 This hearing will come to order Without objection all members opening statements will be made a part of the record the chair notes that some members may have additional Questions for this panel which they may wish to submit in writing Without objection the hearing record will remain open for 30 days for members to submit written questions to these witnesses and to place their responses in the record I Asked for unanimous consent to place in the record a letter with an attachment from dr. Edwin Vieira Who could not appear on this panel today without objections so ordered? I now recognize myself for five minutes to make an opening statement First I want to welcome our panel today To discuss a very important issue dealing with monetary policy We've had a series of hearings and discussion in this committee dealing with monetary policy mostly Directed around Federal Reserve policy and the Federal Reserve today There's not to be that much emphasis on the Federal Reserve itself but on money on money the issue of What it means what our history is like on money whether we can have parallel currencies and What the founders might have thought about? parent parallel currencies But the world's in the midst of a crisis today and many of us believe it is related To a deeply flawed monetary system a deeply flawed understanding of what money should be a Rejection of the notion that money should have real value and that money originated in the marketplace rather than originating from a computer over at the Federal Reserve and Though today the General public as well as the financial markets have a difficult time wanting to accept that or even understand it Ultimately, it is the nature of money that I believe will have to come We'll have to come to grips with and make a decision about it Because as we speak their meeting in Europe and ECB's just deciding what to do and Manipulating their money and credit as well as we here in the United States We in this country have been Given given some benefits definitely by being able to issue the reserve currency of the world and Because there is no definition to money and because we can create money out of thin air. We've had some advantages But the whole world is engulfed in this problem because of this lack of determination a lack of desire to understand What money is all about? So today we want to discuss that and get the testimony from our witnesses to try to further understand this nature of money and credit and Whether it's not whether it is necessary not to have a precise definition Also really what we want to talk about Parallel currencies Concurrencies circulate next to each other and I think the answer is rather clear. They're doing it all the time Internationally currencies are circulating all the time and in the computer age. They adjust their values rather quickly But the question is is can we? Have parallel currencies within the United States would it be legal? Is it does it contradict the Constitution? What would the state's roles be in this can they and what can they do and under these circumstances it does raise a lot of questions because you it raises tax questions and the authorities on how they're going to respond and and what you can do what one can do with currencies without having the wrath of big brother and big government coming down on us and saying no you can't do that but Today we have an absolute monopoly control over money and credit They're they're managing a money That they can't even define and then they wonder why we have chaos in the marketplace I see a time coming where there will be a response to the problems that we have a response that I will endorse and that is for monetary reform but It won't happen because of our hearings today. I know we're gonna have a great hearing a great testimony And there'll be lots of words of wisdom, but we're not going to walk away and all of a sudden the world's gonna say You know that makes a lot of sense, you know, we have to we have to deal with this but the one thing that I'm convinced of is that the current system that we have because we don't deal with the issue of money is the financial system worldwide is going to get a lot worse because They're they're not Admitting the truth of what's happening because the system that we've had We've we've had for so many years and so many decades that it has encouraged a system of horrendous debt and not only are many of our companies and and Banks and and states and countries are insolvent and they wonder why we have a problem And but if they don't admit to it and think that well the solution is just creating new more and more linear So that is an overwhelming task for that reform But in the meantime, is there anything that we can do to emphasize and to promote the Interest of and the understanding of what sound money would be by just permitting Parallel currencies, why can't we have the freedom to do this? We claim we live in a free country in a free society But are we a lot of have parallel currencies? Are we allowed to have? competition are we allowed to You know have something in addition to a Cartel and monopoly that has controlled Money and credit and has created a worldwide monster that they have no answers for So this is the reason I think is a very very important subject and once again. I want to welcome our our panel I would I'd like to know now if any other members have an opening statement Okay, thank you I will now introduce our our guest speakers and The members of the panel our first guest is Nathan Lewis is the principal of Kiku capital management a private investment firm Author of gold the once and future money Now published in five languages his writings can be found in the financial times Fords and Dow Jones news wires among others He has appeared on television networks including Bloomberg TV and CNBC and has been featured in several television documentaries Dr. Richard Ebeling is professor of economics at Northwood University in Midland, Michigan He is recognized as one of the leading members of the Austrian school of economics He's the former president of the foundation for economic education and author of political economy public money and monetary economics Dr. Ebeling Earned his PhD in economics from Middlesex University in London Rob Bray is founder and executive director of the American Open Currency Standard He is responsible for the creation and successful implementation of more than 150 circulating community currencies and silver gold and copper based token fundraising programs Mr. Gray helped issue the official currency of the free and independent Lakota Indian nation and also founded the Mulligan mint a full-service mint in Dallas, Texas Without objection your written statements will be made a part of the record You will now be recognized for a five-minute summary of of your testimony. I recognize now, Mr. Lewis Thank you The phrase parallel currencies tends to sound rather novel and experimental to us today living in the United States However, most people in the world are using parallel currencies today US dollars or euros are accepted in trade in good and services in Many countries that suffer from low quality domestic currencies the largest corporations finance themselves with dollar denominated debt The governments of such countries themselves issue dollar denominated government bonds By the end of World War two the US dollar which had been considered an emerging market currency in 1900 Had proved to be the most reliable currency in the world In practical terms this meant that the US dollar remained on a gold standard system While once prominent European currencies were devalued and the political situations became unstable the dollar thus became the parallel currency of choice worldwide In 1971 the