned" the state....

So at this point the state gets $5000, each citizen is out $50. The state spends $3000 to get the 100 oz of silver and spends the other $2000 on facilities labor, etc. On a larger scale the overhead should be much much less as private mints manage to sell coins for a bery small percentage over spot. So this SHOULD be a ridiculously overblown worst case scenario.)

(The state creates 100 1 oz. coins with a face value of $100.Which has an intrinsic value of $30. But within the state of Utah is legal tender for it's face value.)

Utah: The coins are made. Now, because you already paid $50 for the minting of these coins, to each person that paid the front $50, one $100 coin will be available at a cost of $50.

Ahh this is an interesting angle!!! At the $50 face value (previous example) it didn't make any sense (citizen was out $80 for $50 face value coin....but now we are cooking!!! The way to undermine the FRN would be to put out a coin with $150 face value that only costs the citizen $100 in FRNs....but with the perception its worth more because it has real silver in it.

Of course we go back to the first issue....and you find out very very quickly how tight the multi-global corporation stronghold is when they refuse to take your new money.

Citizens: We concur.

At this point, every citizen has paid out a TOTAL of $100. They now have a 1 oz. Silver coin that is legal tender for $100 within the state. In other words, they are out nothing. The coins can also be converted back to Federal Reserve Notes at any time.

That could be a big potential problem...along with the fixed exchange rate. For example if it costs me next to zero to print FRNs why couldn't I dump a couple truckloads in the state.....and pickup a couple truckloads of silver coins?

The state now has another $5000, from when the citizens bought the discounted coins. They spend $3000 for another 100 oz. of silver and $2000 goes to the state coffers as revenue.

Yes, I just inflated the money supply, as all of the original FRNs are in circulation and all of the "new money" is also in circulation. I think this would be necessary in a competing currency system. Any ideas around that?

In a declining monetary environment such as currently exists....I don't see it as a problem.

What would be the result in prices? I don't know! It seems to me that the original FRNs would still be equally usefull, minimal loss of value for commerce outside the state. It also seems to me that if there was any problem, it would be that demand for the silver money would exceed the states abililty to supply it.

If the money spent the same....yes I think demand would go off the charts....especially if you gave the citizens a higher face value than FRNs in (but that would probably be asking for tons of "additional" trouble).

This would mean (I think) that in the private economy, the silver money would exchange at a premium (the state, as the collective of the people, would not be allowed to exchange money at a premium, but say the state had none available, certainly you could come to me and say - "I really prefer the silver money,a nd would be willing to give you $105 in FRNs in exchange for a $100 silver piece." In other words, individuals and even businesses would be free to exchange or price their goods any way they wanted.

Yes you would really have the advantage with the built in hedge factor (all else being equal - face value and purchasing ability)....especially as the economy spirals down for lack of new money.

So in this example, everyone spent $100 and each ends up with a $100 legal tender silver piece - no loss of purchasing power and a gain of $30 in intrinsic metal value.

I like it!!!

The state ends up with a net 100 oz of silver (for the next cycle of coins, which would be traded into circulation at the full $100 face value price (even though cost to produce, now that infrastructure is in place would probably be less than $35) at this point most of the "profit" would go to purchasing more silver until demand for the coins was met.

If the price of silver skyrocketted due to it being used monetarily - the state would only be benefitted as the intrinsic value of their silver holdings (and the coins of the citizens) went up. It would still be able to mint coins up to about $95/oz silver at no cost tot axpayers (i.e. it would generate revenues that would pay for itself thru people VOLUNTARILY trading their FRNs for the new coins.

And as you stated in your previous posts you could issue coins at higher face value (charge more in FRNs so net 0) to maintain the rough percentage figure.....and anyone with the other coins has higher intrinsic (hedge) value.

Anyway, that's how I see it working, it is probably over simplistic or I have missed an important step, so please point it out! I am just trying to figure out workable alternatives, and any criticism, constructive or otherwise is welcome.

