from InternationalMan Website
The US has embarked on a program to end the use of paper currency and replace it with a system in which all transactions are made electronically (by plastic card or cell phone).
That would mean that, if the program were to be fully successful, the individual could not buy so much as a candy bar without swiping his bank card or phone.
On the surface, this might seem very convenient, but to view it in this light would be extremely shortsighted. In the long term, it would mean that no commerce could take place, except through a bank transaction.
This would allow for banks to charge the client for the privilege of spending his own money. It would also discourage savings, as the depositor would be steadily losing his money through monthly interest charges.
But it doesn't stop there. The depositor would be virtually enslaved by his bank, to the point that the bank would have the power to approve or disapprove any transactions.
Additionally, government could institute direct taxation by debiting the account (since they would have access to the account holder's every monetary transaction and could decide unilaterally what to charge at tax time).
To a great extent, the elimination of currency that can pass between individuals would spell the end of monetary freedom.
The US government is hurrying the demise of the paper dollar as quickly as it is able.
Why the urgency?
The answer is that both the government and the central bank, through runaway borrowing, have become insolvent and, at some point soon, will collapse. If that were to happen, there would be a run on the banks.
But if the banks held all the money electronically and it were no longer possible for a depositor to remove his funds in the form of paper banknotes to then be stuffed in a mattress, the depositor would be at the mercy of the bank.
He would go down with the system.
But a new development on the horizon suggests that pushback may already have begun.
The state of Texas has passed a bill to create a gold depository and to create a means for transactions to occur in precious metals.
NOTE: The US Constitution states in Article I, Section 10, "No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts…" Therefore, whilst a state may not produce its own fiat currency, it can use gold and silver as payment.
Under the new law, an account holder could use an electronic system to make payments to others who hold accounts. (A portion of his gold on deposit would be transferred to the other party.)
This legislation, if it's followed through upon, would end the monopoly now held by the Federal Reserve to create money, and end the plan for the banks to totally control money.
Any individual who sees the currency debacle coming would be able to withdraw his funds and buy gold. Were this legislation to spread to other states, each state could develop the ability to be economically independent of the central bank.
So, may all US residents breathe a sigh of relief? Not likely.
It's anyone's guess as to what the US government will use as its tactics, or how it will justify them, but it cannot tolerate this move by Texas. They must find a means to quash this legislation before it's put into practice.
Perhaps they'll declare this legislation to be an act of monetary secession, which cannot be accepted (even though Texas has a legal right to secede, if it wishes). Or they may claim that gold is the preferred currency of terrorists and that, if Texas is allowed to have a bullion bank, it will become the terrorism center of the US.
However it plays out, the pressure from the federal government can be expected to be considerable.
The very union of the states as a country could be in question.
To be sure, as the effort to eliminate the holding of currency plays out, we shall see, worldwide, a plethora of solutions popping up. And there can be little doubt that gold will play a significant part in the various attempts to maintain personal control of wealth.
In recent years, quite a few private companies have been created whose purpose was to provide gold depositories, with the ability to handle transactions from party to party in gold, by the gram, much in the way that banks presently handle transfers in cash.
Some of these companies have failed, because the principals diverted the deposits for other purposes. Some have been killed off due to US government harassment and/or legal attacks.
But others have survived.
Certainly, we shall see many more of them in the future, and those that are successful are likely to be incorporated outside the US (and the EU, for that matter), where they can operate more freely.
As more of them appear, standards will develop, and together they have the potential to form a new Global Borderless Currency System, independent of exchange rates and political manipulation.
At present, no gold Digital Currency Banks (DCBs) engage in lending and this is likely to continue, as the practice of irresponsible lending has been one of the very causes of the current economic crisis.
It should be borne in mind that such services are not a panacea.
NOTE: A gram of gold is worth, roughly, US$40 at present, so it would be useful only for larger transfers. A conventional bank would still be necessary to make everyday purchases such as groceries and gasoline.
However, assuming conventional banks were willing to accept transfers of money from gold DCBs, the bulk of an individual's wealth could be maintained in the gold depository, and regular transfers could be made to the conventional bank to cover day-to-day purchases.
And whilst this would be a bit of a nuisance that does not presently exist, it would save the bulk of the individual's wealth from the controls and confiscations that are most certainly on the way with conventional banking.
In the future, anyone who wishes to retain a measure of his personal economic liberty is going to have to work harder at it. However, he will not be alone. Historically, the more controlling governments become, the more inventive people become in circumventing the system.
As present-day examples, we can look at such countries as Argentina and Venezuela. Each time their governments pass new legislation to further control the free flow of money, a dozen new leaks in the system pop up.
Inventiveness has always proven to win out in the end.
Alternate forms of currency and black markets appear spontaneously and become too numerous to regulate. These markets are generally illegal, and in a way, that's their foremost attribute, as an illegal market is a free market:
Eventually, the government is forced to cave in to the free market because it works.
NOTE: Possibly the most recent such case is Zimbabwe in 2008, where, eventually, even the government itself began using the black market, as it was the only remaining market that was actually functional.
We cannot be sure at this juncture whether Texas will succeed or fail. Nor can we be certain what role gold will have as governments increase their strangleholds on cash.
We can, however, be sure of two things: