In contrast to attempts to put a stop to the Fed at the national level, a paper that William Greene presented at the Mises Institute’s “Austrian Scholars Conference” proposes an alternative approach to ending the Federal Reserve’s monopoly on money. The “Constitutional Tender Act” is a bill template that can be introduced in every State legislature in the nation. Passage would return each of them to the Constitution’s “legal tender” provisions of Article I, Section 10:

“No State Shall…make any Thing but gold and silver Coin a Tender in Payment of Debts”

11 thoughts on “The Paper: End the Fed from the Bottom Up

  1. Again, @mrbwbridges, I’m not exactly sure what your point is here, at least in relation to the Constitutional Tender Act. The ConTen Act isn’t calling for us to have “dollars backed by precious metal” — it’s a bill that would bring each State back into compliance with the actual demands of the U.S. Constitution, in Article I, Section 10, Clause 1: “No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts”.

    Again, while your points regarding fiat dollars and foreign governments may or may not be valid, the Constitution is crystal clear on the requirement for States to use ONLY gold and silver coins as monetary units. The value of returning to Constitutional obedience in this area is discussed in the paper above, in this blog post.

    Thank you!

  2. A private entity controls the quantity of dollars flowing into the market thereby effecting the value of a dollar. A private entity controls the quantity of precious metals flowing into the market thereby effecting the value of a dollar if it were backed by precious metals. End result is the same sir, it is you suffering the “misperception”.

    This discussion is futile. The States of Guernsey have been using government issued fiat currency for 100, 150 years now and they do not suffer the woes of inflation or deflation or volatility of a precious metals market.

  3. Lonny Eachus

    I should add that in that chart, during the “flat” period (1665-1913), the little “blips” you see are when government borrowed money during wartime. Those are the events that are labeled. You can see quite clearly that after the wars, when government stopped borrowing, prices went back down (i.e., dollar value went back up) to their normal levels.

    But you can also clearly see that increasingly, as the dollar was gradually separated from a standard, how after a war the dollar never returned to its previous levels as it has before.

  4. Lonny Eachus

    @mrbwbridges To add to Bill Greene’s comments:

    You seem to be suffering from a common misperconception about a gold (or other hard money) standard. There are two primary issues here:

    A gold standard is NOT an attempt by government to “control the price of gold”. On the contrary: what a hard money standard does is MODERATE the VALUE of DOLLARS. This may seem like semantic trickery to you but in fact there are two critical differences between this and what you said.

    First, and contributing greatly to this misunderstanding, is the fact that many people do not understand the difference between economic VALUE, and PRICE. They are two very different things.

    Second, is that it is dollars being controlled, not gold. This has nothing to do with “controlling the value of precious metals”. Economically, those don’t change (or change very slowly). What changes is the PRICE in DOLLARS. It is the dollar that is changing in value, not the metal. This is so because dollars are allowed to float in value, but a certain amount of gold is still, on average and over time, going to be worth the same amount of platinum or tin or apples. This is of course barring any kind of catastrophic events like gigantic mine cave-ins or the like. Economically, the VALUE of gold barely changes. It is the dollar (and other fiat currencies) that change. That means the PRICE of gold, in dollars, changes.

    Price and value are sometimes related, and sometimes not. In a healthy market, they are and should be attached to one another. When they become detached is when we have problems. Examples are the housing bubble and the current market bubble surrounding Bitcoin.

    Our current fiat dollar is probably the canonical example of price detached from value. This is probably the single biggest cause of inflation, and swings in currency exchange rates, among other things (mostly bad).

    What this all means is that tying the dollar to a solid, valuable commodity like gold that does not change (much) in VALUE over time, is a stabilizer for currency. It prevents the government + Fed (and banks, and Wall Street) from inflating (and thereby devaluing) the dollar.

    Have a look at the following chart:

    http://s10.postimg.org/qpdmicyg7/prices_annotated.png

    When we had a “hard money” standard (gold and silver), the VALUE of the U.S. dollar, (and what historians use as “proxies” for the dollar before U.S. dollars actually existed), measured in the PRICES of commodities, stayed essentially flat for almost 300 years. Then came the events shown by the arrows. In graphing terms these are called inflection points (where the slope of the line changes):

    1913 Creation of the Fed.

    1934 Abandonment of the “internal” U.S. gold standard. (The Bretton-Woods system, mandating that dollars were still measured in gold for international trade, still remained).

    1971 Nixon nixes the Bretton-Woods system, creating a fully-floating “fiat” dollar.

    See how each step we took resulted in consistent (and accelerated) devaluation of the dollar? A current U.S. dollar is worth only about 4¢ (perhaps even less) of a 1913 dollar (in ECONOMIC VALUE: what you can buy with it).

    The mainstream economists behind government, banks and Wall Street want you to think this inflation is good, because it benefits THEM. But it robs YOU of your hard-earned money and savings. Explaining why this is so would take up far too much space.

    A hard-money standard prevents them from inflating the dollar willy-nilly for their benefit, at your expense.

  5. @mrbwbridges – I’m not exactly sure what you’re asking here, at least in relation to the Constitutional Tender Act. The ConTen Act isn’t calling for us to “tie our currency to gold and silver” — it’s a bill that would bring each State back into compliance with the actual demands of the U.S. Constitution, in Article I, Section 10, Clause 1: “No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts”.

    Again, while your points regarding fiat dollars and foreign governments may or may not be valid, the Constitution is crystal clear on the requirement for States to use ONLY gold and silver coins as monetary units. The value of returning to Constitutional obedience in this area is discussed in the paper above, in this blog post.

    Thank you!

  6. Robert Fallin: While your questions are excellent, and ought to be answered by someone somewhere, they aren’t really relevant to the Constitutional Tender Act, which is a *State-level* strategy, rather than a federal-level strategy, to End the Fed. I recommend reading the paper above on this page, and the FAQ section at http://tender.tenthamendmentcenter.com/2013/10/26/frequently-asked-questions/ . Thank you! 🙂

  7. Why would we want to tie our currency to gold and silver? The world market controls the price of precious metals, not Congress, nor can it ever control the price or value. What Congress could do is control the value of a Treasury issued fiat dollars without interest attached.

    The problem with the Federal Reserve cabal is private banks have total control over quantity of dollars created and attach interest to each dollar as a loan. Under a gold or silver standard currency, banks and foreign govermments could control the value of our dollar.

  8. Robert Fallin

    Why has the “Legal Tender Act” presently in existence not by stuck down by the Supreme Court. Why has there not be a RICO suit against the Federal Reserve, which would freeze the assets of all member banks, preventing them from using ill-gotten gains to defend themselves? Answer these questions in a satisfactory manner and I will be happy to sign your petition.

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