United States abandoned its then nearly two century old commitment to the gold standard system at this point Historically currencies were often discarded for whatever the highest quality most reliable alternative was Which in practice meant a gold standard currency from a large developed country Despite the US is poor currency management since 1971 the alternatives have been even worse This is why the US dollar remains the most popular currency in the world and serves as a parallel currency in many if not most countries today Today there are no particularly owner owners barriers against using a parallel currency in the United States People are free to do business in euros or Russian rubles if they choose to There are over 150 currencies in the world all of which could conceivably used as parallel currencies within the United States or other countries However, all of them are floating fiat currencies generally of lower quality than the US dollar or euro There's hardly any reason to introduce another thus the most meaningful new parallel currency to be introduced in the US Or in another country would be one based on gold Although the use of other countries national currencies is largely accepted in the United States The issuance of alternative currencies within the United States can run afoul of where collectively known as legal tender laws Both de jure and de facto the one person who attempted to issue a gold and silver based parallel currency in the United States Was arrested in 2009 and convicted of charges related to counterfeiting and declared to be a domestic terrorist Gold today is regarded as a collectible and subject to a different system of taxation Then if one were to do a similar transaction using foreign currencies such as euros or Canadian dollars In addition purchases or sales of small quantities of gold is subject to sales taxes in many states Thus in practice the US federal government makes a powerful effort to suppress the introduction and use of alternative Golden silver based currencies today This state of affairs has become intolerable to many in 2011 the state of Utah declared that it would consider us meant Golden silver coins and monetary instruments based on these coins to be legal as currency This included the removal of all state level taxes on Transactions in gold and silver bullion 12 other state legislatures have had similar bills proposed the Utah example Could serve as a template for similar federal level legislation to legalize golden silver based currencies within the United States According to a study of 775 floating currencies Can buy Michael Hewitt? No floating fiat currency has ever maintained its value the average life expectancy of a floating fiat currency was found to be 27 years The US dollar which has been a floating fiat currency for 41 years now is thus an unusual example of longevity However today's extreme reliance upon easy money approaches to deal with economic problems with the Federal Reserve Promising unprecedented zero percent policy rates for years and real interest rates deeply negative Suggest to many that the floating fiat dollar does not have a long or successful future Governments of China Russia Malaysia Switzerland the Gulf States and others have complained about the potential consequences of today's aggressive easy money techniques not only at the Federal Reserve But also the European Central Bank Bank of England and Bank of Japan and have made preliminary steps toward the future alternative including discussions of new gold based parallel currencies on the international scale a parallel gold based currency or many such currencies would help ease this transition and form the basis of a new Monetary order if that should become necessary Each individual would be free to make increasing use of the gold based alternative as it best suited their interests There would be no great day of transition, but a smooth extended process perhaps over years the existence of a high quality Alternative could help people avoid much of the potentially disastrous Consequences if today's floating fiat currencies meet the same end as the 599 floating currencies that no longer exist. Thank you Like thank you and now we'll go on to dr. Adeline Congressman Paul and other members of the committee. I would like to thank you for this opportunity to share some ideas on This important theme of sound money parallel currencies and the road map to monetary freedom To discuss a possible road map to monetary freedom in the United States requires us to first determine What may be viewed as sound or unsound money? through most of the first hundred and fifty years of US history sound money was considered to be the one based on a Commodity standard most frequently gold or silver in Conqueror's the history of paper fiat monies were seen as the an account of abuse mismanagement and financial desire Financial disaster and therefore were viewed as unsound bunnies the histories of our own American continental notes during the revolution The asanyats during the French Revolution in the greenbacks and the Confederate notes during this American Civil War all warned of the dangers of Unrestricted and discretionary government power over the monetary printing press the result was that in the second half of the 19th century all of the major countries of the world moved towards a monetary standard based upon a commodity in this case gold The important matter to be emphasized that while it assured a degree of monetary stability While governments basically followed the rules of the gold standard That is a fixed ratio was established between a unit of gold and the amount of notes or account deposits That were extended after deposit was made the ability to redeem them at that fixed rate The monetary authority of the central banks at that time basically following the rules of the road of limiting The amount of notes or accounts open to the amount of gold that had been Deposited withdrawing notes in accounts when gold was withdrawn the fact remains that it still was a system of government managed money and once the ideologies and philosophies of the time changed and The shift was to a more activist government policy in the 20th century of government Targeting price levels government attempting to influence and manipulate output and employment or inflation targets and so on the Reins of ability to manipulate the monetary system was already in the hands of the authority given Responsibility for money and credit in the economy That raises the entire issue as to whether it is desirable to have government managing a monetary and banking system at all the free market case For competition in general and therefore a similar case in the case of money is The fact that competition in a market does at least two essential things It decentralizes the impact of errors if a businessman makes a mistake in his entrepreneurial Judgments it may have a negative effect on himself some of his employees a few suppliers of the good that he produces But it is decentralized It does not affect the entire economy when a central bank makes a mistake Its impact is potentially on the entire economy as a whole since the monetary authority Influences interest rates in general Affects the supply of money in the economy in general Distorts relative prices and impacts the general rate of inflation in the economy as a whole The other benefit of competition that was emphasized is that it is only through competition that we discover Innovative and creative ways to give people the things that they want and this market advocates have argued is no less true in the case of A money if government did not monopolize the control of money Individuals in the market would determine what commodities such as gold and silver they