Legal Tender, Money Centralization, and Income Inequality

The only way to solve the income inequality problem is to apply free market principles to money itself.

There has been a lot in the press lately about so-called "income inequality" and how to fix it. First, let's examine the terms used in this debate. Then we'll talk about the real causes of "income inequality" and discuss the solutions.

"Income Inequality" is Deception by Misdirection

The first thing to note in this discussion is that face that "income inequality" is a loaded term coined by government. It is designed to misdirect us away from the true cause of the problem.

Freedom Means the Incomes CAN'T be Equal

There is no reason why incomes should be equal in a free society. Freedom means the freedom to fail, to be lazy, to work hard, and to succeed. It is precisely because incomes are not equal that people strive for a better life.

Income Equality is Communism

If everyone's incomes were equal, we would be living in a communist nation. The only way to make incomes equal is by force. That requires a totalitarian government. Incomes cannot and should not be equal.

Income Gap

What we're really talking about is the difference between what people make for working full time on the low and high ends of the pay scale. The terms income spread and income gap better describe what we're talking about.

A Living Wage

People who work full time and make a worthwhile contribution to the economy should be able to live on what they make even though it may not be pleasant. In a functioning free economy and a functioning democracy where the rule of law prevails and all are treated equally before the law, everyone can make a living wage. No one is guaranteed to become wealthy or even middle class. However, the value of their work will be recognized and rewarded.

A Better Life

There will always be people who chose to work in menial jobs and receive low pay. There will always be people who have to work in such jobs. The question is not whether there is an income gap, there has to be an income gap in a free country. The real question is whether the people on the bottom have a fair and achievable path to the top-even if that path requires a generation or two to traverse.

America has always been a place where people believed that if you work hard, get an education, and better yourself, you can move into the middle class or even get rich. What we really want to know when we discuss the income gap whether or not that goal still achievable. We'll answer this shortly.

What Causes the Income Gap to Grow?

A growing income spread indicates just one thing: too much government interference.

Legal Tender is the Root of All Evil

What we must understand in this discussion is that monopoly control over currency is what causes income to concentrate into the hands of Big Government and Big Business. This is the root cause. Without fixing this, no income redistribution scheme will work.

World governments use legal tender laws to artificially force citizens to use government money. This money is created through a partnership with the ultra elite in world finance. In the US, this public-private partnership that creates our money is called the Federal Reserve Bank. The Federal Reserve Bank (the Fed) is a private entity that government can appoint people to to run. But is owned by the ultra elite world financiers. It is they, in conjunction with the government, that determine how much money to print, what unemployment should be, what interest rates will be, and much more. They have tremendous control over our economy and use that control to concentrate money into the hands of Big Government and High Finance.

Our Money and Banking Systems are Broken

The Fed prints our money and the government forces us to use it through legal tender laws. They do this for their own benefit, not for ours. They distribute the money they create through the fractional reserve banking system. This system is completely based on debt. The government borrows money to operate. It pays the money back through taxes and inflation. But we get our money by borrowing as well. And most importantly, the entire system creates money for us to borrow and then charges interest

Charging interest is what concentrates money into the hands of the ultra elite in High Finance. They create the money for us to borrow. But they don't create the money to pay the interest. Think about it, over the life of a mortgage, you'll pay back 2.5-3 times the amount of money you borrowed. But no one created that money. They create money for you to borrow, but there isn't enough for everyone to pay the interest on their loans because no one created that money.

The result of this system is that someone must lose out. There will always be people who go bankrupt and fall into poverty. In order for me to accumulate enough money to pay back my loans, you must fall into poverty because there isn't enough money in circulation for us both to pay the interest on our loans.

The way we avoid this is to constantly have our economy grow as fast as possible. That increases the amount of money in circulation so that more of us can pay back what we owe. But that makes our economy function very much like a cancer. It must grow so fast that it forces people to consume more than they otherwise would. It forces people to throw away more than they otherwise would.