You've fixed the big issue I had with it (cost taxpayers more than they got back....well except for the timing part. Still have to cough up FRNs up front to get the thing off the ground....and they are pretty sparse as of late.) The major hurdle is getting "everyone" to accept it as currency (pain for businesses). State could take only state currency in payment of taxes (force conversion of FRNs)....or steps like no sales tax on transactions in state currency. The other pretty big hurdle is exchange rates for FRNs and every other currency in the world....subject to major manipulation by central banks. I see the IRS getting involved in the middle of this.

Also, if silver dropped in value, there would still be no loss as it would hold its $50 face value as legally minted money. The intrinsic value is only there as a hedge against complete failure of the dollar.

My expectation is that people would flock to such a currency - I know I would. Probably the one downside is the U.S. government would probably be prompted by the Fed to put down another "Mormon rebellion".

Ahh shucks....that isn't the end of the world! Church might not see it that way though....

[Original_Intent]

I am glad to see you coming around on the general idea (it seems!) and again, I am no expert, I am sure there are holes to be shot in it... to answer a couple of your questions.

No interest for the taxpayers - this would be the "priming the pump" step and their "interest" (i.e. why they would bother) is the potential for a legitimate, in state currency. Also this is a simple example, if it needed tweaks such as interest for the borrowed money - possible I suppose, and if the term was set to give time for a few cycles of minting, it shouldn;t be a problem..

As to your concern about truckloads of FRNs being dumped into the state and traded for silver - there would have to be some type of controls in place so that all UTAH citizens would have an equal "option of first refusal" for the coins. Like in my example, each of the 100 Utahns would have "first dibs" on one coin per citizen - in later mintings and as there were larger, again there would need to be a system in place to make sure that every UTAH citizen had first and equally divided access to every minting, and then any "unclaimed" could be open to outside people - and yes I am sure you would have tons of "shell games" happening and other dishonest things going on as people tried to get more than what they are entitled to - I don't see any way around human nature in any system, sure you could try to make it extremely punative from a legal approach for a person to do so, but again, in our current corrupt system - good luck with that!

All I can say in answer is - would it be a step in the right direction from what we have now? Which is more easily corruptible for the benefit of the few at the expense of the many?

There may be a lot of reasons this wouldn't work - that's part of the reason for tossing the ideas out there to get pummeled - to see if concerns can be addressed! Thanks for your input and I must say I am grateful to see you starting to see the possibilities...

And again, the concern is, it would paint a big ol' bullseye on Utah - I figure what the heck, at least everything would be out in the open, people might start to see mroe clearly what's what and who is pulling the strings. My guess is if we did something like outlined it would be hugely successful and profitable for the state (Us lowly peons too!) and other states would be falling all over each other to follow suit. I picture a situation similar to the article in the BAnkers magazine in England, where the big fear was that all of the world's talent would flock to the U.S. if something could not be done to get the bankers firmly in control (sorry anectdotal and I don;t remember the reference) but I could see Utah "blossoming as a rose" and being an example for the rest of the country. Gotta give Connor Boyack the props for actually getting the ball rolling on this (at least I think he is the one who got the legislation to do this "on the docket" - and I don;t know that his details align with my own ideas of how it could work or if it is completely different..anyways - continue to knock the ideas around - look for flaws, suggest improvements etc.

[Jason]

I am glad to see you coming around on the general idea (it seems!) and again, I am no expert, I am sure there are holes to be shot in it... to answer a couple of your questions.

No interest for the taxpayers - this would be the "priming the pump" step and their "interest" (i.e. why they would bother) is the potential for a legitimate, in state currency. Also this is a simple example, if it needed tweaks such as interest for the borrowed money - possible I suppose, and if the term was set to give time for a few cycles of minting, it shouldn;t be a problem..

That comment was prior to seeing the payback (the face value coin that equaled investment).