choose to use as media of exchange What type of financial intermediation and forms of financial intermediation they found most advantageous and profitable to use and a diversity of such forms as banks offer different features issuing their own notes based Upon commodity money deposits and therefore acting as a check and a balance on each other to give consumers what they wanted While restraining their ability to abuse their particular individual authorities So how would one move towards such a system of free banking and competitive choice and currency I Would like to suggest the following steps First the repeal of the Federal Reserve Act of 1913 an all-complementary and related legislation giving the federal government authority and control of the monetary and banking system Second the repeal of illegal tender laws giving the government the power to specify the medium of exchange through which people will Transact and enter into contract repeal three repeal all restrictions and regulations on the free entry into banking business and the practice of interstate banking for Repeal all restrictions in the right of private banks to issue their own bank notes and to open accounts Denominated in foreign currencies or in weights of gold and silver Five repeal all federal and state government rules laws and regulations concerning bank reserve requirements interest rates and capital requirements And six abolish the federal deposit insurance corporation Any deposit insurance arrangements and agreements between banks and their customers and between Associations of banks should be private voluntary and market-based in the absence of government regulation of this type We would naturally move towards a system of competitive currencies and free banking. Thank you. I Think the gentleman and now we'll go to mr. Gray Thank You mr. Chairman and members of the committee My name is Rob Graham I was asked to testify today on the theory of competing currencies and the practical challenges that make such a theory difficult or impossible to Implement for nearly five years now I've successfully directed the American open currency standard the standard for private voluntary silver copper and gold currencies that compete against each other Not against the US dollar Allow me to clarify We do not consider a OCS approved medallions produced and traded in our private barter marketplace competition at all To the US Federal Reserve note because fair competition as one would find in the free market assumes the existence of a level playing field Existence of a standard set of rules Those players who wish to compete honestly do so by simply relying on the merit of the value that they bring to the market Well, no fair challenge can be made between honest men and thieves and let me be clear when I say thieves I refer directly to the current private central bank and the men in government who allow it to exist Brings us to a critical point according to your employee handbook article one section eight says that Congress Shall have the power to coin money regulate the value thereof and I would argue that since 1913 Congress has failed to do the job with which it has been tasked in the free market since our inception The open currency standard has enjoyed nearly five years of growth and success and our mission of issuing a means that allows valuable exchanges among men who produce in the next five years we expect to expand our offerings and to increase our ability to Keep up with the demand for our private currency We are doing the job today that Congress would not But back to theory the use of community currencies here in the US became popular back in the early 1930s You see at the time the theory was that a group of the world's most powerful men were intentionally and systematically removing currency from circulation Creating artificial scarcity of money across the country small cities and towns felt at worse than anyone, but life did go on Then during the greatest economic depression the country had ever seen individuals across the country developed their own mediums of exchange They still needed things like food clothing daily essentials They still needed to live and they didn't have time to sit around and wait for the government to fix the problem And so according to historical records thousands of community currencies were created Circulated and traded in places where the scarcity of dollars was interfering with humans desire to live Individuals took it upon themselves back then to secure the means for their own survival and potential prosperity More recently community currencies have sprung up across Europe as the euro and other national currencies become increasingly unavailable and Undependable today communities all across the euro zone trade their own money instead of the euro Community currencies today are not simply a good idea in theory Right now alternative and complementary currencies circulate widely across the country right now in many different forms Ithaca, New York has Ithaca hours that are loosely based on the value of time Berkshire, Massachusetts uses a fiat backed fiat system And many more communities circulate gold silver copper AOCS approved barter tokens as a medium of exchange as For the practical challenges in the issuance and circulation of complementary currencies There are plenty in a voluntary system those that participate in the trading of private currencies must deal with the possibility of counterfeiting fraud scarcity Acceptance accounting storage and other issues all without the luxury of big brother holding a gun to anyone's head to ensure their success But even with all these risks the market still moves on as in any free market good ideas circulate with success and Bad ones eventually fade away Participants voluntarily choose to accept and circulate the highest quality currencies in exchange for their best production Merchants accept complementary currencies based on the premise that someone else is willing to do the same thing later Issues arising are worked out by the market with only one light to guide them the mutual exchange of value No guns no laws no force just the willingness to think outside the box and act on principle Complementary currencies are not new in theory or in practice Private currencies circulated long before governments have erected themselves to interfere What's new however is the public's apathy towards the government the Federal Reserve and their policies You've managed somehow for the last hundred years to convince the citizens citizens of this country that you're relevant But now just recently we're beginning to see the tides change on this and once it catches on you'll be rendered completely Obsolete the greatest hurdle you'll face over the next hundred years is trying to convince we the people that you're still necessary In spite of their failures failures to get the job done sure some will rely on you for handouts It's what they've always known their entire lives and they'll be slaves right up to the point of their own destruction But they don't know any better, and I don't blame them for their ignorance In the future you'll not have to worry about million man marches or citizen journalists trying to catch you on camera What you need to fear is no one paying attention to you the next American revolution will be fought with bullet Not with bullets and bombs, but instead it'll be one with the opposite consciousness To that end I'm here today to propose a solution my understanding of this committee is that you want to be part of the solution You want to believe that you're doing something good for the country? And so today the greatest gift that you can offer to the people that you clearly represent Not to the legislature, but directly to the