Another Small Step Towards Sound Constitutional Money

Feb. 8, 2019
by Bob Adelmann

Doug Casey, writing for his blog International Man, gave his readers a history lesson including the most important one: nearly every currency that blew up through inflation was replaced by sound money, usually gold and silver.

Wrote Casey:

In late 18th-century America, something of minimal value was often described as being “not worth a continental,” which referred to the continental dollar, the American currency at the time of the revolution.

The continental was paper money. It had occurred to the colonists that, as their revolution was costing quite a bit to maintain, they could go into “temporary” debt to finance the war.

Soon it became clear that the debt could not be repaid. Also, the printing of paper banknotes resulted in inflation. The solution? Print more of them. Further devaluation of the continental motivated the colonists to print more … then more … then still more. The continental became worthless, either for local trade or for repayment of debt.

The Founders learned the lesson:

[They] did something quite unusual. In its new Constitution, [they] created a clause to assure that this would never happen again. Under Article I, Section 10, the states were not permitted to “coin Money; emit Bills of Credit; [or] make any Thing but gold and silver Coin a Tender in Payment of Debts.”

The Founding Fathers of the U.S. had figured out that the issuance of paper currency was a disaster in the making, and in 1792 passed the Coinage Act, denominating coins to be minted. The act authorized three gold coins: $10.00 eagles, $5.00 half eagles, and $2.50 quarter eagles, in addition to silver coins.

But the lesson didn’t stick. During the civil war, the national government reverted once again to the temptation of paper money, and once again after United States Notes became worthless gold and silver was established as the Constitution provided (See Specie Payment Resumption Act in Sources below).

The question of the day is: Do we have to see the total destruction of Federal Reserve Notes (FRNs) before the U.S. returns to constitutional money?

As we reported here last month, Wyoming is moving ahead with plans to require its state’s treasurer to hold 10 percent of the state’s trust funds in precious metals. This followed the state’s decision last summer to allow its citizens to use gold and silver coins as an alternative to FRNs when paying bills or making a purchase.

On Wednesday, Kansas moved ahead on the same front with the introduction of a bill exempting gold, silver, and other precious metals from sales taxes. Kansas and Wyoming join an increasing number of states exercising their sovereignty in such matters, ultimately exposing the fraud of FRNs posing as money.

As Mike Maharrey wrote in the Tenth Amendment Center blog: “By removing the sales tax on the exchange of gold and silver, Kansas would treat specie [gold and silver coins] as money instead of a commodity. This represents [another] small step toward reestablishing gold and silver as legal tender and [more importantly] breaking down the Fed’s monopoly on money.”

He added that the bill, if it became law, would allow citizens, if they choose, to pay bills and make other exchanges in gold and silver instead of paper money issued by the Federal Reserve. More importantly it invites contracts to demand payment in specie, thus largely eliminating the loss of value of paper money due to inflation – increasing the money supply – by the Fed.

Said Maharrey:

This [Kansas bill] would mark an important step toward currency competition. If sound money gains a foothold in the marketplace against Federal Reserve Notes, people will be able to choose the time-tested stability of gold and silver over the central bank’s [the Fed’s] rapidly-depreciating paper currency.

How rapid is that depreciation? At the moment, the Fed admits to price increases – which it incorrectly calls inflation – of two percent a year. If nothing changes, that would cut the present purchasing power of a single FRN in half in 36 years.

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But a better calculation would go back to 1914 with the beginning of operation by the country’s unconstitutional central bank when an ounce of gold was worth $20.72. Today, as the purchasing power of the dollar has diminished the price of gold, reflecting that destruction, now trades a little over $1,300 an ounce. Put another way, a dollar today buys what a little over a penny bought in 1914.

And just last week it was reported that Tennessee legislators offered a bill to make gold and silver coins legal tender there as well. Similar bills have been filed in Arizona and West Virginia.

Ron Paul, in a statement published by the Ron Paul Institute for Peace, praised Arizona’s bill for “ensuring that people are not punished by the taxman for rejecting Federal Reserve Notes in favor of gold or silver. Since inflation [an increase in the quantity of money engineered by the Fed] increases the value of precious metals, these taxes give the government one more way to profit from the Federal Reserve’s currency debasement … it is imperative that [this] law protect people’s right to use alternatives to what may soon be virtually worthless Federal Reserve Notes.”

Oklahoma repealed its sales tax on gold and silver in 2014, but still assesses capital gains taxes on precious metals. That would be repealed by a bill pending in the state senate. Arizona has moved ahead as well by first removing the sales tax on transactions conducted using gold and silver coins and then by presently considering a bill requiring the state’s treasurer to hold 10 percent of the state’s $500 million Budget Stabilization Fund in precious metals. 

The underlying assumption is that increasingly citizens will choose Door Number Two and use real money instead of FRNs to pay their bills. What is more likely to happen is that long-term contracts will require payment in specie instead of paper or digits, thus greatly reducing the risk of loss of purchasing power over time thanks to the Fed’s expanding the money supply.

All of which is good news, but it’s only a start. There is momentum, but many more states have to see the light and the logic before the Fed’s credibility – and it’s fraudulent FRN – is sufficiently damaged for the movement back to Constitutional money replaces the central bank and puts back in place what the Founders originally intended: “No State shall … make any Thing but gold and silver Coin a Tender in Payment of Debts.”


An Ivy League graduate and former investment advisor, Bob is a regular contributor to The New American magazine and blogs frequently at, primarily on economics and politics. He can be reached at

Sources: Doug Casey on “not worth a continental.” Kansas Bill Would Help Encourage the Use of Gold and Silver as Money Tennessee Considering Bills Restoring Gold and Silver as Sound Money Several States Considering Bills to Repeal Taxes on Gold and Silver

History behind the Specie Payment Resumption Act of 1875 The Fed’s Fraud is Being Exposed in Wyoming

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