This theory is called left-wing market anarchism or laissez faire socialism. Its basic contention is that a truly freed market has never existed, and that capitalism is a statist system. There is also the conviction that genuinely freed markets would result in greater relative equality and more worker friendly conditions. The first thing to cover are the four big monopolies identified by the late individualist anarchist, Benjamin Tucker. They are described in his famous essay, State Socialism and Anarchism: How Far They Agree, And Wherein They Differ. They are the money monopoly, land monopoly, tariff monopoly, and the patent monopoly or intellectual property monopolies. Let us consider each in turn.

1) The money monopoly pertains to a government or state grant of privilege to select individuals or people possessing certain types of property. This privilege is the exclusive right to issue money. The effect of this is to keep interest rates artificially high or maintain them period. In a left-libertarian market anarchist society, anyone would be free to issue a currency. There would be a competitive whittling down of lending money to the labor cost of conducting banking business. Another positive effect identified by Tucker would be the absence of control mentioned below:

It is claimed that the holders of this privilege control the rate of interest, the rate of rent of houses and buildings, and the prices of goods,—the first directly, and the second and third indirectly.

Kevin Carson has quoted Alexander Cairncross to the effect that:

the American worker has at his disposal a larger stock of capital at home than in the factory where he is employed….

Said capital or property would serve as collateral or backing. This would increase the bargaining power of labor in relation to capital, because the laborers would be able to organize their own credit systems for conducting independent business apart from the capitalists. As Gary Elkin notes:

It’s important to note that because of Tucker’s proposal to increase the bargaining power of workers through access to mutual credit, his so-called Individualist anarchism is not only compatible with workers’ control but would in fact promote it. For if access to mutual credit were to increase the bargaining power of workers to the extent that Tucker claimed it would, they would then be able to (1) demand and get workplace democracy, and (2) pool their credit buy and own companies collectively.

2) The land monopoly consists of governments or states granting or protecting land titles not based on occupation and use. This is a critique of absentee landlordism and the rent following therefrom. This has the effect of shutting out land based work as a competitive factor with industry. It also destroyed the independence to be derived from occupying land or making use of a stateless commons.

3) The tariff monopoly pertains to the protection of the profits of domestic capitalist industry from foreign competition. This increases the price of goods and thus extracts more of the product of laborers from them. It also helps create oligopolies or monopolies, because there is no competitive whittling down of profit or size. It’s worth noting that Pierre-Joseph Proudhon thought the money monopoly had to be abolished before the tariff monopoly, because the people put out of work by foreign competition would need a market with a vast demand for labor to find different work.

4) The patent or intellectual property monopoly allows people to extract monopoly prices from things that could conceivably be competed over. A person is also denied the ability to use their property in a way they see fit through aggressive force. Two people can write the same book without stealing from each other. Patents are also pooled by corporations to prevent any competition and to control economic resources. This allows them to lock the third world into a dependence on them for technology. In addition to the above, Kevin Carson has noted:

A survey of U.S. firms found that 86% of inventions would have been developed without patents. In the case of automobiles, office equipment, rubber products, and textiles, the figure was 100%.

The one exception was drugs, in which 60% supposedly would not have been invented. I suspect disingenuousness on the part of the respondants, however. For one thing, drug companies get an unusually high portion of their R & D funding from the government, and many of their most lucrative products were developed entirely at government expense. And Scherer himself cited evidence to the contrary. The reputation advantage for being the first into a market is considerable. For example in the late 1970s, the structure of the industry and pricing behavior was found to be very similar between drugs with and those without patents. Being the first mover with a non-patented drug allowed a company to maintain a 30% market share and to charge premium prices.

In my next post, I will continue this introduction.

Stay tuned!

Somehow, however, he can stretch his imagination to reckon “intrinsic value” in ledger entries and green pieces of paper backed by nothing more than “the full faith and credit” of politicians who yank double-digit percentages of the wealth supposedly represented by those dollars out of the economy in direct taxation, who have “borrowed” (after having the Federal Reserve create it out of thin air) another $17 trillion, and who have committed the US government to future liabilities of tens of trillions more, all on the premise that they can find some way to steal that wealth from the rest of us to finance their schemes.

No chutzpah deficiency there, that’s for sure. Lecturing other people on “bubbles” and Cloud Cuckoo Land projects after his own career in same? Really? On the other hand I guess he is, by definition, an expert on the subject.

I’m not an economist, and I try to avoid playing one on the Internet. Yes, I’m aware that some economists — not just Keynesian and monetarist nutcases, but the real thing, i.e. Austrian School types — are skeptical of Bitcoin as “real money” for various reasons. I respect their skepticism. I guess we’ll see.