public is what I call IR 1207 individual resolution 1207 commonly referred to as ignore the Fed Store your wealth in silver bank with non-fractional banks that pay real money on deposits use the card service network to satisfy dollar obligations Do not try to compete with the Federal Reserve system. Simply ignore them I ask you to leave the Fed their Federal Reserve notes and leave us our gold silver and copper Do not push to redefine whatever representations we choose for our wealth Let the Fed do it at once with their legal tenor so long as they leave our money alone I warn you honest money legislation is a wolf in sheep's clothing The greatest thing this body can do is exactly what it's done so far absolutely nothing All I ask is that you stay out of the market's way The people in our world are very happy to go right along saving you from your own destruction By producing value against all odds regulations codes and challenges that you throw our way But leave our money alone. It doesn't belong to you and it never will The bottom line is very simple humanity is not going to wait for permission to survive Things that cannot go on forever simply won't the market will move on with or without you and based on your rate of success to date Our preference is certainly without you Thank you for the time Thank you. I will now yield myself five minutes for questioning First off, I'd like to talk about the legal tenor laws a little bit more I want to pose a question for all three of you It was mentioned in your testimony about legal tenor laws how important they are and whether or not we can ignore them How how important are the legal tenor laws and how important is it that we get rid of the legal tenor laws if we really want to have a Parallel currency and be assured that we can do it. Can we ignore it? Should we work to repeal it? How far can you go without dealing with this issue? Because it does provide the monopoly, you know that that will not go away easily So each one of you could expand your thoughts on the importance of legal tenor laws What we should try to do and is it absolutely necessary that we do something before we can advance the cause of competition or parallel currencies Mr. Lewis Although I think that some communities are using Small-scale metallic currencies more or less under the radar if a large corporation Let's take Ford Motors, for example, we could begin to do business in gold and silver coins or or Related currencies they would immediately come under federal scrutiny and basically be prevented from doing so We what I'd like to see is basically for The gold and silver and currencies based on gold and silver to be treated as Legal currency within the United States in practice this will require a declaration of some sort to make it Effective And ultimately at the very least to be able to treat gold and silver the same way we treat euros of Canadian dollars today We can all do business in them in the United States Even though they're not Necessarily declared as as legal tender and so on and so forth It would be better to have any more official declaration to say yes We accept gold and silver as a legitimate means of monetary transaction and a legitimate foundation for business Thank you. Dr. Edelman. Yes Anyone who's traveled in a country that has been experiencing severe or even hyperinflation knows that in spite of official legal tender laws That is the government declaring a certain money or its currency the lawful money People start using alternative currencies that they view given their circumstances of having a more confident ensured or certain value So in spite of laws and regulations at the end of the day what people will choose to use money Even when it breaks the law, they will follow what they view is most effective and and Self-interested for themselves in the marketplace to secure Their wealth and their transaction opportunities for themselves and their families but the fact remains is that while the market in a sense finally supersedes and and And no longer recognizes government laws when it becomes serious enough It is crucially important if we could eliminate This the the legal tender restrictions in the United States because basically it would say is that now Individuals and the law the government the courts will respect the contracting in the exchanging of any form of medium of exchange That the individual citizens of the society choose to use That that would go a long way For example a well-known Nobel laureate Austrian economist Friedrich Hayek once made the case what he called choice in Currency he was doing this before the euro in the context of Europe But he said one way to tame the inflationary tendencies of government is to allow citizens within their own country Just to use the currencies of other countries within their domestic exchanges if they choose to be able to say I don't trust and Have confidence in the monetary authority to to to restrain itself in issuing excessive quantities of that money Also, if you eliminated the legal tender laws, then the people themselves would decide Do we want to use dollars? Do we want to use alternative to dollars? How much do we want to use notes? How much we do we want to use actually coins of various sorts? And it would be basically saying consumer sovereignty consumer choice, but if we could do that That would be the essential road roadway and path to to Restoring a system of monetary freedom, but if in the United States We were to ever experience and of course we hope we never do a serious and hyperinflation The market would basically tell the government what it thinks of its money because people will choose to use alternative currencies of choice And thank you, mr. Mr. Gray Mr. Chairman before Addressing the or issuing the answer to that question. Can you please summarize for me your understanding of the legal tender laws as they exist today? Well Not at this moment. So I would like you to answer the question first My answer is is very simply leave them alone My understanding the legal tender laws is that they that the US dollar the Federal Reserve know can be used to satisfy debt obligations We don't need to change that at all at all There's there's no law that restricts us from privately minting coinage Tokens medallions as we refer to them There's no law that restricts us from engaging in private barter transactions with with other men And so we don't need to change anything about the legal tender laws to in order to do exactly what we're doing right now Okay Now you I know you would five minutes to mr. Luka Maher from Missouri Thank You mr. Chairman As you talk about the different parallel currencies, you know, I think we've got a parallel currency Situation over in Europe right now. That's pretty obvious How's the euro working over there in your judgment all three of you? Well I'll begin by saying I think it's an unmitigated disaster. The fact is is that this was not a choice by the people Either making their their demonstrated choice in the in market exchanges or even in a political vote Or a referendum this was basically imposed upon many of the EU countries as a discretionary choice of the politicians Some of the more prominent countries Wanted to have a unified currency so as to be able to have the political clout to look down the dollar in the eye To be explicit. That's my view of why the French were pushing it the result is is that This currency has been imposed upon systems that follow different regulatory paths different fiscal paths in terms of debt and deficits All of which has created this problem A lot of people in Europe are saying oh would be disastrous if the Greek pull pulled out and Reestablish the drachma for example Or the Spaniards were to reestablish a peso for