"ricochetboy" <philzberg@e...> wrote:
People take dollars out of habit, convenience, and the force of the
legal tender laws. Bad money always makes good money disappear from
circulation.
No, Gresham's Law (Gresham's law - Wikipedia) only applies
when legal tender laws make bad money have the same face value as good
money. If your gold bug theories were right, then all you smart currency
shoppers would hold and trade a variety of private "good" currencies
designed to hold their value, and would just trade with us dumb currency
shoppers for dollars when it was time to pay taxes. If "habit" can make
hundreds of millions of people adopt a financial practice that is (as you
claim) demonstrably self-defeating, then capitalism indeed does not work. As
for convenience, I've visited Europe in the Euro era and could have easily
gotten by with just my Visa card in lieu of handling any local currency,
even though my Visa account is denominated in dollars.
You should set up a Bank Of Phil with 100% reserves, account values
denominated in precious metals, and a Visa/ATM card that interconverts with
dollars at the spot market rate. I think we can agree that the availability
of this alternative would quickly separate the smart currency shoppers from
the dumb currency shoppers. 
the banks by then would be on one hundred percent reserves and there
we are. The banks would then be free to do as they please, isssue
paper as they plaese, so long as they did not commit theft or fraud.
If you really consider fractional reserve banking to be fraud, who precisely
is the victim? Do you think that depositors would stop using
fractional-reserve banks if the rules were made explicit in the contract
signed when opening an account?
Brian Holtz
Yahoo! Inc.
2004 Libertarian candidate for Congress, CA14 (Silicon Valley)
http://marketliberal.org/>
blog: http://knowinghumans.net/>
book: http://humanknowledge.net/>