Guest Post: Currency Competition

Tyler Durden's picture

Submitted by John Aziz of Azizonomics,

Monopolies contribute to many problems — the record of evidence illustrates the potential inefficiency, waste and price fixing.

Yet the greatest trouble with monopolies is what they take away — competition. Competition is a beautiful mechanism; in exercising their purchasing power and demand preferences, individuals run the economy — it is their spending that allocates, labour, capital, resources and brainpower. It’s their spending that transmits the information that determines what gets made, what doesn’t, which businesses succeed and which don’t. Individuals exercise a far greater political and economic power in a free economy when they spend, and when they work than when they vote. So without competition, the power of choice suffers, and businesses, markets and societies can become economically stagnant and rampantly corrupt; look at North Korea and the myriad other examples of once-prosperous societies impoverished by a lack of economic competition.

In a free market, monopolies are less problematic because lacking competition a monopolist can become complacent and inefficient, allowing competitors a foothold to grab market share; consider the near-monopoly of Microsoft Windows and Internet Explorer in the 1990s, which began to melt away via the rise of Apple, Google, Firefox and the poorly-received Windows Vista in the 2000s.

Monopolies can be much more problematic when a monopoly develops and the holders of that monopoly conscript the power of the state to protect their dominance. Whether their business is food, or clothes, or computers, or money, a state-protected monopoly limits competition and so distorts the allocation of resources, capital and labour.

If we are for competition in goods and services, why should we disclude competition in the money industry? Would competition in the money industry not benefit the consumer in the manner that competition in other industries does? Why should the form and nature of the medium of exchange be monopolised? Shouldn’t the people — as individuals — be able to make up their own mind about the kind of money that they want to use to engage in transactions?

Earlier, this year Ben Bernanke and Ron Paul had an exchange on this subject:

Bernanke contends that it is possible to transact in a competing currency like Yen, or pesos or bitcoin. But, as Ron Paul points out, there are still a number of laws which are still preventing a level playing field:

The first step [to real currency competition] consists of eliminating legal tender laws. Article I, Section 10 of the Constitution forbids the States from making anything but gold and silver a legal tender in payment of debts. States are not required to enact legal tender laws, but should they choose to, the only acceptable legal tender is gold and silver, the two precious metals that individuals throughout history and across cultures have used as currency. There is nothing in the Constitution that grants Congress the power to enact legal tender laws. Congress has the power to coin money, regulate the value thereof, and of foreign coin, but not to declare a legal tender. Yet, there is a section of US Code, 31 USC 5103, that purports to establish US coins and currency, including Federal Reserve notes, as legal tender.


The second step to legalizing currency competition is to eliminate laws that prohibit the operation of private mints. One private enterprise which attempted to popularize the use of precious metal coins was Liberty Services, the creators of the Liberty Dollar. The government felt threatened by the Liberty Dollar, as Liberty Services had all their precious metal coins seized by the FBI and Secret Service in November of 2007.


The final step to reestablishing competition in currency is to eliminate capital gains and sales taxes on gold and silver coins. Under current federal law, coins are considered collectibles, and are liable for capital gains taxes. Coins held for less than one year are taxed at the short-term capital gains rate, which is the normal income tax rate, while coins held for more than a year are taxed at the collectibles rate of 28 percent.

This is not a radical change. In this age of cashless payment people can simply load their alternative currency onto a debit card and spend it — similar to the gold-denominated debit card currently available to non-Americans from Peter Schiff’s EuroPacific Bank. In this age of Google and ubiquitous computing, exchange rates can be calculated instantaneously.

If people and businesses choose to stick to government-backed fiat money and refuse other currencies, that is their prerogative as individuals. It is possible that other media of exchange would not become popular; but at least there would be a more level playing field. Under the status quo, there is no level playing field.

It is often said in Keynesian circles that Bernanke is too tame a money printer, and that the people need a greater money supply. Well, set the wider society free to determine their own money supply based on the demand for money.

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SilverDoctors's picture

Not only does the fed have no currency competition, but Jim Willie says The Morgue and the Squid are about to have less banking competition.


Jim Willie: Morgan Stanley Faces IMMINENT FAILURE & RUIN, May See 1st Private Stock Account Thefts

Willie states that Morgan Stanley faces IMMINENT FAILURE & RUIN, that The older employees are selling all of their stock, and that Many workers are making contingency plans for their next positions in another firm.
He states that JP Morgan will devour the carcass, and that The Morgue may be preparing to execute the 1st ever private stock account vaporization/ rehypothecation.

Muppet of the Universe's picture

devour the carcass? They are leveraged into retardation^infinity.  JP Morgan would be juicing for just a while off that junky's corpse, until the high of all the methodone and k2 wore off and all that was left was a cracked out jp crash.

AldousHuxley's picture

there is a cost to running a competition.


reserve currency says costs to running a currency competition outweights the benefits of competition which is increase in quality so unify to undercut overhead.


but now is time to hold banksters responsible by introducing concept taught in Harvard business school in capitalism 101.....competition increases quality.


when bankers are buying their own debt, you know shit has hit the fan.


someone take a large fan and pile of dung and have it blow in the direction of the federal reserve right about the time bernanke steps out.

repeat in front of congress.