It’s important to keep in mind, though, that the concerns of politicians, bureaucrats, regulators, crony banksters and other members of the political class over Bitcoin are neither true economic concerns (if Bitcoin IS a house of cards, it’s no more so such than the political class’s own “currency” regimes) nor regulatory concerns (did regulators protect us from Bernie Madoff or from the 2008 bank collapses?) nor crime/fraud concerns (in 2012, credit/debit card fraud cost $5.5 billion and affected 10% of Americans … did politicians suggest avoiding credit/debit cards?).

The concerns of the politicians and their hangers-on are far more simple than any of that: What they fear, as they should, is loss of control.

Taxes are part of that fear, and rightly so. The movements of a transnational, decentralized, peer-to-peer, potentially anonymous (Bitcoin is NOT inherently anonymous, but is fairly easy to obscure identity links to) digital currency will be difficult — OK, impossible — to tax. But governments can adapt by taxing things that are harder to hide. Land occupancy and use, for example, or the movement of physical goods.

The bigger issue, to the political class, is that a transnational, decentralized, peer-to-peer, anonymous digital currency is far more immune to political manipulation. If its creation system is secure and if they don’t operate that system themselves, they can’t “borrow” money by creating it. If it’s truly transnational and widely adopted, it will be harder to use it as an instrument of economic war between or within states. If it can’t be effectively regulated, Big Business can’t have its friends in government use it to bar entry to, or disadvantage, new competitors.

And of course such a currency is great for the rest of us for all the same reasons. A complete separation of economy and state will be a major step toward abolishing the latter and putting the former more efficiently to work for the rest of us.

Will Bitcoin be the instrument of such a separation? Maybe, maybe not … but that instrument is coming.

Translations for this article:

• Spanish, Por qué Bitcoin les hace Temblar de Miedo.

The economic contribution of his essay is that it represents the thesis advanced by German economist Georg Friedrich Knapp in The State Theory of Money (1924), an expose advocating the Chartalist approach to monetary theory claiming that money must have no intrinsic value and strictly be used as tokens issued by the government, or fiat money. Today, modern-day chartalists are from the school of thought known as Modern Monetary Theory (MMT).

Without getting into the intrinsic value debate, this is where I strongly depart from Denninger, because if we accept the thesis that all money is a universal mass illusion, then a market-based illusion can be just as valid or more valid than a State-controlled illusion. What Denninger and Greenbackers and MMT supporters reject is the notion that monetary illusions themselves are a competitive marketplace, falsely believing that only the State is in a ‘special’ position to confer legitimacy in monetary matters.

Regarding this issue of State-sanctioned legitimacy, bitcoin as a cryptographic unit seeks and gains legitimacy through the free and open marketplace. It is not a governmental instrument of legal tender that requires regulatory legitimacy and coercion by law in order to gain acceptance.

Therefore, the path to widespread adoption of bitcoin hinges on three primary market-based developments: (a) robust and liquid global exchanges similar to national currencies that can offer risk management via futures and options, (b) more user-friendly applications that mask the complexities of cryptography from users and merchants, and (c) a paradigm shift towards “closing the loop” such as receiving source payments and wages in bitcoin to eliminate the need for conversion from or to national fiat.

Even after graciously accepting Denninger’s definition of what the ideal currency would be (which I don’t) and searching for any economic nuggets of value, his arguments can be distilled into four main criticisms of bitcoin as a monetary instrument. First, bitcoin does not provide cash-like anonymity. Second, bitcoin transactions take too long for confirmations to be useful in everyday transactions. Third, bitcoin exhibits irreversible entropy.  Fourth, the decoupling of the stateless bitcoin from the obligation of monetary sovereigns is considered a fatal weakness.

Now that we identified the objections, let’s take these in order.

On the first point surrounding bitcoin anonymity, Denninger only embarrasses himself with this criticism. By default, bitcoin may not offer anonymity and untraceability like our paper cash today, but it is better described as user-defined anonymity because the decision to reveal identity and usage patterns resides solely with the bitcoin user. This is far superior to a situation where users of a currency are relegated to seeking permission for their financial privacy which is typically denied by the monetary and financial overlords. Also, his capital gains tax issue is a non-starter because it’s a byproduct of a monopoly over money.

His second criticism of a lack of utility in the ‘goods and service preference’ due to timing of sufficient block chain confirmations has some merit. However, advances have been made in the use of green addressing techniques that solve the confirmation delay problem by utilizing special-purpose bitcoin addresses from parties trusted not to double spend.

Denniger’s third criticism that bitcoin exhibits irreversible entropy is confusing. Typically, entropy refers to a measure of the unavailable energy in a closed thermodynamic system that is also usually considered to be a measure of the system’s disorder. In the case of bitcoin, I suspect Denninger is taking it to mean the degradation of the matter in the universe because of his explicit comparison to gold. While it is true that bitcoins lost or forgotten are ultimately irretrievable, I view that as a feature not a bug because it is the prevailing trait of a digital bearer instrument. Two bitcoin digital attributes that make it superior to physical gold are its ability to create backups and its difficulty of confiscation. Furthermore, the number of spaces to the right of the decimal point (currently eight) is immaterial to bitcoin’s suitability as a monetary unit.

