In an email to supporters, von NotHaus indicated that he will appeal his conviction.
A few days before the end of the trial, Rep. Ron Paul (R-TX) introduced H.R. 1098: Free Competition in Currency Act of 2011. Its stated purpose is “To repeal the legal tender laws, to prohibit taxation on certain coins and bullion, and to repeal superfluous sections related to coinage.”
During his Extensions of Remarks on March 15, 2011, Rep. Paul said, “At this country’s founding, there was no government controlled national currency. While the Constitution established the congressional power of minting coins, it was not until 1792 that the U.S. Mint was formally established. In the meantime, Americans made do with foreign silver and gold coins. Even after the Mint’s operations got underway, foreign coins continued to circulate within the United States, and did so for several decades.” Unfortunately, Rep. Paul learned the wrong lesson from history.
Starting with the statement that foreign coins continued to circulate for several decades, fails to recognize the real reason for this. Upon passage of the Constitution and prior to the passage of the Coinage Act of 1792, the new government realized that the they were not ready a would not be ready to supply coins to satisfy the needs of the new nation. Even after the passage of the first Coinage Act, congress realized that the U.S. Mint needed time to produce enough coins for the nation. Rather than plunging the economic potential of the new nation into chaos, the government continue to allow foreign coinage, specifically the Spanish Reales, to be used for commerce. This continued until the passage of the Coinage Act of 1857. Aside from authorizing the issuing of the small cent, which the U.S. Mint did by striking the Flying Eagle Cent, the law gave citizens two years to redeem their foreign money for the equivalent in U.S. coinage. By 1859, no foreign coins were circulating in the United States.
In the years leading up to the Revolutionary War, the new colonies were hampered by a situation where King of England did not allow the colonies to control its own money or create its own monetary policy. In order to expand commerce, colonies issued paper notes. These notes functioned as currency but actually were bills of credit, short-term public loans to the government. For the first time, the money had no intrinsic value but was valued at the rate issued by the government of the colony in payment of debt. Every time the colonial government needed money to pay creditors, they authorized the printing of a specified quantity and denomination of notes. Laws authorizing the issuance of notes were called emissions. The emission laws also included a tax that was used to repay the bills of credit with interest.
As taxes were paid using the paper currency, the paper was retired. As the notes were removed from circulation, that meant less payments the government had to make. On the maturity date, people brought their notes to authorized agents who paid off the loan. Agents then turned the notes over to the colonial government for reimbursement plus a com- mission. Sometimes, colonies could not pay back the loan. They instead passed another emission law to cover the debt owed from the previous emission plus further operating expenses, buying back mature notes with new notes. The colonists accepted this system since it was easier than barter and there were never enough coins to meet commercial needs.
To maintain commerce, many of the notes were tied to the value of the Pound Sterling but the worth of the Pound Sterling was interpreted differently from colony to colony. Although the colonies accepted foreign coins, especially the Spanish silver reales, each colony set its own price of silver as based on its purchasing power. For example, the colonies of North Carolina and Virginia tied the reales’ value to the amount of tobacco that can be traded. This continued following the Revolutionary War so that commerce could continue and the new states could repay war debts.
After the failure of the Articles of Confederation to form that perfect union, the authors of U.S. Constitution understood the a union must be able to be supported out of the whole and not individual parts. It was best explained by James Madison in Federalist No. 44 when he wrote:
Had every State a right to regulate the value of its coin, there might be as many different currencies as States, and thus the intercourse among them would be impeded; retrospective alterations in its value might be made, and thus the citizens of other States be injured, and animosities be kindled among the States themselves. The subjects of foreign powers might suffer from the same cause, and hence the Union be discredited and embroiled by the indiscretion of a single member. No one of these mischiefs is less incident to a power in the States to emit paper money, than to coin gold or silver.By reigning in the chaos caused by 13 different economic policies, the more perfect union turned this young country into an economic powerhouse that has surprised empires of years past.
The economic strength of the United States is based on strength of its currency that is backed by the full faith and credit of the U.S. government. While there are disagreements as to how to use and maintain that strength, the fact of the matter is that much of the world bases its economic stability on the full faith and credit of the U.S. Dollar. There are many economies that use Dollars as its primary means of exchange like most of the countries in Central America. Most of the world’s commodities are priced in dollars like oil and precious metals. And countries buy United States bonds to help back their currency like China.
By repealing the legal tender laws (31 U.S.C. § 5103), Rep. Paul is proposing to demonetize all United States coins and currency that could lead to a global economic collapse. Countries that use the dollar as their currency will not have a currency; currencies backed by the dollar will be worthless; and the price of world commodities will become unstable as the markets search for a new standard. As we have seen during the current economic crisis, instability causes prices to rise—see the prices of gold, silver, and oil.
H.R. 1098 was referred to the Committees on Financial Services, Ways and Means, and the Judiciary. Rep. Paul is chairman of the Domestic Monetary Policy and Technology Subcommittee under the Committee on Financial Services. Should this bill be successfully reported out of all three committees it would have to passed on the floor of the House of Representatives. If it passes the House, it is doubtful that the bill would pass in the Senate. This aspect of the sausage making process ensures that this bill will never pass. Regardless of what you think about United States monetary policy, it is not in anyone’s interest to plunge the world into economic chaos.
2 comments:
If the government is supposed to "supply the nation with money" then where does the government get this money from? (Now, they "print" it, mostly electronically.) If the government does not own mines - as ancient Athens did - the silver and gold must come from the people. Where do they get it? Obviously, they must sell their goods and services for other kinds of hard money which must by definition pre-exist and meet the needs of commerce.
For overseas trade, various fiduciary papers, bills of credit, etc., are preferable to coin, especuially in times of war and piracy.
If you visit the Spanish Coins on American Notes website, (http://scoan.oldnote.org/) you will see that federal money was only "e pluribus unum" one out of many in circulation until 1857.
In his monograph, "The Denationlisation of Money," F. A. Hayek pointed out that competition in money would lead to strong currencies.
Anyone with a Red Book knows that the Bechtlers supplied gold coin from their own mines for over 20 years.
Finally, Ron Paul's theories being whatever they may, the fact is that today, here and now, we have a multiplicity of moneys in circulation. Alan Greenspan counted over a dozen including common stocks and derivatives. I don't know if he included all the silver bars and rounds we like so much.
A few things to point out:
1. I pointed out that foreign coins circulated as legal tender in the US until the Coinage Act of 1857. What I did not publish in the article was a comment from the Congressional Record where congress felt that to strengthen the dollar and promote stronger trade, it was necessary for the US to stand on its own currency and not have it devalued by foreign currency. While the Reales had its intrinsic value, political realities in Europe was causing its purchasing power to decline.
2. Hayek's work was performed in the 1970s with his second edition published in 1977. In the perspective of those times, the monetary market was very controlled with the governments setting the values of their currencies. What people misread from Hayek's work is that he calls for the free trade in money, not competition. The United States started to allow free trade in 1972 as part of Nixon's attempt to stave off inflation because of the oil crisis. Nixon adjusted how the US was allowed to trade gold as a commodity, but not far enough to ease inflation.
Ford allowed both precious metals and the dollar float on the market, while Reagan took all of the reigns off in 1982-3.
3. The problem everyone, including Greenspan, forgets is that the the basis of all of these alleged money alternatives is that they are based on the dollar. Stocks, derivatives, checks, electronic transfers are managed in dollars. Demonetize the dollar by removing the legal tender status of the dollar all of these dollar equivalents become worthless. Once they become worthless it will collapse everything built on the dollar and these other dollar equivalents.
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