[liberty dollars] translated for the non-financial

Welshcakes said she didn't understand the last post so this is as simply as I can put it. Correct me, afficianados, if I go wrong.

Money is only an agreement between buyer and seller that the paper or coin tokens exchanged are worth a fixed amount. If both agree and in fact everyone else also agrees, then that's currency. What makes them even better is if they're backed by something solid everyone agrees is valuable, e.g. gold.

If a government gets into the act and declares:

1.there will only be one currency and any other is illegal;
2.that it is not based on anything more solid than the government's word that one dollar is worth one dollar,

... then all is well as long as you use that currency within the country and the government acknowledges that the paper in your wallet belongs to them and is worth the face value on the paper.

Everything comes down to the word and reputation of that government. When banana republics issue heaps of their currency, the government's word is worth nothing and inflation goes into 1000s of percent, rendering the notes and coin worthless.

The U.S. And British governments have had good international reputations, which is why, in Russia, dollars were always seen as “hard” currency. However, if the government's reputation becomes shaky, as it has done recently or if people don't trust them anymore or if the power over money is given to someone else like private bankers, as it has been in the case of the Fed in real terms, then that is enormously worrying because the value of the dollar or pound is under threat.

That's where the smart financial mind reduces liquidity and gets into commodities and other things which have solid intrinsic value independent of the whim of the government. In other words, safe money. The government won't mind too much if it is just a few of their cronies and some others who are doing this but they wouldn't want a run on the dollar.

That is, they would view dimly any attempt by the ordinary pleb like you and me to buy up solid value such as gold or silver. Basically, people would start trading in this rather than in the worthless paper money. The government doesn't want the average punter to be aware of this and controls the release of gold and silver onto the market.

Into this comes the Liberty Dollar which is, as detractors point out, a scheme. One man set up a company which minted silver coins and backed its paper money with real gold, i.e. If you wanted to cash in that dollar, you'd get real gold in return.

The security is only the word of the man who runs the company. As long as the company trades and the government abides by the agreed rules, the deal is safe. In a stable society like the U.S., where very few suspect anything nefarious is going on up top, there's no reason to feel that this man will cease trading. If he does, he owes money in a big way. He doesn't play about and invest the gold in stock – it is stockpiled. The money is there, even if there's a run on the stocks, unlike with banks who use your deposits for their own risky ends.

The weakness of the scheme was shown yesterday. The law states that the money can't be used as currency – only the greenback can be used for that – but the definition of currency is fluid. If I pay for my fruit with gas, that's technically currency but wouldn't be clamped down on most like.

However, if a growing number of traders agreed to honour the “gas” currency, if people got to hear of it and started dealing only in gas and not paper money, then the government gets interested. “Legal” therefore means any barter or exchange is OK as long as only a few people do it. When a lot do it, it becomes illegal in the government's eyes.

They have a point because there's a hell of a lot of investment around the globe depends on the solidity of the dollar. If enough people backed gas as the medium of exchange, the government would be in increasing trouble and the nation's economy could even collapse - on paper. In real terms it would not collapse because gas is a viable alternative currency within the country between those people who are happy to use it as such.

Then you'd have a situation where in one town, gas is the medium and in another – scrap metal perhaps. This situation is intolerable for the simple reason that the government don't actually control the currency in the first place – the bankers behind them do that and the banks would see all their profits go up in smoke overnight.

Therefore the organs of state – the military and law courts and so on – are going to be brought down on anyone bucking this system of control. A more fanciful reason is that if the military industrial complex, hand in glove with the financiers, were planning, say, a credit crunch or a general collapse so that they could:

1.make profits on the collapsed market ;
2.assert control over the lives of the citizens in a way not possible in peacetime,

... then people must have worthless greenbacks in their hands or bank accounts so that this can be achieved. Anyone holding real money is beyond their control.

Totally fanciful, of course. Your government would never do that – ask George and Gordon, who never tell lies.

Back to the Liberty Dollars. They work fine as long as the rule of law applies in the country and free enterprise is a reality. Neither the banks nor the government, who are in cahoots with the central bank, can do much unless, that is, they can prove or feel there's a better than even chance of a case that the LDs were being used “as currency”.

Protestations from the company that the dollars don't even look like U.S. Currency would cut no ice – if people were trading in them, then the government feels it has a case against the company. This was the situation yesterday.

Now ordinarily, this would mean prosecuting the company but yesterday they omitted that step and just took it all – the gold, scrip, accounts, documents – everything. So I return to the statement above:

As long as the company trades and the government abides by the agreed rules, the deal is safe. In a stable society like the U.S., where very few suspect anything nefarious is going on up top, there's no reason to feel that this man will cease trading.

Again - as long as the government abides by its own rules and the spirit of those rules.

In the case of the Liberty Dollars, the government did not abide by the agreed rules. Therefore everyone who bought LDs has now lost everything.