End the Fed, Then What? Competing Currencies ExploredOctober 22nd, 2012
Over the past few years, countless Americans have awakened to the fact that their currency system was hijacked nearly a century ago by a private banking cartel. The Federal Reserve system, created in 1913, has systematically debased the buying power of the US Dollar, set unnaturally low interest rates, and caused severe booms and busts that have plunged poor and middle class Americans into financial chaos. With a growing number of citizens meeting annually to shout “End the Fed” outside of Federal Reserve branches across the US, it begs the question, what’s next?
Some media outlets have denigrated the End the Fed movement by misstating its policy goals. While most Americans would likely want a gold or silver backed currency note for daily use, the vast majority of Federal Reserve opponents are calling for competition between currencies, which would include a variety of gold, silver, and commodity standard options. However, the Paul Krugmans of the world routinely oversimplify the policy goals of the End the Fed movement by describing it as an effort to return to a strict gold standard pegged to the US Dollar. Let’s take a look at how competing currencies could be realized, both legislatively and in the market.
Ending the Fed, Legislatively
The act of ending the Federal Reserve overnight would have such devastating consequences to the economy that anti-Fed leaders such as Dr Ron Paul and Tom Woods have not called for something so sudden. Instead, they have argued for a move towards competition between currencies.
To create a competitive currency environment, very few policy steps would have to be taken. First of all, legal tender laws would have to be repealed, allowing Americans to recognize whatever they want as a currency. Also, all taxes on capital gains, gold, silver, and other monetary products would have to be completely discarded so that consumers would not face a transaction fee when switching between currencies.
Would Multiple Currencies Lead to Chaos?
Some people fear that competing currencies will create chaos at the counter at the grocery store. However, software is already capable of reading a variety of measurements which compare and contrast the value of different global currencies in real time. Consumer demand for “check card” style transactions would still exist and thus lead most banks to provide them. Retail software applications could easily measure the value of one-to-one gold-backed notes against those issued by a bank with a riskier reserve ratio, backed by investments into new companies. In reality, most consumers would never notice the difference while using competing currencies day-to-day, other than the fact that they would be able to actually retain the value of the money they worked so hard to earn.
Additionally, competing currencies would allow people from different economic backgrounds to use products better suited to their needs. Poor and working class families would probably want a commodity-backed currency product to protect their limited funds from inflation. The vast majority of check-to-check consumers would hold the lion’s share of their money in banks like these. Investors with extra wealth might choose to put their money into banks with risky reserve ratios. Currently, everyone in the US is required to invest all of their money, including that which is to be used for day-to-day expenses, in banks with ten-to-one reserve ratios. This does not benefit someone living check-to-check, as this puts their daily living expenses at serious risk. However, a wealthy oil tycoon might want to invest in a bank which has an even riskier reserve ratio than that, provided that the bank in question was issuing the notes to fund investment into some promising new businesses.
Competing Currencies: The Most Advanced System the 21st Century Has to Offer
Krugmanites and Keynesians often refer to the gold standard as “taking us back to” some period in the past, as if opponents of debasement of currencies (a monetary “technology” dating back to pre-Classical eras) are calling for a barbaric system, unequipped to deal with the complexities of modern life. However, competition in currencies combines all monetary theories into one powerful system.
The vast majority of consumers would opt to put their money in a gold or silver backed bank. These funds would remain in the economy no matter what. However, there would be nothing preventing another bank from issuing notes against business investments or other financial products. These would be riskier currency notes that could immediately lose value if a company went bankrupt. This allows wealthy investors to create jobs with extra money. When their businesses fail, the notes issued against them would be removed from the economy by default, allowing the total amount of currency in the system to expand and contract based on the success or failure of new businesses, rather than the whims of a handful of people at the Federal Reserve.
Google-style algorithms would give rise to baskets of currencies which change their composition in real time and at high speeds, ensuring the strongest possible currency at the time based on proprietary considerations. There would likely be a wide range of these available for consumers that needed them. Ultimately, competition in currency is the most cutting-edge monetary system offered by any economist to date and is the end-game planned by those who are leading the End the Fed movement. By tackling this tough problem in a unique new way, Americans will be allowed to phase their funds out of the Federal Reserve debt-backed note before it totally loses value.
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