As to your concern about truckloads of FRNs being dumped into the state and traded for silver - there would have to be some type of controls in place so that all UTAH citizens would have an equal "option of first refusal" for the coins. Like in my example, each of the 100 Utahns would have "first dibs" on one coin per citizen - in later mintings and as there were larger, again there would need to be a system in place to make sure that every UTAH citizen had first and equally divided access to every minting, and then any "unclaimed" could be open to outside people - and yes I am sure you would have tons of "shell games" happening and other dishonest things going on as people tried to get more than what they are entitled to - I don't see any way around human nature in any system, sure you could try to make it extremely punative from a legal approach for a person to do so, but again, in our current corrupt system - good luck with that!

That sounds nice (the limits or constraints on acquisition)....but the reality is the people have to use the money as currency (thus spend it) rather than silver savings (in which they would be further ahead to buy $100 worth of silver directly instead of $30 worth of silver money for $100). Also remember that the face value is what matters (and ability to use it as intended - currency) so the value of the hedge factor is pure speculation. Some might value it extremely high while others not at all. And those that value it extremely high would still find themselves better off just purchasing the $100 worth of silver and sticking it in the safe to collect dust!

Money is a tool to facilitate transactions.....not safety deposit box or store of savings. If that were the case any dilution would inherently be wrong.

All I can say in answer is - would it be a step in the right direction from what we have now? Which is more easily corruptible for the benefit of the few at the expense of the many?

If the state were to adopt a fiat currency and pay zero interest for its use along with printing volume controlled by the people (or their representatives)....we would be light years ahead of what we currently have!

There may be a lot of reasons this wouldn't work - that's part of the reason for tossing the ideas out there to get pummeled - to see if concerns can be addressed! Thanks for your input and I must say I am grateful to see you starting to see the possibilities...

Thank you! I love a good brainstorming session!

And again, the concern is, it would paint a big ol' bullseye on Utah - I figure what the heck, at least everything would be out in the open, people might start to see mroe clearly what's what and who is pulling the strings. My guess is if we did something like outlined it would be hugely successful and profitable for the state (Us lowly peons too!) and other states would be falling all over each other to follow suit. I picture a situation similar to the article in the BAnkers magazine in England, where the big fear was that all of the world's talent would flock to the U.S. if something could not be done to get the bankers firmly in control (sorry anectdotal and I don;t remember the reference) but I could see Utah "blossoming as a rose" and being an example for the rest of the country. Gotta give Connor Boyack the props for actually getting the ball rolling on this (at least I think he is the one who got the legislation to do this "on the docket" - and I don;t know that his details align with my own ideas of how it could work or if it is completely different..anyways - continue to knock the ideas around - look for flaws, suggest improvements etc.

Yeah I would love to see the actual details....the video was nearly pure propaganda.

[Jason]

Looks like a little traction in this area is being developed....

South Carolina lawmaker wants separate currency for state

A South Carolina state politician wants the state to develop its own gold and silver-based currency in case the Federal Reserve collapses and hyper-inflation ensues.

"If folks lose faith in the dollar, we need to have some kind of backup," State Sen. Lee Bright told the Spartanburg Herald Journal's Stephen Largen. His bill asks a committee to look into the development of a state currency, citing the Constitution and Supreme Court precedents to prove the bill's legality.

Slate's Annie Lowrey tracks down similar bills in Georgia and Virginia, and points out that the legislation reflects a larger trend of state politicians wading into monetary policy. A bill in Georgia would require all debts to the state be paid in pre-1965 gold and silver coins. The Virginia proposal would let the state print its own money. Meanwhile, one politician in Utah wants to cut out the middleman entirely and allow the state's residents to run their very own mints.

Advocates of currency alternatives to the dollar argue that the Federal Reserve's quantitive easing techniques will lead to inflation. Texas GOP Rep. Ron Paul, who won the Conservative Political Action Committee's presidential candidate straw poll last week, has been Congress' most visible anti-Fed leader. Paul argues the Fed devalues the dollar, and proposes that the United States should gradually return to gold-backed currency.