If our economy could grow continuously and if we had unlimited resources, this situation would not be so worrisome. In fact, many in the government believe that our debt-based economic system is not a problem at all. But the reality is that we have limited resources and the planet we live on has a limited ability to absorb and process our wastes.

So our money creation system:

  • Forces people into poverty.
  • Makes the income spread bigger.
  • Concentrates money into the hands of Big Government and High Finance
  • Forces artificially high levels of competition on its participants.
  • Forces our economy to grow at artificially high rates.
  • Forces overproduction and overconsumption.
  • Forces the depletion of limited resources.
  • Precipitates increasingly large environmental disasters.

There Isn't Enough Money in the World to Pay Back the National Debt

We have been using our current money creation and distribution system for 100 years now. During that time, our nation has incurred so much debt that there is not enough currency in the entire world to pay it back. That's right. It is impossible to pay off the national debt. All we can do is limit its growth.

This is a terrible situation for us to be in. In fact, every civilization in at least the last 2.000 years that has arrived where we are eventually moves into hyperinflation. In a hyperinflating economy, the government is printing money so fast that it may lose a significant portion of its value in a single day.

Every country where hyperinflation has occurred has fallen into complete economic collapse. The collapse usually leads to civil chaos and often civil war. Many times, it has also resulted in international wars. World War II is a recent example. The German government hyperinflated its money in order to pay war reparations incurred from World War I. It was actually the case that working men would force their employers to pay them in cash twice a day. Wives would come to their husbands' workplaces and pick up the money paid at noon so they could go spend it as fast as possible. It would literally take a wheelbarrow full of cash to buy a loaf of bread.

As the crisis got worse and the economy went into complete collapse, the Nazis came to power. People often turn to fascist governments when in the midst of the economic chaos caused by hyperinflation. The Nazis eventually got the economy going again, but they did it using the slave labor in their death camps. The price for their prosperity was the suffering and deaths of 11 million people in their concentration camps.

Hyperinflation has occurred hundreds of times in each decade of the 20th Century and throughout the entire first decade of the 21 Century. It never stops and it causes continual war across the globe.

The Dollar will Die

As long as the Federal Reserve is the only entity in the US issuing money, the problem will continue. Nothing we do can solve the growing income gap until we address this one root cause. And nothing will stop the complete and utter collapse of the dollar.

When the dollar goes into hyperinflation, the entire world's economy must also collapse. The dollar is used by approximately 50-60 nations as the backing for their currencies. When our money becomes worthless, so does theirs. Each national economy will fall one after the other like a row of dominoes.

Saving Ourselves

To protect ourselves from the coming collapse of the US dollar, we must apply free market principles to money itself.

We Can Provide Our Own Money

We save ourselves from the dollar's demise by simply recognizing that the government is not the only one that can provide us with money. We can do that ourselves. In fact, we can do it better.

We Can Provide Our Own Banking Systems

We must also realize that we are not dependent on our banking system and the way it currently operates. We can invent new forms of banking and implement them ourselves.

Free Market Competition is Where It All Starts

In a free market of competing currencies, the government and the banking cartel will have to adopt sounder policies or everyone will abandon them entirely. The threat of complete irrelevance is the only thing that will force them to change.

In a free market of competing currencies, the government will not be able to deficit spend and incur debt without end. They will have to adopt a more reasonable fiscal policy or everyone will flee from the dollar.

In a free market of competing banking systems, the world banking cartel must meet the demands for more fair and humane ways of doing business or they risk complete collapse of their system. No one will use it if they can provide themselves with something better.

Is It Legal?

Disclaimer: Neither this blog post, nor any part of it, constitutes legal advice. It is provided for informational purposes only. Consult your attorney before acting on any information provided herein.

Can we legally issue and use our own currencies?

In a word, yes. In fact, Cognisaya is working toward releasing a digital currency that will never suffer from inflation.

When you use a currency besides the dollar, there are a few things you need to know to put that currency on par with legal tender.

