Representative Bob Marshall's (R) announced recently that he is proposing legislation for a third time to study the creation of an "alternate" Virginia state currency of gold and silver coins as part of a growing trend in the United States. Some 16 states in the union already have passed legislation, or are in the process of doing so, that would create a state currency. This development spreads as concerns and fears grow that the Federal Reserve System may fail, either through hyperinflation, a calling in of U.S. debt by another country, or through some other failure, causing the U.S. monetary system to collapse.
According to the International Monetary Fund, in the four decades between 1970 and 2010, there were no less than 145 banking crises, 208 monetary crashes, and 72 sovereign debt crises around the world. This adds up to an astounding total of 425 systemic crises -- an average of more than 10 countries in crisis each and every year!
Could the United States be next?
With this grave apprehension in mind, the 16 states -- namely, Georgia, Montana, Missouri, Colorado, Idaho, Indiana, Missouri, Montana, New Hampshire, North Carolina, South Carolina, Tennessee, Utah, Vermont, Virginia and Washington -- have taken action to create their own state currency. In most cases these are usually backed by a precious metal such as gold or silver. In the case of Utah, for example, the Utah Legislature passed a bill allowing gold and silver coins to be used as legal tender in the state -- and for the value of their precious metal, not just the face value of the coins. Utah's bill allows stores to accept gold and silver coins as legal tender. It also exempts gold and silver transactions from the state's capital gains tax, though that does not shield exchanges from federal taxes.
But isn't the U.S. dollar backed by gold? The guarantee of the convertibility of U.S. dollars into gold on demand was established at the fixed rate of $35 per ounce by the Bretton Woods Agreement in 1944, but abandoned by the Nixon administration in 1971.
It is interesting to note that modern money, the type used today -- whether a dollar bill, euro or yen, was created in the late 17th century with the need to finance wars, giving further impetus to the money-creating mechanism.
A special relationship began between the emerging private banking systems and governments.
The oldest surviving agreement of this type can be traced back to 1668 with the license of the Swedish Bank of the Estates of the Realm (the name was changed in 1867 to Riksbank as the Swedish Central Bank still is known). The agreement gave the power of emission of paper money to a private bank, the Bank of the Estates of the Realm, when the crown urgently needed money to fund a war against Denmark. The same situation took place a generation later in Britain with the founding of the Bank of England (1688) to which the monopoly of emission of paper money was assigned by King William of Orange in 1694, when he needed 1.2 million pounds for a war against the French. From England, this practice spread around the world. In the United States, this same deal -- bank-debt money accepted as legal tender by the government -- was part of the Federal Reserve Act of 1913.
This liaison between terrestrial seats of power and the banking system still is with us today.
During the latter days of the gold standard, the actual gold reserves of the Bank of England, for example, were treated as a state secret, because the amount of gold backing for the British pound was much lower than publicly admitted. The last vestiges of the gold standard, as already mentioned, were removed by President Nixon in August 1971, when he officially stopped any convertibility between the U.S. dollar and gold, even for central banks, thereby severing the last link between a physical commodity and the money system. Their values were severed and divorced from each other.
National currencies now are fiat. Fiat takes its origin in the first words that God spoke in Genesis: "Fiat lux" (let light be). It implies the god-like ability to create something out of nothing (ex nihilo) through the power of the word, or in this case, the stroke of a pen. This means that money isn't something that comes out of a farm, a mine, a mint or even a printing press. It comes into being by the power of the word or a stroke of a computer key, as expressed in the law of the land.
It is by this very design that national currencies are fragile. And, at a lower level that of the state, communities of all descriptions are coming together to find other media of exchange to address their needs.
A quiet revolution is happening that has, for the most part, gone under-reported. The number of contemporary co-operative or complementary currencies operating in the world has grown exponentially from a mere handful in the 1980s to more than 4,000 mature systems worldwide today. They are more prominently in use in Latin America, Australia, Japan and continental Europe than in the United States, although the current economic downturn is resulting in a significant increase in America and globally. The oldest written record of an operational co-operative system still in use today is found in Bali, Indonesia. The island-wide system was first documented in A.D. 826, and it's believed the system was thriving for centuries prior to that date.
A diverse monetary ecology is what is needed to stabilize the global economy, and not to have the continuing pattern of booms and busts. The current flowering of co-operative complementary systems and other monetary innovations has tended to be in small pockets, driven by struggling local economies. With social media, Internet access and cheaper computers however, these ideas are spreading expediential.
As futurist John Naisbitt noted, "Change occurs when there is a confluence of both changing values and economic necessity, not before.
BERNARD LIETAER is an international expert in the design and implementation of currency systems. He co-designed and implemented the convergence mechanism to the single European currency system (the Euro) and served as president of the Electronic Payment System at the National Bank of Belgium (the Belgian Central Bank). He has studied and worked in the field of money for more than 30 years in an unusually broad range of capacities including as a Central Banker, a fund manager, a university professor, and a consultant to governments in numerous countries, multinational corporations, and community organizations. He co-founded and managed GaiaCorp, a top performing currency fund whose profits funded investments in environmental projects. A former professor of International Finance at the University of Louvain, he is currently a Research Fellow at the Center for Sustainable Resources of the University of California at Berkeley. JACQUI DUNNE is an award-winning journalist from Ireland, founder and CEO of Danu Resource, and an emerging leader in helping entrepreneurs develop technologies and initiatives that restore the earth's equilibrium globally. The company serves as a fiscal agent for funding, and works as the interface between the donors and the projects. Danu's unique value is its ability to work from a future reference point that draws out the greatness, and builds upon the strengths, of both the donor and the recipient, thus creating a flourishing paradigm shift for a quadruple bottom-line: people, planet, profits and power within.
JACQUI DUNNE is an award-winning journalist from Ireland, founder and CEO of Danu Resource, and an emerging leader in helping entrepreneurs develop technologies and initiatives that restore the earth's equilibrium globally. The company serves as a fiscal agent for funding, and works as the interface between the donors and the projects. Danu's unique value is its ability to work from a future reference point that draws out the greatness, and builds upon the strengths, of both the donor and the recipient, thus creating a flourishing paradigm shift for a quadruple bottom-line: people, planet, profits and power within.