I Want Your Thoughts on Whether a Single State Could make Precious Metals a Legal Tender

CRHer700

Disclaimer
This is not meant to turn political. I will not be held responsible for that.
I am posting here instead of in the PM forum because of the general knowledge of laws and regulations that resides here and the unpleasant way that all PM forum posts go.
End Disclaimer

I read this article: https://flvoicenews.com/cfo-jimmy-patronis-initiates-study-on-gold-and-silver-as-legal-tender-in-florida/
Don't disect the article, I want your thoughts on the idea, not the article or what it contains.

I want to know everyone here's thoughts on whether a single state could make precious metals legal tender on par with paper money, such that it is able to be bought and sold at banks.

I am very interested in this proposal, and would like it to happen. However, I know that there are several legal and logistical dilemmas which can (and most certainly will) cause problems with anything of this sort being carried out.
These include

1. The fact that there would have to be something in place to keep the exchange rates with United States dollars the same at all banks at the same time.
2. The problem that metals would flow out of the state if they were any cheaper there than anywhere else.
3. The issue of having to have some sort of system in place to regulate weights of the metal without being able to mint coins because the federal government forbids it.

State your cases for and against if it is able to be done, and show your work. I want long posts with quotes from laws and personal experience and I know that you all are capable of it.

I will be very interested in the answers I will receive, so make them good.

jmlanzaf

I fail to see any advantage to this. You can hold gold and silver and exchange it for dollars when you want to pay a bill. Asking the bill payer to do the exchange for you is fraught with peril.

Exchange rate fluctuate by the second. If silver is dropping by $1, as it did the other day, there is risk to both the buyer and seller in the exchange. You might go to the store with $2500 in gold to buy something only to find out that you only have $2450 in gold when you get there.

With the amount of fake gold already floating around, how are you going to assay it? Is every clerk going to have an XRF gun? Scratch test?

What problem does this solve? It creates artificial demand for gold, so gold producers will love it. But it makes commerce harder, not easier, and it does nothing for the consumer. What advantage is there in paying with gold?

jakeblue

Within State Lines, it could be done and regulated by that State’s Executive, Legislative and Judicial branches. From an everyday standpoint, it would prove difficult. It would require daily “rates” on Gold and Silver, which would and could fluctuate with wild swings.

The State could not mandate private businesses to comply with acceptance of the State tender as the only means of payment. Think of credit cards and Federal currency as examples. Publix participates and Wal-Mart does not will create unfair commerce, potentially violating Federal law,

Anything to do with Federal usage, including Federal taxes, will not fly with DC.

Using State tender for specific State business, might be practical on a specific, limited basis.

As to an opinion, yeah, thinking of the types of differing currencies that could be made. Very nice.

PerryHall

I think it has to do more with payment clauses in contracts. Many contracts before the FDR gold confiscation had a "gold clause" that allowed the lender to elect payment in gold.

WCC

@jmlanzaf said:

Exchange rate fluctuate by the second. If silver is dropping by $1, as it did the other day, there is risk to both the buyer and seller in the exchange. You might go to the store with $2500 in gold to buy something only to find out that you only have $2450 in gold when you get there.

This is why I'm convinced that no "crypto" will ever become a functioning currency at any meaningful scale other than central bank digital currencies.

jmlanzaf

@WCC said:

@jmlanzaf said:

Exchange rate fluctuate by the second. If silver is dropping by $1, as it did the other day, there is risk to both the buyer and seller in the exchange. You might go to the store with $2500 in gold to buy something only to find out that you only have $2450 in gold when you get there.

This is why I'm convinced that no "crypto" will ever become a functioning currency at any meaningful scale other than central bank digital currencies.

I think that's true with current volatility. But I live in a border state. Many places take Canadian currency but at a generous premium to them. It's not impossible to accept other currencies. But you need those currencies to be somewhat stable.

The other thing about gold vs crypto is that you can instantly convert the crypto to dollars. That is much harder to do with a physical asset. Consider credit cards that allow you to do transactions in 100 different currencies because the exchange rate conversion is done automatically by the processor.

There are crypto retail transactions done every day even now.

Creg

They should try it and let us know how it works out. If people feel safer using gold it must be a good thing.

logger7

Instead we should advocated for doing away with sales taxes on coins and use cash which gives you all the privacy you need.

jmlanzaf

@logger7 said:
Instead we should advocated for doing away with sales taxes on coins and use cash which gives you all the privacy you need.