instance I think that that that that that would be the path to denationalize Or rather de internationalize this monetary system because it is not working and it is dependent upon a central bank in One location to make the monetary choices and decisions for all of the hundreds of millions of people who participate in this system rather than allowing Even the even the competition of the national central banks as had existed before Because if you if you felt that the lira was being inflated people escaped into marks That was a pardon in the post war period Where does an Italian escape to now as easily as into the mark as was historically the case So even in terms of competitive national currencies The the unification under the yearable euro has been a disaster and certainly for the freedom of the people there Mr. Lewis I Would generally agree with a doctor Ebling it I don't think the euro is a case of a parallel currency so much as a shared monopoly currency Parallel currency the idea is having the choice of two highly viable alternatives for example the euros maybe in Turkey Where the Turkish lira has a rather poor history often people use doge doge marks in the past and and now use the euro So I think that's probably a bad example of a parallel currency Thank you. Mr. Gray. I Think the key thing to consider With what's going on right now in Europe besides the fact that there's just no confidence whatsoever in the banking system is that Still in our country here today. We do have confidence in our currency We do have confidence for the most part in the banking system for whatever reason And that's very different over in Europe right now as soon as money shows up and the banks are unfrozen The people make a run on the bank they pull out as much currency as they can they turn it into Anything they can get their hands on it's valuable whether that's another currency or hard goods or gold and silver It's it's the same thing that we're seeing we're seeing now that we saw in hyperinflation Just before World War two where the race was on to get rid of the currency as quickly as possible The advantage we have right now is that we don't have that yet in our country I think the opportunity that lies before us is to help the people this country get out of that system D-leveraged the system so that they don't have to experience the panics and the and the fear that are being experienced right now in Europe today You know you had a key word there that really describes All monetary systems and basically even economics and that's confidence If people don't have confidence that the money that they're exchanging for goods is worth that amount of Money or whatever it is. There's very little transaction. It takes place And so really even even at the highest levels of the biggest banks and we found in 2008 that you know It wasn't necessarily the entity that they were dealing with it was the confidence in that entity to be able to transact the business And so basically you have fall back on confidence Which leads me to the question with regards to what we're talking about this morning sound money sound money and and parallel money If you work in a different monetary system parallel to another one Where's the level of confidence going to come from that allows that? Business to be transacted in a parallel currency Well, the simple answer to that question is the confidence comes from the fact that the currency is not based on debt Every national fiat currency is put into circulation through loans and debt And so people today are starting to understand that there's so much money out there that people owe in loans mortgages credit card bills All of these derivatives out there Trillions and trillions of dollars and all that money has to be paid back eventually That's where the lack of confidence comes from and so when you start thinking and talking about alternative currencies Especially those that are that are issued in gold silver copper and something real some sort of commodity People that understand the concept begin to realize that those are debt-free currencies that don't need to be paid back at Some point to some bank. I mean think about all the money that the people of America owe to the banks Think about all the people that are in debt all the states the municipalities the colleges universities everyone's in debt The real question is who owns the other side of that debt? That's where the lack of confidence comes from the fact that people are starting to ask that question and Realize that there's really no money out there to begin with I See about time is up. Thank you, mr. Chairman Thank you If the gentleman from Arizona is ready, he could be recognized if not we can wait a couple minutes You ready? Okay, thank you. I'll go on and have a second round of of questions The question of taxation comes up with money as well because we think money is a commodity and Our government tends to think that anytime you have a commodity transaction. You pay taxes on it. You have sales taxes and you have Capital gains taxes and that I think puts and it cartels this development of parallel currencies and I don't know how how we could ignore this if we really want to Promote, you know some competitions are allowing another currency because if you tax one currency, but not another one It's hardly a parallel currency. It's it's at a tremendous disadvantage so If if a parallel currency Really got off the ground because of the conditions where the people became knowledgeable and they thought it was wise to do it The people in Washington don't like you know to have their powers under mind So they have the the power of the IRS Isn't this a significant concern or do you think we can just sort of bypass it and say well It's a problem, but not a big problem. We'll just go do do our thing and it can work What what's your opinion about the tax issue when it comes to a parallel currency all three of you? I think there are Just as you can have under the table transactions in US dollars Small scale that maybe you don't report the IRS You can also do so and maybe people are doing so with gold and silver coins or copper coins today But as soon as you get to a business of any scale You can't break the laws that easily I think that ultimately just as you say We have taxes that apply to transactions in dollars capital gains taxes for example We have taxes that apply to transactions and euros and Canadian dollars many other currencies We have you know many thousands of corporations to do business in many currencies worldwide I think we should recognize that because gold and silver and related Instruments are not recognized as currencies. They're under a different system of taxation Gold for example has a different tax rate because it's a collectible, but I think more importantly Let's take a very simple transaction. I wanted to buy car from the Ford Motor Company I want to pay them in gold coins US Mint American Eagles produced by the government my When I trans trying to give the gold coin to the auto dealer that would be considered basically a sale of the coin And you'd have to pay capital gains tax taxes on with a dollar value of the coin was when you acquired it And when you disacquired it and so on and so forth, which is very different than if I were to for some reason Do the same transaction in euros or that would not apply so I think that at the very minimum We should we should endeavor to treat these the way we treat other national currencies today Which we are actually doing business in not so much in the United States, but When American citizens American corporations are doing every day and the countants are very familiar with and how this works so I think that there is definitely a Something for the federal government to do