GRECO.889  
NOTES  by J.Zube, 5 Aug.89, to
THOMAS H. GRECO, Jr., 'GOLD CONVERTIBILITY, LEGAL TENDER AND MONOPOLIZED CURRENCY, of May 17, 1989, 5pp, with diagram.

CENTRAL BANK LENDING : To the extent that funds are not voluntarily deposited with it or forcibly collected via "statutory reserve requirements" etc., obtained by the sale of bonds, through foreign loans, or accumulated in government cash reserves and departmental current accounts, but, instead, "loans" are made merely by printing and handing out, for a period, new legal tender notes of a central bank, no "loan" is handed to someone or capital is temporarily "spent" or "invested" or "created" but merely requisitioning certificates are issued upon the assets of OTHERS in the economy. These others have not defence against such legalized attacks upon them except to increase their prices. Thus these "loans" are really forced loans, taken up from the whole economy and, later "paid back" in still further inflated money. Honest words should not be used for dishonest actions.
CONFUSION on the role of Gold in the past, present and future, on its potential as an exchange medium and as a value standard, on how optionally, exclusively or coercively it can be and has been applied and should be applied and for what reasons. Myths, errors and assertions around it have accumulated by the hundreds, perhaps thousands and would have to be treated encyclopaedically to cover them. The same situation does largely apply to legal tender and the monopoly for the issue of exchange media and the monopoly consisting in an exclusive standard of value. Legal tender coercively "integrates" the latter two monopolies. A short paper of 4 pages and a graph cannot possibly do justice to this diversity of opion but is likely to include at least some of the wrong opionions.

CONTROL OF THE CURRENCY : While constitutionally, legally, institutionally, juridically and by job descriptions and monetary policy intentions and penal codes the governments are or want to be in control of their own currency, they have established in reality a coercive, fraudulent, dishonest and deceived monster bureaucracy that is very far from being able and willing to fulfill its set task. It is not in control of the situation. It can neither prevent or stop inflation nor deflation. It cannot stabilize the currency for any length of time. For a currency that is monopolized and must be accepted at face value by anyone, in any amounts, all natural controls have been removed and whatever artificial controls have been adopted or proposed, these cannot, in the long run and safely enough take their place, no matter how many laws, men and resources are applied to this impossible task. The stop go policies of central banks have often not smoothed the waves they caused but made them higher still and more destructive, through delays in becoming aware of what was happening, delays in devising counter measures and then applying them - whilst by then the contrary approach would have been more correct. Only in a free market for exchange media, value standards and clearing methods can there be a sufficient and automatic, daily and hourly selfregulation for supply and demand in this sphere. Every forceful intervention, every monopoly, every deception, every secrecy will cause a harmful disturbance, one that will often multiply the size and the direct harm of the intervention.

CREDIT CREATION is always an illusion or a pretence. For the Central bank there is always its issue monopoly option behind the supposed 'creation" and for other supposed "creators" of credit there is always the obligation of debtors to supply legal tender in repayment. Their real or presumed ability to do so makes them credit-worthy in the first place. Otherwise, inflationary re-financing of carelessly granted credits through additional paper money issues of the Central Bank are almost always assured. And real credits can only transfer real existing values, if not of the bank than of its depositors and current customers. Many volumes could and should be filled with the delusions in this sphere. I have seen already at least 3 and possess 2. Neither were written by monetary freedom advocates. A small amount of cash quite normally serves to gradually, one by one and over many pay periods, to pay off many short-term, medium and long term loans, that in total come to much more than the cash existing at any time, without this implying that credit would have been blown up out of proportion. With clearing fully developed, cash would not even be needed for the final settlements. They would take place by clearing, too. Moreover, the total volume of all cleared transactions could be as unlimited as the total of goods and services that could be produced, by endless recycling, agriculturally and otherwise and by involving more and more energies and resources from space. The ones who grant the real credit are usually overlooked. Only the mediators are seen and in their hands "credit" seems to miraculously appear, to the untrained observer.

DEVALUATION : There is never a REASON for devaluation of a currency BELOW its market value but at most a MOTIVE, accompanied with the power to impose such a decision. There is always a good reason to devalue a currency which is artificially valued ABOVE its market value - down towards and to its market value. Generally speaking, no one should have the power to revalue or devalue any standard which other parties have freely agreed upon between themselves or to impose his own standard, subject to his policies, upon others.

