By holding fiat what do you own, your freedom?

So long as the State wants fiat to be valuable, and the State has power, fiat may be converted into property rights by forced seizure of land. This would convert fiat into typical deeds to resources which could be sold into the market.

Fiat money is apparently backed by nothing more than fear of the Government... what then are property rights backed by? Just as a bond certificate entitles the holder to payment from the State at a future date, property deeds confer the right of the holder to claim ownership of an asset as recognised by the State.

Fiat money entitles the holder to a period of freedom, property deeds entitle the holder to a claim on land or other natural resources... they are similar in essence.

The way for the State to remove legal tender (fiat money) is to merge fiat with "ownership" of natural resources as recognised by deeds of the State. Why would it be preferable to exchange only deeds and to no longer have fiat, so that deeds serve the purpose of both? So long as there are property rights (recognised by the State) a "fiat" currency can be said to exist... the State could increase the money supply by issuing rights to itself, so that each previous occupant now owns a smaller percentage of their land...

An advantage of having only deeds to natural resources would be that citizens would be inclined to redeem their holdings for actual land if the banking system (or the Government) increased the supply surreptitiously... but that is no different to the fiat money system now.

Fiat money is the chosen (perhaps) abstraction of the exchange of property rights... If only barter existed, the exchange of large land rights would be problematic because it would be difficult to store value. Perhaps the best means would be antiques or art which offers a value derived from the uniqueness of each item which is part of the (source of) value within fiat currency.

Without fiat it is more difficult to store value in a form desirable to everyone, someone in a distant location wouldn't want your land unless they were prepared to relocate. Shares in property could emerge as a form of currency, for instance a percentage of a large area of farmland would yield a return and be valued by everyone equally. But against what would the relative value of each piece of land be measured, likely this would be gold or other precious metals. The requirement is that it (the money) be divisible so that relative values can be compared. Whatever commodity emerges or is chosen automatically acquires an elevated value...

Stocks in national companies could emerge as an alternate currency to fiat... they are recognised throughout a jurisdiction and have a yield which is valuable universally. Also claims on energy might be a useful means of exchange.

To get rid of fiat then, would require the seizure of land (or other natural resources protected by the State) and then reallocation according to fiat ownership... so that each unit of fiat can be redeemed (and then extinguished) for a unit of land, or similar. The amount of land seized by the State would be auctioned for all the remaining fiat in the system, after that it would not be valuable... but at what stage does the value disappear? Surely as soon as the "auction" is announced fiat is threatened? Or does the fiat become a permanent symbol (share) of ownership in State assets?

Then fiat can (already) be seen as a share in the assets of the State. So, to get rid of fiat is to get rid of the State to the extent that the State claims ownership of assets on behalf of the population: none would feel that they are owed since they no longer hold an IOU.

By giving people something of (almost) equivalent value to what they may already think they own, they will feel more independent of the State.

It should be the aim of the State to convert fiat into land rights, perhaps via Land Value Tax and buying up land. The land would then be sold to the market and the money destroyed. People are already familiar (thanks to the banking system) with the need to get rid of fiat money as soon as it is in their possession.

At what point would the fiat go suddenly to zero? At the point that the State announces all the auctions have been sold and that they are no longer aiming to convert fiat into land value... The "final auction" would set the final price on fiat, it would be rational for anyone still holding fiat to convert their holdings into land...

29th January 2009