Why Competing Currencies is the Solution to a Collapsing Dollar

by Joe Jarvis via The Daily Bell

Cooperate when you think everyone involved will benefit.

Compete when you think something needs improvement.

For too long, certain states have been cooperating with the federal government without any benefit to the state or the citizens who live there. I recently highlighted five states, in particular, that would be better off as countries, without the federal government controlling them, and leaching off them.

Instead, states should be competing against the federal government.

They should be solving problems that the federal government cannot, or will not, solve.

One of America’s biggest problems is a fiat currency which has lost 85% of its value since 1971 when Nixon eliminated the gold standard.

Yesterday I discussed one possible solution. States could create or incentivize banks that safely store deposits of gold and silver, and issue a digital representation of its value. The value would not be denominated in dollars. Instead, the precious metals themselves would be indexed to purchasing power.

The banks would make money in the same way banks currently do, by lending and charging interest.

States could incentivize the use of this real money by giving discounts to anyone who paid their taxes with this new digital metal-backed money.

And the state’s incentive to do this is to cushion an economic crisis triggered by massive debt, inflation, and loss of confidence in value the US dollar.

But one possible pitfall of this system is a shortage of physical gold or silver to deposit, thus creating excess demand, and driving the price of gold and silver up.

So here’s another alternative.

State Cryptocurrency

You know the golden rule–he who has the gold makes the rules.

If states position themselves right, they can avert financial disaster when DC’s luck finally runs out.

Imagine 50 governments scrambling to enact the best policies, to attract businesses, to foster a high tech workforce, and to give citizens a better option for government.

Who’s got the strongest economy? The state with the best financial system. The state that saved its people from a collapsing US dollar.

Competition between cryptocurrencies has set the tone for modern mediums of exchange.

Bitcoin was first on the scene.

Whoever created Bitcoin wrote an algorithm to create the blockchain.

The blockchain uses complex math problems to create “blocks” of information, which correspond to tokens. One Bitcoin is an example of a token. These blocks of information form a continuous “chain.”

When you hear about people mining cryptocurrencies, they are solving these math problems with computers, to verify the legitimacy of each additional block placed on the chain.

When you transfer a Bitcoin to another wallet, you create another block of information which proves who legitimately owns that Bitcoin. That information is spread across an entire network of computers, so it cannot be altered without verification from miners.

People can hack into individual wallets and steal Bitcoins by transferring them legitimately with a new transaction on the blockchain.

But they cannot hack or counterfeit the actual Bitcoin tokens. If they tried, the miners verifying the transactions would see that the new block does not fit with the rest of the math that went into building the chain. The new block would be rejected.

But plenty of people thought the blockchain technology underlying Bitcoin could be improved. So they competed.

Ethereum came out with a different algorithm for its blockchain. It can process transactions quicker and allows applications to be built into the technology.

Other cryptos improved on speed, others on anonymity. Some have limited supply like Bitcoin, and others can be mined indefinitely.

But it was all spontaneous based on the market.

State governments could learn from that to build their own secure currencies.

In a sense, these would still be fiat currencies. Although the technology backing cryptos is valuable, people must agree that the tokens are valuable.

It’s not quite a currency by decree, it is a currency by agreement. People will cooperate as long as the currency benefits them.

But it will be a vast improvement from the current dollar.

First of all, the government won’t be able to manipulate it.

Second, it cannot be counterfeited.

We will all know the rules from the beginning. We will know how many tokens can be created, how they can be issued, and what technology underwrites the tokens.

The state could take on the responsibility of stabilizing the currency by releasing or buying back tokens.

Of course, they could definitely screw this up. And some will. Some state cryptos will fail–people will not find them valuable and will not cooperate by spending and accepting them.

Good thing we have 50 options! Better do it right, or lose your citizens to the neighboring state with better fiscal policy.

This puts the power over currency back in the hands of the people, the market.

Is your only objection to this plan that states are banned from issuing currencies?

Fine, then let private entities build the currencies. States can simply start accepting it and paying employees with it.

Competition–or Cooperation–Among the Many States

Let me be clear about one thing, I do not trust governments.

That is precisely why I advocate competition between governments. That gives governments an incentive to improve. There is no other mechanism to force them to serve the will of the people. Your vote hasn’t mattered since 1913, as I recently explained.

And here in the United States, we have a huge untapped resource. An arena with 50 different states.

STATES. Not provinces, regions, or territories. States.

They were never supposed to be subordinate to the federal government. The cooperation between the states and the federal government was supposed to benefit everyone involved.

I don’t trust any government. But I trust smaller governments more than larger governments. They are easier for people to control.

And I trust competing governments even more. Then citizens can simply move across the border–vote with their feet.

I already did this. I moved from Massachusetts to Florida. That eliminated state income taxes. My firearms license is now honored in 36 states, twice as many as a Massachusetts license.

But federal income tax, federal laws, and federal regulations followed me 1,000 miles south.

We’re missing an amazing opportunity to let the market shape state governments.

But states don’t have to always compete either. They can cooperate when it benefits everyone involved.

Perhaps a regional currency is better where states are clustered together, like in New England.

I don’t know exactly what would happen. And neither do you. The Federal Reserve Chairman and board members don’t know. And the President doesn’t know.

That’s the point.

We currently allow a few politicians and unelected bureaucrats to be the economic dictators of a 3.8 million square mile country with 320 million people.

The market works to set prices because it doesn’t rely on a single indicator or a small group of dictators.

So why do we let the Federal Reserve destroy the value of our hard earned dollars? Why do we let them dictate interest rates? Why do we let them control our financial future, and prevent us from taking matters into our own hands?

All sorts of strategies should be tried to combat this oppression. And I think one of those strategies should be pitting state governments against the federal government.

They could start creating value for their citizens by securing the economic future of their states with a legitimate currency.

You don’t have to play by the rules of the corrupt politicians, manipulative media, and brainwashed peers.

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