DISTINCTION BETWEEN INFLATED AND SOUND CURRENCIES : This is only possible under free and public market rating for sound and unsound currencies, involving as much publicity on issues as possible, much of it expressed on notes and coins themselves. Shares that one would have to accept, and at par, could not be suffciently distinguished from each other, either and would lead to a vast over-issue of such insecurities. The elimination of freedom of choice and of free pricing and of competitive supplies, cannot be fully substituted for by any means, no matter how elaborate, scientifica and calculated. For national exclusive and forced currencies a DEGREE of free valuations exists only internationally or on the internal and international black markets.

FORGERY OF CURRENCY : Does the government forge its own currency? Is it the main forger in a nation? That would presume that one can really forge one's own certificates. But that would be a contradiction in terms. One can, as a money monopolist, engage in either illegal or legal over-issues. In both cases there would be fraud against the public, in particular against all creditors, but still no "forgery". When during WW II the Nazi government forced English pound notes, THAT was forgery. A private forger does not forge his own cheques, either, but rather the checks or certificates of others. A company might water down its stock by issuing more stock certificates than are warranted by its capital or its earnings. But it would still not "forge" its stock, although it would dilute the value of its old stock and would thus defraud its old stockholders. ( Either there are or there ought to be first, second, third priority claims upon liquidation, corresponding to the order of the issue of stock, with the first issues to be satisfied first. If these issues are also separately quoted, then the soundness of new issues could be better judged, too. Such a state of affairs does probably exist already to some extent in the securities market. It would be surprising if it did not. I am badly informed on it. At least for mortgages there exist first, second and sometimes third mortgages, at least in some countries, with first degree ones to be satisfied first.)

GOLD : While facts on gold are now possibly more extensively published, at least in some specialist books and newsletters, than they were ever before, they have not yet led to a consensus on sound theory or counteracted popular myths and errors sufficiently, not even among scholars.

GOLD AND TAXATION POWERS : a) Taxation of gold transactions can give them a competitive disadvantage as means of payment. A 100% tax on gold would amount to a 100% outlawry and confiscation. A 15% tax is a 15% outlawry and confiscation for its use in exchanges. b) Taxation that insists in full or part payment with physical gold can give gold an extra artificial, strong and large demand, one that would tend to drive its value up and that could drive many into bankruptcy who would be otherwise quite liquid e.g. with clearing certificates and accounts. c) No such harm is done when merely the total tax amount is valued in gold weight while not only gold coins and bullion but all other kinds of means of exchange are accepted in payment e.g. at their market rate against gold or at a rate daily or frequently set and published by the taxation dempartment ( with only tiny deviations from their market rate, the "Kassenkurs" in the German practics). Most of the complaints about gold are due to the legal, juridical or customary right of creditors, under an exclusive gold standard currency, to insist upon payment in gold, if it pleases them, regardless of whether the debtor and the market are well or ill supplied with means of payment made of gold or redeemable into gold. d) Mostly governments learnt after a while not to insist on payment in gold alone but were rather satisfied with all kinds of other means of payment rather than not being paid at all, just like a sensible merchant would react. e) The more general legal or juridical or customary authority of all creditors, not just the tax department, to be paid in an exclusive and coercive paper currency, that happens to be in relatively short supply, as happens usually and in deflations and in gallopping inflations and during stagflations, is even more disastrous.

GOLD DEMAND FOR INDUSTRIAL, CHEMICAL, ELECTRONIC, JEWELRY USE etc. is relatively steady and rather rising than falling, as more and more applications for it are discovered. Under some "food" fads and delusions like currently in Japan, it is even eaten! And much is wasted on temporary decorations. A full and plentiful substitute is unlikely to be found. Until then its value on a free market is relatively stable, making it perhaps the "least evil" among optional value standards. But that should not lead to any privileges for it because it is just as vehemently disliked by some as it is liked by others.

GOLD LINK : "Once the link to gold is broken, there is no longer any discipline upon the Monetary Authority to limit its dilution of the currency." In the absence of legal tender and the money monopoly, which are main other features widely but not always associated with a "monetary authority", its issues would be discounted and finally refused. But that would mean that potential acceptors have access to a free market for currencies and its reports, that they are free to price their goods and services in gold or otherwise, that they may issue and accept and pass on alternative means of exchange. Otherwise, if one defines an "authority" beyond any natural controls, and grants it such powers, then it will, naturally, be out of control by its subjects, without being fully in control of the situation. In the absence of free market ratings for its produces, it will know no better what it is doing to itself and its subjects than the central planners in Moscow do. But it is misleading to put forward any kind of link to gold as the only, or best guaranty against abuses and to imply that an exclusive gold standard or currency would be ideal. If gold redemption exists for legal tender currencies and while it is kept up, legal tender cannot reveal all its destructive and confiscatory powers. But precisely to release these, the government usually stops convertibility. Thereupon not legal tender but the lack of convertibility is blamed. Usually more than 2 factors are involved in any event but people usually take only two factors into consideration and judge merely by these, which inevitably leads to wrong conclusions. If the only remaining legal check upon legal tender and the money issue monopoly is removed, then, naturally, abuses will follow but this does not mean that the gold convertibility check was the only possible or the best one and that the powers it was to resist should be upheld.

