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Tuesday, June 30, 2009

Ron Paul and Currency Competition Part 2

Edwin Vieira.

First, Congress is causing a standard silver coin (the “Liberty dollar”) and a set of gold coins (“American Eagles” of various denominations) to be minted in amounts sufficient to meet public demand. See 31 U.S.C. § 5112(e and i).This is not yet constitutional “free coinage”, but (as the saying goes) it is “close enough for government work” at the present time.

Second, these coins are as much legal media of exchange, current money, and “legal tender” as are Federal Reserve Notes and the Treasury’s base-metallic coins. See 31 U.S.C. §§ 5101, 5103, 5112(h).

Third, unlike Federal Reserve Notes and base-metallic coins, “Liberty” and “Eagle” coins are economically sound, and (leaving aside their present inaccurate denominations) basically constitutional, currencies. Certainly they are far better on both counts than Federal Reserve Notes and base-metallic coins.

Fourth, any common American may enter into a “gold-clause contract” (payable exclusively in gold), or a “silver-clause contract” (payable exclusively in silver) that will be enforceable in the courts. See 31 U.S.C. § 5118(d)(2). Indeed, the only party in the United States that appears to be barred by statute from making a “gold-clause contract” or a “silver-clause contract” that is payable in coin and enforceable in those terms is the General Government. See 31 U.S.C. § 5118(b and c). But this can be easily corrected.

Now, more and more people need to be educated and encouraged to use silver and gold coin as their common media of exchange in “silver-clause” and “gold-clause” contracts—not necessarily to the immediate exclusion of Federal Reserve Notes in all transactions, but in those areas and to the degree that the free market determines is best for society as a whole.


This is the most prudent, if not the only realistic, route for reform, because no viable plan exists for a direct, “top-down” replacement of Federal Reserve Notes and base-metallic coinage with a currency of silver and gold (or any other currency, for that matter). The free market sets daily prices for various silver and gold coins in Federal Reserve Notes. But as soon as silver and gold coins became common media of exchange, in direct competition with Federal Reserve Notes for that purpose, their values will increase, and the values of Federal Reserve Notes will decrease, to some unpredictable degrees. The only way to determine how those relative values should change is to allow the free market to change them, on a day-to-day and even hour-to-hour basis, without political interference of any kind. In particular—

Silver and gold coin must be re-established as currencies entirely separate from and independent of Federal Reserve Notes.

The free market must be allowed to set the prices of all goods and services in silver and gold, as well as in Federal Reserve Notes, simultaneously.

Common Americans must be allowed to choose and to use whichever currency they desire for specific transactions.

The Federal Reserve System must be entirely separated from the General Government.
Governments at the National, State, and Local levels must gradually phase out Federal Reserve Notes as their media of taxation and of payments to public creditors, and phase in silver and gold coin for those purposes.

The free market must establish the rates at which silver and gold coins exchange for Federal Reserve Notes (if anyone who holds silver and gold remains willing to trade them for any amounts of such notes).

New banks or other financial institutions dealing in silver and gold accounts, with their demand-deposits on a basis other than fractional reserves, should be created. And,

If the private banks in the Federal Reserve System can find a way to make Federal Reserve Notes honestly redeemable in silver, or gold, or both, at whatever rates are economically viable, they should be encouraged to do so.

In this way, an economically rational silver-and-gold price structure will quickly evolve, common people can disconnect their financial destinies from the Federal Reserve System in a gradual and ordered fashion, and separation of bank and state will finally be accomplished. Whether, as the result of this process, all, or some, or only a few of the banks in the Federal Reserve System can continue in business is for the free market to decide.

In principle, a program of competing currencies could be set in motion from the District of Columbia, if Congress and the White House were populated with patriots. Such is the scenario employed in CRA$HMAKER. Describing it in prose is easier than doing it in the halls of Congress, however. Even if Ron Paul were elected President in 2008, he could count on vanishingly few co-thinkers in Congress to help him push through such a reform. (Of course, candidate Paul should campaign on the ever-optimistic platform that he will propose and fight for such legislation if elected.)

For the foreseeable future, the better strategy is to promote competing currencies in each of the States.

First, it is perfectly constitutional for the States to use whatever constitutional currencies they desire for their own fiscal purposes, as the Supreme Court long ago recognized in Lane County v. Oregon, 74 U.S. (7 Wallace) 71 (1869). And the two currencies that the Constitution itself explicitly mandates for the States are silver and gold coin: “No State shall * * * make any Thing but gold and silver Coin a Tender in Payment of Debts.” Article I, § 10, cl. 1.
Second, a “bottom-up” approach can possibly work right now. Some State legislatures contain patriots who understand the problems the Federal Reserve System poses. And other State legislators will be compelled by their desperate and angry constituents to take appropriate remedial action as the monetary and banking systems go belly-up.
Third, an approach based on reform in individual States, one by one, is the most prudent alternative. Any attempt to create competition between silver and gold coin and Federal Reserve Notes as America’s media of exchange is an experiment. As such, it should be undertaken with circumspection, to minimize the risk. Working one State at a time has two distinct advantages: (i) It does not put all the eggs of monetary reconstruction into one basket. And (ii) it allows for refinement of the process, from State to State, as experience dictates.
If this is what needs to be done, who is capable of doing it? Ron Paul, and only Ron Paul. Ron Paul is the only candidate talking sense—or even talking at all—about this matter. He is the only candidate with credibility on this subject; for he alone has been warning for years, explicitly and consistently, about the structural weaknesses in the monetary and banking systems. The other candidates would not be even marginally believable if they started talking about the issue. They have never said anything before, which suggests that they know nothing about it, and probably care less. And they are part and parcel of the Establishment that created the problem, and intends to perpetuate it in some other form, which suggests that they would do nothing effective to correct it, but likely would exacerbate it. So the choice is as stark as it is simple: Ron Paul as President, or monetary and banking crises leading to a National police state. If this Presidential campaign is made to turn on monetary and banking reform, while the monetary and banking systems are self-destructing before Americans’ very eyes, only Ron Paul has a chance of winning. Only Ron Paul will deserve to win. And only if Ron Paul wins can America be saved.

That being so, candidate Paul should go through the States explaining the dangers in the monetary and banking systems, and promoting radical reform before it is too late. He should tell the voters what must be done, how it can be done, and why he is the only person who will do it—and then wait to hear what the Manchurian Candidates opposing him, in both of the “two” major political parties, will dare to say in response.
Continued at Source

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