When some American state eventually secedes from the Union, they will face monetary issues before nearly any other issue. The establishment of a currency sets the foundation for everything else that will happen in the new nation, since nearly all human interaction is based upon commerce. I’ve already written HERE. about the gold standard. Today I want to say more about this subject, and try to convince you how important it will be.
The Constitution of the United States was a compact ratified by the states. The ratification, or adoption, of the Constitution took place between September of 1787 and July of 1788. But the Constitution is not a legal contract, and cannot bind any two persons legally in any way. Consequently, it has no real power or authority today. I wrote about this subject HERE. So, a seceding state can use the old Constitution as an example of a founding document. But a seceding state is going to become a sovereign nation. So, only if a new sovereign nation desires to enter into a compact with other states to form a new confederacy might many of the articles apply to the new nation. Each state already has its own Constitution that will require amendment and redesign to accommodate its new position in the world as a sovereign nation.
Here is what the old Constitution says about money:
Article I, Section 8: “The Congress shall have power:
To coin Money, regulate the Value thereof, and of foreign coin, and fix the Standard of Weights and Measures;
To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;”
Article I, Section 10 forbids the States from coining money, emitting bills of credit (paper currency with no specie backing), or making anything but gold and silver a legal tender in payment of debts.
When the United States of America was founded, there was no government-controlled national currency. For decades, Spanish silver coins and other foreign coins of gold and silver were widely circulated in the Americas as one acceptable medium of exchange. The US Mint wasn’t established until 1792, and then US and foreign coins were all used in America.
America started out with competing currencies.
Later, legal tender laws were passed. This simply means that Congress passed laws making something other than gold and silver legal tender for payment of debts. If you look at any Federal Reserve note today, you’ll see the words “this note is legal tender for all debts, public and private” printed on the bill. Governments typically and historically have done this so they can inflate the currency and pay for additional government spending without direct taxation. There is nothing in the Constitution that allowed Congress to enact legal tender laws, but they did anyway. The Constitution prevented the states from making anything other than gold and silver legal tender for payment of debts, but did not specifically prevent the Federal Government from it. So, contrary to the Tenth Amendment, they did it.
Over the history of America, we evolved from a system of competing currencies, all backed by gold and silver, to a Federally-founded private bank cartel that monopolizes the printing and issuance of currency.
But, during all this time, America has had a dual currency system that almost no one knew about. I’m not talking about a bi-metal (gold AND silver) system. I’m talking about gold and silver coins with face monetary value, and also paper currency with a face value. There is a section of US Code, 31 USC 5103, that purports to establish US coins and currency, including Federal Reserve notes, as legal tender. Ask Robert Kahre about this dual currency system.
Robert Kahre is a businessman who used to live and work in Las Vegas, Nevada. He now resides in a Federal prison, convicted of violating IRS regulations. For many years, Kahre paid his employees using gold coins…perfectly legal. But the IRS decided that they did not like it, and prosecuted Kahre. Read the Robert Kahre story HERE. You will be stunned. Kahre is in prison for embarrassing the Federal Reserve and the IRS. And the dual currency system still exists unchanged.
In order to establish the most sound money possible, a state that secedes to become a new nation will have to establish a system of competing currencies. In order to complete this precedent-setting act, they will have to:
1. Write their own Constitution to prohibit the establishment of legal tender laws.
2. Write their own Constitution to permit private minting of gold and silver coins.
3. Establish the weight and purity standards for gold and silver coins as a part of the establishment of all standardized weights and measures. The value of the coins should not be regulated by the new nation, but should be regulated by the free market alone.
Establishing sound money, or not establishing sound money, will be the first and most important bellwether for a newly formed nation. If the new nation stumbles in this, its most important issue of the protection of individual property rights, it is destined to eventually fail, just like the United States of America.
“A just weight and balance are the LORD’S: all the weights of the bag are his work. It is an abomination to kings to commit wickedness: for the throne is established by righteousness. Righteous lips are the delight of kings; and they love him that speaketh right.” Proverbs 16:11-13
Secession is the hope for mankind. Who will be first?
DumpDC. Six Letters That Can Change History.
© Copyright 2010, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.