I see no reason why coins should be taxed differently than comic books or sports cards. Investment grade bullion is another matter.

privatecoin

fiat always fails.

gumby1234

Goldbacks

logger7

@jmlanzaf said:

@logger7 said:
Instead we should advocated for doing away with sales taxes on coins and use cash which gives you all the privacy you need.

I see no reason why coins should be taxed differently than comic books or sports cards. Investment grade bullion is another matter.

Consideriing that most coin and currency collectors consider their collections to be investments, taxing would only discourage that. You could suggest that many other collectors consider their collections to be investments, but I believe that coins based in precious metals, etc. are different.

FlyingAl

The problem with the Gold Standard was that there was not enough gold to cover expenses.

Today, all of the gold in the world ever mined could buy about 1/4 of the US national debt.

jmlanzaf

@logger7 said:

@jmlanzaf said:

@logger7 said:
Instead we should advocated for doing away with sales taxes on coins and use cash which gives you all the privacy you need.

I see no reason why coins should be taxed differently than comic books or sports cards. Investment grade bullion is another matter.

Consideriing that most coin and currency collectors consider their collections to be investments, taxing would only discourage that. You could suggest that many other collectors consider their collections to be investments, but I believe that coins based in precious metals, etc. are different.

Not all coins are precious metals. And if you buy a 16D dime for $1000, it's not for the silver content. And are you going to tax clad coins but not silver? Most comic and card collectors also consider their collections to be investments. So, again, I don't see any reason to treat them differently. Tax them all or tax none.

jmlanzaf

@FlyingAl said:
The problem with the Gold Standard was that there was not enough gold to cover expenses.

Today, all of the gold in the world ever mined could buy about 1/4 of the US national debt.

Absolutely true. Gold bugs don't acknowledge how much a gold standard limits economic growth. You can only grow the economy at the same rate as gold production. And why should the digging of rocks be more important than the making of computers or cars?

Goldminers

https://worldpopulationreview.com/state-rankings/gold-and-silver-legal-tender-states

logger7

@jmlanzaf said:

@logger7 said:

@jmlanzaf said:

@logger7 said:
Instead we should advocated for doing away with sales taxes on coins and use cash which gives you all the privacy you need.

I see no reason why coins should be taxed differently than comic books or sports cards. Investment grade bullion is another matter.

Consideriing that most coin and currency collectors consider their collections to be investments, taxing would only discourage that. You could suggest that many other collectors consider their collections to be investments, but I believe that coins based in precious metals, etc. are different.

Not all coins are precious metals. And if you buy a 16D dime for $1000, it's not for the silver content. And are you going to tax clad coins but not silver? Most comic and card collectors also consider their collections to be investments. So, again, I don't see any reason to treat them differently. Tax them all or tax none.

One of the main purposes of taxation is to raise money; sales taxes are regressive discouraging business activity that hits lower income people hard.

Desert Moon

These days all one has to do is point your phone and pay. Why would anyone want to lug around a bunch of metal instead?

jmlanzaf

@logger7 said:

@jmlanzaf said:

@logger7 said:

@jmlanzaf said:

@logger7 said:
Instead we should advocated for doing away with sales taxes on coins and use cash which gives you all the privacy you need.

I see no reason why coins should be taxed differently than comic books or sports cards. Investment grade bullion is another matter.

Consideriing that most coin and currency collectors consider their collections to be investments, taxing would only discourage that. You could suggest that many other collectors consider their collections to be investments, but I believe that coins based in precious metals, etc. are different.

Not all coins are precious metals. And if you buy a 16D dime for $1000, it's not for the silver content. And are you going to tax clad coins but not silver? Most comic and card collectors also consider their collections to be investments. So, again, I don't see any reason to treat them differently. Tax them all or tax none.

One of the main purposes of taxation is to raise money; sales taxes are regressive discouraging business activity that hits lower income people hard.

I'm not arguing for taxes. I just don't feel that coins, other than investment grade bullion, should be treated differently from other collectibles. Tax all or none.

