Could Someone Please Explain the Money Supply?

[tolbiny]

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Well duh, that's why governments (who issue fiat money) outlaw competing minters.

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No, they don't.

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Andrew Williams, a spokesman for the Federal Reserve in Washington, D.C.:

"There is no law that says goods and services must be paid for with Federal Reserve notes. Parties entering into a transaction can establish any medium of exchange that is agreed upon."

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Ummm

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On September 13. 2006 the US Mint issued a "Warning" that it was illegal to use the Liberty Dollar. Then on Tuesday, March 20. 2007 Liberty Services, the organization that promotes and distributes the Liberty Dollar, has filed suit against the U.S. Mint in U.S. District Court in Evansville Indiana to enjoin the government from claiming that the use of Liberty Dollar is a 'federal crime'.

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To begin with it is fairly irrelevant if the a government stifles the competition via an outright law or by proclamations that use of the competing currency is illegal (the only difference is the degree of effectiveness). Threats of jail time against users create uncertainty and devalue the currency, AND the federal government still can pass legislation to make said act illegal if the competition becomes to steep (this is essentially what happened during the great depression when FDR made it illegal for US citizens to hold gold).