You Can Accept Any Currency You Want

There are less than a dozen countries worldwide that force you to use their currencies for all transactions. Most do not. For example, there are many stores on both sides of the US-Canada border that accept both US and Canadian dollars. They charge a conversion fee, but the point is that they are free to accept any currency they want.

So in the US and many other countries, any business or individual can accept any currency that they want to use. You must follow all government regulations in handling your money, such as laws preventing money laundering, but that isn't an issue for regular businesspeople.

You Cannot Refuse Legal Tender

You can never refuse legal tender. If you run a store and someone wants to pay with dollars, you must accept them.

You Must Pay Taxes with Legal Tender

All taxes must be paid with legal tender. This is another way the government forces us to use dollars. So at least some of your business must be done with US dollars.

Bad Money Pushes Out Good Money

Suppose that a currency called SuperBucks were in circulation today and that everyone recognized SuperBucks as superior to the US dollar. In such a situation, your customers would prefer to pay you in US dollars and hang onto their more valuable SuperBucks. Eventually, SuperBucks would not be circulating at all and their use would be discontinued.

But you are a business. You prefer SuperBucks because SuperBucks don't inflate. Their value is stable over time. This means your savings doesn't lose its value before you retire.

So what do you do?

Charge a Conversion Fee

Businesses already charge a conversion fee when they accept money other than their national currency. For example, lots of stores along the US-Canada border accept money from the country on the other side of the border from them. They just charge a conversion fee. You can do the same.

If you prefer SuperBucks to dollars, you can just give a 5% discount to everyone that pays with SuperBucks instead of dollars. By and large, your customers will quickly learn to pay with SuperBucks.

Some people will continue to pay with legal tender. But that's ok. You must have some legal tender to pay your taxes with. If you find that 30%-40% of your customers insist on using dollars, just accept it and use that money to pay the taxes you owe.

It Works for Contracts Too

If you write a contract and demand to be paid in SuperBucks, the payer can still give you US dollars because you can't refuse legal tender. The answer here is the same as before. You simply charge a conversion fee in the contract. You write a clause stating that they must bear all of the costs of the contract. This means that if they pay you in dollars, you can charge them 5% (or whatever else you specify in the contract) as a conversion fee for you to get your SuperBucks. If they sign the contract, they avoid cannot bearing this additional cost.

Court Judgments Will Always be in Legal Tender

Suppose you enter into a contract and it specifies that you want to be paid in SuperBucks  Now imagine that the other party breaches the contract. What do you do?

Well, of course, you take them to court. Let's suppose you win. The judge in the case will definitely not force the other party to pay in SuperBucks. She will award damages in US dollars.

But wait! Remember the clause you wrote into the contract stating that the other party must bear all the costs of the contract? That clause is still valid and binding even though the contract was breached. Therefore, you can charge a conversion fee on all awards and damages that the judge gives. The judge will make the other party pay the conversion fee so you can go out and buy the SuperBucks that you wanted originally.

So Yes, You Can Use Any Currency

The long and short of things is that you can use any currency you want as long as you know how.

But Wait, What about Banks?

Your local banks generally want deposits in legal tender. The don't want to handle anything else. That's why merchants currently charge a conversion feel when they get anything other than the money of their own nation. But this is not a problem.

Larger banks provide services for international businesses. And international businesses often do not convert all of the foreign money they receive. Instead, their international bank allows them to keep accounts in foreign currencies. So if you want to do business with a non-national currency like the Qbit, you must get your accounts in an international bank that accepts Qbits.

In a free market of competing currencies, all banks would eventually accept all of the currencies they consider valuable. So you would have no problem finding a bank that would process your transactions and give you accounts in the currencies you wanted to accept.

Our Software Changes Everything

Is it possible to reinvent money and banking? Absolutely.

With the software that we at Cognisaya are creating, any trusted entity can issue a digital currency. Trusted entities can be individuals, nonprofit organizations, businesses, or even local governments.

Our software also enables anyone to build legal contracts that contain programming logic built into them. That means that you can create new financial instruments, such as mortgages or bonds, that act as if they were built right into the system. Using this capability, you can build entire economic and banking systems on our software platform.