Now for the big and final one. Denninger asserts that monetary sovereign issuers possess not only the privilege, but the obligation, of seigniorage, which Denninger refers to as bi-directional since sovereigns have the responsibility of maintaining a stable price level during times of both economic expansion and economic contraction. As a product of Hayekian free choice in currency, market-based bitcoin is decentralized by nature and poses a false comparison to the century-old practice of central bank monetary manipulation. Fear not deflation.

Governments have appropriated the monetary unit for their own benefit by declaring it the only preferred monetary unit for payment of taxes to the State. Believing that governments have sincere and good intentions in administering the monetary system is akin to believing in fairy tales. Control of the monetary system serves one and only one interest — the unlimited expansion of the sovereign’s spending activity to the detriment of the unfortunate users of that monetary unit. Decentralized Bitcoin obliterates this sad state of affairs.

Denninger’s biased and establishment preference for a monetary sovereign serves only to harm his analysis because it undeniably closes him off from alternative, and usually superior, free-market monetary arrangements. More damaging, however, is the fact that it places him outside of the mainstream in free banking circles and squanders his remaining quasi-libertarian credibility as a champion of markets.

As an anarchist, I’m a big fan of competing currencies, especially competing freed-market currencies not issued by, or subject to direct manipulation by, states. The reasons for that should be obvious: If government can’t supervise and control the flow of money, it gets a lot harder for it to steal (“tax”) part of that money and spend it on killing and enslaving people. So Bitcoin made quite an impression on me, and I’m still sold on it.

One issue I’ve come around on is the absence of commodity backing. In the past, I’ve been of the opinion that to be sound a currency should actually represent a pile of some scarce, homogeneous material (e.g. gold) that’s valuable for other purposes in addition to constituting a convenient medium of exchange.

The problem with commodity currencies, though, is that those piles of material have to be physically stored. They’re vulnerable to roving gangs of thieves, including but not limited to government “law enforcement” agencies. More than one commodities-based currency has been shut down, or at least yanked into government regulatory schemes, by the scruff of its neck.

Bitcoin is just bits of data; it’s created by the process of crunching the numbers involved in exchanging it. That drives commodities-based currency aficionados nuts: No pile of gold in a vault. But it also represents a kind of security: No number of jack-booted thugs can break into the vault and take the stuff backing the currency, because there IS no stuff backing the currency. And because the generation and exchange of Bitcoin is distributed and peer-to-peer, governments would pretty much have to shut down the Internet to put a stop to Bitcoin commerce.

Said commerce, however, is not completely immune to government intrusion.

Internet services that facilitate the storage and use of Bitcoin may be vulnerable (and indeed some are trying to “go legit,” or else shutting down in the face of government threats).

Contrary to popular belief, Bitcoin is not inherently anonymous. In fact, every last Bitcoin transaction is transparent and publicly viewable. You can use Bitcoin anonymously, but it takes a little work: Don’t keep your wallet at one of those vulnerable services, generate new addresses for each transaction, anonymize your IP address or work from public Wi-Fi connections, etc. And help is on the way: The good guys are working on ways to make Bitcoin commerce more private and secure.

So, why the “boom and bust?” The main reason is that Bitcoin’s user base is still fairly small: “Buy low, sell high” traders constitute a large portion of that base and thus have a big effect on price when they decide to take profits, or panic, or sit on their stacks. There are “forex” markets in all currencies, of course and the relative values of those currencies fluctuate, but not as much, because for every day trader bouncing back and forth between dollars and euros and yen, there are hundreds or thousands of people using dollars, euros and yen as money to buy cars, concert tickets and bags of potato chips with. As Bitcoin’s user base grows, and as the proportion of people using it as a medium of exchange grows versus those treating it as an “investment” to grab low and dump high, its valuation will probably stabilize quite a bit.

Is Bitcoin the end of political government? No, but it’s part of the beginning of the end of political government. Hang on. It’s going to be a heck of a ride.