GOLD PRICE : While under a forced and exclusive paper standard gold, as a commodity, has a paper price, under a gold standard it does not have a paper price but all papers, commodities, goods and services have a price expressed in the chosen gold unit ( essentially a weight unit, although its size and fineness as well as name, shape and inscriptions differ under different government coinage rules). In the market this is indicated by goods, services and contracts being priced out in the gold units.

GOLD PRICE, SETTING OF : In free market gold currencies the "gold price" is not set but quantities of gold are CHOSEN  or CONTRACTED for, either as physical means of payment, or as physical means obtainable via "tickets", or as value standards, with which a limitless number of goods and services can be exchanged, theoretically, through clearning transactions, without a single gold coins changing hands.

GOLD PRICES UNDER PAPER CURRENCIES OR COSTS OF GOLD WEIGHT UNITS IN LEGAL TENDER PAPER UNITS. Here one has to distinguish between transactions that may be conducted only in a "market" confined to the central banks of governments ( however independent and private an appearance theses banks like to give themselves or governments pretend that they would possess ). Then there are the more or less open or restricted international gold markets and the more or less restricted national gold markets. For decades governments published and practised only a "purchas price" for gold, not a "sales price". It was usually set much below the free ( black ) market price and might be considered as part of the "foreign exchange" control system of modern mercantilistic "protectionism". To call this a "price" is misleading. The reverse exchanges, close to that fixed rate, i.e. purchases of gold by ordinary citizens from the government's gold purchasing centres, must also be possible - for genuine pricing to occur. For foreign exchange control purposes, a government may also give its paper "rubles" a fictitious gold value, not expressed in any purchases of gold from, far less of sales of gold to its citizens. That price is usually fixed far above the gold weight value of that currency on the black market or on the remaining free markets in other countries. Furtermore, in order to profit from numismatic opportunities, governments have lately also issued gold coins, usually far overvalued by their nominal paper currency value, compared with their gold contents, reckoned at gold market prices.

GOLD REDEMPTION : Full, fractional, as a promise for the future, as the non-realized promise to the public of large accumulted reserves not made available to the public, as a promise to foreign central banks only, as a legal obligations for all note issuers or as a voluntaristic option only for those who believe in this system. Gold redemptionism is obviously absent when there is only a gold purchse price by governments, not a sales price. Likewise, when redemption does not take place at the originally promised par but only at the market rate of the depreciated paper currency. The fact that it was widely used historically and is still desired as an ideal, in any of its forms, by many today, cannot hide the fact that for decades it was absent and monetary transactions took place, although often rather unsatisfactorily. Moreover, any transaction that is inherently merely a clearing transactions for mutual debts, arising out of the exchange of goods and services, does obviously not require that someone has stocked somewhere gold up to the total amount of these cleared or to be cleared exchanges. They can be settled e.g. by the exchange of corresponding paper certificates - without any gold convertibility option promised in them - , by settlement in the account books or via electronic signal exchanges. Only an agreed upon value standard, not an agreed upon exchange medium or a correspondingly large stock of the commodity, expressed in the value standard, would be reqired.

GOLD RESERVES BY GOVERNMENTS : They are not only accumulated by paying an excess paper price for gold but e.g. by monopolizing the possession of gold, by confiscating private hoardings, by retaining gold payments received for due debts by some and paying out in paper instead, by raising loans to be signed in gold, by establising a purchase but not a sales price, by using even tax revenues for this purpose. All in pursuit of false notions like gold redemption policies, the supposed necessity or desirability of large gold reserves, the desire to possess purchasing media that other countries will more readily accept than they would accept the own pawper money, the wish to deprive the own population of alternative value standards and exchange media in this form - in order to prolong a the paper money illusions.

GOLD, CURRENT PRODUCTION : It is influenced e.g. by the current legal tender paper price for gold and gold production costs. But the current output adds only little to the gold stock accumulated over thousands of years, of which only little has been lost ( e.g. in costumes and artwork, wear of coins, electronic relays, gold teeth, buried treasures ) and much of what was lost has been recovered. Thus the current output by itself has little influence on the current gold price which takes the total stock into consideration. In this it differs from most other goods and commodities.

