An argument for private currency contracts.

Exchange is memorialized by contract. That contract can settle between T+0 and T+ n. The contract summarizes the terms and conditions of the exchange. Government’s validity is optimized where it protects enforcement of the contract.

A bank is a repository of contracts. An individual can look at themselves as a bank, sitting also on an inventory of contracts from leases to service agreements to buy-sell agreements. From a money generating perspective, an individual’s bank is the knowledge, data, information she has stored for future input into producing stuff. It represents the energy that will be used to create the output that is then exchanged with another person.

The contract bought and sold between the two individuals creates a claim on each other’s bank of energy. The contract becomes currency when it is traded to a third party before the terms and conditions of the underlying subject of the contract are settled.

Nothing in the U.S. Constitution prohibits this one-to-one relationship, this exchange. In other words, the three branches of State power as described in the Constitution do not stick their roots into autonomous contract making. The State already participates in markets for contract when the Treasury issues bonds (IOUs) and primary dealer and market maker members of the Federal Reserve System buy these State issued IOUs and, in some cases, resell these contracts to private individuals and corporations. For this reason, the State should not feel threatened by private contract making.

Another reason that the State should not be threatened by private contract making is that private contract making offers the State an opportunity to increase its tax revenues from increased market activity between private participants.

I can see where the State may be concerned with how to value these private contracts as currency exchanges and collect revenue. I don’t see this as a complex problem. The government can simply look at the prices for the underlying asset in these contracts and tax the contract based on the market value assessed upon delivery (sale) of the asset.

Private currency contracts negotiated between two parties should not be viewed as competition by the United States. Yes, the idea of something resembling a sub-state within a nation-state sounds foreboding, but that fear can be mitigated by taking a limited view of the US currency. The US dollar should be looked at solely as the legal tender accepted by the United States for tax purposes or settling contracts the United States enters with other parties.

The United States, when viewing private currency contracts, should choose not to interfere with them because interference puts the State in a sub-optimal position when taxing market activity. Interference opens the State to assertions that the freedoms to contract are being impeded. Interference disincentivizes private individuals from conducting price discovery and creating ways to maximize their productive energy. Interference is a suboptimal use of State power.

Alton Drew

2 November 2024

I have launched an advocacy campaign called “The Campaign for Real Money.” This campaign calls for the Congress to recognize individually issued currency backed by valuable assets and bank issued currency backed by valuable, employment-creating assets.

The United States’ monetary policy encourages the issuance of deflated dollars based on the issuance of IOUs backed by no productive value. If the United States is to maintain a currency that attracts investors, while competing against the currencies of resource-based countries, the U.S. must issue currencies backed by real money, by productive energy.

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