Typekat

@CRHer700 said:

“State your cases for and against if it is able to be done, and show your work. I want long posts with quotes from laws and personal experience and I know that you all are capable of it”

Somehow, I think we’re flunking the assignment

jmlanzaf

@Typekat said:
@CRHer700 said:

“State your cases for and against if it is able to be done, and show your work. I want long posts with quotes from laws and personal experience and I know that you all are capable of it”

Somehow, I think we’re flunking the assignment

The Case for a Single U.S. State to Make Gold Legal Tender

Making gold legal tender in a U.S. state can provide economic benefits, foster financial resilience, and protect citizens against the risks of inflation and currency devaluation. Here's an argument in favor of a single state adopting gold as legal tender:

---

1. Economic Stability in Times of Inflation

• Gold as a Hedge Against Inflation:
  Gold has historically been a reliable store of value, maintaining purchasing power even during periods of high inflation. By adopting gold as legal tender, the state offers its citizens a stable alternative to fiat currency, reducing the adverse effects of inflation on their savings.

  • Reference: The World Gold Council notes that gold prices tend to increase during inflationary periods as investors seek safe havens.

• Case Study:
  Utah passed the Legal Tender Act of 2011, recognizing gold and silver as legal tender. The move was largely a response to concerns about federal monetary policies and inflation. Although usage remains limited, it set a precedent for using precious metals to provide an alternative to fiat currency.

---

2. Protection Against Federal Monetary Policy Risks

• Decentralizing Monetary Control:
  Federal monetary policies, such as quantitative easing, can erode the value of the U.S. dollar. Allowing gold as legal tender empowers states to protect their economies from such devaluation, creating a more resilient financial system for their citizens.

  • Reference: Ron Paul, in End the Fed, argues that monetary policies by the Federal Reserve often benefit large institutions at the expense of average citizens, highlighting the importance of alternative currencies.

• Legal Precedent:
  Article I, Section 10 of the U.S. Constitution explicitly allows states to "make gold and silver Coin a Tender in Payment of Debts." This gives states the constitutional authority to implement such policies.

---

3. Enhanced Financial Freedom for Citizens

• Encouraging Savings and Investment:
  Gold is not only a medium of exchange but also a long-term investment. Legalizing gold as tender encourages citizens to diversify their assets, promoting financial security.

  • Example: Arizona passed legislation in 2017 exempting gold and silver from state capital gains taxes, incentivizing their use as savings vehicles.

• Cryptocurrency Synergy:
  The rise of cryptocurrencies highlights a growing public interest in alternatives to fiat money. Gold, as a tangible asset, complements this trend, offering a trusted and time-tested medium of exchange.

---

4. Boosting the Local Economy

• Gold Production States:
  States like Nevada, Alaska, and Colorado—major gold producers—could directly benefit from legalizing gold tender. By creating a local demand for gold as currency, these states could boost mining and related industries, creating jobs and increasing revenue.

  • Reference: The U.S. Geological Survey reported that Nevada alone accounted for 76% of U.S. gold production in 2020.

• Tourism and Trade:
  Legal tender gold coins could attract tourists and investors, enhancing the state's reputation as a forward-thinking financial hub.

---

5. Challenges and Responses

• Liquidity Concerns:
  Critics argue that gold’s high value per ounce limits its use in everyday transactions. However, fractional gold coins or digital gold-backed currencies can address this issue.

  • Example: The Perth Mint has pioneered digital certificates tied to physical gold reserves, showing how technology can make gold transactions practical.

• Fluctuating Gold Prices:
  While gold prices fluctuate, they have historically trended upward over the long term. This volatility can be mitigated by pricing goods in fiat currency and allowing gold to act as an optional payment method.

---

6. Global Trends Support Gold Adoption

• International Examples:
  Several countries, including Switzerland and Singapore, maintain significant gold reserves and integrate gold into their financial systems. Their economic stability underscores the benefits of incorporating gold into monetary policy.

• Gold's Rising Role in Central Banks:
  Central banks globally are increasing their gold reserves to hedge against geopolitical instability and fiat currency risks.

  • Reference: The World Gold Council reported that central banks bought a record 1,136 tonnes of gold in 2022, the highest in 55 years.

---

Conclusion

Adopting gold as legal tender in a single U.S. state can enhance financial stability, protect citizens from inflation, and promote economic growth. States like Utah and Arizona have already set legal precedents, and gold-rich states such as Nevada or Alaska are well-positioned to benefit economically. By leveraging its historical stability, intrinsic value, and growing global importance, gold offers a viable solution to the challenges posed by modern fiat currencies.

jmlanzaf

The Case Against a Single U.S. State Making Gold Legal Tender

While the idea of using gold as legal tender has historical and ideological appeal, implementing such a policy in a single state poses significant practical, economic, and legal challenges. Here’s an argument against the proposal:

---

1. Practical Challenges of Gold as Currency

• Impractical for Everyday Transactions:
  Gold’s high value per ounce makes it unsuitable for day-to-day transactions. For example, with gold priced around $2,000 per ounce, even a small fraction of an ounce is worth hundreds of dollars. Paying for basic goods like groceries would be cumbersome without fractional gold coins, which are not widely available or convenient.

