Cuckoo Bananas Money
July 26th, 2007 by 
draveed
I had a vague idea of the existence of alternative money but it wasn’t until today that I really spent time reading about it. It all started with a passing mention of the Ron Paul Dollar in The Economist. This is a commemorative “coin” issued by Liberty Services (formerly NORFED) to praise Ron Paul’s anti-Federal Reserve stance and, although I haven’t seen it explicitly stated, his likely pro-commodity money opinion.
The Liberty Dollar people are using Ron Paul’s media presence to pump up awareness of their alternative currency. I’d call that plan a success, but what bothers me is the existence of an alternative currency. Why should one exist? Below are five reasons I’m copying from Liberty Services’s FAQ.
- Because you want to protect the purchasing power of your money.
- Because you want to profit from inflation.
- Because you know the US dollar notes are debt based and depreciating.
- Because you want to affect a real change in a peaceful and positive way.
- Because you support the Constitutions of the United States and your State.
This sounds like lunacy. Allow me the pleasure of breaking this down for you.
1. If you’re afraid of inflation destroying the value of your money, you buy TIPS. TIPS are Treasury Inflation Protected Securities. These are a type of US government bond where your principle is adjusted according to the CPI, thereby protecting your investment from inflation.
2. There’s a better way to profit from rising inflation than buying Liberty Dollars. Yeah this currency is backed by a silver mine but as the FAQ says you’re paying a premium to support the overhead of running a currency. Why bother with that? Take your depreciating US dollars and buy silver bullion (or another precious metal). Then when you need money, exchange a portion of your silver for it. The silver is the real store of value. The Liberty Dollars are just a middleman, and a dubious middleman at that.
3. Fine. I know US dollars are depreciating. So I’ll spend them now on things that retain their value or appreciate. It’s called investing. It’s the thing everyone is supposed to be doing. Fools sit on their cash. You should be buying bonds, commodities, stocks, real estate. It’s like that Bible story about three servants who get a hand-out from their boss. The two who invested to grow their money were rewarded. The one who saved his money got nothing for it. I think he got fired actually.
4. This is the only reason I can see why anyone would buy a Liberty Dollar. If you want to try and thumb your nose at credit based currency, by all means spend your money on this. Don’t think you’re making a sound economic decision though. As I already said there are smarter ways of protecting yourself from inflation.
5. I bet this reason is nearest and dearest to the militiamen hiding out on the top of a mountain waiting for civilization to fall. Those people constantly cry about defending the Constitution but they’re the first to hope for the nation to collapse. Anyway, I find the logic behind this lacking. The Constitution makes no statements on monetary policy.
I find it really disheartening that people would want to turn back the clock and use commodity backed money again. There are so many negatives. The obvious one is that using a commodity standard for your money takes away the industrial or commercial applications of that commodity. Switching back to a gold or silver standard means those materials would become too valuable to use. They would stay locked away in vaults.
This presents another problem. For your commodity currency to exist you have to store an amount of the commodity that equals the money supply. M2, which includes cash, savings accounts, checking accounts, travelers checks, CDs under $100,000, and mutual funds, was reported on July 19th as $7.25 trillion. Collecting all the gold on Earth would not be enough to equal M2, let alone M3 which the Fed stopped bothering to report. M3 is probably around $10 trillion.
So switching to a commodity currency would shrink the money supply because there is not enough of any commodity to equal the value of all the money that’s out there today. A shrinking money supply is deflationary. The common person would make the mistake of thinking that’s a good thing because in a deflationary environment you see prices tumbling. You’re forgetting though that your wallet is also shrinking, and so is everyone else’s. There’s less money in the system. This will retard growth or even shrink the economy if it’s bad enough because companies will have a harder time getting money to expand. Entrepreneurs will have a harder time finding people to invest in them so fewer new companies will get started. That means higher unemployment and a stagnant economy. Japan has suffered with deflation for about fifteen years now. It is not an enviable situation.
After the dust settled a commodity currency would be less stable than the credit based currency we’re using today anyway. When have commodity prices been stable? The constant change in the value of gold or silver would constantly change the size of the money supply. Don’t tell me the government is fixing the price of a commodity. You can say a dollar equals one-thirty-fifth of an ounce of gold. When a new gold mine comes online and pumps tons of the metal into the marketplace it will effect the value of your money. If the government doesn’t revalue your dollars, a black market will emerge.
