Another Radio Interview on Constitutional Tender

Here's an interview with Dr. Bill Greene about the Constitutional Tender Act on the Al Gainey radio show, broadcast on 12/2/10. For more info: http://www.ConstitutionalTender.com/



Original MP3: http://algainey.com/mp3/12-2-10_Dr_Bill_Green.mp3
The Al Gainey Show: http://algainey.com/

Radio Interview on Constitutional Tender

Here's an interview with Dr. Bill Greene about the Constitutional Tender Act on the Jody Hice radio show, being broadcast today in six states. For more info: http://www.ConstitutionalTender.com/



Original MP3: http://podcastmachine.com/podcasts/398/episodes/35338/media_files/81390/download/5/file_128kb.mp3
The Jody Hice Show: http://thejodyhiceshow.blogspot.com/

How the ConTen Act can Return America to Sound Money

Ron Paul, in his paper "The Political and Economic Agenda for a Real Gold Standard" (originally delivered at the Mises Institute's 1985 conference on the gold standard), discusses the steps which the economist Ludwig von Mises laid out for us to be able to return to a sound currency (which was in his 1952 epilogue to "The Theory of Money and Credit").

What's particularly relevant about this discussion is that, where the attempts at the national level to implement these steps have been halting at best, the Constitutional Tender Act actually builds on what HAS been accomplished and uses it to implement those steps starting at the STATE level... where they actually have the chance to SUCCEED.

The first step we need to take, writes Paul, is "Gold Coinage":

The heart of Mises's proposal to restore gold to our monetary system is a gold coinage. He wrote,

Gold must be in the cash holdings of everyone. Everybody must see gold coins changing hands, must be used to having gold coins in his pockets, to receiving gold coins when he cashes his paycheck, and to spending gold coins when he buys in a store.[7]

In this one detail — the critical importance of the gold coinage — I believe lies the key to establishing a new gold standard.

We should make no mistake about it: the more progress we make toward reestablishing the gold standard, the more aggressive our opposition will become. Some vested interests, as you know, have a lot to lose if we succeed in getting the monetary system reconstructed on a gold basis. The first political step is, therefore, to get the coinage into circulation.

One objective might be to aim for every American to become a gold owner. We must encourage a broader base of political support for gold ownership and the availability of gold for personal economic objectives. Certainly a broader base of gold ownership in the country would help to reduce the threats of discriminatory taxation or regulation of gold ownership and gold coin transactions, which are seriously favored in Congress today.

Under the Constitutional Tender Act (a proposed State law which re-applies the U.S. Constitution's negative mandate in Article I, Section 10, that "No State shall... make any Thing but gold and silver Coin a Tender in Payment of Debts"), the State would be required to only use gold and silver coins (or their equivalents, such as checks or electronic transfers) for payments of any debt owed by or to the State (e.g., taxes, fees, contract payments, etc.). All contracts, tax bills, etc. would be required to be denominated in legal tender gold and silver U.S. coins, including Gold Eagles, Silver Eagles, and pre-1965 90% silver coins. All State-chartered banks, as well as any other bank that is a depository for State funds, would be required to offer accounts denominated in those types of gold and silver coins, and to keep such accounts segregated from other types of accounts such as Federal Reserve Notes.

So, with the ConTen Act, the foundation is now laid. Dr. Paul goes on:

What we must first do is get the coinage into circulation, and then build the political base to lock the government's fiscal folly with golden handcuffs. People have always understood the tangible value of gold coins in circulation. They don't need to agree or even understand the fine points of monetary theory to own gold coins, trade gold coins, or use gold coins to satisfy part of their marginal-utility demand for cash balances.

Most people understand very little about economics or monetary theory. When they see supposed experts in disagreement, the status quo wins by default, because nobody with the power to change it has the courage of conviction. The majority of voters see the debate among experts and hesitate to support any leaders with comprehensive reform schemes. This is why all efforts to rebuild a gold monetary system have met with frustration and stalemate in the past.

And this is the beauty of the Constitutional Tender Act: instead of being a top-down, federal-level effort, it is a bottom-up, State-level effort, thus giving it a higher likelihood of eventual success (see my paper presented at the Mises Institute's Austrian Scholars Conference, "Ending the Federal Reserve From the Bottom Up: Re-introducing Competitive Currency by State Adherence to Article I, Section 10"). Upon going into effect, the ConTen Act would introduce currency competition with Federal Reserve Notes, by outlawing their use in transactions with the State. Ordinary citizens of the State, being required to pay their State taxes in gold and silver coins, would find it necessary to open bank accounts in those denominations. Businesses operating within the State, being required to pay their State sales taxes and license fees in gold and silver coins, would need to do the same; and in order to acquire such coins, they would begin to offer their goods and services in "dual currency" denominations, where customers could choose to pay in Federal Reserve Notes (which would still be necessary to pay Federal fees and taxes) or gold and silver coins (including checks and debit cards based on bank accounts denominated in such coins). Customers, having found the need to open such accounts in order to deal with the State, would be able to engage in commerce using those accounts.

