cross-posted from the Sound Money Center
In early 2009, I was teaching a course on American Government at Gainesville State College here in Georgia. As I was going over with my students the powers prohibited of the States in Article I, Section 10 of the U.S. Constitution, we hit upon this one: “No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts”.
A student in the back of the room raised his hand, and asked, “What does Georgia use for paying its debts – money owed to the State, and by the State?”
“Federal Reserve Notes,” I replied.
“Not gold or silver coins?” he asked.
“No, not gold or silver coins. And no, Federal Reserve Notes are not backed by gold or silver coins, either.”
He raised his hand again. “Which States DO use gold and silver coins for paying State debts?”
“None of them,” I answered. “They all use Federal Reserve Notes, which were declared to be ‘legal tender’ by the U.S. Congress.”
“When did we pass a Constitutional Amendment to change this requirement in Article I, Section 10?” He had a puzzled look on his face.
My answer seemed to puzzle him even more. “We didn’t.”
It was quiet in the classroom at that point. I waited. I didn’t have to wait for long.
“How have the States gotten away with that?”
I didn’t have an answer to that question. And it bothered me. So, I went and did some research on it – and what I found confirmed that student’s concern: the Constitution makes it clear that “No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts”. This means that no State can make something besides gold or silver a “tender in payment” (which means they cannot make something else an “offer as payment”) for any debts, which would include debts owed by and to the State. However, EVERY State in the United States of America HAS made some other “Thing” an offer as payment – they have by law declared that they will accept, and pay out, Federal Reserve Notes for any debts owed by or to them.
Therefore, every State is in violation of Article I, Section 10 of the U.S. Constitution.
I decided that someone had to do something about that. So I researched different proposals and bills that had been devised by sound money advocates in the past, sat down, and wrote out the draft of a bill that would eventually become the Constitutional Tender Act.
I contacted Georgia Rep. Bobby Franklin, whom I knew to be a strong Constitutionalist (and whom I came to be friends with), and asked him if he’d be interested in introducing such a bill. Bobby jumped at the chance, and after working with me to get the language squared away to pass legislative muster, he introduced it as HB 430.
(On the Senate side, Sen. David Shafer introduced half of the Constitutional Tender Act, directing banks to allow customers to establish accounts using gold and silver coin, as SB 416, the “Sound Money In Banking Act”.)
The last week of March 2009, testimony was given at the Georgia House combined Financial Institutions & Services Subcommittee / Regulations & Oversight Subcommittee hearing on HB 430, the “Constitutional Tender Act”. Testimony in favor of the bill was given by Rep. Franklin; myself; members of our “sound money crew,” Aaron Krowne, Sean Mangieri, and Jesse Bickel; and legendary monetary expert Franklin Sanders.
You can view the testimonies here:
The witnesses testified and explained to the Members of these Banks and Banking Committee subcommittees the absolute requirement of the U.S. Constitution for the State of Georgia to ONLY use gold and silver coins in its transactions, and a dialogue was begun in the best MEANS by which this should be done. The bureaucrats and banking lobbyists who came out to testify in opposition were concerned with cost, efficiency, and change, but it was apparent that they had not read the bill thoroughly or with an open mind, and especially had not read the FAQ on the ConstitutionalTender.com website.
Our experts and Rep. Franklin explained to the Members the need to shift away from our fiat money system, and into a sound money system. The hyperinflationary end of various countries’ fiat money was explained. The fallacies of fractional reserve banking was shown, and how the system robs the inherent wealth of the American citizens. The likely complete devaluation of Federal Reserve Notes, and thus the need for Georgia to protect its citizens via returning to Constitutional Tender, was also explained.
Testimony in opposition to the bill was given by a state bureaucrat and two banking industry lobbyists.Dan Ebersole, Director of the Georgia Office of Treasury and Fiscal Services, worried that the State would have to start storing physical gold and silver right there in their office, and he’d have to have a bodyguard wherever he went. The question, of course, is why would it have to store the gold physically, if we are already dictating that depositary banks will have to have the appropriate gold/silver backed accounts? Do they have to store physical Federal Reserve Notes right there in their office, too?
Mr. Ebersole also worried that he would have a hard time investing the State’s money if we went back to using Constitutional tender. What he doesn’t seem to understand is that, as the value of FRNs drops like a base-metal balloon, all that fiat money he has so “wisely” invested will be GONE — and the people of this State will want to know just WHO is responsible.
The two banking industry lobbyists, Joe Brannen of the Georgia Bankers Association and Steven D. Bridgesof the Community Bankers Association of Georgia, were worried that they’d have to change the way they do business. They might have to convert FRNs to real money; they might have to store gold and silver in vaults; they might have to hire bank security; they might have to initiate electronic transactions…
In other words, as one of our folks remarked, it was largely a puerile dodge, where they pretended like we were demanding they go back to pre-19th century money handling, where there aren’t even banks and so every transaction consists of gold coin being moved around. They then made a straw man out of that. In reality, we are merely establishing gold coin as a standard backing for electronic money in the manner of the current banking system.
Overall, our folks — simply citizens of the Sovereign State of Georgia, not bureaucratic wonks or paid lobbyists — made stunningly adept & forceful presentations. Yes, there was at least one legislator that left in a red-faced huff, remarking that he wasn’t going to “waste his time” listening to this stuff; but it was just as clear that many eyes were opened that day, and it seems that several legislators were actually swayed by the sound argumentation.
The bill, however, died that session, without getting a hearing in the full subcommittee.
But that didn’t sway us. Bobby introduced a new version, HB 3, in the next House session (the “Sound Money in Banking Act” was also re-introduced in the Senate, as SB 116). And though we pushed hard for another hearing, we were hearing back that the chairman of the subcommittee to which it was assigned was not in favor of holding one.
But in a quick change of events, the chairman decided he would allow a hearing – and quickly. So we got the word out, and the first week of March of this year, a hearing was held in the Georgia House Financial Institutions & Services Subcommittee (a Banks & Banking Committee subcommittee) on HB 3, the Constitutional Tender Act.
Full testimony in favor of the bill was given by Rep. Franklin & myself. Other citizens came out and voiced their support for the bill as well. There was no testimony given in opposition to the bill. You can view our testimony at:
The legislators present (only 5 of 13 members showed) asked a good number of questions, many of which were already answered in the handouts they had been given in advance. Rep. Franklin and I explained to the Members the need to return to fidelity to the Constitution quickly, in order to reap the greatest benefits from such an action, since it looked like Utah was about to “beat us to the punch.” The continuing devaluation of Federal Reserve Notes and resulting loss of the value of State pensions, and thus the need for Georgia to protect its citizens via returning to Constitutional Tender, was also explained.
No vote was taken at this hearing. However, the bill is still alive, and our next step is to attempt to get it voted out of the subcommittee, and to get a hearing before the full committee some time in January or February of 2012.
Final Note: Rep. Bobby Franklin, the champion of the Constitutional Tender Act in the Georgia House,passed away suddenly in his home on July 23rd, apparently of a heart attack. He was 54 years old. He will be missed tremendously.