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Got Choices?

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Legal Hurdles

The idea of CHIPs, and other complementary currencies, is clearly in harmony with the Constitution. This is particularly true when we think in terms of what the Constitution was intended to accomplish: To create unity and improved economic cooperation between the states, while establishing limitations on the Federal Government so it would not become too powerful and begin to usurp the natural rights of the states and the people.

The people, whether acting as individuals or in groups, should enjoy the right to engage in contracts to trade their goods and services with each other. This is included in the right to pursue happiness spoken of in the Declaration of Independence. And it is part of the right of assembly enumerated in the First Amendment to the Constitution.

In the exercise of this right, we should enjoy the freedom to borrow from, and lend to, each other on mutually acceptable terms.

As we have discovered, there are really two different kinds of borrowing:

  • You borrow something that actually belongs to someone else. When applied to loans of money, we often refer to this as “private lending” or “secondary lending.” This means, the lender already owns monetary credits, or the promises of a third party, and then he lets someone else make use of those credits, for a time.
  • Then there is the kind of borrowing you do when you take out a bank mortgage. As we have discussed, new money is created in the process. You are not borrowing existing money, or credits. Rather, you are trading new promises with the banking system in order to guarantee your less dependable, personal credit. We might more accurately refer to this process as “credit certification.” If anything is being borrowed, it is the reputation of the bank.

Competent, informed adults should be free to engage in either of these types of transactions as borrower or lender, mortgager or mortgagee. The Constitution creates no singular right of government, nor does it impair any natural right of the people in this regard.

But it is a completely different matter when considering the laws we have enacted since ratifying the Constitution. Have our laws stayed true to the constitutional principles of natural rights and limited government?

As already discussed, credit certification, or what we have come to know as bank loans consists of two parties trading promises with each other. The borrower’s promise is of value to the bank because it is secured by property and will produce the valuable commodity of human labor in the future. The bank’s promise is of value to the borrower because it is trusted by other people. It can be traded more readily than individual, unsecured credit promises.

So the two parties are trading value for value, promise for promise, and simply because it is in their best individual and mutual, interest.

This explanation helps us look at something old and familiar in a brand new way. So let us also take a fresh look at something else we think we understand: our employment, or our jobs.

Like a mortgage, this is also a trade. In this case, one party provides the commodity of human labor directly. He goes to work. The other party also provides human labor back again. But he does it by offering the promise of human labor, work credits, or money.

You go to your job and you do work. You do this because you are good at what you do. And particularly, you may not be good at other things which you still need to have done in order to survive and live happily.

For example, maybe you work on a farm growing fruit and vegetables. You are good at this and you can produce a lot of food–much more than you can eat yourself, and at a reasonable cost. But you are not very good at fixing your own truck or tractor.

For this, you need to cooperate with a mechanic. He goes to work each day working on trucks and tractors. He does this because he is good at it. He can do a lot more of this kind of work than he needs for just his own equipment. And he can provide it at a reasonable cost and value.

If each of us could predict and locate all the trades of labor we needed with perfect precision, maybe we wouldn’t need money at all. We could just trade work for work, value for value with each other and everyone’s productivity would be better than if we had to perform every individual task on our own.

But the much easier way is to generate promises for future work, credit, or money. That way, when you go to work, you can exchange your direct labor for labor credits. Then, as you figure out what you need from other people, you can exchange your labor credits, or money in order to get it.

Whether you buy someone else’s work, or the product of their work, the result is the same. Consider the entire cycle: work, get paid, buy something. You are actually exchanging your work for someone else’s work.

It is just facilitated by money, credit, or promises so the different bits of work can occur in different times or places. Having a medium of exchange makes it so much more efficient. But it can also cause us to forget that commerce is ultimately an exchange of one person’s work for that of another.

The thing we call employment, is really just a trade of labor. You may have already picked up on this other subtle point: so is shopping. It is interesting to divide these trades into 4 groups, call them by their common name, and then understand how they are just a trade of human labor.

  • Person to person, or private trading.

    You might pay a neighbor for a used car, or for some extra food he produced in his garden. Maybe you give the neighbor kid $20 to mow your lawn or to take care of your dog while you are away.

