@guruvan - my reply there was actually to Dan The Man

Good points. I agree totally. But that doesn't equal socialism. 

When you say "real backing currency" you are talking about reserved gold or silver, as that's what hard backing means, right? So they would keep a larger amount of digital currency in reserve than the gold/silver they used as backing? I'm pretty sure the public would want to verify they had the amount of precious metal they claimed.

What do you mean inflate the backing currency? You can't inflate gold or silver.

As soon as they announced this required update you can bet everyone would be running to exchange the currency for its backing.

I'd put my money on the latter too.

However, their site says "all the benefits of cash ... instant private secure". I'd imagine that means anonymous too, but I guess we have to wait and see.

If it's a true gold standard then the backed amount shouldn't vary. And either way, it's still not socialism. Bad economics, yes, but that doesn't equal socialism.

If that were true you'd be asserting the U.S. has been a socialist country since 1913. I don't think so.

Yes, a hard backed Bitcoin alternative could be set up quite easily. But then the government couldn't inflate the currency. What incentive would a government have to do it? The goodness of their heart?

I'm not so sure.

One thing this, and Bitcoin too, has shown me is that money is changing -- it no longer needs to be local to gain adoption. People are going to look for whatever is most convenient to exchange and is the best store of value, two key functions of "money". In the past, since people and economies were separated physically, and money was/is physical, the local currency would win by default.

With the Internet this is no longer the case. Now it comes down to the nitty gritty. Currency systems will compete globally. And since software can be the same anywhere, the money that wins will be what people agree has the best value.

Inflated paper currencies are on their way out. They are about to self-destruct anyway, but even if not they represent old technology. Globalized e-currency will be what is next.

However, just as the Internet enables better money systems it will allow people to get better at identifying them. Information is no longer encapsulated and unavailable to the uninformed. It won't be easy or perhaps even possible for currencies to be inflated without being severely devalued. I believe the world will identify gold and silver as a benchmark. These metals have been recognized as valuable as money for thousands of years, and are not inflationary. I doubt that will change.

I think people will maintain a physical store of gold/silver as savings, and convert them to the winning e-currency(ies) as needed. Bitcoin, with its transparent, verifiable cap at 21 million coins, and authority-less features, will have obvious value. The governmental/regulatory environment that springs up around it will determine what role it plays in everyday mainstream use.

On the other hand, currency like this MintChip is novel as the first e-currency sponsored by a government. What they do with it remains to be seen, but it appears they are looking to inflate it. The only clue we have is from the CEO who commented it would be "backed by a fund". Not backed by gold or silver (which could be surreptitiously inflated anyway), but backed by a fund. That leads me to believe it won't go very far with acceptance.

EDIT: Here is more reading I found on MintChip. It appears there is more in store from them April 17th.

http://www.agoracosmopolitan.com/news/canadian_news/2012/03/15/3426.html

How do you get that?

Thread title is inaccurate. It's not an alternative to Bitcoin because MintChip is centralized and requires trust in one entity. It's a competitor, however, because it competes on an electronic functionality level.

Aha.

To borrow some of your earlier words, and now we get to the crux of the matter.

Let's say a mother sends a son to the store to buy some eggs and milk. She gives him $10 saying that should cover it. If the son returns with cigarettes, booze, chips and other junk food, and is asked why he doesn't have eggs or milk, do you think he can validly claim it's because he ran out of money?

Matching this analogy to US monetary policy your answer would seem to be 'yes'. But I would say no; the money didn't run out. Instead, stupid and possibly harmful and dangerous decisions were made which were not in line with the original plan.

Things like war and entitlements are favorable to big government because they allow it to maintain power and even expand it. However these things are expensive.

Here is the second sentence from the Wikipedia entry on the 'Nixon Shock':

By the early 1970s, as the costs of the Vietnam War and increased domestic spending accelerated inflation,[1] the U.S. was running a balance-of-payments deficit and a trade deficit, the first in the 20th century.

Do you think that things like the Vietnam war or Iraq war were, on balance, good things? I don't know many that do, and yet that's what we got. We got them because as long as people don't feel the cost of such things government can get away with it. But if these are expensive how can government mask the cost? Simple, by monkeying with the money.

Inflating or debasing the money supply is not new to the world. Governments have been doing it for hundreds, if not thousands of years.

The Founders were knowledgeable of this. The Constitution was written to restrain government. The Founders knew the role that money and "legal tender" would play in this restraint as well. In my grocery store analogy one might argue there was not explicit instruction to not buy cigarettes and booze, so the excuse of running out of money for milk is valid. But we have established the Constitution is quite clear on legal tender. It says the States shall make no thing but gold or silver legal tender. And yet we see that we now have paper money with absolutely no connection to gold or silver as legal tender.

How did this happen? Gradually. The Nixon Shock of course wasn't when we first stopped paying out gold/silver. We reduced and eliminated domestic payments much earlier. Nixon simply cut the last shackle to government spending completely. de Gaulle recognized what was happening with US spending, and understood the monetary role played by gold. Someone else recognized the significance of the events of the early 70s. A young physician named Ron Paul who had picked up economics from hobby reading saw the distant course the US was taking away from the original plan towards bigger government too, and decided to get involved in politics and warn about it.