Monopoly and inordinate accumulation naturally attend one another, the inefficiencies and crises that stem from such a system requiring excessive reliance on debt. Under such a system, then, the commercial bank, trussed, needless to say, to the national banking network, becomes far more important, central to the character and to the functioning of the overall economy. Since the relationships at issue benefit the ruling class, a consequence by design, such institutions enjoy the use of all the easy state-created money they can ingest. Free banking crusaders of the Austrian style should know better than to think that such easy money as we have now is commensurate with the mutual money proposed by the individualist anarchists. Have the monopolistic restrictions on free banking, the privileges that prevent the laborer from capitalizing his wealth, actually been lifted, or have such privileges simply made way for the institutions that Professor Brooks seems to think have effectuated the dream of the anarchists? Are we to think that the existence and abundance of high-interest credit for the working poor is the vision that Tucker and Greene had with regard to credit? Even Rothbard understood that the first one to spend a counterfeit dollar enjoys the greatest boon, the rest finding their money depreciated. It therefore seems absurd to suggest that credit cards and payday advance loans for the working man, offered at a monopoly rate, are proof that widely available credit is incapable of destroying the tribute system called interest. There are hosts of products and services that are quite abundant, but are nevertheless priced far in excess of their true market value due to the interventions of just as abundant privileges.

Rothbard obscured a key argument of the “money-cranks” in ignoring the fact that Greene, Tucker and company did not advocate for inflation for its own sake, for simply splitting in two the money already in people’s hands and calling it doubled. Their argument was that restrictions on banking favored some people and fell disproportionately on others, so that access to credit was obstructed for most of the population. To merely inflate the money supply arbitrarily was not at all the goal, especially when the “easy money” we have under the existing banking system is “easy” only for politically connected institutions, particularly commercial banks—a fact that the Austrian, “End the Fed” crowd has quite right. As Tucker said of the greenback movement over one hundred years ago, national currency takes the money question and “degenerate[s] it into an unprincipled scramble for spoils by which the strongest would profit.”M It is difficult to understand why indeed workers, if allowed, would not offer one another credit at cost under a mutual banking system whereby they would all expect reciprocal treatment in kind somewhere down the line; such an agreement may be thought of as an insurance that credit will be available to the working community, the credit to be secured by all kinds of valuables. That such arrangement are not allowed doesn’t seem to bother those who bizarrely insist that if interest could ever be abolished, it would be so abolished by now. They must suppose that we have the free, competitive banking that Greene and Tucker recommended, which I suppose isn’t all that surprising. If individuals were left free to compete and organize, there’s no telling how many would enter the field of banking, or how many different schematics they would develop for that end. As John Beverley Robinson observed, banking is, after all, a “simple and safe business.”

With the capitalist banking apparatus as it is, crises like that of 2008, will not abate at least not for very long intervals. Capital and credit concentration gives way to complacency in business, to waste, to destitution for the people whose work hours drive industry forward even in spite of its unstable footing on which the economic system stands. That system works for the capitalists—is their great swindle—but only to the extent that it remains at all and doesn’t end up completely in ruins. Why those who defend some version of “free banking” should defend the tax—because that’s really what it is—of interest is utterly beyond my comprehension, but what it means is that it’s all the more important for libertarians to continue in the tradition of William B. Greene and Benjamin R. Tucker.

Bitcoin is not about making rapid global transactions with little or no fee. Bitcoin is about preventing monetary tyranny. That is its raison d’être.

Monetary tyranny can take many ugly forms. It can be deliberate inflation, persecutory capital controls, prearranged defaults within the banking cartel, or even worse, blatant sovereign confiscation. Sadly, those threats are a potential in almost any jurisdiction in the world today. The United States does not have a monopoly on monetary repression and monetary tyranny.

Once the State is removed from the monetary sphere and loses the ability to define legal tender, its power becomes relegated to direct legislative and enforcement measures that do not immorally manipulate a currency. Taxes for wars and domestic misadventures will have to be raised the old-fashioned way — that is to say government money cannot be raised by simply debasing the currency.

Just as the Second Amendment in the United States, at its core, remains the final right of a free people to prevent their ultimate political repression, a powerful instrument is needed to prevent a corresponding repression — State monetary supremacy. That task has fallen to an unlikely open source project that is based on cryptography protocols and peer-to-peer distributed computing. As the mechanism for a decentralized, nonpolitical unit of account, the Bitcoin project uniquely facilitates this protection.

The timing of Bitcoin’s appearance, and subsequent growth, is no accident either. If one follows the relevant sentiments and trends, it’s evident that society was approaching a breaking point. Essentially, bitcoin is a reaction to three separate and ongoing developments: centralized monetary authority, diminishing financial privacy, and the entrenched legacy financial infrastructure. An alternative money provider that was centralized would probably not survive long in any jurisdiction. The emergence of Bitcoin was baked into the cake already.

We can see from the case against digital money provider e-gold that an efficient challenger to the provision of a stable monetary unit will not be permitted… really. In 1996, a humble oncologist named Doug Jackson bravely built an auditable and verifiable system of transferring ownership rights to gold and silver bullion in an online digital environment. Wired’s Kim Zetter described it this way:

E-gold is a privately issued digital currency backed by real gold and silver stored in banks in Europe and Dubai. Jackson says about 1,000 new e-gold accounts are opened daily, and the system processes between 50,000 and 100,000 transactions a day.