    These transactions are quite informal. The government typically has a hard time regulating this activity because there are a lot of people and a lot of small transactions. Besides, people are voters and we don’t appreciate too much meddling from government–at least when it affects us. So we still enjoy a fair amount of freedom in private trades.

  • Person to group, or shopping.

    In this case, you might go to a grocery store to buy some vegetables. Or you might pay for a car from a dealership or a used car lot. The only difference here is the party on the other end probably consists of more than one person, or a group. We call them a corporation.

    That name implies a body or a group, acting as one. So it is nothing more than multiple people, working together to act as a single trading partner with you. And you are still trading labor for labor, value for value.

    But in this case, the government wants to get very involved in regulating our transactions, probably because there are fewer corporations than people–particularly when we are talking about large corporations. It is easier to monitor and regulate their activities.

    Sometimes, politicians respond to the voters to force corporations to do things a certain way. For example, businesses might be required to offer warranties or returns if you are not satisfied with your purchase. Government may force a business to tell you the ingredients in a certain product, or they may require businesses to pay licensing fees, tariffs, or taxes.

    But corporations have their own power as well. Although they don’t vote directly, they certainly can provide money to politicians in exchange for the favors they want. Sometimes laws are passed requiring you to buy a product you might not otherwise choose. Or you might be required to buy from a certain provider rather than one you would have otherwise selected.

    There can be some advantages to this layer of government regulation on your shopping. But it can easily get out of control and end up depriving you of choice, rather than enhancing your quality of living. This is most likely what the Founders wanted to prevent when they placed Constitutional limits on the federal government.

  • Group to person, or employment.

    Even more than shopping, employment has become very over-regulated. There have been many historical abuses on both sides of these transactions. Corporations have sometimes taken advantage of employees, using power and circumstance to limit the natural choices those employees might otherwise enjoy. This has been done in order to enhance their own profits or to take other advantage in the transaction. The result has been for politicians to respond to voters and place stricter controls on how one trading partner, the company, must behave in the transaction.

    But this has resulted in many abuses on the employee side as well. Labor laws now greatly favor the employee and give very little advantage to the employer. For example, once entered into, it may be very difficult for an employer to terminate a trading relationship. Corporations may be forced to employ people they might otherwise choose not to employ.

    But such regulations do not exist in the other direction. Can you imagine the government preventing you from quitting your job without due cause? What if your employer could force you to continue working for him, unless he really did something unfair to you? What if you want to quit just because that is what you want? Shouldn’t you have the right to end the relationship for any reason and at any time?

    What if the government could force you to produce a certain amount of work-product in each hour. Maybe you work in a factory and if you don’t load the minimum number of boxes each hour, you might face government penalties and fines.

    Through the evolution of our laws, we have seen times where government favors employers. And we have seen times where it favors employees. Neither is desirable.

    The better path would simply be to favor choice. Trading with other parties, whether as a group or as an individual should be purely optional. You should not be forced to trade with someone you would not otherwise choose–for any reason. And you should not be prevented from trading with another person when both parties are competent, informed adults, both desire the transaction on their own terms, and the completion of their transaction would not bring undue harm to outside parties.

  • Group to group, or business-to-business transactions.

    There is still a degree of regulation in these transactions. However it is much less political when individual voters are not involved. Perhaps we feel corporations are more able to fend for their own interests and so require fewer protections.

    Regardless, there are still abuses of government power and favoritism. Most often this is manifest when a particular business, or sector gains the favor of government and is able to use the power of regulation to enhance its own profits.

    Too often, laws can be used to direct transactions to a corporation that is a friend to powerful people in government. When this happens, the natural laws of economics are impaired. Natural forces of regulation are not allowed to operate. And there are nearly always undesirable consequences.

    As with any other trade of value, corporations should be left to freely choose their trading partners as long as they don’t bring undue harm to outside parties.

In short, government regulation has reached farther and farther into what ought to be our private transactions. We are supposed to be free to enjoy our lives and our liberty. We should be able to pursue happiness in the way we choose.

Working is a pursuit of happiness. We work to obtain the things we want and need. We own that work, and the things it produces. No one else should be able to take it from us by force, even if they have friends or allies in government.

The primary obstacle to implementing CHIPs is, we have allowed government to regulate our individual trades of value much more than was intended by the Constitution. Because government has become party to each of our transactions, we allow it to define how and what we may trade.