Today we have wars, high unemployment, massive debt and an inflated money supply measured in the trillions of dollars. We're likely to go bankrupt. You are right that there probably isn't enough gold and silver in the entire world to back dollars now at the defined rate. But I have to ask: do you consider those inflated dollars and the course we've taken to be what was intended as best for the people? Because that would be the only way we could have a failure of the ability to use the originally defined backing of silver.

You put two of my quotes together, apparently to suggest they contradict each other. But the 27 dollars listed in bold from the second quote represents inflated and, to be sure, unconstitutional dollars. Big difference.

Now that I'd love to see happen.  

Fair enough. Then I'll imagine for now it's only States that can't coin gold and silver. Private individuals and Congress can.


Federal Reserve Notes are not paper?  

And you think paper can't be a commodity? Let's say the U.S. experiences massive hyperinflation resulting in total loss of confidence in the dollar, or more accurately Federal Reserve Notes. The many newly poor and homeless on the streets might be glad for paper to burn for warmth. You're saying a vendor wheeling stacks of FRNs down the streets in a wheelbarrow (perhaps along with matches) selling for gold rings, bracelets, etc., and the people lining up to buy a source of warmth for the night wouldn't be purchasing a paper commodity? Which universe exactly are you in?


Nice try.

The value wouldn't be stable either. If there was any value you can bet those with the ability to create more dollars (the govt.) would do so since they would not be restrained by the ability to honor the backing. This would mean inflation and loss of value, even if the value was small to begin with. You either have zero value, or some value. I've shown why your statement is false, unless you meant a stable value of zero?


Do me a favor and get a paper dollar from somewhere. Look for the words "legal tender" on it and let me know if you don't find them. We established the Constitution says only gold and silver can be legal tender.


I said the value of the U.S. dollar was based on a certain amount of silver. I did NOT say there was an attempt to maintain that value. Your problem appears to be failure to account for fine distinction. The Constitution gives Congress the power to coin money and regulate the value thereof. If Congress instructs the U.S. Mint to create 1 dollar coins consisting of 1 ounce of silver then Congress is legally exercising its Constitutional authority. This says nothing of any "attempt" to maintain the value for a dollar. The legal instruction to the Mint is not an "attempt", it's an instruction.

Now if people in the marketplace want to price their goods in dollars and accept those 1 ounce silver coins Congress had minted that's their business. People are NOT forced to use those coins if they feel they don't provide enough value. People are ONLY required to accept them for settlement of debt owed them if they are declared legal tender.

So I hope you can see, as I said above, it's only people that can ultimately decide the value of something. Foreign coins consisting of 2 ounces of silver might be the preferred choice of the marketplace to use as dollars, for example. And in this case Congress still hasn't failed at any attempt. They can go on defining 1 dollar as 1 ounce of silver. Some in the marketplace will recognize that value simply because it's the legal national currency.

But as I've pointed out the people and the marketplace have never rejected that definition of a dollar. Indeed, people WISH they could get as much silver per dollar as the original definition stipulates. So where is the failure?

Indeed, what we are missing IS an attempt to maintain the value of a dollar in terms of silver. IF this WAS the attempt we would never have stopped paying out silver/gold.

We may have had failure in political decisions in history, yes, but we haven't had failure for trying to define the ratio of silver to 1 dollar.


I'm sorry what it sounds like to you. Let me tell you what each is.

Fiat is a decree. So fiat money is money that becomes so by decree. This means if the government wants to declare that sticks are money, then sticks will then be money by decree. The problem, which should be obvious, is that simply declaring that something (like sticks) has a certain value, or any value at all, is inherently flawed. Why? Because the assigned value has to be accepted by people who have free will and probably other ideas about what is valuable to them.

Denomination is a value or size (as of money), or the act of denominating.

Yes, I know. What I was referring to there was competing currencies, and should have more specifically said: as long as they are not gold or silver, and thus compete as legal tender. But since you are pressing me on this point I would have also defer the question of whether or not competing currencies could also be gold/silver to a Constitutional law expert.


I didn't say the value of Federal Reserve Notes had anything to do with the commodity value of paper, it was you that suggested it. You said: "The way that stable value is assigned to a commodity, whether gold or silver or anything else, is by keeping it in circulation."

I simply pointed out that paper is a commodity, so if your statement is correct its value could be assigned and made stable by keeping it in circulation. I then provided example of why that is false.


No, it wouldn't. This is also false. Let's walk through what you're saying, which is if I collect 5000 dollars as you describe I can turn them in somewhere for 1 block of firewood, right? And this would make the value of dollars extremely stable over the last 100 years?

I'll explain why that's false. Gold, unlike tree firewood, is hard to acquire when you have none. Scarcity creates value. If you gathered together all of the gold ever mined you could only build about 1/3 of the Washington Monument. Contrast that with the ample supply of tree firewood already available, not to mention what could be created and harvested on demand. This would mean your dollars backed by firewood would never have any significant perceived value. Far from having stable value firewood backed dollars would only be valuable and in demand when required for payment of debt, assuming they were declared legal tender. Further, it's obvious they would be inflationary because there is nothing realistically restraining their creation, since they could always be honored.


