Before listing the most frequently asked questions about the Constitutional Tender Act, every person with questions is encouraged to try to preface each question, when possible, with this statement: “Since the U.S. Constitution requires every state to ONLY use gold and silver coins in payments to and by the State, then… [insert question here]”. We find that this usually causes the one asking the question to phrase it a little differently.
Most of the questions below are real questions, asked by real people (usually legislators).
- Why is there a need for this type of bill?
This type of bill is needed because every single State is in violation of the U.S. Constitution without such a bill (because every State is making some other “Thing” a Tender in Payment of Debts, both to and by the State). State legislators are all required to swear an oath to uphold that Constitution, so ethically and morally they need to do whatever the Constitution requires. This type of bill is also needed because, due to the ever-widening circle of economic disaster that is affecting the citizens of every State, we MUST do something to at least begin the process of restoring sound money and a sound economy, even if (and especially if) the current federal administration refuses to do so.
Passing an item of legislation that would mandate the use of only constitutional money in State transactions (taxation and payables, contracts, etc.) would immediately begin the flow of real wealth toward that State’s treasury. This would stabilize the participating State’s economy, protect the pensions of State employees, etc. — and offer many other immediately recognizable benefits. This (the Constitution) is the only true “hedge fund” that can protect the people from the effects of inflationary paper money.
- Who is pushing the idea?
We’ve not seen anyone else “pushing” this particular idea — to strictly obey the Constitution in its “legal tender” clause — in any State. To be honest, that’s surprising; in studying the U.S. Constitution, and in light of the economic disaster that the Federal Reserve system has brought about, it should be plain to see that every State is violating the basic Law of the land — and if States would go back to obeying the Constitution in this one matter, it would likely lead to an eventual reversal of that economic disaster. It is also assumed that this bill would serve as a template for similar bills to be enacted in every State in the union.
Now, after the bill is introduced, it should be very easy to “push” it from a grassroots level. This bill would get a great amount of support in every State, and legislators would certainly hear from their constituents in support of it.
- While I favor returning our nation to a gold standard, is it a prudent move to try to do it at the State level?
Actually, the Constitutional Tender Act doesn’t return the national dollar to a “gold standard” – it just brings the State back into compliance with what the Constitution requires every State to do. Remember, for most questions about this Act, it’s good to preface each question, when possible, with this statement: “Since the U.S. Constitution requires every state to ONLY use gold and silver coins in payments to and by the State, then… [insert question here]”. The key is to figure out HOW to do this, since we are required TO do this.
- Article I, Section 8 makes it clear that the federal government has the responsibility regarding our currency. Doesn’t Article I, Section 10 refer to the fact that at that time, the federal government had established gold and silver coin as our currency and therefore the States were prohibited from adopting another thing as currency?
The national government does indeed have responsibility regarding money in America: to coin it (notice it does not give Congress the power to “emit bills of credit”, the common parlance of “print currency”, nor does it give Congress the power to bestow that power on any other entity); to regulate (literally, “make regular” – to make sure there is no deviance in the specie content of) the value of the money they have coined; to regulate (again, “make regular”) the value of foreign coins (which meant they could be used here, but they had to be of a specific amount of gold or silver content); to fix the Standard of Weights and Measures for circulating coins (grains, ounces, pounds, etc.); and to declare what the punishment should be for anyone who counterfeits what the U.S. Mint coins (which, by the way, was death — that’s how seriously they took the idea of making our money worth less).
Remember, in obeying the Constitution, we should always try to understand it as written, with the definitions it was meant to be understood by, and not by overlaying modern definitions or understandings upon it. (Can you imagine the international uproar if Congress were to “regulate the Value of foreign currency” today, according to today’s definitions?) If we don’t like what the framers meant, then they gave us the means to change it: the Amendment process.So, Article I, Section 8 declares specifically what Congress can do (Section 9 makes some specific declarations of what they can’t do); Section 10 declares specifically what the States cannot do. Included in there is that they can’t print currency (“emit bills of credit”), that they can’t coin money, AND that they can’t “make any Thing but gold and silver Coin a Tender in Payment of Debts”. Now, that’s pretty clear: if a State owes money to anyone, it can’t “make a tender” (offer to pay the debt) to those entities in anything but gold or silver coin; and if the State is owed money, the State can’t accept any tender made except if it is made in gold or silver coin.
