Competing currencies was the subject of a meeting of the House Domestic Subcommittee on Monetary Policy. The meeting was entitled, “Sound Money: Parallel Currencies and the Roadmap to Monetary Freedom.” During the chairman's opening statement, he said,
“The American people have suffered for decades from the declining purchasing power of the dollar. The Federal Reserve has abused its position as the monopolist issuer of currency to enrich Wall Street and impoverish Main Street. ...The Fed can effectively create money out of thin air with impunity, while creators of gold and silver currencies face jail time. This is a travesty.”
The chairman was making a reference to Bernard von NotHaus, founder of Liberty Dollar, who was convicted before a federal jury last year of making, possessing, and selling his own coins. He made coins out of gold and silver mostly. In effect, he was making a competing currency, although he did not market it as such. And it was catching on. In specific locales around the country, people were using his Liberty Dollars to make purchases. I guess the Fed felt threatened by the competition, and Bernard was arrested for, among other things, "domestic terrorism."
If you asked people ten years ago about a competing currency, most probably wouldn't know what you're talking about. Thanks to the economic downturn, the subject of the Federal Reserve and monetary policy isn't boring or esoteric anymore, as much as the Fed would like to remain so and out of the spotlight. This subject is one of the most important issues in our country and world today. You can't talk about "big government" without addressing the Fed. You can't talk about high taxes without addressing the Fed.
You can't talk about warfare without addressing the Fed. And you can't talk about a sluggish economy without addressing the Fed. The Federal Reserve is behind all these things. It is the "great facilitator." It allows politicians to spend and waste vast amounts of money on pet projects. It allows the President to start and fight wars on a whim. It causes economic bubbles to form and eventually burst. It encourages the welfare state to exist and grow. It allows bankers to get filthy rich at the expense of the taxpayers.
The Fed is responsible for our inherently worthless paper currency. The Fed can literally create money from nothing and loan it to corporations, foreign governments or our own government, expecting repayment with interest. This inflation of the money supply devalues the dollar and causes prices to creep up. So things aren't necessarily worth more; our dollar is just worth less. The dollar does have artificial value in the sense that we are required to use and accept Federal Reserve Notes as currency.
We don't really have much choice in the matter, as the Liberty Dollar case points out. The dollar's value is also being propped up artificially by the Petrodollar system. For a while, it worked. We maintained our monetary hegemony around the world just fine. Nixon had made a deal with Saudi Arabia that we would protect their oil fields from the Soviets and other enemies, and the Saudis would accept only U.S. dollars for their oil. That alone created incentive for other countries to own our dollar. But now, this situation is shaky at best.
Oil importing countries are abandoning the dollar and using other forms of currency to purchase oil.
Before we ousted Saddam, he had abandoned the dollar and agreed to accept the Euro for his oil, and some suggest that that was the real reason we ousted him. India and China have even agreed to pay for Iranian oil with gold. These kinds of trends are not good for the U.S. dollar. This is why certain people have been sounding the alarm on hyperinflation. If countries continue to abandon our dollar, it will lose its artificial value and could potentially become worthless overnight.
At that point, the Fed couldn't print enough money fast enough in order for anyone to want to borrow it. In a hyperinflation scenario, how would we be able to survive? We could barter, but that only works to a point. How about allowing for competing currencies?
One of the experts that testified at the hearing was Robert Gray. He is the executive director of a group called the American Open Currency Standard which works to promote sound alternative currencies. He testified:
“Since the creation of the Federal Reserve and Congress' abdication of their responsibility, the dollar has lost 98% of its value. I don't suspect anyone would call that stellar job performance. I must be blunt and say that, as employees, Congress, you have not been successful in your charge to ‘...coin money and regulate the value thereof...’ and therefore your services in this area are no longer needed.”
Allow Federal Reserve Notes to circulate and allow private mints to issue gold and/or silver coins and see which ones win. I would bet an ounce of gold that people wouldn't choose paper if given the freedom to chose.