We need a licence to print our own money | Hacker News Reader

We need a licence to print our own money

guardian.co.uk

11 pointsmakimaki14 comments

Lietaer's book contains some economic nonsense, but for the most part it's a very compelling argument. The examples drawn from history are especially powerful.

But perhaps the best argument against the usefulness of alternative currencies is that they exist, but no one uses them. There are some modest successes, such as Ithaca Hours (http://www.ithacahours.org/) and there are probably some LETS systems that work, but that's about it.

In an extreme liquidity crisis, such as the Great Depression was, they were great success, but I doubt we'll ever see that kind of crisis again. We have far more tools for preventing extreme liquidity droughts now than we did then.

I'm pretty sure that alternative currencies are illegal in the united states -- wasn't their a big fiasco with the FBI raiding the people making liberty dollars?

I think this makes it illegal: http://www.law.cornell.edu/uscode/18/514.html

Also, there may be tax issues. If you have an alternative currency and the us dollar is inflated do you have to pay capital gains taxes on the growth in value of the alternative currency?

There are also probably issues with money laundering -- in other words I don't think we can say that they exist, without a caveat about the legal limbo in which they exist.

They're definitely not illegal, although certain forms are illegal. That law only covers attempts to create currencies that could be mistaken for US dollars. Other systems are illegal because they amount to an unregulated form of banking, or because they are used for laundering.

For tax: it depends on the currency in question. Barter systems that use a currency to settle barter accounts are taxed as normal income. Systems such as Time Dollars are considered tax free because they are used for non-commercial activities (http://www.timebanks.org/faqs.htm#taxexempt).

In China, there exists at least one system that is considered tax-exempt, except when the currency is exchanged for real currency, in which case it is subject to tax.

Incidentally, Lietaer's website is http://www.transaction.net/

This point isn't anything new. I sent this over to my economist girlfriend and here was her response:

http://www.econgirl.com/1/post/2009/01/first-post.html

The question of local currencies is interesting, but no matter what happens the consumer will have to pay for it in the form of increased inflation.

Actually, she said it would cause inflation only if the central bank also successfully increases the money supply at the same time. I think Monbiot is suggesting this as an alternative to that, rather than something to occur simultaneously.

It's also worth pointing out that although central banks will always be able to produce the necessary liquidity, they have to take ever greater risks to do so. At the extreme, they could purchase each and every public and private bond in the economy, but then they expose themselves to the risk of default on those loans, which could result in severe future inflation. If they are unwilling to do this, then they will not be able to stop deflation. So although they can stop deflation, it's not clear that they will.

Perhaps the most unfortunate thing about Monbiot's article is that he sees alternative currencies simply as a means to fight deflation, but Lietaer saw them as a way to create social capital. The benefit of a negative interest rate mutual credit currency is that it encourages a gift economy, rather than a competitive economy, and therefore builds social ties as well as financial wealth.

He forgot the most important reason that governments and central banks don't allow these things to exist. They can't be reliably and universally taxed.

Generally speaking, these schemes are not illegal.

While not technically illegal, (here and now) the article mentions several historical instances of the creations of such systems and their subsequent abolitions by central banks and governments.

In any case, the tax issue is a hairy problem that has to be dealt with whenever these systems are set up. They will not be allowed to exist tax free.

They exist here and now and are generally counted either as income from a tax perspective, or tax free, depending on the system and the country.

This exists already to some degree already - it's called a gift card, although gift cards are missing an important element of being able to be traded at multiple places.

This is interesting to read, but I don't think it will work. First, forcing people to spend seems immoral, second his "negative interest" is called inflation, and it already exists in ordinary currency.

Presumably stores will be able to redeem the scrip for regular money right? So I can just imagine a store allowing currency exchanges, pay a small fee (less than the monthly fee) and get real money.

The whole thing doesn't seem right to me. And I think the examples don't prove anything - I bet those recoveries would have worked if they used regular money, and on top of that cities can issue IOU's right now, which effectively do the same thing.

And finally the economic problems are global, not local, fixing things locally might not do enough.

Variations on these schemes are already successful. Examples include:

Time Dollars: http://www.timebanks.org/

Ithaca Hours: http://ithacahours.org/

Tlaloc: http://www.vidadigna.info/index.htm

The difference between negative interest and inflation is that the interest rate can be set by fiat (whereas inflation can be uncontrollable) and the value of one unit of the currency stays stable, so contracts written now are still meaningful in the future.

Also, no one is forced to spend, you are simply taxed for holding a non-zero balance, just as you are with a normal loan (or normal inflation, if you are in credit).

As for the examples from history: all the examples Monbiot cites are those where the normal currency has collapsed or is suffering severe deflation. So regular money was clearly not a solution in those edge cases.

PayPal, SecondLife, and other online payment startups have all at one time dreamed about printing a government-free independent virtual currency. The problems are that 1) the existing government really doesn't like that and 2) it's been too easy to abuse and devalue the virtual currency when it's exchangeable for any other recognized currency, destroying your internal economy (and business) to benefit aggressive virtual currency traders.

My 10 year old self would have had no objections at all about working for arcade token wages. I think the author is onto something.

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