With a value independent of any national legal tender, the electronic cash has cultivated a libertarian image over the years, while drawing the ire of law enforcement agencies who frequently condemn it publicly as an anonymous, untraceable criminal haven, inaccessible to police scrutiny.

Where have we heard that before? Then in December 2005, the U.S. Federal Bureau of Investigation and Secret Service raided e-gold’s Florida offices. Jackson tells Wired, “They basically raped our computers and also took us offline for 36 hours, took all the paper out of our office.” Jackson says that the government also froze parent company Gold and Silver Reserve’s U.S. bank account but the company survived, “only because its euro, pound and yen accounts are maintained outside the United States.” The physical bullion assets were subsequently seized as well.

With the prosecution resting on a civil complaint charging Gold and Silver Reserve, Inc. with operating as an unlicensed money-transmitting business,Jackson finally acquiesced in July 2008 and plead guilty to conspiracy to commit money laundering (a victimless crime) and operation of an unlicensed money transmitting business rather than the alternative threat of 20 years in jail and a half million dollar fine.

Wired magazine, in June 2009, published this excellent account of the e-gold business in the wake of the federal investigation entitled “Bullion and Bandits: The Improbable Rise and Fall of E-Gold”. Also included in the article is probably the most telling photo of all — Doug Jackson sitting on the floor surrounded by file boxes labeled U.S. Secret Service.

Zetter writes, “At e-gold’s peak, the currency would be backed by 3.8 metric tons of gold, valued at more than $85 million.” E-gold founder Doug Jackson wanted to solve the world’s economic woes, “but instead got an electronic ankle bracelet for his trouble.”

Recently, in 2009, Bernard von NotHaus was indicted on counterfeiting charges for manufacturing a private metallic coin that actually contained some precious metals. After 23 years of research and development plus 11 years of operating in the marketplace, Liberty Dollar suspended operations. Following the conviction and for the appeal, the prominent Gold Anti-Trust Action Committee filed an amicus curiae brief in support of acquittal and revolving around the question of whether anyone but the government has the right to issue money. Afterwards, many commentators pointed out the absurdity of penalizing honest money to strengthen the facade of manipulated money.

Further contributing to the disturbing trend against monetary freedom and financial privacy are initiatives like the Foreign Account Tax Compliance Act (FATCA), which has been written about many times on these pages and also in The New York Times. Other countries around the world would not even contemplate such a brazen endeavor that imposes a costly withholding and disclosure regime on sovereign foreign entities and financial assets. Furthermore, they see it as American arrogance and American hegemony run amok.

However, society will not be ready to fully embrace the promises of decentralized nonpolitical currency until it can come to terms with the fact that money in a free society should not be used for the purposes of identity and asset tracking. Banks and governments may be concerned with that goal, but it is not the role of our money.

Obama opined, predictably, that the 2008 banking crisis was the result of under-regulation. And he was right — as far as it goes. The repeal of Glass-Steagall, for example, no doubt exacerbated the growth of the bubble economy over the past thirty years.

The problem is that for Obama — and for Romney as well — “regulation” refers only to secondary state interventions that stabilize or ameliorate the existing model of corporate capitalism, and prevent corporate power from becoming so great it destroys itself and takes everything down with it.

“Regulation” decidedly does not include the primary state interventions that created the power of big business, finance capital and the FIRE Economy in the first place. So the regulations Obama champions are really just a state restriction or qualification on the exercise of powers granted by the state in the first place.

If the bloated FIRE Economy and bubble-fueled demand didn’t exist, corporate capitalism would have to invent them in order to survive. It was the state itself, in the mid-19th century, which created a centralized, capital-intensive, overbuilt corporate economy prone to chronic overaccumulation of capital, stagnation and idle capacity. The tendency toward stagnation was exacerbated by the “maldistribution of purchasing power” resulting from state enforcement of rents on artificial scarcity and artificial property rights, which shifted income from those classes with a high propensity to consume to those with a high propensity to save and invest.

State capitalism’s chronic crisis tendencies almost destroyed it in the Great Depression — and would have, had not the state intervened to save it with a little stimulus package called World War II. WWII not only stimulated domestic war production — nearly half of all American plant and equipment in 1945 had been built in the previous three years — but it destroyed most industrial production in the world outside the United States. Between having bombed most of its competition flat and having greatly expanded aggregate demand from the permanent war economy, the U.S. had good economic times for a generation after WWII.

But by around 1970, Europe and Japan had more than rebuilt their industrial capacity, and America’s chronic tendencies toward overaccumulation and excess capacity resumed. Since then there’s been an increasing tendency toward declining profits and jobless recoveries, with profit in boom times increasingly fueled by speculative bubbles, the creation of new industries by the state and deficit spending far beyond the naughtiest of Keynes’ dreams.