there to Legitimize that and treat it as the same way we treat other national currencies today. Thank you Yes, I would argue that that the the parallel way of thinking about this is an international trade What we call the most favored nation clause Any agreement that you've reached into with country X you give the same best favorite treatment with Import duties and so on to all other countries that you trade with Well, the the the parallel argument would be that the government should recognize that anything that people use as a medium of exchange in Transactions should be viewed as anything that they have historically viewed as a transaction Basically that there shouldn't be these extra taxes that was just pointed out so that if people are now using gold and silver coins Transactions should be no more taxed or treated in a different way than any A transaction with the Federal Reserve's own note that gives a level playing field with neither an advantage nor Disadvantage for the use of one currency versus the other because otherwise the government can create stumbling blocks and hurdles To to to to give people those those fair and level playing field choices So the parallel should be some some taxing of media of exchange along this notion of the most favored nation clause Mr. Gray Well, first of all, mr. Chairman I want to clarify that we are not tax experts and we are not allowed to give tax advice Nor do we give tax advice to anyone that participates in our system? Our job is very simply to to issue the currency and make sure we guarantee the weight and the purity So we're just keeping an eye on what's going out there But tax obligations vary from state to state Municipality to municipality Some states some some cities and towns allow you to barter they say well You can do a hundred barter transactions per month or per year and they don't look at it as being under the table or underhanded They look at it as just being private trade. That's that's not a taxable event Certainly my my understanding is the federal government would like us to report the profit or gain from any transaction That's kind of strange because in a in a barter transaction. There's not really any profit or gain on either side of it But in our voluntary system, we encourage the participants to Explore and decide for themselves based on their own Morals and values what their tax obligation is and to to report and to remit accordingly I thank you now. I recognize mr. Luka Meyer from Missouri again Thank You mr. Chairman Following up again on my comments earlier with regards to the competence in the system And the ability to protect the citizen whenever you transact business like this You know mr. R. Dr. Ebling I think in your your testimony you abolish the federal reserves effectively federal deposit insurance corporation Well, you may not like it that is also one of the things that adds confidence To the person who deposits money in the bank to realize that if they deposit the money there, they're going to be able to get it back without that The consumer is going to have to an awful lot of work and as you gentlemen have described this morning, you know parallel monetary systems you're going to put a tremendous onus on the Individual to make sure that they get value back for whatever they exchange their money for and that that money will have value down The road so they will not lose value and be able then to be trans the business continue to be transactive that same form and so I Think one of the advantages of the system We have now is that it takes a lot of the work in trying to Find ways for the money to be able to be secured and have confidence in Away from the consumer Am I wrong in that or do you agree with that that statement? I think that the problem with a deposit insurance is that it creates a degree of confidence But a false sense of security the fact is is that the impression is made that the bank is serving as a depository for your money and That it's always guaranteed to be gotten back The fact is you put money into a bank to earn interest The bank can pay you interest only through one way and that is it extending it and pooling your savings with others to worthy borrowers They pay interest for the loan The bank receives that loan they take what they view as their service of service charge for financial Intermediation and then you as the depositor receive your interest whether it be a savings account or some form most forms of checking accounts Which pay interest now the fact is you're putting your money at risk you're lending it to others through the banks good good services and the federal deposit insurance has created this impression is if there's no risk with your money and The fact is I think the people I think would be more cautious and more attentive to the nature of the bank that they're doing business with What the track record of the bank is in managing your funds along with those of other depositors? And on that basis seeing what what what private insurance or guarantees or or or or or other forms of Assurances banks competitively would establish we take for granted that when you go in and buy a for example a microwave Or an oven or a refrigerator What if it doesn't work well most large companies for brand name reputation give you various warranties and guarantees and it is important for the company's success To stand by and guarantee that warranty and guarantee Well various banks for competitive advantage would offer various types of perhaps a guarantees and warranties On deposits but with the understanding that nothing is certain in a in a money market mutual fund You realize that the value of your account may go up or down depending upon the value of the portfolio of the company You're dealing with the fact is that's the case of a bank, too You're mixing apples and arches there doctor You're talking about an investment account where you know that the money is going to be invested and it has the ability to Go up and down versus a deposit Where you put the money in and you're going to write checks on that count and And I think that you know The deposit insurance takes takes some of the risk away ever over the last four years We as a society have been educated the fact that banks manage risk. That's what they do Before people thought that just make take deposits make loans and turn around and pay out dividends and interest in whatever That's not what happens. They manage risk And so the deposit insurance actually minimizes the risk doesn't take it all away But it minimizes it so that gives them some level of confidence to that investor And I don't think you can sit there and and say that you know Somebody who invests in a money market account or some sort of investment account at the bank has that that's a totally different Relationship between that between the bank and the individual customer and have some concerns about that if I can just sort of follow up on that The mistake is that that people view their checking accounts. I have a checking account as I know you have You feel as if well, I've deposited my paycheck and I can draw that money down by writing checks So using my debit card, etc The fact is is that that is not a warehouse Deposit or like a safety deposit box The fact is under our current banking system that money is then taken which you're viewing as 100% accessible to you and using it as part of their investment funds to lenders It is at risk as much as a savings account is where you know that during the period of like a time Deposit your money is being lent out to a to a lender The fact is is to a borrower excuse me the same thing applies with our checking accounts People are given a full sense of security that this is not an investment account when it is it is as