  • Example: A $5 cup of coffee would require approximately 0.0025 ounces of gold, making transactions unnecessarily complex.

• Physical Storage and Portability Issues:
  Gold is heavy, difficult to store, and prone to theft. Unlike digital or fiat currencies, which can be easily transferred or stored electronically, gold requires physical handling, posing logistical challenges for both consumers and businesses.

  • Reference: The World Bank emphasizes that physical gold lacks the convenience and scalability of digital payment systems.

---

2. Volatility in Gold Prices

• Fluctuating Value Creates Instability:
  Gold prices are highly volatile, influenced by global markets, geopolitical tensions, and investor sentiment. This volatility could lead to inconsistent pricing in gold-based transactions, confusing consumers and businesses.

  • Reference: Between 2010 and 2020, gold prices ranged from $1,000 to over $2,000 per ounce, creating significant uncertainty for anyone relying on it as a stable medium of exchange.

• Inflation Hedge Misconceptions:
  While gold is often considered a hedge against inflation, it does not provide short-term price stability. During deflationary periods or times of low inflation, gold can underperform compared to other investment vehicles.

---

3. Economic Disruption

• Fragmentation of State and National Economies:
  Introducing gold as legal tender in a single state risks creating a dual-currency system, complicating trade and commerce with other states that rely solely on the U.S. dollar. Businesses operating across state lines would face additional transaction costs and accounting complexities.

• Hoarding Behavior:
  If gold becomes legal tender, citizens might hoard it during economic uncertainty, reducing its availability for circulation. This hoarding behavior undermines its utility as a medium of exchange and exacerbates economic instability.

  • Reference: Studies on the Great Depression show that hoarding of gold and cash worsened deflationary spirals.

---

4. Legal and Constitutional Challenges

• Conflict with Federal Law:
  Although Article I, Section 10 of the U.S. Constitution allows states to make gold and silver legal tender, this must align with federal monetary policies. A state introducing gold as legal tender could clash with federal statutes governing currency, potentially leading to legal challenges.

  • Reference: The Supremacy Clause in the U.S. Constitution establishes that federal law takes precedence over state law.

• Federal Reserve System Dependency:
  The U.S. monetary system is centralized under the Federal Reserve, which regulates the supply of fiat currency. A state introducing gold as legal tender undermines this system, potentially causing friction with federal authorities.

---

5. Economic Inefficiency

• Increased Transaction Costs:
  Transitioning to gold-based transactions would require significant infrastructure changes, such as minting coins, recalibrating payment systems, and educating the public. These costs could outweigh any potential benefits of adopting gold as legal tender.

• Reduced Economic Flexibility:
  A gold-based currency limits the state's ability to respond to economic crises. Unlike fiat currency, which can be adjusted through monetary policy, gold is a finite resource, making it unsuitable for managing liquidity during recessions or emergencies.

  • Reference: Nobel Prize-winning economist Paul Krugman has argued that reliance on gold reduces the flexibility needed to stabilize modern economies.

---

6. Global and Historical Lessons

• Lessons from the Gold Standard:
  The gold standard, abandoned by most countries in the 20th century, restricted economic growth and caused deflationary pressures. Reintroducing gold as legal tender on a state level risks repeating these historical mistakes.

  • Example: During the Great Depression, adherence to the gold standard deepened economic downturns in countries that refused to devalue their currencies.

• Modern Alternatives Are Superior:
  Digital currencies and stablecoins offer the benefits of decentralized money without the logistical challenges of gold. These alternatives are already gaining traction globally and could provide more practical solutions for states seeking currency diversification.

  • Reference: The International Monetary Fund (IMF) has highlighted the potential of digital currencies to modernize financial systems.

---

7. Inequality and Accessibility Issues

• Gold Ownership Is Concentrated:
  Wealthier individuals are more likely to own gold, giving them an advantage in a gold-based economy. This could exacerbate economic inequality, as lower-income citizens are less likely to have access to gold reserves.