(For the understanding of this phrase “to make something a tender in payment of debt” see the original 1828 Webster’s Dictionary – “TENDER: In law, an offer, either of money to pay a debt, or of service to be performed, in order to save a penalty or forfeiture which would be incurred by non-payment or non-performance; as the tender of rent due, or of the amount of a note or bond with interest. To constitute a legal tender, such money must be offered as the law prescribes; the offer of bank notes is not a legal tender.”)
To answer the second part of this question, Article I, Section 10 has not been amended. No matter what Congress does — and no matter whether or not they have violated the Constitution with our current monetary system — the Constitution remains very clear: No State is allowed to make or accept payments in anything but gold or silver coins. It’s not up to the federal government to determine whether or not States can now disobey that direct prohibition, any more than it’s up to the federal government to determine whether or not States can now disobey the direct prohibition on passing an ex post facto Law or granting any Title of Nobility. The Constitution says the State CANNOT do it – so the State must simply obey the Constitution, NO MATTER WHAT the federal government says or does. It is the duty of every State, and it is the duty of every State’s elected officials, in keeping with their Oath before God, to pass laws that conform to the directives of the U.S. Constitution. Again, we can preface any question we may have, when possible, with this statement: “Since the U.S. Constitution requires every state to ONLY use gold and silver coins in payments to and by the State, then… [insert question here]”. The key is to figure out HOW to do this, since we are required TO do this.
So, in passing the State Constitutional Tender Act – or any other bill that would do something similar – the State would not be responding to any failing of the national government; it would be acting in obedience to the U.S. Constitution, from which the State and federal governments derive their just powers.
- How would the gold and silver be weighed at different banks yet in a standard fashion — fair to the customer?
Banks would have no need to weigh the gold and silver; the U.S. mint would have already done that for them, just as it has done for all other forms of legal tender. This is because this bill specifies that the gold and silver being talked about is “gold and silver coins minted by the United States” which are very clear in what their weight and fineness are; and it specifies that the value of these coins for purposes of payment of State obligations is to be fixed by a standard measurement recognized worldwide (the London Fixed Price). The customer and the banks are completely protected in this bill, because the “gold and silver coins minted by the United States” required for use are already “legal tender” under 31 U.S.C. § 5112 and Pub. L. 89, 81, 79 Stat. 254, noted in the bill.
- How will the State detect manipulated or counterfeit coins?
Quite easily. Manipulated coins — ones, for example, that have been clipped, shaved, or filed to remove some of their precious-metal contents — as well as out-and-out counterfeits can be readily detected with inexpensive devices already commercially available, and commonly in use by dealers in precious metals. Moreover, most bad coins will probably be discovered by simple visual inspection alone.
- Where would the banks keep the gold and silver they receive from depositors?
The same place they always kept it in the past, before (and since) the introduction of unbacked Federal Reserve Notes: in their vaults. They still have those! Under the Constitutional Tender Act, banks and lending institutions chartered by the State, and any bank or lending institution serving as a depository for the State or any department or agency of the State, are required to simply add three types of accounts to they current FRN-based accounts they currently offer: Pre-1965 Silver accounts, Silver Eagle accounts, and Gold Eagle accounts. Those accounts are to be segregated from all other types of currency, and withdrawals must be made in the same currency as deposits, to avoid the possibility of monetization by the banks.
- Is it really constitutional and otherwise legal for a State to use and require gold and silver coins for all transactions with the State?
Absolutely. Article I, Section 8, Clause 5 of the United States Constitution grants Congress the power “To coin Money”; and Article I, Section 10, Clause 1 provides that “No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts”. Congress has authorized the coinage of silver and gold. See 31 U.S.C. §§ 5112(a)(1-7) (gold) and 5112(e) (silver). Congress has declared this coinage to be “legal tender.” See 31 U.S.C. §§ 5103 and 5112(h).
In fact, the Supreme Court has squarely held that Congress lacks any constitutional power to specify what the States shall use as “legal tender” or media of exchange in the exercise of their reserved sovereign functions. See Lane County v. Oregon, 74 U.S. (7 Wall.) 71 (1869); and Hagar v. Reclamation District No. 108, 111 U.S. 701 (1884). As the proposed legislation deals with a State’s reserved sovereign functions, it comes within these decisions.