much of a risk as When you put your money in the bank as a savings account And you more consciously know the bank is using your money for a period of time with a risky loan Checking accounts are in fact with our system no different and if you didn't have deposit insurance I would suggest that people would become more aware of it and be more cautious cautious informed and intelligent In what type of banking institution they they did business with I'm talking about the long-run Institutional incentives of a system. I see my time is up. Thank you, mr. Chairman Thank you. I now recognize the gentleman from Arizona mr. Schweikert. Thank you, mr. Chairman Maybe slightly more in a theory question, but I'm trying to also understand how much of this is actually going on around us In and actually also if you've ever looked at the differential in high transaction cost jurisdictions, you know high high sales tax The barter economy Some of these things I now see on the internet What was one of them called something coin where you can actually develop? What was bitcoin? I believe Yeah, and I think there's two or three versions that where you actually through because of certain transactions or uses of websites Are these things you actually build accounts? How much of this is there already even though In the scale it may be very small Is there actually in sort of the the barter of Economy of this internet Exchange of value that that's out there. I remember there was an explosion of it in the early 80s Very early 80s when inflation so I would trade You know something with my dentist for this and and even though inflation and other things I knew I was getting a certain service for a certain service What's out there today? It's it's pretty substantial The first thing to take a look at is is the gray and black economies of the world Which right now are really the only segment of the global marketplace. It's actually growing a lot of that's done with barter Direct trade some of it's done with alternative community currencies. Some of it's done with golden silver So it's happening right now across the globe in a very big way In the u.s. There are probably 400 to 600 different community currencies in circulation right now The total value of the the currency in circulation is probably somewhere between one and five billion dollars I would estimate So it's it's small, but it's consistently growing I don't think a lot of folks even understand My little sister's was part of a babysitting exchange You know she puts in so many hours. She gets so many hours over there In many ways that was a barter economy and folks don't realize they were basically transacting You know value for value What happens if we wake up tomorrow and a handful of our trading partners competitors Move to a basket of currencies And so china and a couple other countries say we're going to do this new blended currency Does that actually now create a new You know method of exchange I've been trying to figure out does that actually create an an additional Value of exchange that we would have to deal with Well, I think on the macro level in the global economy. Yes, it does as far as the the micro level and the babysitters and the pet groomers and the The people in small towns and cities across the country I don't think they would notice that any more than they they notice and are affected by the international currency problems We have right now So I think yeah globally sure But where that more comes from mr. Chairman and to whoever would like to answer this I don't know how often you see this, but I used to see it in the old days A contract would have a a gold clause in it Particularly, you know Contracts that were coming out of the late 70s very early 80s when there was high inflation saying hey We're we're going to write the contract in denominated in us dollars, but there'll be a gold Peg on it. So if somehow inflation might you know by the time we're going to do the takedown I'm curious if we're seeing any more of that type of hedging And that's actually what a blended commodity currency would would do also I told you this was going to be a bit ethereal. Well, I I I think what what what is off What is being sometimes proposed the chinese and the russians have talked about this instead of you know, the dollar as an international You know currency for a lot of transactions It what what this idea of a basket of commodities or a series of currencies is is to try to have an index Of what currency a let's say the us dollar is worth As sort of an index or composite of these other currencies To determine some some some value But the fact is is that is that what would still be traded is is actually some currency a for currency b But but the market estimate of what currency a is worth in relation to currency b Uh would be that that that the currency b would be in fact have its value based upon some composite index It's a way of determining the exchange ratio not so much that you would be trading the basket of the currencies For this other good or this other current in my fear is often and and my good friend mr. Lukmeyer I think that was also part of the the dialogue of it sometimes It's not only you get back your dollar per dollar invested But what was the actual ultimate purchasing power? Of that dollar when you get it back And and that's actually you know, I think a much more honest way to look at the value of Of a transaction right and see what happens is that again as I mentioned in in At an earlier question is is that if you've traveled in a country that is dealing with a severe or hyper inflation The the uncertainty and instability of that own nation's currency has reached such a point The people no longer either use that currency or they calculate its real value in another currency Whether be let's say a dollar Or or or an ounce of gold and they say that based upon this other currency That's what we're going to view as the value of my own currency in buying commodities In I know mr. Chairman. I know way over time But if you've done lots of traveling in particular third world, you'll often see here's the price in the local And here's the price of as I had an experience in menmar There was a price for green Which was u.s. Currency, so Thank you, mr. Chairman Thank you We'll be having a vote shortly, but I believe we have time for another quick round of questions I have a question for dr. Evelyn And it's a more generalized and philosophic question You know under the system we have today Um, it's very unfair to one group where another group. I think benefits And if you look at what runaway inflation It's not usually those who've been able to park their money overseas and escape the harm It's many times. It's the average person who had savings in accounts and and they lose everything But I think what we're dealing with on the monetary system is a reflection of a bigger philosophy And that is the philosophy of government big government why we spend so much money And money is not so much A means of exchange like it should be it's the vehicle for taxation Because we have big government for various reasons And and there's never enough tax money But there's also the printing press and there's the printing of money Which is which is really a tax on the people of the middle class and the poor Many people endorse that system because they've been convinced that the current system is helpful to the poor You can we can have housing programs and we can provide welfare And they really like the system. They don't want to Give up on it Now we might agree that you know a sign monetary system would be fairer and it wouldn't be beneficial to the very very wealthy And to the wall streets and the bankers But what about If we got a little further along on