This medium of exchange should satisfy certain properties: it should be durable,
that is to say, it does not wear out easily; it should be portable, that is,
easily carried; it should be divisible into units usable for every-day
transactions; it should be recognizable and uniform, so that one unit of money
has the same properties as every other unit; it should be scarce, in the
economic sense, so that the extant supply does not satisfy the wants of everyone
demanding it; it should be stable, so that the value of its purchasing power
does not fluctuate wildly; and it should be reproducible, so that enough units
of money can be created to satisfy the needs of exchange.
Over millennia of human history, gold and silver have been the two metals that
have most often satisfied these conditions, survived the market process, and
gained the trust of billions of people. Gold and silver are difficult to
counterfeit, a property which ensures they will always be accepted in commerce.
It is precisely for this reason that gold and silver are anathema to governments.
A supply of gold and silver that is limited in supply by nature cannot be
inflated, and thus serves as a check on the growth of government. Without the
ability to inflate the currency, governments find themselves constrained in
their actions, unable to carry on wars of aggression or to appease their
overtaxed citizens with bread and circuses.
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 US 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.
On the desk in my office I have a sign that says: "Don't steal – the government
hates competition." Indeed, any power a government arrogates to itself, it is
loathe to give back to the people. Just as we have gone from a constitutionally-instituted
national defense consisting of a limited army and navy bolstered by militias and
letters of marque and reprisal, we have moved from a system of competing
currencies to a government-instituted banking cartel that monopolizes the
issuance of currency. In order to reintroduce a system of competing currencies,
there are three steps that must be taken to produce a legal climate favorable to
The first step consists of eliminating legal tender laws. Article I Section 10
of the Constitution forbids the States from making anything but gold and silver
a legal tender in payment of debts. States are not required to enact legal
tender laws, but should they choose to, the only acceptable legal tender is gold
and silver, the two precious metals that individuals throughout history and
across cultures have used as currency. However, there is nothing in the
Constitution that grants the Congress the power to enact legal tender laws. We,
the Congress, have the power to coin money, regulate the value thereof, and of
foreign coin, but not to declare a legal tender. Yet, there is a section of US
Code, 31 USC 5103, that purports to establish US coins and currency, including
Federal Reserve notes, as legal tender.
Historically, legal tender laws have been used by governments to force their
citizens to accept debased and devalued currency. Gresham's Law describes this
phenomenon, which can be summed up in one phrase: bad money drives out good
money. An emperor, a king, or a dictator might mint coins with half an ounce of
gold and force merchants, under pain of death, to accept them as though they
contained one ounce of gold. Each ounce of the king's gold could now be minted
into two coins instead of one, so the king now had twice as much "money" to
spend on building castles and raising armies. As these legally overvalued coins
circulated, the coins containing the full ounce of gold would be pulled out of
circulation and hoarded. We saw this same phenomenon happen in the mid-1960s
when the US government began to mint subsidiary coinage out of copper and nickel
rather than silver. The copper and nickel coins were legally overvalued, the
silver coins undervalued in relation, and silver coins vanished from