- I have a Federal Reserve Note that says on it, “THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE”. Doesn’t that mean that everyone has to use FRNs as money?
Yes it does — unless the U.S. Constitution specifically says otherwise. Laws passed by Congress, such as legal tender laws, cannot contradict the Constitution. Article I, Section 10 states very clearly: “No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts.” Therefore, if any State accepts or pays with – in other words, “tenders” – any other “Thing” (such as Federal Reserve Notes) except gold or silver coins, it is in violation of the Constitution. It’s that simple.
Another thing to consider is that the U.S. Supreme Court itself has stated in Lane County v. Oregon, 74 US 71 (1868), “the general words ‘all debts’ were not intended to be taken in a sense absolutely literal… the clause making the United States notes a legal tender for debts has no reference to taxes imposed by state authority, but relates only to debts in the ordinary sense of the word, arising out of simple contracts or contracts by specialty, which include judgments and recognizances.” It also stated in Hagar v. Reclamation District No. 108, 111 U.S. 701 (1884), “The acts of Congress making the notes of the United States a legal tender do not apply to involuntary contributions in the nature of taxes or assessments exacted under state laws, but only to debts in the strict sense of the term; that is, to obligations founded on contracts, express or implied, for the payment of money.”
In other words, the statement on that Federal Reserve Note you have does indeed mean that everyone has to use it — except the States, since they are directed to only use gold and silver coins, and nothing else.
- Is the present supply of United States silver and gold coin sufficient for the purpose of returning Constitutional tender to my State; or will the United States Treasury have to mint more?
The present supply of United States silver and gold coin is certainly sufficient for the program the proposed statute sets up in a single State, and most likely sufficient even if all the States implemented similar programs. Critics forget that, in a free market, prices of all goods and services will automatically and correctly adjust to the amount of silver and gold coin in circulation, whatever that may be. Moreover, it is far better to allow the free market to adjust prices to the amount of money in circulation, than to empower monopolistic banks or ponderous government bureaucracies to dictate the supply of money in inevitably futile attempts to control prices.
In any event, the supply of United States silver and gold coin is not unalterably fixed. Congress has mandated that the United States Treasury should mint sufficient silver and gold “American Eagle” coins to meet public demand. See 31 U.S.C. §§ 5112(e) (silver coins) and 5112(i)(1) (gold coins). Therefore, the supply of silver and gold coin can increase step by step with the successful implementation of the proposed legislation.
- I was told there isn’t enough gold and silver available in the world to back U.S. currency, especially at the rate that the Federal Reserve is creating more dollars every day. If this is so, wouldn’t that mean that there wouldn’t be enough available to coin what would be required for State Constitutional Tender?
Those who make the claim that there isn’t enough gold or silver available for today’s purposes are, in reality, saying that since the supply of gold and silver are limited, there is not enough gold and silver to back an infinite number of printed, worthless paper fiat dollars, thus not allowing for an infinite, unaccountable governmental spending spree (like we are seeing today). They are correct. However, their desire to continue just such a system, as we now have, borders on immoral. And as mentioned above, there is ample supply of gold and silver in the United States for the purpose of this Act.
- Aren’t silver and gold coins out of date as money?
If they were, Congress would not have mandated that they be coined now in amounts sufficient to meet public demand, and that they be “legal tender.” See 31 U.S.C. §§ 5112(e) (silver coins) and 5112(i)(1) (gold coins); 5103 and 5112(h). Besides, the question of which forms of money are best suited to people’s needs should be decided through open and fair competition in the free market — and let’s not forget the fact that the U.S. Constitution mandates gold and silver coins be used by the States!
- Won’t the use of silver and gold coin as media of exchange be cumbersome?
Not necessarily. The proposed legislation provides the State with the means, through already existing state-chartered banks, for storing and exchanging silver and gold coin for Federal Reserve Notes and base-metallic coin, and those exchanges will largely take place through such familiar and convenient means as checks and debit cards. As utilization of the program becomes more widespread, methods of electronic transfers will doubtless become even more readily available, just as they already are for banking with Federal Reserve Notes.
