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While not exactly an economist / finance type I would have thought the federal and state governments would have shut this down as it removes a certain level of

While not exactly an economist / finance type I would have thought the federal and state governments would have shut this down as it removes a certain level of currency control no? Can anyone explain the legalities around this?

bigdubs 9y ago
It's pegged to the dollar.
- rurounijones 9y ago
  For the moment, the wikipedia article talks about plans to not have this be the case. > but Nick Kacher of the Schumacher Center has discussed the possibility of pegging its value to a basket of local goods in order to insulate the local economy against volatility in the US economy.[6] What then?
  - brianpgordon 9y ago
    With a peg to the USD, banks will be happy to take your real money and hold onto it while the exchanged Berkshare remains in distribution, because they know that at worst they only have to pay back the original money. But as soon as the Berkshare is able to move against the dollar, participating banks assume some risk because they may be forced to pay out more than 1 USD for a single Berkshare. There's even some risk that the bank could run out of "foreign currency reserves" (USD deposits) to defend the Berkshare, causing it to collapse.
jakebasile 9y ago
The funny money here is stilled pegged to the US dollar, so the Fed can still exercise monetary control over it. It's really just a form of gift certificate (or scrip) from my reading of it. Anyways, there's a history of using non-USD money in the US: see company towns that only dealt in company scrip, Disney Dollars, etc. No matter what you're making money in, the government expects to be paid, and it only accepts US dollars.
- EGreg 9y ago
  The history of non USD goes back way further than that. Historically, the Federal Government was in charge of the coins but banks issued paper Banknotes which circulated. Then during the Civil War the federal government issued notes with which you could pay tariffs and land taxes. These became popular. It was only a few years later that the Legal Tender laws were passed, making the Greenback the most-accepted banknote in America. https://en.m.wikipedia.org/wiki/Greenback_(1860s_money)#Pre-Civil_War_period https://en.m.wikipedia.org/wiki/Greenback_(1860s_money)#Pre-... Having said that, most of our money today is credit money in bank networks, like VISA or Paypal. In China it had a meteoric rise with WeChat etc. My company is working on a platform that will allow ANY community to issue its own currency. And no, I don't think there is any requirement to have it pegged to the dollar.
  - redblacktree 9y ago
    I looked at your profile and I didn't see the company you're talking about. Would you please provide a link?
    - EGreg 9y ago
      Sure. https://qbix.com/blog https://qbix.com/blog Feel free to get in touch - the email link is in my profile.
- RobertoG 9y ago
  "The funny money here is stilled pegged to the US dollar, so the Fed can still exercise monetary control over it." It doesn't matter if it is pegged or not to the US dollar. Nothing is going to out-compete the US dollar in USA territory while the federal government taxes have to be pay in dollars. The federal government can create demand for dollars by the simple act of taxing.
xenadu02 9y ago
I believe there is still a tax on private bank notes along with some federal regulations that make it extremely unattractive for banks to issue their own currency. State governments are prohibited by the constitution from issuing their own currency. Otherwise private entities are free to issue whatever currency they like. Nothing requires it to be pegged to the US dollar as far as I'm aware. You're effectively trading the "full faith and credit" of the US government for some pretty paper. Whether that pretty paper is worth something depends on whether you believe you will be able to purchase things of value with it, or in this case because banks guarantee a fixed exchange rate with the dollar.
- dannyw 9y ago
  The ironic thing is that the US broke their faith and credit, by closing the gold window.
sandworm101 9y ago
It is barter, goods for goods. The profit is still taxed. This is not technically money in that it is not backed by a government. It's just bits of paper. Printing your own probably isnt a horrible crime, more a copyright violation or fraud rather than a felony. That people assign value to these bits of paper is no differnt than bitcoin. If a bank wants to sell bitcoin, or buy them, it can. The regulations re whether a bank can call such holding an asset make thing complicated for the bank but so long as things remain small there isnt much of an issue. It also isnt money because people can refuse to participate. An employee need not accept these in lieu of wages. A business need not accept them. Real money cannot be avoided. All debts in the US can be settled with dollars.
- em3rgent0rdr 9y ago
  > "This is not technically money in that it is not backed by a government." Being "backed by a government" is not a necessary condition for something to be money. From wikipedia: "Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts in a particular country or socio-economic context. ... Money is historically an emergent market phenomenon establishing a commodity money, but nearly all contemporary money systems are based on fiat money." Even though most contemporary money systems are fiat, that doesn't mean that all money has to be.
  - littlestymaar 9y ago
    > Even though most contemporary money systems are fiat, that doesn't mean that all money has to be. If you want to avoid deflation you need a supply of money that grow at least as much as total wealth (otherwise the relative value of money is increasing => deflation). That's why gold-based currency are now considered a bad idea (and crypto currencies also, see [1] for illustrations about the deflationnist situation in bitcoin). [1] http://avc.com/2017/08/store-of-value-vs-payment-system/ http://avc.com/2017/08/store-of-value-vs-payment-system/
    - em3rgent0rdr 9y ago
benmowa 9y ago
how is this different than a coupon? or a store branded Gift card? .. funds available for redemption at a subset of merchants. Edit: I see now that its considered the same for tax reporting purposes. https://en.wikipedia.org/wiki/BerkShares#Taxation https://en.wikipedia.org/wiki/BerkShares#Taxation

bigdubs 9y ago

It's pegged to the dollar.

