Daily Archives: January 16, 2011

States beginning to assert their money power

Bills have recently been introduced in several states to try to address the money problem. In an article that appeared in Financialsense.com, Robert Kientz describes actions that are occurring in several states. It is unclear how much support the various bills might have, or what their chances of passage might be, but Kientz implies that the state of Virginia has already taken official action to at least study the matter of using alternative payment media other than Federal Reserve currency. He says:

Virginia announced yesterday that the state would commission a study of alternative currencies including gold and silver in House Joint Resolution No. 557. A selected quote from Resolution 557:

WHEREAS, the Supreme Court of the United States in Lane County v. Oregon, 74 U.S. (7 Wallace) 71, 76-78 (1869), and Hagar v. Reclamation District No. 108, 111 U.S. 701, 706 (1884), has ruled that the States may adopt whatever currency they desire for the purposes of performing their sovereign governmental functions, even to the extent of adopting gold and silver coin for those purposes while refusing to employ a currency not redeemable in gold or silver coin that Congress has designated “legal tender”;

Such actions are a hopeful sign that the money power, and the political power that goes along with it, are devolving away from Wall Street and Washington and back to our states and communities. The states have a powerful weapon in the form of the United States Constitution, which declares that, no state shall make any thing but gold and silver Coin a Tender in Payment of Debts.

Of the two metals, I much prefer silver as the value standard, for several reasons. My main objection to gold is that it is closely held by a few banks and governments that are able to manipulate its market price, and thus manipulate the economy if gold were to play a major monetary role. Silver is much more abundant and widely held, and while present market mechanisms enable a few entities to manipulate its market price, I think parallel  mechanisms can be put into place that would assure a freer market giving silver a more stable value. Ideally, however, trading entities will ultimately adopt an objective value measure using a composite commodity standard composed of a “market basket” of basic commodities.

Keynes was not wrong in calling gold “a barbarous relic,” but that’s not the whole story. We must also recognize that central banks, legal tender laws, and credit monopolies are relics even more barbarous than gold. The separation of money and state must ultimately be gained in order to have a truly free and harmonious society.