If the federal government can pass a law defining a minimum or a maximum wage, they can certainly pass a law restricting direct person-to-person trades. How would you like that? What if you couldn’t buy eggs from your neighbor down the street, but instead were forced to buy them from a government-approved grocery store?

If a truly viable complementary currency begins to take hold, what is to prevent Congress from passing a law preventing you from using it? This is where, as a country, we need to return to the original Constitutional values of limited government. When we truly want to be free, we will limit the power and scope of the federal government to allow us to trade with each other without constantly being told how to do it.

Until the voting electorate can understand this, we may not be ready for the true freedoms we could enjoy from CHIPs and other monetary alternatives.

This leads us once again back to the specific example of legal tender laws. The CHIPs system enhances our understanding that commerce is the act of trading labor for labor. But labor is not a legal tender. Only the Federal Reserve dollar is.

One way to prevent CHIPs from succeeding would be for the government to refuse to enforce any agreements involving CHIPs. We can certainly expect big banking interests to feel threatened by the competition arising from competitive currencies. Just as other big businesses lobby government for protective policies, they should be expected to make every possible attempt to invalidate or prohibit CHIPs.

For example, banks might claim a CHIP contract constitutes an unjust indenture because it requires a person to work. They might try to free CHIP borrowers from their CHIP bank contract to show how compassionate they are. Once the contracts were unenforceable, a CHIP could lose its basis and therefore, be of no value.

Government regulators might try to declare CHIPs a commodity. This would force traders to compute a capital gain on every transaction, as they now must do with Blockchain-based cryptocurrencies. This would be a difficult legal position as a CHIP is clearly a credit obligation.

Bureaucrats might try to declare CHIPs a security, subjecting it to regulation by the Security and Exchange Commission. This would also be a difficult legal position as trade payables and receivables are clearly exempt from such regulation.

Regardless, those in power are sure to fight against any successful reform of the monetary system. It will be important to ask some critical questions:

  • Why do we need legal tender laws at all?
  • Why would we ever want the government forcing us to use a single type of money in our contracts?
  • What business is it of the Federal Reserve Bank to care about what kind of money we might choose to use in our private trades?

Remember, government regulations nearly always end up favoring established bi business monopolies and protecting them from smaller would-be competitors. Legal tender laws are no exception to this rule.

First, the government empowers a private monopoly, the Federal Reserve, to issue credit money notes which we all become responsible to pay for through our income taxes. Then our government enters into debt agreements which we have not consented to, but which indenture us all to perpetual labor to service the ever-rising debt. Meanwhile, we are virtually prevented from entering into private contracts with other individuals which involve payment in any medium other than government-approved Federal Reserve dollars. The government builds a monopoly in the financial market and then forces us all, by law, to use its product.

Ideally, U.S. government dollars should work just like privately created credit money. Remember, money is debt. Rather than borrowing all money from an official central bank, our government could just create money either as printed dollar notes or as electronic numbers in a government-owned bank account. The government could then spend those newly created dollars for the type of goods and services it should appropriately be buying according to the powers granted to it by the Constitution. It would then accept those same dollars back as payment of federal taxes. As long as the money spent by government is roughly even, over time, with the money it collects in taxes, then the notes issued will eventually be extinguished and the federal budget will automatically balance.

In such a system, federal money would quite literally be measured in tax credits. A tax credit, even if not backed by gold, would have inherent value because it could be used to satisfy a tax liability. Whatever other currencies were in primary use in the economy, people and corporations would have to buy federal tax credits in order to pay their taxes. As they purchased these credits, the government would obtain the purchasing power it needs to fund the services we want it to perform.

In an economy based on choice, the only entity that should be forced to accept a particular type of note, or money is the entity that issued it. In other words, if I promise to pay you something in the future, then I, and only I, should be required to honor that obligation. In like manner, the government should not force us all to accept its federal notes, or money.

We should be free to accept whatever kind of money we agree to in the course of entering into consensual contracts with one another. And our state governments should enforce those contracts without regard to the form of compensation they require.

When the government issues notes, or credits of its own, this is the act of borrowing on the credit of the United States. It is authorized in article 1, section 8 of the Constitution. And as such, only the federal government should be required to redeem those notes in satisfying the only obligation we should have behind them–the paying of federal taxes.

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