Barter, Trade, or Commerce?
Part 2 of 2
 

Can a person use Federal Reserve Notes (FRNs), that is, a fiat currency, and avoid being involved in commerce?

After advertising in the local newspaper for one day, Jane sells her old lawnmower for 40 FRNs. Jane’s intent is not to make a profit but only to liquidate property. The exchange is relatively immediate, thus eliminating the time domain. This was not an exchange where records were required nor was this a taxable activity. Although the public was involved, the public was not involved for the sake of profit. Jane was simply exchanging her lawnmower (property) with the public at large and receives a claim check on other property owned by the public. However, because money is used, the exchange is properly classified as trade.

Yet, the same lawnmower example can be an exchange of commerce as well. Jane holds in her hands FRNs, thus creating for herself equitable interest in the total wealth of the community. By holding equitable interest, the time domain is introduced. Although her intent was not to make a profit, simply holding the FRNs in her hand creates a record that property was exchanged. Jane also offered the lawnmower to the general public. Although unlikely to be viewed as an exchange in commerce, the case certainly can be made as such.

Thus, the case can be made then that any time a fiat currency is used, because such a currency has no intrinsic or tangible value, and because all transactions create equitable interest in the aggregate wealth of the society, that all exchanges using a fiat currency are exchanges in commerce. This is not to say that all such transactions are commerce, only that a case can be made for such.

Because paper currency contains no tangible or intrinsic value, paper currency is only a tender in payment; the currency is not payment unless acknowledged as such, either by agreement or through default, by those involved in the transaction. Being contractual in nature, the currency’s acceptance is always based on the faith of the recipient in the outcome of some anticipated action.

Because specie currency contains tangible or intrinsic value, a buyer using full value specie as currency pays the seller for their wealth. Payment extinguishes the buyer’s debt to the seller by transfer of the wealth incorporated in the coinage.

Strictly speaking, payment requires the delivery of wealth. If the same transaction is made using irredeemable paper currency, the buyer does not “pay” the seller but only “tenders” the debt. U.S. law specifically declares that the settlement of debts with negotiable paper is not payment unless accepted by the parties in that sense.

Payment is the execution and delivery of negotiable papers and is not payment unless it is accepted by the parties in that sense.[11]

Some people would argue that technically, the Federal Reserve System owns all FRNs. That FRNs are considered by some to be a private currency rather than a public currency is largely irrelevant. The foundational consideration is that FRNs are a fiat currency, containing no intrinsic or tangible value. Thus, using a fiat currency always creates equitable interest in the total wealth of the society. Whether that equitable interest is considered to be trade or commerce is determined by other factors.  The Fed certainly has a concern for “its” “private” notes, but technical ownership is not a concern when you have exchanged your property for FRNs. Those FRNs are yours and the banker can’t take them from you without due process, a case any banker would be hard pressed to make.
 

An important point to remember regarding FRNs is that most FRNs are created by loaning them into existence. Thus, immediately upon creation, an FRN represents equitable interest in the property being purchased, but once the currency is in circulation, this connection is immediately lost. By circulation and as a currency, the FRN becomes a general claim upon the total wealth of the society, but that equitable interest is owned by the physical holder of the FRN, not the Fed or any banker. If the property purchased by the money provided through the loan is security for the loan, the creditor then owns equitable interest in the property, not the currency.

All currencies represent equitable interest in the total wealth of the society.

Regardless, even if a person is debt-free, by fiat that person is forced to participate in this trading of debt and equitable interest in the aggregate wealth of the society. The reason is not because of private issuance of money, but because the substance of all money is essentially one of serving as a claim check on property (goods and services).

How would using a currency with tangible or intrinsic value remedy this situation? Depends. If the commodity currency is used strictly as currency, then the currency represents unclaimed property, and thus creates equitable interest in the total wealth of the society. Such exchanges could easily be interpreted as exchanges in commerce. However, by using a currency with tangible or intrinsic value, exchanges can, if desired, be removed from the realm of commerce and be considered trade—or even barter, simply because the currency also has intrinsic commodity value.

Even if the Treasury issued the paper currency, instead of the quasi-private, quasi-public Federal Reserve System, thus changing the nature of the currency from quasi-private to public, a publicly owned currency still acts as a claim on the total wealth of the community. Unlike “private” currency, public currency creates no private or personal equitable interest in the currency as there are no “private” owners. However, an exchange of property for publicly owned currency is just that—an exchange and nothing else. With publicly owned currency, a person would be hard pressed to prove Jane was engaged in commerce while selling her lawnmower as the currency is strictly a medium of exchange. Jane can devote her time to thinking about how to mow her lawn and attending economic symposiums.
 

11 Uniform Commercial Code §3-410
 

Now, your Honor is to know that these judges an appointed to decide all controversies of property, as well as for the trial of criminals, and picked out from the most dexterous lawyers, who are grown old or lazy, and having been biased all their lives against truth and equity, are under such a fatal necessity of favoring fraud, perjury, and oppression, that I have known several of them refuse a large bribe from the side where justice lay, rather than injure the faculty, by doing any thing unbecoming their nature or their office.

It is a maxim among these lawyers, that whatever has been done before may legally be done again: and therefore they take special care to record all the decisions formerly made against common justice and the general reason of mankind. These, under the name of precedents, they produce as authorities, to justify the most iniquitous opinions; and the judges never fail of directing accordingly.

In pleading they studiously avoid entering into the merits of the cause, but are loud, violent, and tedious in dwelling upon all circumstances which are not to the purpose. For instance, in the case already mentioned, they never desire to know what claim or title my adversary has to my cow; but whether the said cow were red or black, her horns long or short, whether the field I graze her in be round or square, whether she was milked at home or abroad, what diseases she is subject to, and the like; after which they consult precedents, adjourn the cause from time to time, and in ten, twenty, or thirty years, come to an issue.

It is likewise to be observed, that this society has a peculiar cant and jargon of their own, that no other mortal can understand, and wherein all their laws are written, which they take special care to multiply; whereby they have wholly confounded the very essence of truth and falsehood, of right and wrong; so that it will take thirty years to decide whether the field left me by my ancestors for six generations belongs to me, or to a stranger three hundred miles off.

In the trial of persons accused for crimes against the state the method is much more short and commendable: the judge first sends to sound the disposition of those in power, after which he can easily hang or save the criminal, strictly preserving all due forms of law.

Here my master interposing, said it was a pity that creatures endowed with such prodigious abilities of mind as these lawyers, by the description I gave of them, must certainly be, were not rather encouraged to be instructors of others in wisdom and knowledge. In answer to which I assured his Honor that in all points out of their own trade, they were usually the most ignorant and stupid generation among us, the most despicable in common conversation, avowed enemies to all knowledge and learning, and equally to pervert the general reason of mankind in every other subject of discourse, as in that of their own profession.

Gulliver attempting to explain to the Houyhnhnms the concept of lawyers, from Gulliver’s Travels by Jonathan Swift, 1735