Thursday, March 12, 2009

Business Journals report on the Constitutional Tender Act

One of our folks was handed a copy of last week's Atlanta Business Chronicle at a Toastmaster's meeting recently. Inside was a long article on the Constitutional Tender Act!

Click Here to read the article in its entirety. (By the way, the article was apparently also published in sister business journals across the country!)

Of course, as happens in the media, there were misunderstandings of the bill. For example, it said that while "the state would accept checks or other payments linked to gold coin- or silver coin-backed accounts," it could also "accept Federal Reserve dollars — the existing U.S. standard for nearly four decades — for other types of transactions." That, of course, is incorrect; that section of the bill is referring to what everyone ELSE in the State is allowed to do -- they can use gold, silver, or even worthless pieces of paper with pictures of dead politicians on them. It's their choice under this bill.

Also, as happens with members of academia, there were even more misunderstandings of the bill. Surprisingly, they came this time from Dr. George Selgin, the "BB&T Chair in Free Market Thought / Professor of Economics" at West Virginia University, whom the article called "an expert on the history of currency standards and monetary theory." Here's what he had to say:

Selgin said the challenges of re-introducing such a standard, if the bill became law, are numerous.

“We as a country walked away from gold to fiat money,” Selgin said. “It’s very hard to walk back.”

Selgin said he sees the bill, rather than attempting to re-introduce a now-defunct financial standard, as creating the artifice of one.

“Banks would have to meet two sets of standards, one for doing business with the state, and one for everyone else because everyone else uses another standard,” he said. “You’re asking them to create parallel systems, and that’s very difficult.”

OK, yes, "it's very hard to walk back" to real money. No one is saying that would be something that could happen overnight. BUT, this bill would actually put us on that ROAD back to real money -- by introducing competition in currency. By getting the State to obey the Constitution, and ONLY use gold and silver coin in receiving and making payments, we can begin to get people used to using real money again, because they'll have to use it in their transactions with the State. Once they start doing that, they'll be more willing to use it in their everyday transactions as well -- especially as the fiat money continues its spiral downwards in purchasing power, and the gold and silver maintains its value. At that point, we can see "Gresham's Law" work in reverse -- good money will chase out bad money.

What is most unsettling, though, it that a prominent academic like Dr. Seglin is willing to look at a bill that attempts to make the State obey the U.S. Constitution in the area of money... and he calls it "a bit kooky." Instead of making suggestions of better ways to make the State enforce the requirement for Constitutional tender, he dismisses it outright as just "creating the artifice" of a "now-defunct financial standard."

Is this what "experts" in "free market thought" are teaching in the schools these days?

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