-- Posted Wednesday, 16 June 2010 | | Source: GoldSeek.com
By: Dr. Jeffrey Lewis
Metals investors enter the business for usually one reason: to protect their money against inflation. Obviously this wouldn't be a goal if currencies weren't generally inflated into oblivion, or if the history of the fiat currency could give investors any hope that inflation wouldn't happen.
Alas, as long as governments have been charged with the task of issuing currency, they have also made it their job to inflate them out of existence. However, we should note that there are at least some people interested in honest and accountable currencies.
Private Currencies
Recession is said to be one of the greatest motivators for innovation, and in money, it certainly has been. In the two years since the recession began, in order to fight off a depletion of local wealth, local communities have created their own currencies. Many of these are quite popular, some of which have already distributed more than $2.3 million worth of currency that can only be used in local shops in one locality. The benefit here is that the money spent at these shops can openly circulate throughout the community, ensuring that at least a small amount of liquidity stays local and keeps the economy moving.
Slight Downside
One of the biggest disadvantages to these local currencies is that they are unfortunately pegged to the US dollar, so it is just as encumbered with the threat of inflation as the dollar. However, their popularity does suggest that consumers are at least willing to drop the greenback as a medium of exchange, and we can only expect that as these currencies spread further and further, Americans will begin looking at their dollars a little bit differently. One of the most popular currencies, BerkShares, which was started in Massachusetts, has grown to be worth $2.3 million, and now as many as 400 local businesses accept it. That's some serious market power!
The Next Step
The next step in moving forward with competing currencies and the eventual resurgence in metals as money is right around the corner. Following the success of currencies backed by the US dollar that can be readily exchanged in local businesses, we should only expect that the next step will be a currency system that is devoid of any ties to the greenback. Instead, the new currencies will be backed by metals, labor, or another fungible product that is easily monetized. Their use in local businesses will help propel an economy that is strained by debt and fear of the future, and we can only hope that they will go mainstream.
However, investors should be careful. The last currency created privately and distributed on the basis that it could compete with the US dollar was promptly shut down by Federal authorities because it contained the word “dollar.” Going further, we can imagine that currency providers will be more prudent about their labeling, and we may once again have a currency that is actually worth something tangible – that is, something more tangible than inked paper.
Dr. Jeffrey Lewis
www.silver-coin-investor.com
-- Posted Wednesday, 16 June 2010 | Digg This Article
| Source: GoldSeek.com
