The Alternative Currency of a 19th Century Abolitionist

Via The Daily Bell

Have you ever had the dream of starting your own society? What about introducing a new currency? Turns out Bitcoin was far from the first private currency.

Josiah Warren didn’t like the political system, and he didn’t like the economic system, so he started his own little alternative community, with a unique medium of exchange. Warren actually started multiple “anarchist” micro-societies, with varying levels of success. Although he never called himself an anarchist, he believed in individual freedom to the point that he argued government was inherently a violation of rights. Continue reading

How Bankers Have Manipulated Currency for Centuries

A friend of mine pointed me to a great article about the history of banking in the United States, and how it has related to everything from our independence from England, all the way up through World War II. The article is very long, so here I will go over some main important points which I have fact checked. I usually think of the creation of the Federal Reserve in 1913 as the tipping point when everything started going wrong in America, but really it starts at the birth of our nation, with people who wanted to manipulate currency, and couldn’t do it without the government’s complicity.

Something they don’t teach in school is one of the main reasons colonists were so angry at England. The conventional story is the Stamp Tax, and the Tea Tax put the colonists over the edge, but in reality, the Currency Act took a much larger toll on Colonists’ way of life. Previously each colony printed its own paper money, since gold and silver were in short supply, which was used to pay back debts to British merchants and bankers at depreciated value. The act forced Colonists to use British money, and in order to borrow it from British banks, it would need to be paid back at interest. Already this created higher costs just for using money at all.

After the Revolution the Founding Fathers attached the value of a dollar to silver so that it would not inflate, and issued the public currency directly from the Treasury, as opposed to using a private central bank which charged interest for the use of its currency. But this system was working too well for many in the banking world, specifically from England who saw their power and profits diminishing as much from the financial independence of America as from the recent Revolution.

Where Britain’s military might failed, politics succeeded and spurred on by Alexander Hamilton, the first Bank of the United States was granted a 20 year charter in 1791. Almost immediately, the spiraling debt in the government budget, championed as necessary for international commerce by Hamilton, began to drain the livelihood of ordinary Americans. The furor over the debt was one of many issues that led to the famous duel between Hamilton and Aaron Burr which resulted in Hamilton’s death on July 11, 1804.

When twenty years were up, the bank charter was not renewed because of widespread public dissent against the system, due mostly to the debt accrued and interest owed, which had to be paid back by everyday citizens. The following quotation by Thomas Jefferson shows his distrust of centralized banks, which when coupled with government power, rob the people of their control over currency.

“The Bank of the United States is one of the most deadly hostilities existing, against the principles and form of our Constitution. An institution like this, penetrating by its branches every part of the Union, acting by command and in phalanx, may, in a critical moment, upset the government. I deem no government safe which is under the vassalage of any self-constituted authorities, or any other authority than that of the nation, or its regular functionaries. What an obstruction could not this bank of the United States, with all its branch banks, be in time of war! It might dictate to us the peace we should accept, or withdraw its aids. Ought we then to give further growth to an institution so powerful, so hostile?” –Thomas Jefferson

The War of 1812 may very well have been an attempt by the British banks to bring the United States back under their control. The war failed, but the debt caused by the war posed new problems for America, and a second Bank of the United States was chartered, again with a 20 year expiration. But twenty years later, the same thing had happened, with runaway debt hoisted on the American people in order to pay back the interest on a private currency. The charter was not renewed, a platform Andrew Jackson rode to victory. The second Bank of the United States tried to maintain on its own, but without government force on its side, went bankrupt in 1841. Richard Lawrence, who attempted to assassinate Jackson in 1835 said his reason was that with Jackson dead, money would be more plentiful.

[T]he main difference between the economic system created by the Founding Fathers and the current system is that the control of the printing presses has been given over to the private central bank. The government no longer prints up and spends the money it needs to operate, but BORROWS the money from the private central bank, at interest! Then the money is spent into circulation and winds its way through the population, and is then collected back in taxes. But here is the problem. Taxes now have to collect back MORE money than the government spent in order to pay the interest back to the private central bank. Over time, relentlessly, the private central bank is acquiring wealth from the population, in essence charging the people a fee for doing what the government itself originally did for free.

Banks were still constrained by the definition of a dollar, which was 371.25 grains of silver according to the Coinage Act of 1791. The actual value rested in the metal, and that metal was actually kept at the banks, even when paper notes were issued. These notes were not the currency, they stood as a marker and could literally be brought down to the bank and exchanged for the amount of silver they represented. This meant banks needed to have something of actual value on hand, silver. So banks could lend out as much silver as they had on hand. But in a system where the value of a dollar is attached to nothing, systems of loans and debt can be manipulated by the bankers.

Even when Lincoln issued a non silver backed currency during the Civil War, it caused inflation, but at least did not accrue debt to be paid back to the issuers. And it turned out Lincoln’s assassination was great benefit to banks who wanted to continue to make money on interest for providing currency.

Following Abraham Lincoln’s assassination, Congress voted to end the Greenbacks, but did not restore convertibility. Banks could issue notes without regard to actual bullion reserves and a period of intense post-war inflation and speculation resulted.

This was the worst of both worlds. Interest would be charged based on the currencies issued, and inflation occurred because the currency was not backed by silver or gold. In 1900 President McKinley restored convertibility in currency by signing the Gold Standard Act, and one year later was assassinated—a curious trend among Presidents who oppose centralized banking.

