blog by Arbitrage Wise 

As I watch our stock market constantly dropping every day due to what I would consider a dismal monetary policy set by the US Feds, I can’t help but think the collapse of the USD is looming just not too far ahead.  And if the US Dollar does collapse, how will it affect the virtual worlds, particularly the Linden Dollar since its conversion rate is set based on the USD?

As more open grids and virtual worlds start linking up with each other, one of the things I wouldn’t mind seeing (assuming that it’s legal), is a free market of currency.  No doubt that in the early days of the free market currency, there will be a lot of bank collapse and rampant frauds.  Being a pure capitalist, I have to say that we just need to let the market play out.  Under the condition of a privatized currency, there should be some kind of universal agreement of checks and balances, or ‘membership rules’ that banks must go by in order to ensure that full transparency.  But aside from that, it’s really up to the investors and market to perform their due diligence.  We can’t expect everyone to research each individual bank they think about using, but we can certainly expect that a business will come around to fill that void – that’s what a free market does: fill gaps and decrease inefficiencies. 

If anything is to serve as a ‘Lab’ on how a free market currency would work, virtual world is the place for it.  The ‘GDP’ (more like GVP – Gross Virtual Products) of virtual worlds are relatively small compared to the Real World, and virtual world as a whole is still an emerging market.  So why not try out free market currency and pure laissez-fair, and see how it works.  Something worth looking into, or at least talked about.  So assuming that our government somehow allows this, or we can circumvent this just as Linden Lab did – do you think this is a good or bad idea?

**For a good understand of Privatize Currency, read this article by Roderick Moor.

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karen palen - I agree, but ...   | 2008-02-06 21:58:48 Arb, you are correct except that the "average" so called "investor" just doesn't do their homework! How many "buy and hold" stock "investors" even know what a form 10K IS, let alone studying it and the related documents BEFORE they put their money down? When it comes to money, hopw many even know what money/currency really IS, let alone the various theories about why it is worth XXX? Even among millionaires I have people who really can't tell me the difference between "price" and "value" of an asset! (Hint: see Warren Buffett) Quote 1   1

Kailen Juran     | 2008-02-07 13:03:43 We already have privitised currencies in a great many limited markets. These take the form of frequent-flyer miles, bonus points on credit cards, and S&H Greenstamps. True, the markets for these currencies are limited. Then again, that's true of the Icelandic krona as well. In this sense, the Linden dollar already serves as a private currency. It's simply not legal tender, meaning that it cannot be forced to settle debts. The idea of a laissez-faire currency is an interesting one, but the only system for that is a barter system. An issuer of currency has by definition a hand in the policy regarding it. Perhaps competition between currencies would be useful. (For now, I would accept payments in euros, pounds sterling, and loonies.) :-) Quote 1   1

Milton Freidman - Democracy and capitalism   | 2008-02-07 16:10:18 The US Constituiton already got this one covered. Article I Section 8 says only Congress has the authority to coin money and Article I Section 10 prohibits the states from emiting bills of credit. Further on down the historical line the Federal Reserv Act of 1913 gave all the power to make a market in curreny to the Federal Reserve Bank. What you are describing is called "counterfeiting" in legal circles. Quote 2   0

Anonymous   | 2008-02-07 17:03:18 Perhaps speak with Anshe Chung, I recall she was considering introducing this between 2 virtual world platforms. Quote 0   0

Karen Palen - re: Democracy and capitalism   | 2008-02-07 17:59:09 Milton Freidman wrote: The US Constitution already got this one covered. I htink that really depends exactly what you define as "money", for "legal tender" which must be accepted for all debts you are correct, but as Kailen Juran points out there are many equivalents which are accepted in limited areas as a substitute. I know of nothing that would prevent me from accepting UK Pounds or Euros as payment for a debt for example. Like most "privatization" arguments though this really turns on convenience and practicality. The US$ is actually supported by a vast exchange mechanism as well as all kinds of government "guarantees". Despite the opinion of many bureaucrats however, the US Government does not have a mandate from God and those guarantees are only as good as the word of the politicians in charge. :-( It is worth noting though that even a "natural" standard such as gold is only as valuable as a consensus makes it! The "gold standard" was subject to all kinds of manipulation in its day, just as today's "fiat" currency. Bottom line is that money or currency is essentially an abstract concept as is the value of that money. As such it is very much subject to manipulation and can be created or destroyed by appropriate (or inappropriate) mental activities. Concepts such as the "GDP" and "Consumer Price Index" merely serve to quantify these actions. Quote 1   0