Over time, as residents of the State use both Federal Reserve Notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve Notes do will lead to a "reverse Gresham's Law" effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve Notes). (Gresham's law is stated as, "Where legal tender laws exist, bad money drives out good money." A reverse of this would be, "In the absence of legal tender laws, when people are given the free choice between using and accepting good money or using and accepting bad money, bad money becomes less popular than good money, and is driven out of the marketplace.") As this happens, a cascade of events can begin to occur, including the flow of real wealth toward the State's treasury, an influx of banking business from outside of the State (as citizens residing in other States carry out their desire to bank with sound money), and an eventual outcry against the use of Federal Reserve Notes for any transactions. At that point, the Federal Reserve system will have become unwanted and irrelevant, and can be easily abolished by the people's elected Representatives in Washington, D.C. -- and thus open the door for a return to sound money, nationwide.

All of this can take place because Dr. Paul helped bring about the minting once again of legal tender U.S. gold and silver coins, which can now be used to return every State to its Constitutional mandate for honest money. He recognized that this first step was a necessity: "There must certainly be no restrictions on the private production of coins, but I believe that getting the US Mint further into the act, producing a gold coinage with some of the mystique of the government, will be useful in the further political stages of monetary reform. Honest money, after all, is a political objective; it is fitting that people should demand honesty from their government, as well as an economic policy that permits individuals to compete honestly." Now, with the Constitutional Tender Act, that political objective is within reach.

Renaissance of the Gold Standard?

Discusses how the gold standard might effectively revive, from the private sector.
http://www.prudentbear.com/index.php/thebearslairview?art_id=10471

Global opposition to Fed Chairman Ben Bernanke's policy, World Bank President Robert Zoellick's "trial balloon" and statements by some of the new Republican Congressional caucus have caused a modest revival in consideration of the Gold Standard. In my view, the chances of its revival by official means in the next 10 years remain infinitesimal, but there is an increasing probability of private sector activity in that direction. Not only politically, the bombed-out Gold Standard stock may have reached bottom and be beginning a modest revival.
The Gold Standard did not disappear because it caused the Great Depression (it had only modest fingerprints on that disaster) nor because Maynard Keynes called gold a "barbarous relic." In reality, its demise had a much simpler cause: the rising rate of global population growth, which caused it to become damagingly deflationary...

One advantage of commodity-based money over fiat currency, however, is that it does not require official sanction to come into existence. Whereas paper money requires a central bank and a national credit rating behind it to attain credibility (and even with this sometimes fails to do so, as in Zimbabwe, Weimar Germany or Latin America for much of the 20th century), gold-based money can come into existence through private activity.

There is some evidence that this is happening. Austria's Raiffesen Zentralbank now offers its clients gold-based accounts, and other banks are likely to follow. The SWIFT international payments system now allows payment in gold, an essential element in a currency's infrastructure in today's markets. Governments worldwide are competing to depreciate their currencies (or, like the hapless EU, watching their currencies come under fire as the weaker members of their union get into difficulties). At some point, a major exporter with a good competitive position—if you asked me to guess, from China or Germany—could start invoicing its customers in gold.

When that happens, a very important barrier will have been crossed. Once gold-denominated trade paper comes into existence, it will form the nucleus of a short-term money market, in the same way as the eurodollar market for assets and liabilities outside the United States arose in Europe after 1957 or so. Within a few years, gold bonds will be issued—once a company has gold-denominated receivables, it will have a natural hedge for such financing, which will remain cheap in interest terms even after conventional currency interest rates rise. It has happened before, in the formation of the eurodollar and eurobond markets in 1957-65. This time, once gold invoicing happens, the gold money and bond markets are likely to spring up quite quickly.

Banks, even outside Austria and Switzerland, will quickly get up the curve of offering gold-denominated accounts once their corporate customers demand them. They will find that a substantial demand exists at the retail level also. Here, modern technology will be very helpful. An ordinary citizen will be able to use a gold-denominated account for day-to-day transactions by means of a debit card, without the need to carry round expensive sovereigns or double eagles. A payment of $9.50 for a sandwich will be satisfied by the debit card, which will pay dollars (say) to the sandwich bar while debiting the account about 0.007 ounces of gold, using that day's gold price.

The card holder will pay perhaps 1% extra for everything, to cover the cost of the gold/dollar exchange transactions; but on the other hand, since his cash holdings are in gold, he will very likely gain much more than that percentage in dollar terms each month. His wealth will be expressed as so many ounces of gold (or kilos, if he is European), but he will never need to hold physical gold at all—or any other currency, though probably he will get a few dollars from the bank's cash machine each month for expenditures for which his debit card is not accepted.