GOLD, LAW OF SUPPLY AND DEMAND : It cannot freely operate when many markets are closed to free gold transactions, when it is taxed and differently taxed in different countries, while wars, revolutions, confiscations, deflations and inflations occur or threaten and corresponding buying or selling panics occur, while governments forcefully hoard gold and suddenly release some of their stocks, while gold trading is not fully reported or while gold is given privileges as means of exchange or as standard of value, e.g. in an obligatory gold redemption system  or when its owners are deprived of ownership, transfer, accounting or standardization ( coinage ) rights. In a world dominated by exclusive and forced paper currencies, manipulated in stop and go policies and characterized by many crises, sharp ups and downs of the paper price of gold have to be expected and give more information on changes in the value of that paper than of the gold so traded. However, in the long run, compared e.g. with the cost of a pair of good leather shoes or a good woolen suit or a consultancy fee of a doctor, if expressed in gold weight units, it has preserved its value well over the long run, over many decades, much better than most paper currencies. As an optional exchange medium and or value standard, even if only as a gold accounting unit for clearing purposes, it would not only be harmless but useful to those who want to use it in this way. While as an exclusive exchange medium its quantity would matter greatly, if it is merely an exclusive value standard or an optional one then almost any quantity of gold regularly traded in the market would suffice for this purpose.

GROWTH OF THE TOTAL CURRENCY VOLUME: Is it "growing" faster than the aggregate value of purchasable goods and services in a country? For something to grow it must be alive or comparable to crystals in saturated solutions or to accumulating sedimentary deposits etc. Otherwise, we have the results of purposive actions. In this case a printed product, paper money, is "growing" in volume" Well, it does not produce itself. Someone must have given the order to print it, someone must print it, someone must issue it, someone must be willingly or under protest or with silent curses accept it. Someone must be able to order the payee to accept it and to accept it in par and deny his right to refuse it or discount it and his right to use quite different and independent means of exchange, instead. Reform your words, your language use and then your actions and the whole country will be reformed, as already Confucius realized. Only monopolized and forced currency can be issued and kept in circulation beyond the needs of trade. All other currencies will be additionally produced and issued as required but not quite proportionally, either, since many of the new and more numerous products and services will not only be better but also cheaper than the previous ones. Thus less additional notes - or clearing accounts - will serve to turn them over. And in spite of the increased note circulation, the price level will rather tend to fall than to rise - due to innovations in science, technology and production procedures. Only this week did I buy my cheapest watch ever : $ 2. 30-40 years ago, I might not have been able to buy such an item, then a rare luxury, for $ 200 or 2,000.                                     

ILLEGITIMATE CURRENCY : Governments have passed extensive and frequently changed but substantially identical legislation to "legitimize" their exclusive, forced and fraudulent currencies, not by principles of natural law, common law or individual rights but merely by formal legislation. The natural limit of a "lawful" currency in the meaning of a "law" of justice, of natural law and individual rights and liberties, would be set by that amount of currency which could easily be issued at par with its chosen and accepted value standard and maintain itself at it, apart from some minor and temporary fluctuations. But such sound alternative currencies have been strictly outlawed in most countries and sometimes even prosecuted as "forgeries", althought they had no resemblance to the government's paper. The main flaw of the truly illegitimate currencies is precisely that they have been legally "legitimized", although they remain unlawful under a law of justice and illegitimate in a moral or individual rights sense.

ILLEGITIMATE CURRENCY, IS IT INDISTINGUISHABLE FROM LEGITIMATE CURRENCY? When lawful currency is outlawed and illegitimate currency is legal, then the remaining differences are not revealed in the rump-market that is left but a) merely in the law and actions following it and their consequences and b) in some black market transactions. When depreciated paper dollars are legally, juridically and coercively equated with silver and gold dollars then, to that extent, there appears to be no difference. Where no one may legally sue, there seems to be no complaint. But the market and free monetary actions are merely suppressed, not abolished. Free market rating for any unwarranted issues, against the expressed and other standards of value, in free and well publicized exchanges, that would also quote other internal and external standards of value and exchange media, would rapidly reveal the existing differences. But with a "fixed" thermometer one cannot measure a fever nor with a "fixed" barometer any change in air pressure. Controlled prices do not indicate free prices.