Gen Ferraris - Arb, what took you so long ? :   | 2008-02-07 21:10:42 The legal question is a simple one, as long as LL gets OK from the govt that L$ is just a limited license right, then so should a more sound money than L$. Should this fail, why not form a new country on international waters aimed at virtual worlds ? (virtual worlds dont need real land) Without any doubt the "gold standard" was by far more businessfriendly than the lunatic Keynesian theory (wich serves one business sector on behalf of bancrupting another because of its idea of stimulating something that should be left untouched). The 1 Trillion question is what should be the commodity backing this new currency ? Since the purchasing power of the majority of sl users (usa+eu+japan) will get destroyed over next few years backing it by something too isolated from virtual worlds and their rl purchasing power doesn't sound like a good idea, so i'd drop the idea of precious or base metals, while a basket of these currencies would be close to their RL purcashing power it still isnt any good neither since both $, Quote 0   0

Gen Ferraris - part 2   | 2008-02-07 21:12:22 Quote 0   0

thx1138 Vanbeeck   | 2008-02-07 21:15:25 my casino only takes s&h greenstamps, omg i thought they were game tokens until you had something of value you took out, i will have to alert the tax guys, lol Quote 0   0

Gen Ferraris   | 2008-02-07 21:17:39 Ok, sorry looks like i hit the escape characters with the eur symbol again. Please delete/ignore my previous comments. Heres the full comment: The legal question is a simple one, as long as LL gets OK from the govt that L$ is just a limited license right, then so should a more sound money than L$. Should this fail, why not form a new country on international waters aimed at virtual worlds ? (virtual worlds dont need real land) Without any doubt the "gold standard" was by far more businessfriendly than the lunatic Keynesian theory (wich serves one business sector on behalf of bancrupting another because of its idea of stimulating something that should be left untouched). The 1 Trillion question is what should be the commodity backing this new currency ? Since the purchasing power of the majority of sl users (usa+eu+japan) will get destroyed over next few years backing it by something too isolated from virtual worlds and their rl purchasing power doesn't sound like a good idea, so i'd drop the idea of precious or base metals, while a basket of these currencies would be close to their RL purcashing power it still isnt any good neither since both USD,EUR,GPB and JPY will get wiped out then we'd be better off by choosing the falling $ or the falling EUR. A fair commodity to back the currency should be a diversified basket of land on all opengrids, land as the backing is also excelent for transparency since anybody could see if the issuer of this new money actualy holds the % of land they claim to hold (unlike fractional reserve system). Ithink this is absulutely intteresting to look deeper into, i've irritated myself over traders at slmarkets buying stocks at 1.00 L$ and selling them 2 months later at 1.10 thinking they made a small profit while in reality they lost because dollar fell more than the L$ they made. Quote 0   0

IntLibber - re: Democracy and capitalism     | 2008-02-08 04:33:48 Milton Freidman wrote: The US Constituiton already got this one covered. Article I Section 8 says only Congress has the authority to coin money and Article I Section 10 prohibits the states from emiting bills of credit. Further on down the historical line the Federal Reserv Act of 1913 gave all the power to make a market in curreny to the Federal Reserve Bank. What you are describing is called "counterfeiting" in legal circles. Not so. Counterfieting is producing unauthorized replications of a governments own legal tender (i.e. making fake US Dollars, for instance). You can create your own private money without breaking a law at all. You can exchange it, trade it, buy stuff with it. Perfectly legal. What you cannot do is call it "currency", because "currency" has a specific legal meaning, which is that it is recognised by the government as current money. The US Constitution does say some of what you quoted, but you are taking its meaning wrongly. For instance, while the states cannot issue bills of credit, they CAN, for instance, mint gold and silver coin. The constitution also says congress "shall make nothing but gold and silver". It does NOT say the states or private persons cannot do the same thing. It also does not say that congress cannot emit bills of credit, it only says the states cannot (it also does NOT say that private persons cannot emit bills of credit either). Its important to not read into the constitution what is not there. Quote 0   1

Arbitrage Wise   | 2008-02-08 08:27:43 One thing to remember is that the Federal Reserve is nothing more than a collection of large bankers, and is no more federal than Federal Express (this was not my quote). It is actually a privatized entity endorsed by the government. Quote 1   0

anne   | 2008-02-08 19:35:38 LOL deleting the post that you dont like wont help in anyway ,all of the forums ,chat groups are full ,how are you planing to censure them all ? Quote 1   2

Guardian Market - SLR CFO     | 2008-02-08 19:41:30 @Intlibber: The US Mint, FBI, and Secret Service think otherwise about printing your own money - whether you call it "currency" or not. Ask the Liberty Dollar folks when their mints were raided. Link to the US Mint page (Liberty Dollar info about halfway down): http://www.usmint.gov/consumer/index.cfm?action=hotitems Quote 0   0

Cash Yiyuan - re:   | 2008-02-08 19:51:39 anne wrote: LOL deleting the post that you dont like wont help in anyway ,all of the forums ,chat groups are full ,how are you planing to censure them all ? LOL?? You may think it is funny to make racist comments, I certainly dont. You have your opinion, but keep your Bigotry out of these forums. http://en.wikipedia.org/wiki/Bigotry Regards, Cash Yiyuan CEO SL Reports Quote 1   1