I can only guess an old fashioned commodity currency appeals to people who distrust the modern world. Go hoard your bullion fellas. Just don’t try to give me any of your cuckoo bananas money.
Posted in Finance, News | 8 Comments »
July 28th, 2007 at 3:22 pm
I’ve been using the Liberty Dollar (LD) for near four years.
Most of your points are fine,
1. If you want cheaper silver, buy silver. Liberty Dollar costs more because of the expense of it’s design to be a currency (rather than a bulk commodity)
2. If you want a currency that doesn’t encourage BIG Govt, non-backed fiat and the semi private Federal Reserve, you’ve not much choise than to use LD. Have you ever tried to negotiated a trade wiht a PLAIN silver round? Even in a post catastrophe or hyper inflation I think a more fairly denominated silver round will do better than the plain ones or the silly denomination of “ONE Dollar” Federal ones.
3. TIPS??? Sure, IF you trust the Govt’s inflation measure more than thousands of years of Silver as money.
4. and sheeeesh dude!!!you need READ the Constitution!! it clearly states “NO STATE shall make anything but GOLD AND SILVER a TENDER”
5. Who benefits from The Liberty Dollar??
Holders benefitted greatly since 1998 since it started, LOOK at a silver price chart.
Business who accept them get new customers and make a commission using LD.
Customers get a bit of BEAUTIFUL silver occasionally as they choose. it’s gone up in value and is a nice value holder for future. Many many people have LEARNED and had fun by TALING about using REAL money. (even today, Law dictionary’s define real money as “precious metal or gold and silver” and Federal Reserve notes as “evidence of debt”. Many customers even get a discount for using LD and/or buy it from www LibertyDollar ORG direct at a discount, saving money shopping at LD merchants.
To say money should not be a commodity is fine,IF it were by FREE Choice. Money wouldn’t NEED the force of LAW if as you claim, fiat were superior! Silver as money ensures’ it’s continued supply, it does not make it “dissapear” as you seem to think. For you to assume current per ounce prices off to the future is not proper, even ONE OUNCE of silver could be a worlds’ supply of money if denominated in millionths of an ounce. so THAT argument is irrelevant too
So, Finally, CHOICE is important in a FREE Society, we don’t stop YOU from using Federal Reserve notes (just because we occasionally use silver), please don’t encourage our Govt to continue to stop us from using Silver!! via such strong attacks.
but THANK YOU very much for listening and letting me react to your article!!
July 30th, 2007 at 6:12 pm
I didn’t read your entire article. I read the part about TIPS, and stopped. Why? Because the real inflation rate is upwards of 13% and rising. If you use the CPI, you will never beat the real inflation numbers. Check this out for verification — http://www.shadowstats.com/cgi-bin/sgs/data
Gold and silver are completely manipulated on the world market, thanks to the plunge protection team (PPT) and can’t be trusted — see http://www.gata.org for verification on this.
Southeast Asia securities and foreign property investment (anywhere Americans will have to move to, to be able to afford retirement and healthcare outside the US) are the only real reliable sources of future income, going forward.
Cash out your home equity while you still can. Liquidate your assets. Get out of US dollars entirely. The plan seems to be to make the US dollar worthless, to ensure a smooth transition over to the North American Union “Amero” currency. The Amero will likely be backed by digital gold, which will be yet another form of fiat money (vulnerable to Fed-induced inflation).
November 29th, 2007 at 5:11 am
The decline of the American dollar is inevitable so long as we continue to rely on our current Federal Reserve system. True growth of wealth can not be achieved simply by printing/minting more currency. In fact, the opposite is true. The more you print/mint, the less that currency is worth, hence, inflation. So, it baffles me as to why you would think a commodity based currency is foolhardy ‘Cukoo Bananas Money’ as you put it. I believe the best possible hedge against inflation and thus a loss of wealth would be a commodity based system.
Just my .02
November 29th, 2007 at 6:52 am
[...] we’ve recently discovered that Ron Paul is backed by: people minting their own “cuckoo bananas money” and members of an identity theft ring. We’ve learned that “Paul has the support of [...]
November 29th, 2007 at 11:53 am
To the people who make the point that the Constitution says that states can’t make anything but gold & silver currency:
1) It refers to the STATES, not the Federal government – it’s in a section entitled “Restrictions on State Powers.”