In addition to the nightmarish logistical challenges involved with a state adopting a new currency, Lowrey points out that commodity-backed currencies can also experience volatility. For example, if a state collects income taxes in gold and then a big new gold mine is discovered, the metal's value would decline--together with the state's revenue holdings.

So for now, it's probably bests for individual consumers to refrain from shifting over to sovereign state currencies--especially since none of the recently introduced currency bills stands a strong chance of passing. However, for numistmatists looking to make a political statement, the Ron Paul silver dollar will likely appreciate--especially since federal authorities raided the libertarian minting operation that marketed it back in 2007.

http://news.yahoo.com/s/yblog_thelookou ... -for-state" onclick="window.open(this.href);return false;

In their detractions from the idea....they miss the single biggest one - where do you come up with the gold/silver to begin with????

Strange Currency - Return to the gold standard? It's just crazy enough for some state legislators to propose it.

Imagine it's April 15 a few years from now. You need to pay your state taxes, and fast. So, you check out the latest official state exchange rate, and then reweigh your bars. You're over—thank goodness—so you hope the tax office has some ingots to change out. It's such a pain when they run out of ingots. After you pay your taxes, you need to pick up a few groceries. Luckily, you have some spare silver ore on hand and decide to use the home mint in the basement to pop out a few coins. Voilà—restocked pantry!

It sounds ridiculous. It is ridiculous. But in the past few months, a few state legislators have considered letting you do something like that: Trade in gold and silver in addition to dollars. The country as a whole is not moving closer to adopting a gold or commodity-price standard, though there are some national-level proposals. And state legislatures have a long and honorable history of proposing, debating, and sometimes even passing silly laws.

Now some state politicians, mistrustful of the Federal Reserve and juiced by the general anti-Fed climate, are trying to wrest a bit of currency control into their own hands. The first proposals emerged in 2009 and have been floated thus far in Montana, Missouri, Colorado, Idaho, Indiana, New Hampshire, and Washington, among other states. In Georgia, for instance, state Rep. Bobby Franklin has introduced the Constitutional Tender Act, requiring "the exclusive use of gold and silver coin as tender in payment of debts by or to the state." Which gold and silver coins, you might ask? "Pre-1965 silver coins, silver eagles, and gold eagles." Those "shall be the exclusive medium which the state shall use to make any payments whatsoever to any person or entity," the bill says, adding "such coins shall be the exclusive medium which the state shall accept from any person or entity as payment." It notes "other forms of currency may be used in all other transactions within the state upon mutual consent of the parties of any such transaction."

In Virginia, Republican Delegate Bob Marshall has also considered creating an alternative to the dollar for his constituents. "Many widely recognized experts predict the inevitable destruction of the Federal Reserve System's currency through hyperinflation in the foreseeable future," his joint resolution reads. So he has asked a subcommittee to study what would happen and what Virginia should do in case of a monetary crisis. And he has plans to submit a bill asking the Commonwealth to start minting its own gold and silver coins, as an alternative to the dollar.

A legislator in Utah has gone even further. At the urging of a constituent, Rep. John Dougall has promised to put forth legislation permitting citizens to run their own mints, pumping out their own gold and silver coins for use in the state. The Utah Sound Money Act exempts the commodities from state sales and capital-gains taxes, lets taxpayers remit funds to the states in dollars or gold or silver coins, and establishes cooperatives to promote the use of the new coinage. Because the plan may reap the state so much gold, the proposal also revives the Utah Defense Force, to help protect the cache.

What is behind the spate of make-your-own-money proposals? Mistrust of the Federal Reserve and worries about the value of the dollar. In a much-cited July 2009 Gallup poll, Americans rated the Federal Reserve Board as doing the worst job out of nine major federal agencies. The sentiment has apparently stuck. Just last month, a majority of Americans said the Federal Reserve should be "reined in or abolished." These politicians are reacting to this anti-central-bank sentiment.