The important point is not whether the use of silver and gold coin may be marginally inconvenient, but whether it will stabilize the monetary and banking systems, and protect the average person’s financial situation, by providing media of exchange with definite commodity values in the free market. And let’s not forget the fact that the U.S. Constitution mandates gold and silver coins be used by the States!
- What forms of silver and gold will the State allow to be used?
All types of United States legal tender silver and gold coins currently and recently minted by the United States may be used. Foreign or private silver or gold coinage or privately generated “electronic money” that pays in silver or gold may not be used, because these are not “legal tender.”
- From what sources will people and businesses obtain silver and gold coin to exchange with the State?
Initially, people and businesses will obtain silver and gold coin from State-chartered banks, the U.S. Mint, private coin dealers, or (if they are creditors of the State) from the State Treasury. As the program expands, people can expect increasingly to find silver and gold coin being used in day-to-day transactions in the free market, too.
- How will the State print the gold and silver it needs?
[This was an actual question from a State legislator.] It won’t, for several reasons. First, gold and silver aren’t printed like paper, they’re minted because they’re metals. Second, there is no need for the State to mint its own gold and silver, since the Constitutional Tender Act mandates that the State use coins that are minted by the U.S. Mint. Finally, the State couldn’t mint its own coins anyway, since Article I, Section 10 of the U.S. Constitution forbids States from coining money.
To initially obtain silver and gold coins, the State can become a United States Mint Authorized Purchaser, with the ability to get the coins at the small premium charged by the U.S. Mint.
- Why are pre-1965 silver coins valued at the current market value of the silver content of each coin, multiplied times 0.715 of the face value of each coin, instead of just using market value plus the U.S. Mint’s Authorized Purchasers’ premium as the measure, as it is for the other categories of money?
Since pre-1965 silver coins are no longer minted, they have no U.S. Mint’s Authorized Purchasers’ premium. These coins have a 90% silver composition (“coin silver”), and when they were minted they contained 0.7234 troy ounces of silver per dollar of face value. In practice, the content is universally assumed to be 0.715 ounces because of wear. Therefore, the common practice everywhere is to assign a value of silver’s market value times 0.715 of the face value of each coin. So, for pre-1965 silver coins, that IS the accepted value of each coin.
- What State taxes, fees, and other charges will be payable in United States silver and gold coin?
The intent of the proposed legislation is to make every State tax, fee, or other charge, and every payment by the State, payable in U.S. silver and gold coin, as required by Article I, Section 10 of the U.S. Constitution.
- This bill says that it would require payment of all state taxes and fees in gold or silver coin. If I were required to pay say six thousand dollars in U.S. gold coins using the face value of the coins, how much would it cost me?
You wouldn’t be paying using the face value; in fact, you wouldn’t be paying based on FRN dollar amounts at all — you would be paying based on the type and weight of the coins themselves. The original bill introduced in Georgia, for example, reads in 50-37-4, “Upon the date of effectiveness of this Act, all obligations owed by and to the state shall be converted from denomination in Federal Reserve Accounting Unit Dollars to denomination in gold and silver coins… the conversion value of each coin used as payment of obligations by and to the state shall not be determined by the nominal face value of each coin itself,” but as the bill goes on to explain, by the value determined by the market and the U.S. Mint itself.
To put it simply, you wouldn’t receive a tax bill of “six thousand dollars” — you might receive a tax bill of something like “one 1-ounce Gold Eagle, one 1/4-ounce Gold Eagle, fifteen pre-1965 Half-Dollars, and one pre-1965 Quarter.” However, the State is likely to simplify tax bills to fewer types of coins, for convenience sake when paying by check (as you pay with now); as banks adapt to quick and easy conversion between these legal tender currencies (allowing them to pay in fractional amounts), such things as tax bills are likely to read “$266.77 face value Gold Eagles” or “5.34 1-ounce Gold Eagles”.
- I run a private company that has contracts with the State. How will my company be paid?
As required by the Constitution, every company would be required to be paid in silver and gold coin (usually with “checkbook money,” that is, transactions conducted electronically, just like it’s done with Federal Reserve Notes now). This will be easy enough to do when writing new contracts: simply denominate payments in specific amounts of gold and silver coin.
