SC Joins Growing List of States Contemplating The Restoration Of Gold And Silver As Legal Tender

P. Gardner Goldsmith | December 18, 2019
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Another state has joined the battle to free people from the oppression of the Federal Reserve.

The New American’s Joe Wolverton II explains that a few weeks ago in SC:

State Representative Stewart O. Jones submitted legislation that would restore gold and silver to their status as legal tender in his state.

This means that South Carolina joins a handful of other states that either have passed or are close to passing, statutes to return gold and silver to the market for legal tender and,  one that opens a window to an understanding of US history, the Constitution, and the meaning of inflation.

Simply put, the paper Federal Reserve Notes states accept as payment for “debts” (i.e. taxation, not really a debt) or use to pay state debt are prohibited by the Constitution. Article One, Section Ten states this quite explicitly:

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

States cannot print or coin their own form of currency, but private citizens can, and those citizens can even pay “debts” to the state, as long as the coinage is either silver or gold, also known as “specie”.

Additionally, Article One, Section Eight, Clause Five states Congress has the power “ (t)o coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures…

That means Congress can coin a form of money, not the only form of money, and regulate the value of the money it coins – reinforcing the prohibition against printed paper money and against what is called “fiat” currency, or money that is forced on the public by statute as the only currency they can use.

But, despite these clear constitutional rules, various politicians throughout US history have, evidently, skirted the law of the Constitution and the laws of economics when it comes to monetary policy.

The first on a national level was Abe Lincoln.

As Philip W. Newcomer observes for the Foundation for Economic Education:

…President Lincoln signed the first Legal Tender Act on February 25, 1862. This act authorized the printing of $150,000,000 in United States notes, that amount being increased by later legislation to $450,000,000. These notes were declared to be “lawful money and legal tender in payment of all debts, public and private, within the United States, except duties on imports and interest on the public debt.”[2] Because they were printed in green ink, the United States notes quickly became known as greenbacks.

And, of course, anyone with the capacity to read could see that Lincoln’s move was wildly unconstitutional. In fact, since the Constitution forbade states from accepting any payment for debts except in coin, many state governments would not accept the paper “greenbacks”. This, Newcomer explains, led to a titanic Supreme Court ruling in 1868:

In Lane County v. Oregon, 74 U.S. 71 (1868), the Supreme Court placed a restriction upon the application of the Legal Tender Acts, holding that states may require payment of taxes to be made in specie rather than in United States notes.

Less than a year later, the Supreme Court ruled on the Lincoln Administration’s “Greenback” move itself…

In 1869, Hepburn v. Griswold came before the Supreme Court. On February 7, 1870, the Court, by a four to three vote, upheld the earlier decision of the Court of Errors of Kentucky.[7] In so holding, the Court clearly rejected the constitutionality of the Congressional legal tender legislation. Ironically, the majority opinion was written by Chief Justice Salmon P. Chase, who, as Lincoln’s Secretary of the Treasury, originally endorsed the first Legal Tender Act.

Indeed, Newcomer observes that Chief Justice “Chase found no expressed Congressional legal tender power within the text of the Constitution,” and he went further, acknowledging the inflationary tendencies of fiat currency and noting that any government mandate to use such currency – any mandate forbidding a free market in money choices – actually broke numerous provisions of the Bill of Rights.

By requiring the repayment of debts in a depreciated medium of exchange, the Legal Tender Acts impaired the obligation of contracts. Creditors, therefore, were denied property by Congress without due process of law. Chase declared the legislation to be nothing less than a violation of the due process clause of the Fifth Amendment.

Unfortunately for the Constitution and for our wallets, the very day that the Hepburn v Griswold decision was released, President Grant announced the names of two nominees to fill vacancies on the Supreme Court, and a year later, with Knox v. Lee (1871) the first of two new legal tender cases, the majority reversed the earlier decision.

Which leaves us where we are today. Since Lincoln’s time, the feds have claimed the sole power to issue “the” money of the US and prohibited any that private people might issue themselves. Since this eliminates choice and competition in a real market, and allows the government to inflate the amount of currency (reducing the buying power of every unit), various political factions have fought over whether the money will be paper, paper supposedly “tied” to a metal, or paper issued by a bank given the monopoly to issue it (i.e. the Federal Reserve).

But the arguing is beside the central point.

Whether the US government issues the currency itself, a-la Lincoln’s “Greenback”, or the government creates a monopoly as it did with the federal Reserve Act of 1913, there is no enumerated power in the Constitution giving the politicians the power to monopolize the money we, supposedly free people, can use. The Constitution also prohibits states from accepting any payments except in coined currency.

So the potential that SC could join the ranks of states allowing gold or silver legal tender is not just a thumb in the eye of the feds, pushing against federal economic tyranny going back to the 1800s, it’s an acknowledgment of what the Constitution itself.

It’s great to see some folks on the state level truly “get it”, not only about economics and inflation, but about the supposed “rule book” under which the US is supposed to operate.