INJECTION OF CURRENCY : Can an illegitimate, inferior, inflated, fraudulent currency simply be "injected" into an economy? That is the illusion of Gresham's Law in the popular version. This kind of monetary despotism can only be realized by legal tender and a money monopoly. It is like saying : You may read and publish any book - as long as it is the Bible, or Mao's "Little Red Book". Legal tender notes are so bad, through their coercive and fraudulent character, that they can drive out the better currencies in the same way as an armed robber can, while he has you under his gun, suppress free and voluntary exchanges, just taking what he likes. Under freedom the creditors could not be thus victimized by the debtors but would refuse to accept depreciated means of payment altogether or refuse to take them at par and would, generally, insist on being paid in sound and agreed upon alternative means of exchange, using better value standards, too. The "injection" image, while correct for legal tender, like a compulsory injection of a poison, is a wrong image for free currencies. It is wrong for another reason : In an economy subjected to an issue monopoly there exists always a degree of deflation or undersupply of currency and consequent underutilization of existing resources, goods and services, even during inflation and especially in its later stages, when prices have raced ahead of the printing presses, in expectation of further price rises. Then something like a part-vacuum exists for currency, one  that SUCKS IN any official currency that it can get or any alternative currency that it can get away with, without checking their quality sufficiently. One has to apply pressure to inject but something rather like suction becomes revealed in these monopoly and currency famine instances.

ISSUE MONOPOLY : "When a banking monopoly exists, banks inevitably abuse their state-granted privilege to issue currency." That applies to the one central bank of issue in each State or federation of States but not to the privileged banks that are subordinated to this central bank and which do not have the right to issue notes. And seemingly independent "Federal Reserve Banks" of the Federal Reserve System of the U.S., are NOT independent banks of issue but merely branches of the central bank or central banking system, that issues the same currency. See also under "creation" of money and credit.

LEGAL TENDER : Is the paper currency which the Monetary Authority issues invariably declared to be 'legal tender'? A strong tendency in this direction does exist, especially during times of emergency. However, historically it has not always happened and govermentally privileged banks have issued paper money for the government, sometimes for many decades, without these notes being given the special legal tender privilege, too. If I had all the references computerized and graphic capabilities on my computer, I would make some tabulations, for all of the major nation states and the periods from which all or some of their currencies had the legal tender privilege. Each of the periods should also be overlayed by graphs indicating the inflations that did occur. The result would be, I predict, that inflations occurred ONLY in legal tender periods but did not occur always or all the time in legal tender periods. The system rather produces swings between deflation and inflation and even its boom periods are, objectively, periods of underdevelopment, i.e. development below their capacity and of misdirected developments. Under legal tender a currency proceeds not on any straight course but, rather erratically, like a ship without a rudder. And a rudder made out of gold is not the only possible one and may also pull the whole ship down.

MODELS FOR MONETARY SYSTEMS OR EVENTS : One of the curious phenomena with money is that sometimes decades after some old models have been given up or even outlawed, they still do occupy people's minds and their discussions, as if these models were still operational. E.g. full or fractional gold redemption models still occuply most peoples minds - decades after their abolition and, probably, years before they are partly re-introduced among some volunteers. Moreover, these models so predominate thinking that alternatives to them and to the presently ruling monetary despotism, are all too rarely discussed. The choice is not merely between mere "fiat" paper currencies of governments and 100% gold covered or fractionally gold covered gold certificates but involves the whole spectrum of monetary freedom.

MONETARY AUTHORITY : I oppose the use of this term because most of the legally established authorities on money and most of those recognized, by mere scribblers among academics and journalists, as "monetary authorities", have over and over revealed that they are not authorities on their subject but revealed a rather abominable ignorance, prejudice and lack of forsight on this subject. As Beckerath described them : They are just the high priests of the monetary religion of the people.

MONEY MONOPOLY AND LEGAL TENDER: While the money monopoly supports legal tender and legal tender supports the money monopoly, the two are not identical, no more so than the muscles and bones of a brawler are idential, although they support each other. Money monopolies have existed without legal tender powers for them and legal tender powers have existed for some currencies which did not have an exclusive monopoly.

MONEY MONOPOLY, ABUSE. Is it invariable? No. But possible and likely as long as this monopoly and legal tender powers exist, i.e. as long as sound alternatives are outlawed. There were various degrees of issue monopolies and limited competition in the German States of the early nineteenth century to the early twentieth century. However, in the absense of legal tender, and in the presence of some competing currencies and while goods, services and contracs were largely priced out in silver or gold units, no inflation took place. But in the absence of fully free banking, it being outlawed and its techniques not fully known, either, deflations still occurred periodically, largely through the unstable foundation of large credit amounts upon small cash bases while creditors retained the right to demand cash any time. Only in the long run will the abuse of the issue and legal tender monopolies and powers be inevitable. Some goverments might be lastingly and others temporarily unwilling to resort to such dishonest policies but in the long run almost all governments or their successors will, sooner or later. Thus they must be deprived of these monopolies and powers, even though, temporarily, they apear trustworthy, in this respect. At least for 87/88 the German inflation was down to zero but that was an exception for this century, since 1914, rather than the rule. Zero inflation can be instantly and lastingly only be achieved through the abolition of the legal tender coercion and the note issue monopoly.

