Silver in New Hampshire

There are many advantages of living with people who think as you. Especially if people who think like you value trade. Sometimes people forget about the wealth that trade brings. It is trade that allows the division of labor. This is the simple idea that a shoemaker can excel at making shoes and a potato farmer can excel at growing potatoes, and through trade both the shoemaker and farmer can have both shoes and potatoes. This specialization allows for more wealth creation than the farmer making shoes, or the shoe maker growing food.

People wishing to guard their wealth from inflation may buy gold and silver. Once bought it makes more sense to trade it then to sell it back for paper money. I will describe the extent that this has happened in New Hampshire.

Not everyone in New Hampshire accepts silver, but some do. Some people accept silver for rent. The result is demand for silver. This demand, makes silver more liquid. Specific people offer good prices for silver buying and selling. People here are acting as their own bank, buying silver when there is money to save and selling it when they need money. I have traded silver for books, bookshelves, food.

The rewards for people who have bought silver have been outstanding! The price has more than doubled since 2009. This has been a big boon for silver bugs. As USD prices go up, silver prices are going down.

Now you may not be able to get all of your needs taken care of with silver. However we are creating a nice pocket of a world where silver trades with those that will take it. For example at porcfest there was one individual who refused to use federal reserve notes. He made it just fine through porcfest. An interesting dynamic that happened at porcfest was the dynamic involving Shire Silver.

Shire silver is a laminated card that contains one or five grams of silver. At porcfest gram silver pieces were selling for about $2. Some people would only accept them for spot (around $1.20 at the time.) This setup created an interesting dynamic where some vendors were getting more business because they accepted a gram as $2. You could even get a gyro for three grams and a piece of baklava as change. Porcfest is like the rest of the year in silver transactions compressed into one week.

Other silver we trade include: one ounce fine rounds, half and tenth ounce rounds, U.S. mint silver dollars, old 90% silver U.S. mint coins, including laminated dimes, shire silver, shire gold. For big items gold can be traded.

To think that only one thousand people have officially moved. As people continue to move at an increasing clip, the Free State Project is already an interesting experiment and will only become more so.

Race to the bottom

You may have heard or read about conditions being right for another step in the degradation of fiat currency. It has been a tale that has been told many times before. That is the tale of hyperinflation. Hyperinflation is something which has happened too many times in the past. You may have heard about Germany during the Weimar republic, or the phrase "not worth a continental" which was a bit closer to my home.

It would not be surprising to me if the fate of the US dollar will be the same as so many other currencies of the past. I have thought this for a while, but was still surprised to hear about the "race to the bottom" idea. This idea is that many countries will try to keep the exchange rate of their currency low so that exports appear cheaper and imports more expensive. I must say that I originally thought that this idea would not come to fruition. Now, I'm not so sure.

Today, after study, we are faced with the fact that there is evidence for this race to the bottom hypothesis. Over the past few months the bank of Japan has intervened to weaken its currency. Switzerland has also lowered interest rates. Today, we read about the Swiss central bank announcing that they will effectively devalue their currency and peg it to the Euro. A result of this intervention is a 7% drop in the value of the Swiss Franc verses gold, and a 9% drop verses the US dollar. I view this as evidence of the ongoing race to the bottom.

The results of this move will be good for the Euro in the short term. The value of the Euro will be supported by this new demand from Switzerland. Long term, the issue is much different. Over time, as the Euro experiences new trouble, so will the Swiss Franc. This move will make it so the Franc and the Euro act as if they were the same currency, and as such, a collapse of one will lead to a collapse of the other. The European Central Bank will depend on the support from Switzerland, and not address the structural difficulties it faces.

The Swiss Franc has been a pillar of stability for quite some time. Today, that has changed. Perhaps the Chinese Yuan may step up to the plate, in effect become the new Swiss franc. Alas, this will not happen as long as the Yuan is pegged to the dollar. It seems that people who wish to preserve their purchasing power are left with only one option, commodities.