Changing to a “Legal” Gold & Silver Economy

Prof. Michael S. Rozeff recently wrote an article at LewRockwell.com entitled, “Changing to a Silver Economy“. It’s an excellent exercise in thinking about how to return to an economy based on sound money:

A libertarian in Columbia, South Carolina sent me a message recently. He works at a convenience store. He was interested in introducing silver as a means of payment or currency at this store. His specific ideas I thought would not work because of the taxes on silver. The government treats silver as a collectible subject to income taxes at ordinary rates. He had some ideas of buying bullion and then setting up a market in it by buying at a small discount to the spot price and selling at a small premium, thereby creating a bid-ask spread. He had some idea of getting people to transact in silver.

Instead I spun out the following proposal. It too has the fatal flaw that taxes on silver dealings occur, but thinking about this process is very useful anyway. It shows how stores might become 100% reserve banks and how the economy might transition from paper and slug coin currency to silver money. And, if this skeletal proposal has flaws, others can possibly improve on it. I merely want to demonstrate a degree of feasibility, so that the possibilities become more tangible.

The basic idea is that silver is the unit of account, but silver is not necessarily used as the medium that is used for redemptions.

Prof. Rozeff’s idea is a good one, but it’s also a little complicated and potentially legally hazardous – we all know how our wonderful federal government likes “competition” in currency, and the Secret Service and IRS are used quite effectively to squelch such attempts. So instead of trying to swim upstream like so many others have attempted… how about using the government’s own “legal tender” laws against it, as an alternative?

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Constitutional Tender Act Gets Georgia Hearing

On Monday, March 8, 2011, a hearing was held in the Georgia House Financial Institutions & Services Subcommittee (a Banks & Banking Committee subcommittee) on HB 3, the Constitutional Tender Act.

Testimony in favor of the bill was given by Rep. Bobby FranklinDr. Bill Greene, who authored the bill. There was no testimony in opposition to the bill given.

Watch it:

HB 3 would return the State of Georgia to adherence to the U.S. Constitution’s legal tender provisions. Specifically, the U.S. Constitution declares in Article I, Section 10 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 a “tender in payment” (which means they cannot “make something an offer as payment”) for any debts, which would include debts owed by and to the State.

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