MONEY, DEFINITION : "Money ( as an exchange medium purely ) should be taken to be a claim for value, held against the economy in general, which derives from the fact of value having already been delivered by a seller to a buyer. Money, then, is an acknowledgment of value received, and is only legitimate when issued as part of such a transaction in which the issuer is a buyer who has the wherewithal and intention of redeeming it PROMPTLY and FULLY." -  The economy includes the world. A local and privately issued currency does not give an entitlement against the whole world economy but ONLY against the local issuer and those under acceptance contracts to him. This is recognized in the second part of the above definition attempt, not in the first. Consequently, there is no logical connection between the first and the second part, at least in this respect, which would justify the term "then". The first part embodies all too many of the collectivist and fiat notions, by which monopoly and centralized and coercive issuers want to oblige the whole national economy and, if they can, the whole world by THEIR issues ( Why should others give a fig for them, voluntarily???), in one or the other scheme of monetary despotism, that loads the responsibility for the own irresponsible, ill informed and coercive actions upon the whole community, on a national or world-wide scale. The issues of such people do, inherently and morally or contractually - not according to their despotic laws - oblige none but themselves. If they had some real protection, welfare, insurance services etc. to offer and if they were to accept their own notes in payment of them, then, consequently, among their voluntary subscribers, they would find ready acceptors, for an amount of their own notes which, according to past experiences, may come, without depreciation below par, to something like the receipts for the next 2 or 3 months. That period might be different in different communities and stages of development and under today's conditions than it was before. Consequently, then as now, it is is not a firm and fixed rule but, rather, the daily, nay hourly guide for their issues must be the free market rate for their exchange media. As soon as it drops below par, they must cease and in their own interest will cease further issues. Why? A $ 100 contribution note issued by them but accepted only at a 5% discount can, within a day or even less, be used by one of their contributors to pay a $ 100 contribution that is owed to them, giving them a 5% DAILY loss and him a 5% DAILY gain. Moreover, the first such discount will be rapidly publicized and will induce others to test whether there is still ready par acceptability for these notes in their hands, at least with the issuer and those indebted to him. Those not holding these notes and being offered them, will either refused them altogether or accept them only at the same or an even larger discount, unless they can immediately pass them on at par. And if there was not just a misjudgment involved, leading to a small and temporary and local discount among a few, but a genuine over-issue, by which some acceptors at par suffered a discount loss in passing them on, then this issuer has little hopes for any future acceptance of his notes. ( However, it will only rarely come to this. Even a 1% discount will already induce smart operators to either mediate their acceptance at par, while removing these notes and their discount from circulation, or to find out and to publicize that a real over-issue has occurred, whereupon most would refuse further acceptance of this depreciated medium.) We would then have a contribution based money, free market rated, subject to voluntary and contractual acceptance and obliging only the issuer and his debtors under contract to him. But this definition does not fit all other kinds of money that are possible and desirable and that some people may want to issue and others want to accept. And any money that does not fit this description does not, thereby, make it "illegitimate", either. As for acknowledgement of value received : The money issued may be no more than a down payment on a larger purchase, to be delivered only when all the payments are made, i.e. one for value TO BE received. In the meantime, only the promise is received that the down-payment bargain will be kept by the other party. Moreover, the issuer may actually be an intermediary, who merely looks after a degree of standardization and typification, administeres the issues and their reflux, checks for forgeries, publicizes all relevant details and has, himself, no other goods or services to sell. Only his members, for whom he acts as an agent, do sell them for his notes. In other words, he might be, for instance, the coop bank of issue of a shopping centre. The common note issue of this centre would find more wide and ready acceptance than the diverse issues of every associated store would. Nor would such an issuer have to be a "buyer" himself, as a final consumer. He may merely lend his notes to the members, so that they can pay their bills with them and charge them, for this loan of a common means of exchange, his small administrative fee. What the issuer would "buy" from them would be a short term debt certificate, embodying the obligation of the other to repay this loan. This certificate could e.g. be a sound commercial bill of exchange or some equivalent. It would assure the necessary reflux of the notes to the issuing centre, i.e. increase the demand for them so that they would complete the circle. In other words, a primary readiness to accept foundation, among debtors of the issuing centre, for goods and services in dayily demand, a "prompt and full" one, would suffice for most of the note holders as final consumers. The rest is a issue technique and debt relationship only between the issuer and his debtors out of that issue arrangement. However, this, too, is merely one of many sound & free options. Cowrie shells for instance, were widely used as "money" and in some remote islands might be still. No one but "Mother Nature" "issued" them. The others just picked them up as her ready gift to them. Moreover, the mere "intention" to redeem notes is not enough. People have been known to go back on their verbal promises and to change their intention. They must be under enforceable contractual obligation to redeem with their goods and services. - With all these qualifications only a tiny fraction of all monetary and clearing possibilities are covered. Acceptance in debt clearing is, for instance, a very important foundation aspect, one that is not clearly enough covered by the "redemption" concept, which to most people, either involved rare metals only or which they have extended to goods and services.