parallel currencies, do you see any way This could give a temporary reprieve or would it once again be seen? Oh, this is just another gimmick to protect the rich and the poor don't know anything about this. They can't use this currency And uh, it's it's really not a solution. It doesn't even address the subject Of this inequity in the system that we have today. Do you have any thoughts on that at all? Yeah, I think that's an important point We can sort of see the the problem Sort of magnified As one reads about it in the press for example is what has happened in Greece right now The fact is is that for years decades the greek government promised more than it has turned out it can pay for either with taxes Or with continuing borrowing That's one of the reasons they want to return to a Some in greece want to return to a drachma So they can just print the money that they need to cover the promises for which the real resources in the society are not available It's it's the long run versus the short run in in the short run if the government can tax borrow or print money It can create the illusion of generating wealth and benefits and special opportunities for various segments of the society But in the longer run the problem is is that Eventually the piper has to be paid the tax money runs out. So where comes the government? Spending funds or it can't borrow anymore Such as or it becomes very expensive as the spanish and the italians are now finding as well as the greeks Or they resort to printing money But at the end of the day printing money dilutes the value of every unit of money in people's pockets It destroys savings. It undermines the ability to undertake exchanges It it diminishes the the ability for profit making decision making and therefore is most devastating on the poor The analogy is like the kid who goes to the circus And he eats too much cotton candy And and his uncle bob who took him said gee. I'm sorry that you have a tummy ache. So To make you feel better better. Here's more cotton candy. Well, that's just exacerbating the problem at the end of the day The boy gets home and he has a big tummy ache And and that's that's what has to be emphasized the illusion I'm gonna uh in the long run because I want to know about whether the parallel currencies Effect this in any way positive or negatively or you know, does it help this inequity and this disadvantage of the kind of system we have today? Yes, I would argue that if people had a choice in currency Whether they'd be rich middle income or poor They would have a way to park their income and wealth in an alternative medium of exchange and unit of account That would that that they could have greater security of that its value is more certain and more stable Based upon their fears and expectations about the trend their own national currency is following So there's even advantage to incrementalism in moving in this direction if it's available to the people rather than saying Well, we can't do a thing until we repeal the federal reserve act and that sort of thing Absolutely. Okay. Very good now. I want to go to mr. Lukomar if he has another question Thank you, mr. Chairman To follow up on that. How do you protect the citizen to make sure that they don't get Slipped up on with going to alternative or parallel currencies How do they how do they have how can they enable? You know, we have a whole group of folks here this morning How can each one of them know that if they want to transact business and each one of them a different currency It's going to be something that they'll be able to trade down the road Well I just relates to your previous to comment about confidence in practice, it'll it'll It'll be a process of of some institution establishing a track record and also the institution being, you know, sort of visibly Considered to be a long term. So in other words, whatever whether it's a country or city or a state Whatever entity Produces the currency there will have to be a certain level of confidence in that entity to be able to trade and it'll have to be earned You can't you can't decree it, you know, cancel you have an advertising campaign We're kind of talking about these very small kind of neighborhood currencies On a larger scale that might be where we begin a larger scale. It could be Could be city bank. It could be the state of utah I know some of my my my colleagues here would be appalled at the idea of the of the us federal government issuing a parallel gold currency But I think it's an interesting idea or you know, it might be the state of russia In practice the one that has The most confidence will be the one that people use the reason that people use the us dollar After world war two is because it had a long history over a hundred years of sticking to the gold standard It had a stable political system It was military militarily impervious And that's why they use that instead of the currency of China and what have you it'll be ultimately A process of track record and probably very large organizations will dominate Okay, mr. Lewis. We have the force this morning your book I was trying to read the cover in the The back of it here as well as the inside slips And can you just briefly tell me how you would like to see us or Could be enabled to be able to move over to the gold standard. What's your thoughts on it? Well, ideally, um, we would all have an epiphany and and understand that this is the best system for all of us However, in practice since we're one of the reasons we're here today, I think It would typically people have these epiphanies after a tremendous catastrophe It happened many many times in the past. Usually things go all the way You know, you don't stop halfway and say, oh, I think I know where this is going Let's stop now and switch to a gold standard system Usually you have end up in disaster whether it be china in 1949 The uh hyperinflation japan in 1949 hyperinflation united states in 1784 hyperinflation germany 1923 hyperinflation You tend to end up with some kind of catastrophe beforehand Um, one of the nice things about the parallel currency ideas. Maybe you can avoid that process that political cycle you could have You could establish something even by the federal government or Or By very many means and you could you could have the two options available So when people keep people could simply decide to do business In one currency or another say I'm going to write the contract in us gold dollars not us bernanke bucks Um, and they'll start to do buy and sell and do business that way And then over a period of a few years, perhaps Thing will just naturally people decide which system they like better the bernanke system or the or the gold system And they can migrate and eventually Have a very smooth Non-disruptive transition between one and the other ideally But even even you your system of moving over the gold standard it there still has to be a level of confidence And that is as the backup as as the standard would or not Um, well, you'd have to have ultimately every currency has an issuer and ideally that issuer will be uh have a track record of of managing the currency correctly And it will likely probably be in my opinion a large institution Maybe maybe national government, maybe state government, maybe a maybe a large bank Maybe some other large institution that emerges We're simply not going to have you know, the entire united states do business in a currency that's issued by something in You know a little storefront in miami or something of that sort when we get to that scale So the the institution will earn the confidence. All right. Thank you. Thank you, mr. Chairman I think the gentleman uh, this hearing will now be adjourned. I appreciate your appearance today. Thank you very much