When Obama and Romney debate “regulation,” they’re not talking about the primary regulations that define the structure of capitalism as we know it. They’re both entirely in favor of them. Their entire disagreement is over the amount of secondary regulation — of restraint on the rentier classes’ exercise of their state-created power — necessary to maximize long-term profit on a sustainable basis. Those two clowns, in other words, just represent the two major factions in the economic ruling class.

To the extent that the primary interventions were even hinted at, Romney let out a vigorous dog-whistle that he’s all fur ‘em. “Regulation is essential. You can’t have a free-market work if you don’t have regulation, You couldn’t have people opening up banks in their garage and making loans. At the same time, regulation can become excessive.”

So Romney’s totally OK with regulation that protects the banksters from competition with garage loans. It’s just regulations that prevent them from becoming too big to fail, or restrict their participation in the casino economy, that he has a problem with.

It’s worth considering just how much of the alternative economy we free market anticapitalists promote centers on things like the “garage banks” to which Romney is so justifiably opposed. The real reason he (and the economic parasites both he and Obama represent) are so vehemently against such operations is that they represent the one thing above all of which the economic ruling class is opposed: Competition.

Legal tender laws and requirements that taxes be paid in legal tender hinder the operation of alternative currency systems, which provide much-needed liquidity for local exchange in conditions of economic downturn when there is “no money” in circulation. They’re growing rapidly right now in places like Greece and Spain thanks to Europe’s currency meltdown, for example. And bank licensing laws that mandate minimum capitalization levels for lending institutions further hinder the development of alternative money and credit systems.

Tom Greco‘s credit-clearing network, my favorite alternative currency, serves as a rough model for most of the digital, encrypted local currency systems around the world. The beauty of Greco’s system is that it serves as a denominator for exchanging existing values, rather than a store of past value. So members of the system can trade present against present, or present against future services, even when nobody has any money accumulated from past transactions. Greco’s system functions much like a checking account: When you sell a good or service within the “barter” network, your balance goes up. When you buy, it goes down. But most such systems let members run standing negative balances up to an amount equivalent to some selected period of average activity on their account. Which means that, even with everyone starting from zero, members of a community with “no money” have liquidity for trading their goods and services. Obviously, such advances of purchasing power by a barter network — which amount to free overdraft protection — risk falling afoul of government banking regulations.

Mutual banks, likewise — banking cooperatives which issue zero-interest secured loans against their members’ own collateral — are in clear violation of the state-enforced banking monopoly when they issue even secured credit without any capital reserves.

Obviously the economic ruling classes — which have lived off the rents on artificial scarcity since the rise of the state — cannot tolerate competition from such arrangements. The state is the instrument of armed force by which an economic ruling class extracts rents from the producing majority of a society. Since the beginning of history, rentier classes have interposed themselves between producers and consumers, setting up tollgates to collect tribute in return for not forcibly obstructing production, or allowing producers to trade their goods and services with others in return for a cut of the take.

The usurer, the landlord, the licensed monopolist, the holder of copyrights, patents and trademarks — are all comparable to the owner of a toll-gate erected on a bridge. On one side of the river is (say) a farmer who needs shoes, and on the other side a shoemaker who needs corn. The shoemaker and farmer can cross the bridge — so long as the owner of the toll-gate gets a share of the corn and shoes for allowing it.

The function of the state is to back up, with its guns, the right of these toll-gate owners to exact tribute from the rest of us for the privilege of feeding ourselves. And regardless of Obama’s talk about “working families” and “kitchen tables,” and Romney’s talk about “free enterprise” and “individualism,” both of them are good and faithful servants of the classes that own the Earth and everything in it, and live off our sweat and blood.

Two things to remember, though. First, it’s “garage banks” — credit clearing networks, LETS systems, and mutual banks — in conjunction with local micromanufacturers, permaculture, open-source information technology, and other horizontal and decentralized forms of production — that will keep us alive long after the state and corporations are smoldering in the garbage heaps of Gehenna. And second, thanks to such expedients as encryption and darknets, the state is losing its ability to stamp out such competition to the rentier classes at the very time it’s becoming most essential to our survival.

We will bury them.

Es irónico que los delirantes monetarios de izquierda, como yo, y los delirantes monetarios de derecha, como los fanáticos del oro seguidores de von Mises, les cueste tanto llevarse bien. Los izquierdistas, o bien todos los que seguimos la tradición de William Greene y Benjamin Tucker, argumentamos que el monopolio estatal del dinero le permite a la banca cobrar un precio monopólico por el crédito, y de esa manera mantiene artificialmente altos los costos de acceso al capital para los trabjadores. El resultado es que los medios de producción se tornan artificialmente caros y escasos, lo que coloca a los trabajadores en una posición de negociación desventajosa respecto a sus empleadores.

