Alternative Currency - Local Communities Rightly Shun Fed, IRS

This story has been reported a few times over the last year - so I will take this opportunity, ahead of the TAX DAY TEA PARTY, to address it: Local Currency.

Let us suppose a hypothetical situation for a moment. You have $10, backed and taxed by the Federal Government... you use that $10 to buy a lamp. Now you, and every one of your neighbors has a lamp... now suppose that your neighbor had an extra desk and in bartering with him, you agreed to trade your new lamp for his extra desk. It is a legal exchange of goods and services - there was a buyer, a seller, a product, etc... but no taxes... there was perceived earning by both parties - but at what value? Or should I say, what legal taxable value???

Now, let us move this hypothetical into a real life situation - Local Currency. More specifically, let us use the "Berkshare", printed and circulated as a local currency in Great Barrington Massachusetts. This product costs $0.95 for one note of Berkshare. It is not a federally backed currency, and thus not a federally recognized legal tender. It is therefore a "good"... or a product. If a business, be it a neighbor, a diner, or a furniture store chooses to accept this product in exchange for another product - what is the tax value of a fair trade on barter of goods?

Amy Kirshner, in discussing the "Liberty Dollar" writes:

Report your earnings on your taxes and pay your taxes - it’s the law. If you
have issues with the IRS and taxes, there are other movements and organizations
that address that. Don’t use local currency for that reason.

So I ask again - what is the legal value of a lamp. Isn't the idea of money a perceived medium used to standardize "value"? So should I submit my taxes to the IRS in the measure of lamps? What if I don't report the transaction - am I legally mandated to report all such transactions or "earnings" - like when a buddy tosses me a beer before the game, is that a tax write-off for charity on his part, and do I need to report an exchange of goods or value income on my part?

And if a community chooses to opt-out of the federal reserve system, how can there be a legal measure of value within the community's new currency?

The idea of community currency is to establish wealth within a community - it limits trade and goods exchange from other communities, but supports local trade and commerce. Taxes remove the wealth from this community - for the sake of benefiting the community??? That does not make sense.

Suppose, for an instance, the situation in Hawaii, where private citizens of a community went around the bureaucratic roadblocks of state and federal government, and fixed their own washed out road and bridge. This took place in Hawaii, where private citizens feared for their livelihood if the repairs were not completed before tourist season. What the government had planned for a two year "near term" project - slated to cost over $4 million dollars, the private citizens completed in 8 days at a cost of FREE. The story is here.

These citizens of this Hawaiian community kept value in their community, rejecting government intervention, and rejecting the notion that the greater value of the "state" community was being served by higher priorities... Community does not work efficiently at the Macro Level!

If citizens begin to realize that they are responsible for the best interest of their community, and that it is more important to retain wealth locally to support their own infrastructure, and they begin to understand that they can achieve better results more efficiently outside of government bureaucracies - then doesn't this pose a grave threat to the massive government requiring taxes and subjugation to survive? Don't these individuals pose a threat to the infrastructure established to ensure equal wealth and equal outcome, as the Obama administration and liberals are attempting to establish.

Isn't the idea of localism and statism dangerous?

It seems to me that a community that takes ownership of itself is more likely to upkeep, as wealth will not come from outside, but from within - so it is in their best interest to enhance their own infrastructure - not by government contracts - but on the blood, sweat, and tears of their own labor - their own back breaking work - which is the ownership of something local. The same thing is said for private property ownership - when you invest in something, it is in your best interest to enhance it, not destroy it... else you are destroying your own wealth.

As the federal government is pushing for less personal ownership and more collective ownership, one has to wonder the logic behind their reasoning.

Local ownership and personal property ownership are the foundation for wealth, personally and locally.

Consider, as a commenter posted in my previous post, ways to invest locally, enhance your wealth off the radar of the mainstream (which ultimately would be used as Obama to say "I told you so" - completely discounting your hard work as his success), and do your best to support local currency or barter.

The Federal Reserve's "Bail Out" Bad for Economy?

In a recent conversation with a fellow Defender of Capitalism, I was taken aback by the following comment (paraphrased):

After 9/11, the economy was stabilized because the Federal Reserve released a flood of money into the markets... therefore they are there to help.

And again, we see the Fed "bailing out" the US economy by flooding the market with more money, manipulating rates which have no basis in free market, or reality for that matter, and are doing little more than placing a band aid over a gaping wound!

The Federal Reserve is little more than a group of economist-elites dictating how the market should and will work. There is little room for free market and personal responsibility when one does not trust the free market to work.

So the gold standard is abandoned... The US dollar becomes little more than a figment of our economic imaginations... and we have nothing tangible with which to trade our money in for, should we so desire.

Economics has replaced Christianity as the religion of the US.

How can I say this? Because we need to have more faith that the next person will equally value and accept a green piece of paper as the appropriate medium for commerce. What's more, fewer people are carrying cash on hand, so we take it on faith that when I swipe a plastic card through a machine, that I will, in good will, back it up with a stack of green paper. Everyone has faith in the mighty dollar... but are we at a point where we should be questioning our monetary system?

Yes.

The cause of economic issues prior to the Federal Reserve was a constant run on banks. It used to be the case that wealth was measured by how much gold or silver you had, or was had by the powers issuing the currency. It used to be that banks worked independently, and were expected as a private bank to be able to back a "deposit".

What was the case, however, was that "your" deposit of $100 was taken and divided up to the fellows behind you in line asking for loans or withdrawals. So should you change your mind and want your money back, assuming that your deposit was all the bank had so far that morning, the bank would be unable to give you the money that was yours... there was nothing tangible on hand, BUT the US Treasury had promised that for every dollar in circulation, there was One Silver Coin in the treasury, and they could request that coin. (It is fascinating to collect old US currency, and actually read what was printed on it!)

So the cause of economic strife was that there was not enough money to be handed out... so the Federal reserve came up with a brilliant idea... Print More!

The problem is that with the production of more money, you get something called Inflation.

Now it takes two green pieces of paper to get your one coin (in this example). The price of silver doubles, the price of bread doubles, the price of everything doubles!

In a free market, there is supply and demand. The Demand dictates the production of the Supply, while the lack of Supply drives the cost for Demand. This is helpful with new industry, as early high costs fund the Research and Development necessary for establishing a healthy industry... and when the ability to produce more allows an increased supply, the cost can lower to allow wider distribution at a lower cost, though the revenue is still coming in at the same rate (or roughly the same).

However, the Federal Reserve has eliminated the basis of free market... every time the market tries to correct itself, the Fed interjects, causing additional inflation, driving the value of the dollar down, and ensuring that when this market is actually allowed to correct, it is going to make the Great Depression look like a Maypole Festival.

When your system is based on faith, and not gold... and when your market is driven by manipulation, not free market economics... well, you are in the midst of a system on the brink of collapse... Especially when people begin losing their faith in your currency...

I say to the Fed, "Stay out of it! You caused the Great Depression, and now you are looking to outdo yourself! Let the Free Market work! We don't need our currency manipulated any more!"

I should have taken my own advice years ago... invest in Gold... Maybe it is not too late! Gold is most likely going to hit $1000 an ounce... what does that say about the strength of our dollar!

Not much!