In this way, both corporate and individual users will be able to move their transactions and holdings to gold, with the banks adapting to meet their needs. The banks will remain regulated by national authorities, and will have to manage their gold assets, liabilities and capital in such a way as to avoid breaching the authorities' leverage ratios, based on the gold price at the end of each reporting period...

CLICK HERE TO READ MORE...
(original link here - now broken)

Silver money for Americans

I don't agree with this article's solution in its entirety (it's too Fed-based; obviously, implementing the Constitutional Tender Act at the State level would be the best solution!). However, I am happy to see more and more solutions being proposed in order to take us away from fiat funny money, and back to sound money.

I think that my readers will agree that there is a desperate need for some fresh thinking about money in the U.S.

Many respected analysts worry that the expected action by the Fed to apply a new bout of QE after the coming elections is fraught with danger.

Fiat money in the US is in an advanced stage of decomposition and when money rots, the whole social, economic and political structure of the nation rots with it. A return to sound money is urgent. More and more people are aware of the perilous road ahead if nothing is done.

The problems facing the US are so gigantic in nature, that an all-round solution to them is impossible when analyzed in practical terms. A return to sound money is a return to gold and silver as currency. Gold is outstanding as money – but how to realize that goal? Silver is great for popular use – but again, how to regain it?

The only way open to regain a sound footing of real money for the US economy must be by establishing a process through which there will be a gradual and natural return to sound money. It is impossible to reform or improve the present monetary system of the US any other way.

The US abandoned sound money in a series of gradual steps; the first metal out of the monetary system was gold, in 1933; the second metal out of the system was silver, in 1965. The return to sound money would follow those steps, in inverse order: silver would return first, because silver has always been the money of the people; gold would return last, silver having opened the way.

CLICK HERE TO READ MORE...

Silver money for China

This comes from the "Asociación Cívica Mexicana Pro Plata A.C." It's an interesting approach to solving that country's rising inflation woes...
The most interesting section is here:

The silver coins that go into circulation will be money, but will hardly be used for purchases. It will be difficult to find these coins, as they will all be treasured up by the Chinese population. Their velocity of circulation will be close to zero and thus they will have no inflationary effect upon the economy. Paper Yuan are withdrawn and replaced with silver money which goes into savings; this is a correct way to fight inflation.

Saving these coins will amount to voluntary austerity for the Chinese. Saving is the postponement of consumption. Voluntary austerity is always more effective and sounder from an economic point of view than the forced savings beloved of Statists, who have dictated taxes and scarcity for consumer goods so that the Statists can build factories.

The monetization of a silver coin will be a free-market decision that prompts people to save, spontaneously, of their own accord, and which does not require raising interest rates to draw the people’s money out of the economy into savings.

We have been proposing the monetization of a silver coin in Mexico since 2001. According to our proposal a one-ounce coin of pure silver, with no engraved value, would be given a monetary value by the Mexican Central Bank. This coin would exist and circulate as money, in parallel with the paper money system of Mexico.

The monetary value would be superior to the bullion value of the silver ounce by about 15%. This margin would allow a profit, called “seigniorage”, for the Central Bank. Since the coin would not have an engraved value, rises in the price of silver (which would tend to eliminate the seigniorage of the Central Bank) would be met with new, higher, Central Bank quotes for the monetary value of the coin.

The rises in the value of silver in the silver markets of the world would no longer cause the disappearance of the monetized silver ounce. As soon as a rise in the price of silver would begin to affect the seigniorage of the Central Bank, it would produce a new and higher quote.

In order for the silver coin to become money and cease to be a commodity, the last quote of the Central Bank would have to remain stable and not diminish if and when the price of silver were to fall, which of course it does from time to time. Granted such immunity from falls in the price of silver, the coin would become legal tender money and could be used for any commercial transaction.

Now we read that China is having problems with inflation of its money supply. We think that if China were to monetize a silver coin, its Central Bank would have an effective instrument to assist in dealing with inflation.

China used silver exclusively as money for many centuries and restoring it to circulation in China would seem appropriate for China, as it aspires to recover its former glory as the richest country in the world.

CLICK HERE TO READ MORE...

Constitutional Tender Act RE-Introduced in Georgia!

The "Constitutional Tender Act" has been re-introduced in the Georgia House of Representatives by Rep. Bobby Franklin (R-43), a member of the Georgia House Banks & Banking Committee, for the 2011 Session of the Georgia Legislature. The bill number is HB 3.

It will take a strong dose of involvement from citizens across the country to get our States back on track using Constitutionally-mandated money, so we'll need YOUR help!

Every citizen TODAY needs to contact the Leaders of the Georgia House of Representatives and ask them to support this bill -- CLICK HERE to take action NOW!