Choice

In many important areas of your life, you have choice. You can choose your spoken and written language, your computer’s operating system (Windows, Apple, etc.), and your mobile phone service (Sprint, AT&T, T-Mobile, etc.). However, when it comes to money, you don’t have a choice. You must accept and use the local national currency—the dollar if you live in the United States—for your salary, contracts, and to pay taxes.

The problem is the dollar can lose value like any other item. If you negotiate a salary in dollars, and during the next 12 months the value of the dollar falls 10 percent, then your salary fell 10 percent. Unless you get a 10 percent raise, you’ll be making less value the next year. It’s not about money; it’s about value.

Calculate your real salary

To calculate the real value of your salary, divide it by the cost of a product you regularly purchase. For example, the price of gas (in dollars) in 2004 was about $2 and has since doubled to about about $4 in 2012 (see data). Measured in gas, your salary would need to be twice what it was in 2004 for you to be making the same value. If you were earning $25,000 in 2004, you would need to be making $50,000 in 2012, just to be earning the same value, and that’s assuming you haven’t been promoted. If you were given a “raise”, you would need to be earning more than $50,000.

What has happened is the value of the dollar declined possibly by 50 percent between 2004 and 2012 and your salary increases have not kept pace. You’re earning more dollars, but less value. Had you been paid in another money product, you might be living as well as you did in 2004.

To avoid this declining standard of living, you should have the right to choose your money. You should have monetary choice.

Better than a gold standard, it will be your standard.

Declining standard of living

Because of inflation, most people get poorer every year:

• Your salary does not keep up: If the value of money falls 10 percent during a year, and you negotiate a five percent raise, then you are five percent worse off. You might earn five percent more, but you can only buy about five percent less.
• Your savings buys less: If when you earn and save 100 dollars, the price of a movie ticket is five dollars, you saved the equivalent of 20 movie tickets (100 divided by 5). If the value of money falls 50 percent, then ticket prices will rise to 10 dollars, and the value of your $100 savings will buy just 10 movie tickets (100 divided by 10). Your savings are worth half as much.

Inflation is a tax

Governments use national currencies to tax people. In fact, governments without strong tax authorities primarily use inflation to tax people.

When a government or its “central” bank issues new money, the value for the new money comes from the existing money – in your saving account and your wallet. Your government’s deficit is paid by you through inflation. Those ten tickets you lost, were taken by your government.

It’s like stock fraud. To take value from existing shareholders, fraudulent executives issue more shares. Your dollars, or yen, or euros, are your share of what can be purchased with those currencies. If there are 100 dollars, and you have 10 dollars, then you own 10 percent of what can be bought. If the government issues 100 more dollars, raising the total to 200 dollars, then your 10 dollars are five percent of what can be bought.

At least two percent worse each year

Central banks actually target a two percent annual price increase, meaning your salary must rise two percent annually to stay even.

Every year, better production methods and new technology make it easier to make things, yet prices rise. The truth is that costs go down, but the value of your money falls more, and merchants raises prices to receive the same value. For example, if money is suddenly worth 50 percent less, then prices will double. The problem is the money, not the prices (or shortages or greedy merchants).

A central bank is not necessary for an economy. The central bank’s legions of economists calculate how much they can devalue the currency without causing a revolution. You never benefit from new inventions. If the central bank targets a two percent annual price increase, and calculates a new invention such as email reduced costs by two percent, then the central bank issues new money to devalue money by four percent, leading to a price increase of two percent. That new money goes to other banks that earn interest on new loans or to the government and its contractors.

What is money?

Money is any popular product used for indirect exchange. It is the middle-man in a transaction. You make a sweater and trade it for a product, such as a gold coin, that you do not intend to use, but instead will trade for something you will use. You later trade the gold for a meal. You could have also traded your sweater for silver, stock shares, or a gift card for songs on iTunes. All would be widely accepted. The key is you would have choice.

Don’t worry about carrying around gold. Money substitutes are convenient ways to trade money products and come in many forms: paper notes or receipts, charge cards, and bank checks. At one time, the “dollar bill” you might have in your wallet used to be a substitute or receipt for a silver coin referred to as a “dollar.” Now the paper note is a substitute or receipt for…nothing, and that is one reason the value is not stable.

Start-up Monies

Throughout history, people have chosen many items to use as money, from salt to copper to tobacco to silver. The evolution of money should continue, and the digital age and robust international trade creates new opportunities for money products, previously impossible.

You’ve heard of start-up companies such as Google and Apple or new start-up chains such as Starbucks. Have you seen any start-up monies lately?

Choosing your money might increase complications, just like when someone who chooses a Windows computer works with someone who chose an Apple. You would weigh the costs and benefits.

Using different forms of money could be as easy as using different credit cards. Businesses now accept Visa, Mastercard, Amex, and cash. Imagine if they accepted charge cards that transferred oil, silver, wheat, or even combinations of these and other items.

Political Recommendations

To end the hidden inflation tax and return to a rational economy, we recommend these changes:

• Individuals should have the right to use any product as money.
• Taxes should apply to only one side of a transaction.
• Remove the monopoly privilege that only “central” banks can issue notes.
• Exclude government from money.

Benefits

• Stable or lower prices each year due to productivity improvements
• Secure savings that need not be invested to maintain purchasing power
• Government limited by direct, visible taxes.

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