AUSTIN, Texas (March 7, 2017) – A joint resolution introduced in the Texas House proposes a state constitutional amendment to guarantee the right to own, hold and use any mutually agreed upon medium of exchange. Passage of the bill would take another step toward undermining the Federal Reserve’s monopoly on money.
Rep. Matt Schaefer (R-Tyler) introduced House Join Resolution 89 (HJR89) on March 2. If passed, the resolution would place a constitutional amendment on the ballot recognizing the right of the people to own, hold, and use a mutually agreed upon medium of exchange, including cash, coin, bullion, digital currency, or privately issued scrip. The proposal would add the following language to the Texas state constitution.
“The right of the people to own, hold, and use a mutually agreed upon medium of exchange, including cash, coin, bullion, digital currency, or scrip, when trading and contracting for goods and services shall not be infringed. No government shall prohibit or encumber the ownership or holding of any form or amount of money or other currency.”
In effect, passage of the bill would, as Ron Paul has often said, “legalize the Constitution” by treating gold and silver specie as money. Professor William Greene, an expert on constitutional tender, noted that the proposal would introduce competition with the Federal Reserve. “By introducing competition in currency through ‘recognizing the right of the people to own, hold, and use’ bullion such as gold and silver coins, passage of the amendment would take one more step toward the ultimate goal of ‘nullifying’ the Federal Reserve system,” he said.
The amendment would also protect the right to own and use digital currencies like bitcoin in the state.
The legislation builds on recent efforts in Texas to encourage sound money, such as the 2013 law eliminating sales taxes on gold and silver bullion, and the establishment of a precious metals state depository that can develop into a “hard money bank” for average citizens to use gold and silver in everyday transactions.
If passed by the legislature, the proposed amendment would go before the voters in Nov. 2017.
NULLIFYING THE FED
Green explained how passage of the amendment would take another step toward nullifying the Fed’s monopoly on money.
As I noted in a paper I presented at the Mises Institute (“Ending the Federal Reserve from the Bottom Up“), when you introduce competition in currency, “[o]ver time, as residents of the State use both Federal Reserve Notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve Notes do will lead to a ‘reverse Gresham’s Law’ effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve Notes).” Economist Peter Bernholz has labeled this “reverse Gresham’s law” as “Thiers’ Law,” after French politician and historian Adolphe Thiers.
As “Thiers’ Law” takes effect, a cascade of events can begin to occur, including the flow of real wealth toward the State’s treasury, an influx of banking business from outside of the State (as citizens residing in other States carry out their desire to bank with sound money), and an eventual outcry against the use of Federal Reserve Notes for any transactions. Far from causing economic destabilization, as monetary theorist and Constitutional scholar Edwin Vieira notes, a “more sound currency will simply supplant a less sound currency, by operation of the free market.” At that point, the Federal Reserve system will have become unwanted and irrelevant, and can be easily abolished by the people’s elected Representatives in Washington, D.C.
While praising the amendment as a good first step, Green said there is more to be done.
If a full version of the Constitutional Tender Act were passed into law, then not only would the use of Federal Reserve Notes by the State be made illegal (because they are in violation of Article I, Section 10 of the U.S. Constitution); the use of legal tender U.S. gold and silver coins would be encouraged among the general population as well, along with any other currency that parties mutually consent to using. This would have three immediate effects: the elimination of FRNs from State transactions; the requirement of individuals and businesses to cease using FRNs in their transactions with the State; and (like HJR89) the introduction of competition in currencies among the general population. With all three effects working in tandem, the use of low-value pieces of paper issued by the Federal Reserve will become increasingly irrelevant, and an emaciated Federal Reserve system can much more easily be brought to an end — in essence, a de facto “nullification” by the State of the Federal Reserve itself.
HJR89 will be referred to a House committee where it will need to pass by a majority vote before moving forward in the legislative process.
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