OUTFLOW OF GOLD : Are the only options in case of an outflow of gold that either the currency is devalued or gold convertibility is abolished? If gold coins or gold certificates are not exclusive or quite customary means of exchange but merely optional ones, if there is freedom to clear and to use alternative means of exchange and value standards, then a gold clearing standard, at the previous ratio of gold weight to the nominal paper unit, could be maintained, profitably, without any sacrifices, even though the last gold coin had been exported from the country or temporarily hoarded. But when note holders can demand redemption in the value standard commodity, not on the gold market but from the issuer and when every creditor may demand from his debtor payment in gold, while there is a shortage of gold, a country will be in trouble until it abolishes these senseless restrictions. Only those who voluntarily and individually and under express contracts do accept such obligations should have to suffer their consequences. It is nonsense to insist that EVERY payment be ultimately payable in a single third kind of commodity, different from the two commodities two traders deal with or that all debts for all service and goods sales, in their millions of varieties, are to be payable, ultimately, in a single scarce commodity only. In normal times, via various credit, clearing and non-cash arrangements, one bypasses these ultimate claims. But, until they are abolished, they hang, like the sword of Damocles, threateningly over every transaction and can lead to sudden collapse of non-cash payments and credit volumes, even upon relatively small sudden increases of the demand for cash, under all systems where cash-like substitutes are outlawed or remain unknown.

PAPER CURRENCIES OF GOVERNMENTS : WHY ARE THEY ACCEPTED AT ALL AND AT PAR, AT LEAST FOR LONG PERIODS? a) Because of legal tender laws and jurisdictions, they must be so accepted. b) Because at least in Germany and in wage and salary payments, "good" unionist, based on ancient anti-truck judgments and legislation, could insist upon being paid again, once they were paid "merely" in alternative means of exchange. Thus an employer would not offer them readily anything else in payment or rather dismiss them than do so. This effect is even worse than that of minimum wage laws, at least during deflationary times. c) Because they are, as a rule, the only means of payment in which hand-outs are offered, directly or indirecly. ( Sometimes food vouchers intervened, redeemed by the grocers in government cash.) d) Public servants an all other payees of goverments are only paid in this way. e) Alternative means of payment do not exist or may not be legally insisted upon. Thus anyone who wants to exchange monetarily has to use the government's inferior paper currency. f) Everyone can and has to pay his taxes and other government and semi-government charges and fees with it and thus needs it for this purpose. g) Due to legal tender laws he can pass this medium on to others, at its full nominal value, no matter how depreciated it is. Wrongfully ridding oneself of debt has long been a favourite occupation of debtors. To them such money is not acceptable because it is good but because it is so bad that it is cheaply attained and yet suffices to pay of debts nominally established when the money was worth still much more.

PRIMITIVE MONETARY MEANS : The redemption option into rare metals or, better, into consumer goods and services, is not as "primitive" as the last paragraph of the article asserts. Alas, it never had full freedom to be demonstrated by competitive issuers. Who knows what might have developed from it and who knows how long this "primitive" approach will be able to effectively compete, e.g. with credit cards and other electronic fund transfers, particularly as long as it provides some tax evasion options. The abacus was also a relatively primitive and ancient tool but well into my lifetime it was still effectively used among large scale merchants in Asia. And for digging a flower bed in your garden or hammering in a nail in your shed, the "primitive" tools, spade and hammer, are often still the handiest, fastest and easiest to use and the cheapest to acquire. Fancy buying your daily paper from different newsagents with a credit card or icecreams for your kids. The administrative costs might exceed the value of the transaction. As long as you can get a 5 - 10% cash discount on a large deal, how many electronic fund transfers can compete with such transactions? 

SCARCITY OF GOLD : While gold is very widely distributed on the land surface and in the sea, and its total quantity, if it could be completely recovered and combined, is relativel large, compared with the present gold stock, its percentage among other minerals and in sea water is so fractionally small that its recovery costs would in most instances exceed its market value. Thus gold mining has been concentrated on the few spots where it has been relatively concentrated by natural forces.

