Liberty Dollars and Postage Stamps

A nameless friend of mine ripped this out awhile back. I found it intriguing enough to ask if I could post it here.

Basically, it seems that people get all bent out of shape when their
assumptions about money are violated. Seeing as you two have mentioned
Liberty Dollars, I thought I'd mention the micro-economic perspective.
It hinges on a theory about the relationship between currency and
wealth, which I will now spend two skipable paragraphs on.

There are dollars, and there are dollar bills. One bill in a million
is fake, which means that a dollar bill is actually worth 99.9999
cents. (Actually, the fake bills are generally larger denominations,
but that's the idea.) But if all funny money were instantly
recognizable by all and torn up tomorrow, a few people would take a
loss but the bills would again be worth exactly one dollar. That is,
the remaining bills would have slightly more buying power in
accordance with the change in scarcity. The effect is more pronounced
the greater is the local circulation of counterfeit bills.

The underlying problem with counterfeit is that it devalues the
currency. People don't want their currency devalued, so they arrange
to reject and seize counterfeit bills at key points in the cash cycle
such as banks. As a result, anyone who accepts funny money will
ultimately take an economic loss unless they successfully recirculate
it. (This can happen by accident.) This arrangement causes anyone who
creates and passes a fake bill to be stealing buying power from the
last person to accept the bill before it reaches a currency validation
checkpoint. There is also a great sense of unfairness that some
private party can create money without corresponding wealth. For both
reasons, the penalty for counterfeit is harsh.

Liberty Dollars (and things like them) are a subtle issue. Clearly,
they are not counterfeit, because they make no attempt to masquerade
as standard currency. However, there is still that same appearance (in
some minds) that someone is creating money without wealth, and
furthermore, as zeolots promote the widespread acceptability of these
alternative currencies, the notes take on an economic effect similar
to that of counterfeit. They increase the cash supply artificially,
The banks dishonor them for obvious reasons, and merchants don't
generally have wherewithal to make the conversion to standard funds.

In truth, the only difference between baseball cards and counterfeit
currency is that nobody tries to buy beer with them. They have almost
no intrinsic value and plenty of speculative value, but most
importantly, they have no face value.

If you really want to muck with the system, see if you can pay for
things using postage stamps. Once you buy your stamp, the postal
service has the use of your original cash. But if you can extract
gains from trade using those stamps as a medium of exchange, then you
retain your use of the face value of the stamps for as long as you
have them. In short, you've duplicated money until someone slaps that
bad boy on an envelope, which is the inherent economic value backing
the stamp. Get more than a few people doing this, and you might spawn
an investigation. or at least some serious head-scratching in high

His observations do coincide with some of my experiences trading in ALD. There's always someone on the sidelines who's just certain there's a scam going on here somewhere.

It's also interesting to note that the US government would have to crack down on stamp usage as 'current money' if they were consistent in their interpretation of law. This would put the government in the interesting situation of having to crack down on exchanges of a federal document (stamps) because it cuts into the value of another federal document (dollars).

...Which is just as logical and consistent as outlawing tobacco usage while funding it's production at the agricultural level. Your federal government at work.

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