Now the more bank-like your business becomes, the more likely you'll be classified as a bank. So you may want to consider making your business into a credit union. That way, you can give your customers bank-like services and comply with all of the relevant regulations.

A word of warning: Don't try to skirt government regulations! You could end up in jail. Follow all the relevant laws regarding the handling of money and the processing of transactions. We call this "going in through the front door." When you go in through the front door, you aren't trying to find ways to sneak around. Always make sure that whatever you're doing in your business is in compliance with the laws of your locality.

So what can you really do with our software?

Credit Clearing Cooperatives

You can create local microeconomies with people that you know and trust and then network those together into an entire macroeconomy that provides you with stable money that keeps its value no matter what happens to the dollar.

These free market economies give you a way to create any banking structure that you want by having your co-op network start its own credit union, as mentioned above. As a result, you can build an economy that is more fair and humane than what we have now.

Commercial Credit Circuits

Your business can use our software to reduce the costs of operating capital. Specifically, you can bypass short-term bridge loans offered by the bank and use a commercial credit circuit instead. Because you don't pay the exorbitant interest rates that banks charge for short term loans, your operating costs go down.

Business-Purpose Currencies

Many big businesses issue their own currencies. They call them airline miles, cashback programs, or rewards cards, but these are just special-purpose currencies redeemable by a single business.

With our software, any business of any size can issue a currency for its customer loyalty programs. Businesses can also issue discount coupons as digital currencies. The ability to bundle all of your incentive programs as currencies means that your customers can have a single, unified experience for all of your incentive programs. They can choose which incentive device (cashback, coupons, etc) that they prefer to use for payment and how of each to use, thus simplifying the whole experience.

Social-Purpose Currencies

As businesses are finding out in their loyalty programs, the features that a currency has affects how people use that currency. Experience has shown that this aspect of money can be used to help solve otherwise intractable social problems. It is well proven that we really can find solutions to huge social problems without raising taxes, incurring debt, or redistributing wealth.

Local Government Currencies

It is both legal and possible for city and state governments to issue their own currencies. All they have to do is issue a bond. They can package ownership certificates for the bond into the currency they release. In other words, a state can issue a currency that is used solely in that state. They issue a bond and turn that bond into a currency using our software. So $20 worth of the state's currency is actually a certificate of ownership for $20 worth of the bond. When the bond matures, the holder of the currency can cash it in for dollars.

Commodity-Backed Currencies

It is both legal and possible for you to issue a currency backed by gold, silver, oil, cell phone minutes, or any other commodity that you want. In fact, you can even create a collection or "basket" of commodities so that your money is even more stable. If the price of one commodity tanks and the other commodities maintain their values, your money will keep its value too.

You created a commodity-backed currency by packaging certificates of ownership for the commodity into the digital currency that you create. So, as with a bond-backed currency, $20 worth of the currency gives ownership of $20 of the commodity.

Note that your currency doesn't have to be denominated in terms of legal tender. It is undoubtedly best if you do not tie your currency in any way to the US dollar. Suppose you call your currency SuperBucks and back it with gold. You could then say that 1 SuperBuck is equivalent to one ounce (or kilogram) of gold. Then it is not tied to the dollar in any way. No one can accuse you of fraud or counterfeiting.

Denationalized Currencies

Because any trusted entity can issue a currency, it is perfectly possible to do business with a currency that is not issued by a government and is not tied to any particular nation. The Qbit is such a currency.

In a free market of denationalized currencies, competition forces issuers to issue the most stable, valuable, and usable currency that they can.


We have serious problems in our world. One such problem is the increasing income spread between the low and high ends of the economy. If we keep going the way we are, there will be no path from the low end of the spread to the high end. Already, it has become extremely difficult to traverse that gap. People are sinking into poverty instead of rising into the middle or upper economic classes.

We are at a turning point in history. If we take action now, we can prevent the collapse of civilization by building forms of money and banking that are stable, valuable, usable and humane. If we do nothing, we are headed for a much darker day.

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