For existing contracts denominated in FRNs, the Constitutional Tender Act provides for the conversion of those payments from FRNs to gold and silver coin through the current “London Fixing Price” of the content of each coin on “conversion day” plus the U.S. Mint-established premium, and not by the “face value” of each coin. For example, if the state needed to convert an old contractual debt of $100,000 FRN owed to a bridge-building company, conversion to gold & silver would be based on the current market value on “conversion day” plus the U.S. Mint premium, and so could be converted to a new contract with that company for the resulting denominations of coins: If the London Fixing Price on “conversion day” was $1,124.57/oz. gold and $17.38/oz. silver, the new contract could be written for 86 1-ounce Gold Eagles, One 1/4-ounce Gold Eagle, One pre-1965 Half-Dollar, and One pre-1965 Quarter; alternatively, it could be converted to fractional amounts, such as “$4,446.14 face value Gold Eagles” or “88.93 1-ounce Gold Eagles”. (To eliminate the need for multiple and/or repeated conversions over time, all old FRN-based contracts would be converted on a date specified in the Act to gold & silver coin-based contracts, and all subsequent contracts would be based on the type and weight of gold and silver coins.)
- How would I or my company pay my State taxes?
As required by the Constitution, every individual and company would be required to pay the State in silver and gold coin (again, usually with “checkbook money”). Again, this will be easy enough to do when the State begins sending new tax bills denominated in specific amounts of gold and silver coin (which it will be required to start doing by the date specified following passage of the Act).
For existing tax liabilities denominated in FRNs, the Constitutional Tender Act once again provides for the conversion of those payments from FRNs to gold and silver coin through the current “London Fixing Price” of the content of each coin, and not by the “face value” of each coin. For example, if you or your company had an existing (pre-Act) tax liability of $1,000 FRN owed to the State, conversion to gold & silver would be based on the current market value, and so could be converted to an amount owed to the State for the resulting denominations of coins: If the London Fixing Price on “conversion day” was $1,124.57/oz. gold and $17.38/oz. silver, the new tax liability could be 1 1/2-ounce Gold Eagle, 1 1/4-ounce Gold Eagle, 1 Silver Eagle, 2 pre-1965 Half-Dollars, and 2 pre-1965 Dimes; alternatively, it could be converted to fractional amounts, such as “$57.54 face value Silver Eagles” or “57.54 1-ounce Silver Eagles”. (Again, to eliminate the need for multiple and/or repeated conversions over time, all old FRN-based tax liabilities would be converted on a date specified in the Act to gold & silver coin-based liabilities, and all subsequent tax bills would be based on the type and weight of gold and silver coins.)
- If I own a bank, what exactly would be the mechanics of making money from account holders with gold and silver coins on deposit at my bank? With FRNs, I can make loans based on fractional reserve lending and get back in loan payments more than I loaned out. How would that work with gold and silver coins?
You are correct that, in many senses, banks would have to change the way they do business. However, with the high rates of bank failures across the nation in recent years, banks need to change the way they do business. And it is true, it would not be as ridiculously easy to loan out money willy-nilly as it is now.
This requires an understanding of what interest is and how it works. Interest is, properly, the future cost of present money. This has always been its definition since money first came into use. Interest did not suddenly appear with fractional reserve banking; it’s always been present, even when we used gold and silver as money. Even when we were using pelts and tobacco leaves as money, interest was a part of the deal.Here’s the main difference: Money must be saved before it can be lent out (not true in a fractional-reserve system). Therefore, lenders must be more cautious when choosing to whom they lend and at what interest rates. Preferably, they would loan money to whomever they reasonably suspected would pay it back with interest! The borrowers would have to be productive in order to be able to pay the loan back.
- Will the requirement in the Patriot Act, that some purchases of silver or gold from dealers be reported to government agencies, have an adverse effect on what this bill is proposing to do?
No. Reporting requirements are designed to expose tax cheats, money launderers, and clandestine flows of funds for illegal purposes. The proposed legislation addresses legitimate transactions in the public domain. No one dealing with the State, with the U.S. Mint, or with legitimate dealers in precious metals for lawful purposes should worry. This is not to say that the Patriot Act and similar legislation raise no concerns about privacy. Those concerns, however, apply equally to reporting requirements already in place that affect banks and similar financial institutions. Reporting requirements should have no disproportionate effect on the legal use of silver and gold coins, especially where the ultimate transactions involve the State.
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