NotApplicable's picture

Well, there goes my dead, near-worthless IRA (dot-com remnant).

"They be stealin' my handful of CEF shares! Noooooooo!!111111!!!1!"

NotApplicable's picture

Oh, wait, my IRA got sold to Merril Lynch, not Morgan Stanley.

Safe for now! LOL

Muppet of the Universe's picture

Ayn Rand would be proud sir.  Big L-onomics 101


But you make one mistake sir.  Keynesians do not mistake money printing for a solution to the economy, but rather a solution to their lack of supreme control.

No one can be that stupid, as to think keynesian economics actually works.  & that's what figuring it all out* is actually all about.  Realizing its all just ponzi.

NotApplicable's picture

Not only can they believe (call it think if you like), they've got a tried and true rebuttal provided by Keynes himself.

"Government has to cut back during the 'good' years."

Of course, that's wholly unbelievable as well, but then again, this is debate we're discussing, where logic only goes so far.

Muppet of the Universe's picture

People who actually believe keynesianism works, aren't actually people.  they are subhuman retards.

& no one that is human, and proclaims keynesianism works, actually believes it.  chances they are just a mouthpiece like krugman, get it?

All Out Of Bubblegum's picture

Why haven't the good folks here at zerohedge put up a piece about bitcoin yet? I have more faith in network protocols than I do fractional reserve banking.

NotApplicable's picture

Maybe because the untrustworthy governments will crush bitcoin as a terrorist money-laundering operation.

Hell, I'd go so far as to predict that they'll eventually arrest Peter Schiff. There will be no alternate currency for free people, but only for the criminals, be they real (the Fed), or imagined as in the case of Mr. Schiff (as well as his father).

All Out Of Bubblegum's picture

Governments can't even stop the web or bit torrent, also network protocols. The only way to squash bitcoin, aside from trying to suck up available bitcoins (which I belive is happening to some extent), is to shut down the net.

Tirpitz's picture

"Governments can't even stop the web or bit torrent, also network protocols."

No need for government action, as long as Comcast does the dirty torrents filtering job.

All Out Of Bubblegum's picture

And bit torrent is still one of the largest, if not the largest, P2P network on the planet, filtering or not. Bitcoin might be a close second.

Totentänzerlied's picture

LOL, wrong. All it took was a few phone calls to shut down 95% of Egyptian internet connectivity last year. Corporations own the infrastructure - the cables, the satellites, the radio dishes, the telephone poles, the data centers, the backbone lines, the servers, the routers, and everything else - even if you use your own DNS scheme, good luck when the physical connection is simply not available because your ISP got a call and was told to pull the plug. All the protocols and packets in the world are useless if you don't have the physical layer, it is the fulcrum of the internet and it is most securely in the hands of the world's governments.

Oh, and if ISPs somehow failed to disconnect, governments can also shut down the power grid at a moment's notice.

I'm not a gold and silver evangelist, but unlike electronic credit-money, when you can't get online and your grid power is out, your gold and silver are still there.

All Out Of Bubblegum's picture

If bitcoin can't be used because the internet is shutdown, we'll have bigger problems than not being able to move some bitcoins around. 

I see bitcoins as another way to diversify, not as a primary investment. Putting a couple of hundred bucks into it strikes me as prudent. I also use them to buy things a few times a week. 


LawsofPhysics's picture

Interesting point of fact related to bitcoin.  You can buy things anonymously.  Sounds great, but there is still the issue of moral hazard.  People are not prosecuted for stealing fiat, what makes bitcoin any different?

DaveA's picture

Sure, your bitcoins are anonymous, but if you ever want to smoke this excellent weed you just bought, I'm going to need your mailing address.

GoinFawr's picture


 You sir, are a Sir, sir.

goldfish1's picture

the physical layer,  is the fulcrum of the internet and it is most securely in the hands of the world's governments.

when you can't get online and your grid power is out, your gold and silver are still there...

I suggest food and water as well.

NotApplicable's picture

Luckily for the government, the CIA is always looking for ways to break shit for power and profit.

As for the unbreakability of the network protocols, I'll note that the core routers are ALL maintained by those operating under political protocols. Sure, there will always be ways to hide payloads inside of innocous looking packets, but that's just another arms race with a constant give and take.

Worse yet, it creates the "mandate for more action" against it.

Between rhetoric criminalizing users (and the drama surrounding the founders) as well as agencies undermining operations, they hardly need to crush it from a technical aspect.

All you've done is to provide defense in the form of a Maginot Line. Meanwhile look at Mr. Dotcom, and his dilemma. He thought he was safe, too.

LawsofPhysics's picture

Right, we are all tired of being fleeced by these paper FRNs, let's get fleeced by an electronic bitcoin instead.  Until the issue of moral hazard has been addressed, some things will never change.