The concerns over inflation and the value of the dollar are especially strong on the right. As the argument goes, the Fed's easy money policies and rounds of quantitative easing will inevitably cause massive inflation. People with their savings all in dollars will be hurt. "Since the founding of the Federal Reserve Bank system in 1913, Federal Reserve Notes have lost more than 95 percent of their purchasing power," the Utah act notes. "During that same period of time, from 1913 to the present, as well as through the entire course of recorded human history, gold and silver coin have reliably retained their purchasing power, although subject to periodic fluctuations in value."

Concerns about inflation and the purpose of the central bank may or may not be valid. Either way, a return to the gold standard—on the state level, no less—is probably not going to help matters much. First, there are the not inconsiderable logistical hurdles. To state an obvious point: Dollars are ubiquitous, liquid, and stable. It's easy to use them to pay your car registration fees or taxes. But consider paying your taxes in gold coins, as the Georgia* law would require. At tax time, every Georgian would need to scramble to find gold or silver coins that are, well, in very limited supply. The pre-1965 coins, obviously, haven't been minted in nearly a half-century, and the eagles are collector's items. There aren't a lot of them, and many are in private hands. Every year as April 15 approached and Georgians' tax bill were due, there would be extraordinary demand for the coins, pushing prices through the roof. The result? Chaos. Likewise with the Utah proposal. Would the state need to weigh and test every single payment before accepting it? What if it got scammed? How to deal with counterfeiting?

Second, there are more theoretical reasons that allowing a gold or silver alternative within a state might not be good. Most notably, it ties that state's fortunes to the supply and the price of the commodity. If a South African mine dramatically boosts gold production, that would not bode well for a state that has just taken in a year's worth of income taxes in gold. (And imagine if someone figured out alchemy: free taxes forever!) Moreover, it is increasingly investors, not supply, that are determining commodity price fluctuations.

Speaking of the recent run-up in gold prices, for instance, investor George Soros called gold the "ultimate bubble," driven entirely by speculation, with prices unmoored from any underlying, tangible value. Other investors disagree. And dollars, of course—as Soros well knows—are not immune to speculative pressure. Still, for a state and its citizens, the question becomes: Why expose an economy to the whims of an unstable commodity market?

Finally, individuals seeking to hedge themselves against imminent hyperinflation have alternatives. They don't need another currency system to protect them, and indeed, they can protect themselves. Nothing stops taxpayers from holding their funds in gold or Norwegian krone* or anything else, then changing them over to dollars when it comes time to pay the taxman.

But for now, Americans seem safe. All of the proposals remain either proposals or in the early stages of the legislative process. So even as the debate over the Federal Reserve and the scourge of possible inflation continues, the primacy of the dollar seems secure.

http://www.slate.com/id/2282765/" onclick="window.open(this.href);return false;

[Col. Flagg]

Looks like a little traction in this area is being developed....

South Carolina lawmaker wants separate currency for state

A South Carolina state politician wants the state to develop its own gold and silver-based currency in case the Federal Reserve collapses and hyper-inflation ensues.

If? )

[creator]

You might be interested in listening to this LDS Liberty podcast episode on the Utah Sound Money act. They interviewed Larry Hilton (I believe he is the guy that wrote it), I thought it was a good episode: http://www.ldsliberty.org/sound-money/" onclick="window.open(this.href);return false;

[Jason]

You might be interested in listening to this LDS Liberty podcast episode on the Utah Sound Money act. They interviewed Larry Hilton (I believe he is the guy that wrote it), I thought it was a good episode: http://www.ldsliberty.org/sound-money/" onclick="window.open(this.href);return false;

He's nuts!!!

[mes5464]

I think one thing that has to be tided to the success of the Utah Sound Money Act, the Federal Government shouldn't be able to tax the currency! Especially, income tax on it.