Los derechistas argumentan que el sistema de banca central abarata artificialmente el crédito, que es la causa fundamental de que la economía esté dominada por los sectores bancario, de seguros y de bienes raíces, y de que sea tan propensa a las burbujas. Acusan a izquierdistas como nosotros de sufrir “delirios monetarios” (a pesar de que desde el punto de vista de los economistas convencionales, ellos son tan delirantes como nosotros) y de querer crear prosperidad a partir de la creación de dinero inorgánico inflacionario.

Pero no es así. Aún cuando Murray Rothbard, discípulo de von Mises, fue uno de los que despreció las propuestas de banca mutual por considerarla inflacionaria, ésta se basa en una crítica del monopolio monetario idéntica a la crítica que Rothabrd hizo del monopolio en la industria del seguro de vida. Según él, las regulaciones estatales imponen requerimientos de capitalización mucho más altos de lo que se necesitarían por consideraciones puramente actuariales, funcionando como una barrera a la entrada que reduce el número de empresas competidoras en la industria y les permite cobrar un prima monopólica de precio a sus clientes.

Eso es exactamente lo que hacen las leyes estatales de licenciamiento bancario: Imponen requerimientos mínimos de capital incluso para los bancos que sólo emiten créditos respaldados por colateral. Ésto significa que es ilegal que un grupo de personas comunes y corrientes formen una cooperativa bancaria que emita poder de compra respaldado por las propiedades de sus miembros, sin interés, al menos que éstos sean capaces de recaudar millones de dólares para constiuír las reservas de capital. Por ésto, no les queda otra que pagarle una tasa de interés monopólica a un banco capitalista que emite crédito respaldado por sus propiedades.

Y cualquier emprendimiento que implique emitir crédito respaldado por ingresos futuros sin mantener reservas de capital, como las redes de crédito mutual propuestas por Tom Greco, corre el riesgo de ser clausurado por “carecer de licencia” (aunque tengo la esperanza de que pronto puedan operar con impunidad encubiertos por darknets encriptados).

El dinero emitido por los bancos capitalistas es inorgánico, creado de la nada, como bien lo dicen los derechistas. Cuando la Reserva Federal reduce los requerimientos de reserva bancaria, aumenta la cantidad de dinero que los bancos pueden crear a costo cero, y prestar cobrando interés. Por ésto es que el dinero es artificialmente barato de producir para el cartel bancario privilegiado que lo crea, pero al mismo tiempo, es artificialmente caro para aquellos que dependen de los bancos como fuente de crédito. Gracias a las leyes estatales de moneda de curso legal y la imposición de licencias bancarias, los bancos están en una posición monopolística, con el poder de cobrar interés sobre dinero que crean de la nada y sin incurrir en absolutamente ningún costo adicional.

El precio que cobran no tiene ninguna relación con el costo de proveer sus servicios. Ésta es la peor de todas las posibles combinaciones de resultados que pueden surgir en un sistema monetario estatista. Si el estado crea oferta monetaria de la nada, sería mucho menos destructivo que simmplemente lo depositase en las cuentas corrientes de la gente sin cobrar ningún interés (como lo proponen los promotores del Crédito Social), o si lo gastase en compras de bienes y servicios. Pero no: El estado crea dinero de la nada, pero delega la tarea en una clase de parásitos privilegiados que cobra precios de usura por llevarla a cabo. Es un perfecto ejemplo de lo que los derechistas de falso “libre mercado” (como lo es la gente del AEI, Heritage y el Adam Smith Institute) llaman “privatización” en un sistema estatista, consistente en sumar un estrato adicional de bocas nominalmente “privadas” que alimentar, por encima de los burócratas estatales. En términos prácticos, el componente privado de esas “asociaciones público-privadas” es simplemente una parte más del estado.

Así que en realidad, tanto los delirantes monetarios de izquierda como los de derecha tienen la razón. ¡Que el amor florezca entre todos los delirantes monetarios!.

Artículo original publicado por Kevin Carson el 26 de abril de 2011.

Traducido del inglés por Alan Furth.

The Times describes how an alternative economic network in the city of Volos works:

People sign up online and get access to a database that is kind of like a members-only Craigslist. One unit of TEM [Local Alternative Unit] is equal in value to one euro, and it can be used to exchange good and services. Members start their accounts with zero, and they accrue credit by offering goods and services.

The online network includes a rating system to boost quality control. Loans and vouchers that can be used like checks are also available to participants.

The opportunities that the network engenders are especially important at a time when news from Greece tends to be grim — most recently, massive wage cuts have been proposed for state-controlled publicly listed companies. When the system fails to deliver what it promised in exchange for power, alternative economic networks offer a real social safety net for people to fall back on.