2) The same clause authorizes letters of marque & reprisal…so I’m heading to the courthouse to get my privateering paperwork done so I can sail the high seas plundering our enemies’ vessels.
How many people who claim to be Constitutionalists are really just following whatever they’re being told, and how many just have issues with reading comprehension?
November 29th, 2007 at 11:13 pm
Actually, “the same clause” *prohibits* states from granting letters of marque and reprisal – instead of authorizing them as your clearly superior reading comprehension skills have led you to believe!
But by the way, I find nothing hilarious or outlandish about having the federal government grant letters of marque & reprisal. I think taking such an action could have been a useful tool in taking care of Bin Laden.
November 30th, 2007 at 7:44 am
Funny. Ever read Gibbon’s Decline and Fall of the Roman Empire? How less and less Gold was used in their coins? Ancient form of inflation. The last tie to gold was broken in 1972 by Richard Nixon. The Dollar has a 35 year history as Fiat money. Gold and Silver have over a thousand years of history as a store of value. How in the world does this escape the notice of this self rightous pompous fool who wrote this? Believed a few too many things your public school economics professors taught you? Anybody can google Dow vs Gold to see the historical comparison of the two. Since Gold was tied to the dollar pre 1972…any pre 1972 comparison is pointless. What you will see is Gold beats Dow 1972 to 1980. That reversed during the high double digit fed rates during Volckers tenure as Fed Chairman. Dow beat gold from 1980 to 2000. From 2000 to present Gold beats Dow. Somehow I doubt the author of this note believes the Fed should raise rates to double digits but that is the only things that is going to prevent a return to stagflation.
At Bretton Woods in 1944 the US was #1 in Gold Reserves, #1 in Manufacturing, Large Oil and Natural Gas Prospects, the strongest military, A stronger rule of law and financial institutions and traditions that merited confidence. The leader of the “global economy” was placed in our hands. Great for our financial institutions and political leaders. But…power corrupts. Today we our no longer a leader in manufacturing, Research and development is follwing the same path. Our military is tied up in two gureilla wars, our natural resources are depleted, our political and financial leadership is corrupt and no longer respected. Our grip on the “global economy” is slipping as more countries no longer want to use our dollar as the reserve country. With good leadership this wouldn’t have happened. But power corrupts as it always has. Our leaders have concentrated on military and financial power at the expense of everything else. If we maintained our manufacturing and development leadership other countries would still be willing to follow us. As we have nothing but our military power and our historical role as global finance leader…most countries are seeing us for the hollow shell that we are. Our days are numbered. But this is what history tells us. Empires rise and fall and are replaced by the next empire. China? India? Who knows…You will know the passing of the baton is near when the latest products and scientific breakthroughs are coming from Asia instead of the US. There is a false belief that Americans are naturally intuitive as part of our culture and the Asians are not capable of being inventive!!! This is nonsense. Most of our talented scientist are imigrated Asians. They are already doing the heavy lifting, they have just been doing it here. They came here because this is where the most money and work was being done. Many of Asias most talented engineers and scientists are staying put now. It is only a matter of time. You can only run the world on a printing press and by the barrel of a gun for so long. The rest of the world is turning away from us. The smartest thing any American can do right now is buy gold and silver.
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
Alan Greenspan
1967
“By a Continuing Process Of Inflation, Governments Can Confiscate, Secretly And Unobserved, An Important Part Of The Wealth Of Their Citizens”
John Maynard Keynes
November 30th, 2007 at 9:45 am
“1) It refers to the STATES, not the Federal government – it’s in a section entitled “Restrictions on State Powers.” ”
Any power not delegated to the Federal government by the Constitution belongs to the states. “…To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures…” Article I, Section 8. A simple look at history and the constitutional convention debates will show that the choice of the word “coin” (as opposed to print) was no oversight. The massive inflation caused by printing Continentals during the Revolution, as well as every other fiat currency throughout the history of the colonies, showed our founding fathers the need to abstain from paper money. And alas, they were right. A mere 16 years after the Federal Reserve Act was passed, we had the worth depression in history, FDR stole everyone’s gold, and we’ve since been saddled with a dollar that’s worth about 4 cents what it was then.
Most Constitutionalists usually know a little about history, too.