All Out Of Bubblegum's picture

How does one get fleeced by bitcoin? I've only lost money by gambling with it.

CH1's picture

Oh, so a criminal robbed someone... well, that sure proves BC is flawed.

Lord knows nothing like that could ever happen with fiat, or with gold!

Get a grip.

LawsofPhysics's picture

I welcome you to try and come onto my property and steal my PMs.  You are an idiot.  Thanks for self-identifying as a troll. FYI, I have used bitcoin.

All Out Of Bubblegum's picture

I welcome you to find my USB drive with 100 bitcoins on it. It's easier to move 100 bitcoins across the network or from hand to hand than it is to move ~30 ounces of silver. 

Both have their strong points and their weak points. I'm interested in utilizing any tool available to store and transfer. 

LawsofPhysics's picture

People don't give a shit about your computer shit, but always seem to accept gold or silver for goods like food and oil.  Good luck kid.

Half_A_Billion_Hollow_Points's picture

Laws of Physics, I love your comments, but you're mistaken about bitcoin.  It currently has so much upswing potential that to stay out is actually a bad bet.  In July, 93 Billion has been taken out in Santander's bank run.  That's ~1000 all the bitcoin value in the world.  One month, one failing bank, one country.  


Bitcoin is extremely cheap on a risk-adjusted basis.  (And there's always ways to trade them for gold/silver.)

CH1's picture

I welcome you to try and come onto my property and steal my PMs.

Hey, that was a great hard-ass non sequitur!

Sure, I'll bring my big ass ass weapons and we can shoot each other, like MEN!


LawsofPhysics's picture

Someday, just maybe, you will grow up, turn off the X-box and go out into the real world.  Whether you survive or not is another issue altogether.

GoinFawr's picture

just stay ca'm LoP. Stick to reason. You're pretty good at that.

TraderTimm's picture

PFG Best screwed a bunch of customers, MF Global, Bernie Madoff.... And you guys still trade, right? Still love those dollars in your pocket?

Thieves exist in any system, my friend. In yours, bankers, economists and politicians decide how much to give the dollar a good rogering on any given day. In BTC, I'm the master of my own wealth. I'll take self-directed over communal lunacy any day of the week.

Keep holding on to your green toilet paper, please. It will give me a chance to front-run the lot of you before the tide turns.

CH1's picture

let's get fleeced by an electronic bitcoin instead.

Do you even understand BC?

Sheesh, talk about going off for the sake of going off...

LawsofPhysics's picture

Yes I do.  Bitcoin is backed by...  ...oil?  ...CONfidence?

In a world of laws and contracts, bitcoin is a good idea, now about that moral hazard.  Fix that first, then let's talk about bitcoin.

All Out Of Bubblegum's picture

Moral hazard is trumped by caveat emptor. 

TraderTimm's picture

I'm trying to take you seriously, but you insist on putting your foot in your mouth.

Fix "moral hazard"? Please, stop, you're killing me here -- do you honestly think you can remove greed from the human mind? How in earth would your fantasy of zero moral hazard play out? IV Drip bags ala "THX-1138"? Perpetually stoned populace? Please, clue us in to your utopian vision.


LawsofPhysics's picture

Precisely why you need monetary system that has a certain amount of integrity built in.  Now you are starting to think.  Good for you. 

TraderTimm's picture

De-Nationalization of currency is a good start. I know you can't wrap your head around why a cryptographic proof of work would have value, but believe me - we'll be better off with something that isn't in the hands of corrupt politicians and bankers.

Feel free to disagree, but you already have orbiting electrons representing your dollars in a bank account, and you accept this virtualization with no hesitation at all.

Half_A_Billion_Hollow_Points's picture

bitcoin is backed by the laws of mathematics, the scarcity of a commodity, and the laws of supply and demand.  Nobody makes any promise to you concerning bitcoin.  Rather like physical gold, you are on your own--if you're smart, you're safe from both inflation and from a dishonest banking system.

GoinFawr's picture

can I buy a house in Vietnam with it? Hrvatska?

will someone deliver groceries to my door in exchange for it?

I know I know. 'early days', 'fledgling'... looks good on, er, paper. Interesting.

Half_A_Billion_Hollow_Points's picture

Trade it back into authority-declared money and buy (  Or wait for bitinstant's instant conversion debit card, which (with a little luck) will arrive in a couple months.

This is what a strong currency and an honest banking system looks like:


Yes we can.

Papasmurf's picture

Here we go with the fuckin bitcon promotion again.

CH1's picture

Ummm... this iis a thread on competing currencies. Mentioning a currency that might compete seems sensible to me.

All Out Of Bubblegum's picture

Those dismissive of bitcoin remind me of the people 20 years ago that dismissed the web as a fad. 

In 1993, I offered to do a column on the internet for a friend's newspaper. I told him he needed to get out in front of the net and his paper would look good.

His response: "No one cares about computers."

LawsofPhysics's picture

Right, now how many fads haven't survived again?  Good luck kids.  Many things come and go, Gold has been money for six thousand years.