Reclaim.org Takes A Closer Look At The Montana Sound Money Bill
The smart minds over on Reclaim.org have spelled out some detailed information relating to the Montana Sound Money Bill. (HB 639)
The purpose of the Montana Sound Money Bill HB 639 is to begin to reassert Article I Section 10 of the United States Constitution:
“No State shall . .. . coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts”
The Gov’ment has done a great job on having us think backwards. The Federal Reserve Note (FRN) may be legal tender, but it has NEVER been legally named a dollar. You will not find any law anywhere that states this. The FRN may be denominated in dollars but this makes it no more a dollar than calling a chicken a duck makes it a fly south in the winter. Legal Tender Laws make us use something for money even if something else may be better. It is a very important point that Legal Tender Laws are always found where Fiat Money is being used. In other words, whenever governments have DECLARED that this and only this can be used as money, they have had to back it up with penalties for those who may want to use something else.
A critic of the bill being considered in the Montana Legislature said, “Gold, and even silver, are in increasingly short supply, so how would the billions of dollars required to run the state of Montana be carried out in precious metals? Obviously, they’d have to issue some form of paper scrip in its stead.” One way to accomplish this goal is to use American Eagle’s in place of Federal Reserve Notes. This could be the answer Montana and others are looking for, and the best part is it would not require any new laws be pasted because American Eagle’s are Legal Tender. Allow me to explain.
If there were a need for “paper script” so that Montana could conduct business electronically, there is a way to set that up as I will explain. First, Montana could simply mandate that money be backed by the American Eagle (which is 1 Troy once of silver). This medium of exchange could serve as new standard for inflation proof money within Montana or any other local community. Soon any store owner could price his/her product/service in American Eagle coin, all the business owner needs to do is divide the retail price in Federal Reserve Notes (FRN) by a ‘Base Rate’ to get the price in American Eagle coin (or Montana silver backed script).
The store owner could make his “Base Rate” any amount he chooses. Should the value of silver go up against the FRN then the “Base” would also move up. The inverse is also true. No matter what happens, the consumer would always maintain his purchasing power as there is no inflation stealing his money. Obviously, the consumer will shop where he gets a better value for his money.
If you have two flower shops accepting American Eagles, one uses a base of 13 and the other a base of 15, where do you think the consumer will shop? The base of 15 gives the consumer more purchasing power, so in time the market place will find equilibrium not by central planing but rather by the market itself.
If the state of Montana used American Eagles (already legal tender) as it’s standard for money–-no new laws would need to be passed. The need for “paper script” is an easy problem to solve, a simple checking account issued from a bank which ONLY allows Silver American Eagles to be deposited is the obvious answer. This system could be legally set-up today and implemented tomorrow without a single new law being written.
The bill being considered in the Montana Legislature is attempting to make uncoined silver or gold bullion legal tender. Personally, I love the bold initiative, but sadly the critics are correct is saying there are practical problems with this idea. I suspect the initiative will fail, but if it does fails, why not implement American Eagle strategy I outlined above? If they did, Montana would set an example of sound money for the rest of the world to follow. If not Montana, then perhaps another state. The ideal place would be Nevada, after all that is the Silver State.
Source: http://unspy.wordpress.com/2009/03/23/montana-bill/
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Comment by Bill Greene on 25 March 2009:
Great analysis. Here’s how we answer a couple of those questions regarding HB 430 in Georgia, the “Constitutional Tender Act” –
“Is the present supply of United States silver and gold coin sufficient for the purpose of returning Constitutional tender to Georgia and other states; 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 Georgia, 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.
http://www.ConstitutionalTender.com/