But investing in alternative networks is beneficial not just as insurance, but as a means to greater individual and community autonomy. A Volos resident described the sense of empowerment that came from participating in the alternative economy. “The most exciting thing you feel when you start is this sense of contribution,” she told the Times. “You have much more than your bank account says. You have your mind and your hands.”

Alternative economies create more options for people to use what they have to get what they want in a peaceable manner. Participants do not need to wait around for someone with money to create jobs, but can directly interact with each other to meet needs and thrive. By participating in an alternative economy, individuals make their livelihood less subject to the decisions of official banks or governments.

The United States is no stranger to alternative currencies or barter networks. Back in the Great Depression, local trading systems sprouted up across America, filling a gap where there was work to be done and people willing to do it but otherwise no money to pay them with.

Alternative currencies are also being used today by people interested in fostering community and freedom. Time banks and time-backed currencies like Ithaca Hours or Shire Hours allow members to make exchanges based on labor time. Some barter networks are backed by precious metals instead. Shire Silver, created by enterprising libertarians in New Hampshire, uses cards containing small amounts of silver or gold. DelValley Silver is establishing a barter network based on silver tokens. And BitCoin is a digital currency in worldwide use.

A nice thing about alternative currencies is that numerous alternatives can exist for people to choose from. An individual could use one currency for certain things and other currencies for different things. When necessary, alternative currencies can be exchanged like international currencies are today, and they actually are frequently exchanged for official national currency. This means that a variety of methods could complement each other, whether based on gifting or mutual aid or on hard currency.

The economy is made of transactions between people. By working together, people can build a more engaging, exciting, and cooperative economy than what elites will make for them. After all, there is work to be done, and people have skills and time to do it.

The right-wingers argue that the central banking system makes credit artificially cheap, and that our bubble-prone FIRE (Finance, Insurance, and Real Estate) economy is caused by “free money.”  They call us left-wingers “money cranks” (despite the fact that, in the eyes of conventional economists, they’re as cranky as we are) who want to create prosperity with inflationary fiat money.

Not so.  Although Mises’s disciple Rothbard was one of those who dismissed left-wing mutual banking proposals as inflationary fiat money schemes, they’re actually based on a critique of the money monopoly identical to Rothbard’s critique of the life insurance monopoly.  State insurance regulations, he argued, mandate capital reserves for life insurance companies far in excess of what actuarial considerations would require.  They thereby function as an entry barrier that reduces the number of competing companies and enables them to charge a monopoly markup on the service of provicing life insurance.

That’s exactly what the state’s bank licensing laws do.  They mandate minimum capital reserves even for banks that are solely in the business of issuing secured loans against collateral.  That means it’s illegal for a group of ordinary people to form a banking cooperative and issue purchasing power against the members’ own property, interest free, unless they can also raise millions of dollars in capital reserves.  So instead they have to pay a monopoly rate of interest to a capitalist bank that issues credit against their property.

And any venture that amounts to issuing credit against future performance without maintaining capital reserves, like Tom Greco’s mutual credit clearing networks, risks being shut down as an “unlicensed bank” (although I have hopes that they’ll soon be able to operate with impunity under cover of encrypted darknets).

The money issued by capitalist banks is indeed fiat money, created out of thin air, as the right-wingers say.  When the Fed reduces reserve requirements for banks, it increases the amount of money the banks can lend into existence — at interest.

So the money is artificially cheap for the privileged banking monopoly to create — but at the same time, it’s artificially expensive for those that depend on them as a source of credit.  Thanks to the state’s legal tender laws and bank licensing laws, the banks are in the position of a monopolist, empowered to charge interest on additional money that they lent into existence at no additional cost to themselves.  But because they have a legal monopoly on the power to issue credit, they can charge a price for the service that bears no relation to the cost of providing it.

In terms of the sheer degree of statism, this is about the worst of all possible worlds.  If the state were going to create a money supply by fiat, it would be far less oppressive simply to create it by depositing it into existence in people’s checking accounts interest-free (as the Social Credit people advocate), or spending it into existence (Greenbackism).  Instead, the state creates money out of thin air — but delegates the function to a privileged class of parasites that charge usury for the function.  It’s a classic example of what passes for “privatization” on much of the fake “free market” Right (like the folks at AEI, Heritage, and the Adam Smith Institute):  The framework is just as statist, but there’s an additional, nominally “private” layer of mouths to feed, on top of the state bureaucrats.  In practical terms, the “business” component of such “public-private partnerships” is really just another part of the state.

So both the left-wing and right-wing money cranks are really right.  Here’s to money crank love.

Translations for this article:

• Spanish, El Dinero Está Muy Caro y Muy Barato al Mismo Tiempo.