(1) Yes, the California warrants are “bills of credit” (to use a classical term of finance), and they are serving as a local currency to the extent that banks and merchants are accepting them as payments. This is what Von Mises identifies as “circulating credit.” He was distinguishing between “money” and “credit.”

But both are forms of liquidity – spending power; trade lubrication in a decentralized, division-of-labor society. Credit cards work even better. I do not know how well the California warrants are circulating there, but it is *NOT* inflationary in these circumstances to add lubrication and circulation for trade.

(2) No, there is not an impact on rich-vs-poor. Who is made poorer? Who is made richer? To the extent that trade is lubricated – closing the gap after the collapse of credit in 2008 – the California warrants help people mange their suddenly more difficult financial contracts and obligations.

If the welfare state has over-promised, particurlay in medical benefits, then it will simply have to cut them back or raise taxes. Money and credit are not sustainable solutions.

(3) Global vs. local determination of currency values: There are different markets, for example the local labor market and the international stock and bond markets. For such an international market, a global currency – outside a government – is best, unless of course some “central bank” to manage it could not be trusted. For a local labor market, more suitable might be a local currency.

The primary benefit of any monetary system is the ability of businessmen to quote relative prices in a common denominator, but the benefit of a “floating exchange rate” monetary system between international or interregional trade areas is to provide a “cushion effect.”

Consider that some prices in some markets are auction prices, like the prices on stock exchanges and commodity exchanges. Other prices are contract prices, like the wages of workers. The latter do not change, as worldwide market conditions change. So, it would be best if relative prices in the labor market were quoted in local currencies. If the local region were falling on hard times, the local currency would depreciate. Wages would remain unchanged. Standard of living for the unfortunate, lower-productivity workers would decline due to the higher prices for imports from other regions.

An efficient market requires flexible prices. Contract prices are an impediment, but floating exchange rates among local currencies, with an international non-political currency at the top, for the financial markets, would take care of many price inefficiencies.

I’d say that this “F.R.A.U.D.” thing doesn’t do you any favors, but maybe with the populists, it does.

We also want to know if the fed has been orchestrating the business cycle – as opposed to trying to temper it. If there is a connection between the fed and who gets the money and the fed’s influence on the business cycle, we want to know about it. Making the business gives great power, as during expansion, everyone is going into debt; during recession many people are unable to pay their debt and are losing real assets to the lenders.

The Fed is not audited sufficiently. Just like Enron and WorldCom were audited, they left out certain key information from their reports. In that case the IRS can audit them; in the Fed’s case, no one can audit them… yet.

Sorry if you thought that men in power can do no harm, are not self-interested, and are only looking out for the public. But seeing as how you like economics, you should take a hint from Adam Smith: “It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest”.

Self-interest, opacity, and control over the money supply is a recipe for disaster and corruption. It’s to be expected. It’s human nature, sad to say. Don’t kid yourselves otherwise, you are just doing yourself a disservice.

In response to your closing paragraphs, would I be correct to conclude that the Registered Warrants or IOUs issued by the State of California http://www.sco.ca.gov/5935.html to pay its bills is an example of a local currency? If so, how does it create prosperity to create a currency market for these IOUs? Does the average recipient of IOUs have the skill to determine whether to hold them until redemption or sell them at a discount? Wouldn’t this just increase the prosperity-dampening gap between rich and poor, with the cash flush taking advantage of the cash desperate?

By prosperity-dampening gap, I mean how can our economy with its safety net of government services (e.g. unemployment insurance, Medicaid, food stamps) bear the burden of more poor? Or did you not factor this into your equations?

Also, isn’t it sufficient that the dollar’s value is determined in a global currency market? Would the benefits of additional competition from local currencies outweigh the losses incurred by those who can’t calculate the true price of goods given the multiple currencies in which they could be purchased?