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Ending the Government Monopoly on Currency
Wednesday, February 03, 2010
By Ann Shibler
The John Birch SocietyThe legal tender laws of the United States are found in Article I, Section 8 of the Constitution and grant power to Congress to “coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.” Nothing more.
In the Constitution’s Article I, Section 10, the states were restricted in regard to money: “No state shall ... coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts.” Bills of credit is a term used by the Founders to describe what we have come to know as unbacked paper currency, or fiat money.
So, we know that the federal government was never given the authority to issue paper currency, while the states were specifically prohibited from doing so. In 1792 the U.S. Mint set to work, constitutionally authorized to do so, stamping coinage of a fixed size, weight and purity for people who brought in their gold and silver. There were also private mints that did the same work. There was no government monopoly and no unbacked paper money issued by the federal government.
However, U.S. Treasury notes, unbacked by gold or silver, were issued beginning in 1862 during the Civil War. Known as "greenbacks," this fiat paper currency was made official legal tender by an act of Congress in 1862. This legal tender status guaranteed that creditors would have to accept greenbacks despite the fact that they were not backed by gold, bank deposits, or government reserves, and bore no interest. Then in January of 1875, Congress passed the Specie Payment Resumption Act, which returned gold backing for these notes beginning the first of January 1879.
Jumping ahead to 1913 when the Federal Reserve was created, we see the Fed issuing its Federal Reserve Notes, circulated side-by-side with U.S. Treasury Notes, bearing the phrase “redeemable in gold.” That didn’t last long. In 1933 FDR’s administration outlawed possession of gold and the people were ordered to turn in all they had. Almost simultaneously, the Federal Reserve notes declared they were “redeemable in lawful money.” But gold was no longer lawful money; silver still was, but silver redemption was abolished in 1968.
The transformation, then, from honest money, backed by gold and silver, to fiat money redeemable in absolutely nothing, was complete. The nation barely noticed the new debased and devalued currency, perhaps because they were mesmerized by the growing stack of greenbacks in their pockets. The purchasing power of the dollar has shrunk by almost 95 percent since 1913 because of the takeover of the money supply by the Fed; inflation is rampant and the Fed continues to ratchet up the printing presses, further devaluing the dollar.
But there is a way out of the downward spiraling valuation of fiat money.
Congressman Ron Paul (R-Texas), has once again prescribed just the right medicine for what ails this country’s monetary system by introducing H.R. 4248, the Free Competition in Currency Act of 2009 (See 5-minute video explanation by Rep. Paul.). An advocate of sound money, Congressman Paul noted that, to be useful and honest, currency has to be, just as it has historically been, durable, portable, divisible, uniform, stable, reproducible and scarce -- gold and silver certainly fit the bill. “Currency, or money, is what allows civilization to flourish,” he stated upon introducing his very short, clear, precise and understandable bill.
The purpose of the Act is to reintroduce a system of competition in currencies. By eliminating legal tender laws that give the Federal Reserve a monopoly over our money supply, the Federal Reserve would lose its power to manipulate the money supply and therefore its value. Doing away with laws that prohibit private mints from creating coinage would also end the Federal Reserve’s money monopoly. Eradicating the capital gains and sales taxes on gold and silver coins, platinum palladium or rhodium bullion coins is just plain common sense -- after all, a sales tax is not applied every time we exchange a $10 bill for a roll of quarters -- and would set the groundwork for real prosperity. And along with the above, repealing federal criminal code pertaining to precious metals would be a protection against government confiscation and penalties.
Rep. Paul’s concluding paragraph in his "Statement Introducing the Free Competition in Currency Act" properly proclaims:Allowing for competing currencies will allow market participants to choose a currency that suits their needs, rather than the needs of the government. The prospect of American citizens turning away from the dollar towards alternate currencies will provide the necessary impetus to the US government to regain control of the dollar and halt its downward spiral. Restoring soundness to the dollar will remove the government’s ability and incentive to inflate the currency, and keep us from launching unconstitutional wars that burden our economy to excess. With a sound currency, everyone is better off, not just those who control the monetary system.
A case to help illustrate what sound money can do rests in the once-great, agriculturally-based bread basket of Africa, Zimbabwe. Suffering from a dictatorship that imposed wage and price controls and bad economic policies that resulted in massive hyperinflation that destroyed the manufacturing and production base that in turn effected an enormous rise in hunger and poverty, Zimbabwe has recently seen a remarkable turnaround in the last year.
Zimbabwe’s Finance Minister Tendai Biti suspended the use of their completely worthless currency and instead legalized the U.S. dollar as currency. Zimbabwe resident Cathy Buckle wrote that Biti’s move “eradicated the black market almost overnight, stopped super-hyperinflation instantly and put real money in people’s pockets. But, more importantly to everyday life, Mr. Biti’s policy put food back in the shops.” Ms. Buckle went on to relate how badly state control damaged even the communication system of the nation. Since the introduction of the U.S. dollar, cell phones proliferate which she credits with having an impact on the reduction of crime and the increase in freedom.
Once one grasps the concept that sound money is necessary for the prosperity of any nation, that sound money can be the difference between freedom and tyranny, and that it is certainly the prescription for reversing the approaching economic tsunami created by the Federal Reserve, it becomes even more difficult to accept the current political rhetoric that emphasizes increasing the national debt, installing a national health care system through a gargantuan 2,000 page bill, increasing spending toward the idea of creating jobs, etc.
H.R. 4248 was introduced in early December and as yet has no cosponsors. It probably won’t see the light of day as it is buried in several committees -- Financial Services, Ways and Means, and Judiciary -- unless Americans make clear to their elected representatives that a true stimulus is needed, in the form of sound money that can only come about by eliminating the Federal Reserve’s current chokehold on the money system.
Contact your representative and senators today and urge them to commit themselves to really stimulating the economy by supporting H.R. 4248. Any other policy or program is disingenuous, no matter how it’s sugarcoated, painted, or marketed to we, the people.NOTE: In accordance with Title 17 U.S.C. section 107, any copyrighted material herein is distributed without profit or payment to those who have expressed prior interest in receiving this information for non-profit research and educational purposes only. For further information please refer to: http://www.law.cornell.edu/uscode/17/107.shtml