rurounijones 9y ago
For the moment, the wikipedia article talks about plans to not have this be the case. > but Nick Kacher of the Schumacher Center has discussed the possibility of pegging its value to a basket of local goods in order to insulate the local economy against volatility in the US economy.[6] What then?
- brianpgordon 9y ago
  With a peg to the USD, banks will be happy to take your real money and hold onto it while the exchanged Berkshare remains in distribution, because they know that at worst they only have to pay back the original money. But as soon as the Berkshare is able to move against the dollar, participating banks assume some risk because they may be forced to pay out more than 1 USD for a single Berkshare. There's even some risk that the bank could run out of "foreign currency reserves" (USD deposits) to defend the Berkshare, causing it to collapse.

jakebasile 9y ago

The funny money here is stilled pegged to the US dollar, so the Fed can still exercise monetary control over it. It's really just a form of gift certificate (or scrip) from my reading of it. Anyways, there's a history of using non-USD money in the US: see company towns that only dealt in company scrip, Disney Dollars, etc. No matter what you're making money in, the government expects to be paid, and it only accepts US dollars.

EGreg 9y ago
The history of non USD goes back way further than that. Historically, the Federal Government was in charge of the coins but banks issued paper Banknotes which circulated. Then during the Civil War the federal government issued notes with which you could pay tariffs and land taxes. These became popular. It was only a few years later that the Legal Tender laws were passed, making the Greenback the most-accepted banknote in America. https://en.m.wikipedia.org/wiki/Greenback_(1860s_money)#Pre-Civil_War_period https://en.m.wikipedia.org/wiki/Greenback_(1860s_money)#Pre-... Having said that, most of our money today is credit money in bank networks, like VISA or Paypal. In China it had a meteoric rise with WeChat etc. My company is working on a platform that will allow ANY community to issue its own currency. And no, I don't think there is any requirement to have it pegged to the dollar.
- redblacktree 9y ago
  I looked at your profile and I didn't see the company you're talking about. Would you please provide a link?
  - EGreg 9y ago
    Sure. https://qbix.com/blog https://qbix.com/blog Feel free to get in touch - the email link is in my profile.
RobertoG 9y ago
"The funny money here is stilled pegged to the US dollar, so the Fed can still exercise monetary control over it." It doesn't matter if it is pegged or not to the US dollar. Nothing is going to out-compete the US dollar in USA territory while the federal government taxes have to be pay in dollars. The federal government can create demand for dollars by the simple act of taxing.

xenadu02 9y ago

I believe there is still a tax on private bank notes along with some federal regulations that make it extremely unattractive for banks to issue their own currency. State governments are prohibited by the constitution from issuing their own currency. Otherwise private entities are free to issue whatever currency they like. Nothing requires it to be pegged to the US dollar as far as I'm aware. You're effectively trading the "full faith and credit" of the US government for some pretty paper. Whether that pretty paper is worth something depends on whether you believe you will be able to purchase things of value with it, or in this case because banks guarantee a fixed exchange rate with the dollar.

dannyw 9y ago
The ironic thing is that the US broke their faith and credit, by closing the gold window.

sandworm101 9y ago

It is barter, goods for goods. The profit is still taxed. This is not technically money in that it is not backed by a government. It's just bits of paper. Printing your own probably isnt a horrible crime, more a copyright violation or fraud rather than a felony. That people assign value to these bits of paper is no differnt than bitcoin. If a bank wants to sell bitcoin, or buy them, it can. The regulations re whether a bank can call such holding an asset make thing complicated for the bank but so long as things remain small there isnt much of an issue. It also isnt money because people can refuse to participate. An employee need not accept these in lieu of wages. A business need not accept them. Real money cannot be avoided. All debts in the US can be settled with dollars.

em3rgent0rdr 9y ago
> "This is not technically money in that it is not backed by a government." Being "backed by a government" is not a necessary condition for something to be money. From wikipedia: "Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts in a particular country or socio-economic context. ... Money is historically an emergent market phenomenon establishing a commodity money, but nearly all contemporary money systems are based on fiat money." Even though most contemporary money systems are fiat, that doesn't mean that all money has to be.
- littlestymaar 9y ago
  > Even though most contemporary money systems are fiat, that doesn't mean that all money has to be. If you want to avoid deflation you need a supply of money that grow at least as much as total wealth (otherwise the relative value of money is increasing => deflation). That's why gold-based currency are now considered a bad idea (and crypto currencies also, see [1] for illustrations about the deflationnist situation in bitcoin). [1] http://avc.com/2017/08/store-of-value-vs-payment-system/ http://avc.com/2017/08/store-of-value-vs-payment-system/
  - em3rgent0rdr 9y ago

benmowa 9y ago

how is this different than a coupon? or a store branded Gift card? .. funds available for redemption at a subset of merchants. Edit: I see now that its considered the same for tax reporting purposes. https://en.wikipedia.org/wiki/BerkShares#Taxation https://en.wikipedia.org/wiki/BerkShares#Taxation