I didn't disagree with your post. I disagreed with parts of it, as indicated.


I find it amusing you presume to know what I do or don't know or recognize.  


Who says there was an attempt to maintain the value of the dollar in terms of silver? And that it failed? If that were true you would not be able to exchange about 24 grams of pure silver (or ~0.85 ounce) for 1 dollar. Have you checked the exchange rates on silver lately? Far from 1 dollar, you can get about 27 dollars for that much silver today.


No, I believe it's you who doesn't have the point. The flaw of fiat currency is that it attempts to assign value where there might otherwise be none.

Congress has been overstepping its bounds too. So has the president. I'm only pointing out what the system is, and how it's supposed to work. The three branches of government answer to the people. It's the people that are not holding them in check.

The Supreme Court has the duty and power to interpret the law, not write it. That's why it's important to be clear in writing laws.

No, I disagree here. For example, paper is a physical commodity. Many governments, including the U.S., keep fiat paper money in circulation but that obviously doesn't guarantee a stable value, nor prohibit hyperinflation which results in zero value.

I actually said "persistent" value not "stable" value. And the way to assign that is simply by denomination. For example, the U.S. dollar is originally based on a unit of weight equaling 371 4/16th grains of pure silver, or the precise amount found in Spanish milled dollar coins.

It's only people that can agree as to whether or not anything used as money is stable  

However, I do agree that by declaring what is legal tender by decree or fiat, and thus imposing it in circulation does give an advantage and usually does result in some baseline value. Of course, as mentioned, that baseline value is never absolute, no matter how many years people become accustomed to it circulating (*cough* US dollar *cough*).


I agree here. And this is an important point. As I mentioned above whatever is declared legal tender has an advantage for being accepted as money. But as you say, what Congress coins doesn't have to be gold or sliver -- it just won't be legal tender. By this same token we return to your earlier point about the legality of competing currencies. I agree they are legal, whether created by Congress or individuals, as long as they are not gold or silver, and thus legal tender. So bitcoins are already legal according to the Constitution IMO.
 

Hmm, I can't say I agree here regarding who owns legal Constitutional gold/silver coins created by the US Mint. I'd have to defer that to an actual Constitutional law expert like Tom Woods, but my understanding is the US Constitution trumps the US Treasury, and the Constitution was written to restrain government. I don't believe the government can claim ownership of any gold/silver US eagle coins I possess, nor prevent me from melting them down, so long as I am not attempting to defraud their value.

EDIT: Oh, and no, it's only Congress that can create laws, and any regulations/rules made by departments are to support but never contradict those laws. The U.S. Constitution is the highest law in the United States.

Nope, nope, nope.

So much wrong here.

@benjamindees - I agree there is a lot of misunderstanding of what the Constitution authorizes regarding money. That's part of why we have such a mess of the monetary system now.  

Taking a strict constructionist view of the Constitution you are correct the government only has the powers listed, and none more, so they can't seize private property. But we must also look at the context in which the power to "coin money" is given, and what that means.

First, what does coining money mean? For that matter, what is money?

Article 1 Section 10 is clear that States cannot coin money, so there is obviously something of importance here. But States are also not to make anything but gold or silver legal tender.

So taking Article 1 Section 8 with Article 1 Section 10 which gives Congress the power to coin money we arrive at a monetary system we would have if Americans currently used only gold/silver U.S. eagles from the mint as legal tender.

I believe this is what the Founders intended. And if we had this monetary system we of course wouldn't have inflation or the bloated and unsustainable debt and government we currently have.

So, answering the question what exactly is "coining money", I believe it is assigning a recognizable and persistent value to some commodity -- in our Constitutional case, gold or silver. So Congress is supposed to coin gold/silver coins and specify their value.

As to mutilation/confiscation, seizing property etc.

FDR didn't seize only gold coins. Executive order 6102 specified all gold coin, gold bullion, and gold certificates had to be delivered to the Federal Reserve. Indeed the current gold/silver U.S. Mint eagle coins we have now are a recent thing, brought about thanks to congressional efforts from Ron Paul.

There are actually two separate US Code sections on mutilation: 331 and 333, where 331 refers to fraudulent intent and specifically mentions "coins". Taking gold/silver coins into account that wording make sense.

http://www.law.cornell.edu/uscode/text/18/331

Section 333 refers to bank notes (bills, drafts, or other evidence of debt issued by any national banking associatioin, or Federal Reserve Bank, etc.) and the qualification is intent to render such evidence of debt unfit to be reissued.

http://www.law.cornell.edu/uscode/text/18/333

Penny machines at theme parks should be fine IMO because the "money" they are mutilating is unconstitional/illegal in the first place.  

If the pennies were made from gold or silver then as long as the machine didn't intend to defraud the value it would be legal.

I believe you're looking for this: http://bitcoin-otc.com/vieworderbook.php


I believe you're well intended but short-sighted.

If someone asked me that question I'd say yes, but instead of a game it's very real.