Tag Archives: Competing Currencies

Ron Paul – Legalize Competing Currencies

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I recently held a hearing in my congressional subcommittee on the subject of competing currencies.  This is an issue of enormous importance, but unfortunately few Americans understand how the Federal Reserve and Treasury Department impose a strict monopoly on money in America.

This monopoly is maintained using federal counterfeiting laws, which is a bit rich.  If any organization is guilty of counterfeiting dollars, it is our own Treasury.  But those who dare to challenge federal legal tender laws by circulating competing currencies– at least physical currencies– risk going to prison.

Like all government created monopolies, the federal monopoly on money results in substandard product in the form of our ever-depreciating dollars.

Yet governments have always sought to monopolize the issuance of money, either directly or through the creation of central banks. The expanding role of the Federal Reserve in the 20th century enabled our federal government to grow wildly larger than would have been possible otherwise.  Our Fed, like all central banks, encourages deficits by effectively monetizing Treasury debt.  But the price we pay is the terrible and ongoing debasement of our money.

Allowing individuals and business to use alternate currencies, especially currencies backed by gold and silver, would expose the whole rotten system because the marketplace would prefer such alternate currencies unless and until the Fed suddenly imposed radical discipline on its dollar inflation.

Sadly, Americans are far less free than many others around the world when it comes to protecting themselves against the rapidly depreciating US dollar.  Mexican workers can set up accounts denominated in ounces of silver and take tax-free delivery of that silver whenever they want.  In Singapore and other Asian countries, individuals can set up bank accounts denominated in gold and silver.  Debit cards can be linked to gold and silver accounts so that customers can use gold and silver to make point of sale transactions, a service which is only available to non-Americans.

The obvious solution is to legalize monetary freedom and allow the circulation of parallel and competing currencies.  There is no reason why Americans should not be able to transact, save, and invest using the currency of their choosing.  They should be free to use gold, silver, or other currencies with no legal restrictions or punitive taxation standing in the way.  Restoring the monetary system envisioned by the Constitution is the only way to ensure the economic security of the American people.

After all, if our monetary system is fundamentally sound– and the Federal Reserve indeed stabilizes the dollar as its apologists claim–then why fear competition?  Why do we accept that centralized, monopoly control over our money is compatible with a supposedly free-market economy?  In a free market, the government’s fiat dollar should compete with alternate currencies for the benefit of American consumers, savers, and investors.

As Austrian economist Ludwig von Mises explained, sound money is an instrument that protects our civil liberties against despotic government. Our current monetary system is indeed despotic, and the surest way to correct things simply is to legalize competing currencies.

Competing Currencies – a Defense Against Profligate Government Spending

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The end of June marked what is hopefully the end of the Federal Reserve’s policy of quantitative easing.  For months the Fed has purchased hundreds of billions of dollars of Treasury debt, enabling the government to fund its profligate deficit spending, push the national debt to its limit, and further devalue the dollar.  Confidence in the dollar is plummeting, confidence in the euro has been shattered by the European bond crisis, and beleaguered consumers and investors are slowly but surely awakening to the fact that government-issued currencies do not hold their value.

Currency is sound only when it is recognized and accepted as such by individuals, through the actions of the market, without coercion. Throughout history, gold and silver have been the two commodities that have most fully satisfied the requirements of sound money.  This is why people around the world are flocking once again to gold and silver as a store of value to replace their rapidly depreciating paper currencies.  Even central banks have come to their senses and have begun to stock up on gold once again.

But in our country today, attempting to use gold and silver as money is severely punished, regardless of the fact that it is the only constitutionally-allowed legal tender!  In one recent instance, entrepreneurs who attempted to create their own gold and silver currency were convicted by the federal government of “counterfeiting”.   Also, consider another case of an individual who was convicted of tax evasion for paying his employees with silver and gold coins rather than fiat paper dollars.  The federal government acknowledges that such coins are legal tender at their face value, as they were issued by the U.S. government.  But when it comes to income taxes owed by the employees who received them, the IRS suddenly deems the coins to be worth their full market value as precious metals.

These cases highlight the fact that a government monopoly on the issuance of money is purely a method of central control over the economy.  If you can be forced to accept the government’s increasingly devalued dollar, there is no limit to how far the government will go to debauch the currency.  Anyone who attempts to create a market based currency– meaning a currency with real value as determined by markets– threatens to embarrass the federal government and expose the folly of our fiat monetary system.  So the government destroys competition through its usual tools of arrest, confiscation, and incarceration.

This is why I have taken steps to restore the constitutional monetary system envisioned and practiced by our Founding Fathers.  I recently introduced HR 1098, the Free Competition in Currency Act.  This bill eliminates three of the major obstacles to the circulation of sound money: federal legal tender laws that force acceptance of Federal Reserve Notes; “counterfeiting” laws that serve no purpose other than to ban the creation of private commodity currencies; and tax laws that penalize the use of gold and silver coins as money. During this Congress I hope to hold hearings on this bill in order to highlight the importance of returning to a sound monetary system.

Allowing market participants to choose a sound currency will ensure that individuals’ needs are met, rather than the needs of the government.  Restoring sound money will restrict the ability of the government to reduce the citizenry’s purchasing power and burden future generations with debt.  Unlike the current system which benefits the Fed and its banking cartel, all Americans are better off with a sound currency.

Ron Paul

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