IntLibber - re: SLR CFO     | 2008-02-12 12:29:15 Guardian Market wrote: @Intlibber: The US Mint, FBI, and Secret Service think otherwise about printing your own money - whether you call it "currency" or not. Ask the Liberty Dollar folks when their mints were raided. Link to the US Mint page (Liberty Dollar info about halfway down): http://www.usmint.gov/consumer/index.cfm?action=hotitems This is a nice battle of the federal agencies here, Guardian: http://treasury.gov/education/faq/currency/legal-tender.shtml The US Treasury says: QUESTION: I thought that United States currency was legal tender for all debts. Some businesses or governmental agencies say that they will only accept checks, money orders or credit cards as payment, and others will only accept currency notes in denominations of $20 or smaller. Isn't this illegal? Answer: The pertinent portion of law that applies to your question is the Coinage Act of 1965, specifically Section 31 U.S.C. 5103, entitled "Legal tender," which states: "United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues." This statute means that all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor. There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services. Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise. For example, a bus line may prohibit payment of fares in pennies or dollar bills. In addition, movie theaters, convenience stores and gas stations may refuse to accept large denomination currency (usually notes above $20) as a matter of policy. As for what constitutes "counterfiet" the US Secret Service says this: http://www.secretservice.gov/money_law.shtml Manufacturing counterfeit United States currency or altering genuine currency to increase its value is a violation of Title 18, Section 471 of the United States Code and is punishable by a fine or imprisonment for up to 15 years, or both. Possession of counterfeit United States obligations with fraudulent intent is a violation of Title 18, Section 472 of the United States Code and is punishable by a fine or imprisonment for up to 15 years, or both. Anyone who manufactures a counterfeit U.S. coin in any denomination above five cents is subject to the same penalties as all other counterfeiters. Anyone who alters a genuine coin to increase its numismatic value is in violation of Title 18, Section 331 of the United States Code, which is punishable by a fine or imprisonment for up to five years, or both. Forging, altering, or trafficking in United States Government checks, bonds or other obligations is a violation of Title 18, Section 510 of the United States Code and is punishable by a fine or imprisonment for up to 10 years, or both. Printed reproductions, including photographs of paper currency, checks, bonds, postage stamps, revenue stamps, and securities of the United States and foreign governments (except under the conditions previously listed) are violations of Title 18, Section 474 of the United States Code. Violations are punishable by a fine or imprisonment for up to 15 years, or both. Quote 0   0

IntLibber     | 2008-02-12 12:45:42 I know the Liberty Dollar people very well, Bernard Von Nothaus is a friend of mine, and I broke the story on the internet in my blog on the US Mint declaring the Liberty Dollar illegal. Firstly the US Mint has no police authority, policing the currency is the Secret Service's job. They have no statutory or rulemaking authority either, thats Treasury's job. Now the big legal problem with the Mint's claims is that they applied the legal tender law to NORFED, however NORFED nor its members have ever claimed the Liberty Dollar was legal tender, or presented it as such, so it is therefore impossible to accuse them of doing so. Nor has NORFED ever attempted to replicate, i.e. counterfiet, legal tender US currency. The Secret Service has recognised this for years and on many occasions clearly stated such. NORFED has many letters from the Secret Service over the years saying so in response to ignorant local cops attempting to cause problems for NORFED members. The raid on NORFED was really about seizing a bunch of gold coins with congressman Ron Paul's face on them which were intended to be sold to raise funds for Ron Pauls campaign. This was a political hit, not a legal one. Claudia Dickens, spokeswoman for the U.S. Treasury Department Bureau of Engraving & Printing, stated that according to the Treasury, The Liberty Dollar is legitimate. "There's nothing illegal about this," Dickens said after the Treasury Department's legal team reviewed the currency. "As long as it doesn't say legal tender, there's nothing wrong with it." A Washington, D. C. Federal Reserve System spokesman said, "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." A Federal Reserve Bank of Minneapolis official said, "If these [NORFED] people want to issue their own money, so be it." Another reason NORFED was raided was that NORFED had the temerity to sue the US Mint when it made the illegal declaration against NORFED (i.e. illegal as in not having authority to make such declarations). Read the case history here: http://www.libertydollar.org/ld/legal/lawsuit.htm Quote 0   0

Heretic   | 2008-03-23 16:21:28 Hahaha if the US$ will collaps your Disney dollars will be the least of your worries. Quote 0   0

Heretic   | 2008-03-23 16:38:42 Virtual worlds, virtual econony hahaha, Do you people realy think goverments will allow you to get a foothold with these ideas beyond a silly game, wake up will ya, you have lost all perspective on how things realy are in grown up land. Quote 0   0

Heretic   | 2008-03-23 16:47:44 But I would love see the reaction on the face of the landlord if you try to pay the rent in L$, WIC's or SLW shares hahaha. Quote 0   0

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