In 1910, a group of private bankers met at a private island named Jekyll Island to plan the imposition of yet another private central bank on the people of the United States. As part of the ruse, they abandoned the unpopular name “Bank of the United States” and chose the name Federal Reserve to grant themselves the illusion that this was a government agency, when in point of fact it is just another privately owned central bank… Three years later, in 1913, Congress voted the Federal Reserve act and President Wilson signed it, redeeming a campaign promise to his financial backers.

The charter for the Federal Reserve was originally 100 years, seeking to avoid the fates of the first two central banks of the United States. Congress later made the charter permanent, and we continue to be bound to the Federal Reserve today, owing interest on every dollar borrowed for circulation by the U.S. government. In addition, the lack of convertibility, or a gold standard, means that every dollar printed by the Federal Reserve increases inflation, robbing those with savings in favor of those with debts. The gold standard was destroyed by FDR in 1933 when the Federal Reserve complained that it had to have 40% of the gold on hand which the notes issued represented—using the 1929 crash as an excuse for why this needed to be changed.

But the struggle did not end there. Another Presidential assassination would occur when the U.S. itself issued a currency backed by silver. Stay tuned for more on the history of currency in the U.S. and how it can help us, or destroy us.

Private Currency Could Cushion Collapse of Dollar

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What if everyone just stopped using U.S. dollars? Could this possibly solve the economic crisis if people could participate in a barter system free from government intrusion? Amazon has announced that it will start using Amazon coins for purchases, beginning by giving away 500 Amazon coins to every Kindle owner to be used on apps and books. Each Amazon coin is worth one cent, and the money will soon be able to be used on the entire website to purchase anything that you could buy with cash. Amazon will even be offering the coins at a discounted price, for instance 10,000 coins would cost $90, according to the Daily Mail. Even then, customers will get an additional 10% off any purchase bought with Amazon money.

So imagine if all these Amazon coins became so widespread that other people began accepting them, because of the discount that you could get on Amazon. Let’s say a house cleaner decides that instead of accepting $50 to clean a house, 5,000 Amazon coins (the equivalent in U.S. dollars) would also be acceptable. This means that the person paying for a house cleaning can get a 10% discount based on the price he paid for the Amazon coins. The house cleaner will then get a 10% discount when spending the money on Amazon. Both people have now benefitted from using an alternative currency because of the discounts offered, and Amazon has benefitted because the home owner converted his cash into money that had to eventually be spent on Amazon.

But let’s say that because people started using Amazon coins, the local retailers were having trouble competing with Amazon. A local electronic store then decides to accept Amazon coins in order to better compete with the online retailer. People in the community are happy because they can now save 10% when shopping at their local stores, because they can buy Amazon coins for a 10% discount. The local electronic retailer is happy because he now has more business, and when spending the Amazon coin online his money will go even further based on the 10% discount.

But everything he needs for the store cannot be found on Amazon, so he strikes up a deal with the company he buys supplies from to pay part of the price in Amazon coin. Even if this company cannot get all it needs from Amazon, they could begin paying employees part of their salary in Amazon coin, which would now be accepted at many local retailers, in addition to the fact that many employees could substitute some of their shopping to buy on Amazon (with the 10% discount which means if $10,000 of the employee’s salary was converted to 1,000,000 Amazon coin, they would be able to buy $1,000 more dollars worth of goods on Amazon than with the $10,000). Amazon still benefits since the currency is backed by the business, the money must eventually be spent on Amazon, even if it goes through other economies in the mean time. The value of the currency will rise or fall with the success of the business, which would make strong companies like Amazon’s currency a more reliable money.

I had an idea that all currencies could be private, to stop the government from being able to bring on massive debt by just printing more money, and inflating the currency, which takes value from already printed money, and from anyone who has a savings account. Individual banks and stores could issue their own currency, which would have to compete on the marketplace for value. Maybe a local bank wants to profit off of exchanging currency, so they buy up many different store currencies, which are used to back their own currencies. [For example, a local bank buys Amazon coin, and other stores’ coin that are not accepted everywhere, and issues their own currency that all local retailers accept]. Then the stores could begin accepting the bank currency which could be easily exchanged for other currencies, or would become so widely accepted that the bank currency is as good as gold. There could even be more successful, though more volatile currency if say, Stop and Shop currency came to be accepted everywhere, with the knowledge that it would translate into more bank dollars or other business dollars per unit.

This sort of alternative currency is already being used in some parts of the country, including the Berkshires in Massachusetts, which has a local currency called BerkShares that you can read about on the official website of the non-profit group which issues the currency.

BerkShares are a local currency for the Berkshire region of Massachusetts. Dubbed a “great economic experiment” by the New York Times, BerkShares are a tool for community empowerment, enabling merchants and consumers to plant the seeds for an alternative economic future for their communities. Launched in the fall of 2006, BerkShares had a robust initiation, with over one million BerkShares circulated in the first nine months and over 2.7 million to date. Currently, more than four hundred businesses have signed up to accept the currency. Five different banks have partnered with BerkShares, with a total of thirteen branch offices now serving as exchange stations.

I think that these sorts of alternative currencies are a safety net to ensure that the economy continues to function in the event of the collapse of the dollar. If the government keeps printing money, it is only a matter of time before inflation hits severely economically damaging levels. If there is already a system in place of alternative currency, people can still get the products they need, and food they need to live. Obviously a transition to alternative currency in the event of a collapsed dollar would still be a tumultuous transition, but it would be better than a complete lack of a functioning economy. Decentralizing the economy in a way of competitive private currencies would allow regions and industries to be sheltered from the destructive financial decisions of the federal government. If the U.S. dollar collapses, we don’t all have to go down with it.