SPENDING PAPER MONEY INTO CIRCULATION, by government or the central bank. The term "spending" implies a genuine exchange of values, not an exchange of a scrap of printed paper for a value. If I passed an uncovered check, I would not "spend" my money but pretend to the victim that I do. I would actually defraud him. For the government or the central bank it is the same, if it attempts to pay its debts or grant some loans with additionally issued notes. One can spend only what one OWNS or assignments upon that property. What forced currency amounts to in these instances, are requisitioning certificates upon the property of OTHERS. ( Are people and their property and earnings primarily the property of governments???)  And the recipients of legal tender are privileged to legally pass on most of this burden to OTHERS, again. Between them and in an uneven and often unjust fashion, they would gradually raise all prices, expressed in that paper currency, while between them they would also be suffering the usual inflation losses and disadvantages. Such a "forced currency" is "current" but not liquidly, like water, flowing under its own pressure, from high to low, with a fall of one meter sufficient to move it 100 km, finally evaporating and rising with hot air, moving, cooling, condensing and last returning as rain to the place of origin, in similar quantities, sooner or later, participating in a natural and automatic water cycle. It tends rather to have a FORCED issue, FORCED circulation and FORCED reflux - and corresponding problems and creating corresponding dissatisfactions.

VALUE OF PAPER MONEY OF GOVERNMENTS : This is sometimes entirely denied. This overlooks that almost any kind of money is mostly better than none at all - excepting only cases of extreme inflation or rationing ( where ration tickets become the real money ). When all sound alternatives are outlawed, then  even a flawed paper moeny will keep an economy going at at least a fraction of its potential, while in its absence, too, most exchanges, except barter exchanges, would come to a stop and millions might die from starvation before some serviceable private alternatives are becoming known and realized, judging by present ignorance of and disinterest in such matters. And during various payment crises, e.g. during wars and revolutions, exclusive and forced government paper money, too, does sometimes disappear, to a large extent and at least temporarily, partly paralysing the economy. And the government does offer a curious value in exchange for paying it a tribute in its "value" tickets : It does not prosecute the taxpayer for tax evasion but only the one who does not pay it in its tickets, in the demanded quantity. When a conviction is obtained, the penalties can be rather severe. The immunity from such persecution does have a practical value. And there are the numerous misled and foolish people who believe in the various welfare and protection rackets the governments organize for them. They are under the illusion that they get value in exchange, even that they get more than they paid for. If any businessman could penalize those, who would not subscribe to his expenses, in his own "money" and if he could force services and disservices upon them, at "prices" arbitrarily set by himself, all payable in his on "currency", then it could circulate, too, among his victims. And all too many would grant him the "sanction of the victims" and have all kinds of excuses, rationalizations or even praises for his activites, particularly if they were on his payroll or would receive grants from him. Tax foundation is not a genuine free market foundation for money but it is a foundation and it can be run either with extreme degrees of dishonesty or with a large degree of honesty an with any degrees in-between. What is "set" by coinage or mint acts, in relatively honest countries ( where the government has wrongfully monopolized this aspect of transactions ), is usually merely the weight, fineness, name, shape, denominations and inscriptions of the chosen gold unit and charges for coining gold delivered to the mint for this kind of standardization. Then no kind of "price control" is involved that goes beyond those of monopoly mint charges.

VARIETY OF MONETARY OPTIONS :The vast variety of monetary options cannot be encapsuled in a few sentences or even paragraphs or pages, without becoming so general in the terms used that little or different meanings are conveyed and many misunderstandings are invited. Often even a correct definition is combined with no unerstanding at all of what is involved in the practice falling under this definition and what the consequences of its application are. As evidence I point you towards thousands of economic textbooks, chosen at random, which give you the legally correct definition of legal tender but no economic understanding at all of its effects upon the stability of a currency, of its nature as a precondition for inflation, for Gresham's law, in the popular version and of its exclusive nature as a precondition for deflation. Nor are most people fully aware of the political and military consequences of these two man-made monetary catastrophies.

ZZZ : As for the rest of the article, I largely agree with it but deem it unncessary to point out its many positive points and clear wordings one by one. The topic is so wide-ranging and and touches on so many points that some omissions, shortcuts and simplified statements were inevitable. I still aim at making all the different theories, definitions, explainations, terms, functions, principles, factis, ideas, arguments and prejudics on monetary freedom accessible in an alphabetized collection, to be gradually supplemented and updated by many contributors into a monetary freedom handbook.   FB-IOT, John Zube. >