• Limited Practical Use for the Average Citizen:
  The average citizen relies on accessible, divisible, and easily transferable currency for daily transactions. Gold fails to meet these criteria, making it an impractical choice for most people.

---

Conclusion

While gold has a storied history as a medium of exchange, making it legal tender in a single state would create practical, economic, and legal challenges. Gold’s volatility, logistical inefficiencies, and potential to disrupt commerce outweigh its perceived benefits. Instead, states should focus on modern financial innovations, such as supporting digital currencies or improving financial literacy, to achieve economic resilience and stability.

jmlanzaf

AI did my homework

Typekat

Brilliant!
Still waiting to see the other Qualified entrants…

yspsales

It requires a level of financial responsibility and literacy most politicians and the public lack.

Nothing practical about PM's in daily life.

coinkat

Work?

I regret to inform you that is not my Department.

Will it work and can it be done?

Even thought it is not my Department, I will suggest that we set up an Exploratory Committee to investigate your assignment to assess whether it is feasible. It will be incumbent on the Committee to make a recommendation before any further action can be taken. We are working towards goals in an effort to meet expectations. Please be advised that It is quite possible that Hell may freeze over before there is a recommendation.

On a serious note, the short answer is no.

JCH22

.

pmh1nic

Does a store or any establishment in the U.S. have to accept U.S. currency as payment? U.S. currency isn’t as volatile as silver but it is volatile (subject to a change in value). Should establishments or individuals have the freedom to do their exchange for goods and services with gold, silver or government currency? If a merchant is willing to take the risk of doing business with precious metals should they have the freedom to take on that risk?

TwoSides2aCoin

We ought to. If you check Coinflation and base metals, you will find the new dollars are only worth $.07. Technically that means what ? The dollar lost 93% of its value.

And a silver dime .900 purity is worth roughly 30 times that.

Don’t take my word for it. We are dumbed down.

TwoSides2aCoin

Then there is article 10 of the Constitution

seatedlib3991

Anyone thinking about this should read about the panic of 1873. James

Cougar1978

I think it’s a crummy idea. Why not eliminate the cent, nickel, and dime?

CRHer700

@Cougar1978 said:
I think it’s a crummy idea. Why not eliminate the cent, nickel, and dime?

Why the dime?

CRHer700

This has been an interesting thread.

This is my 2000th Post.

Sapyx

To me, the US Constitution is quite clear:

Article 1 Section 10: "No state shall... coin money... [or] make any thing other than gold and silver coin a tender in payment of debts..."

States are not allowed to make their own coins. States are not allowed to make any object that isn't already a gold or silver coin legal tender - so they can't generically declare gold bullion to be legal tender, unless it's in coin form. The state will have to name the specific coins being legalized in their legislation. Which also means they can't make "medals" or "rounds" and unilaterally declare those rounds to be "coins", because (as mentioned) they can't coin money.

While it has never actually been tested or proven in a court of law, the common-sense definition of "gold or silver coin" is something like "a piece of gold or silver that has been stamped into a convenient form for circulation, and has been duly given legal tender status and/or a face value by an internationally recognized government". British sovereigns, Canadian maple leafs, Australian nuggets, South African krugerrands and Mexican onzas would all be "gold coins" under this definition. Goldback notes, gold ingots, Hutt River Province quasi-coins and private bullion rounds are not.

Section 10 is all about taking away the rights of states that they (theoretically) used to enjoy as quasi-independent member-states under the Confederation. Prior to 1789, states could and did issue their own coinages. Now, they cannot. The exemption clause about "gold and silver coin" is all about adopting foreign coinage in emergencies and contingencies. The Constitution's drafters knew that the Federal government was in no position to immediately replace the entire coinage supply with US money, and they wished to give states the power to declare whatever foreign coinage they could get their hands on as legal tender. But even here they wanted to limit this foreign coinage to gold and silver, rather than base-metal.

There is, of course, a way around this constitutional blockage: using another country as a flag-of-convenience.
- Make some quasi-coinage in the name of some impoverished third-world country. Liberia, Somalia, Angola... there's lots to choose from. Take your pick.
- You do not need to export your quasi-coins to that country or import them into the US, since making quasi-coinage in the name of another country is not illegal in the US.
- Have that country's government do whatever they need to do to declare your quasi-coins as legal tender in that country.
- Hey-howdy-hey, your quasi-coins are now fair dinkum true blue "coins", and your state can now make them legal tender.

jmlanzaf

@seatedlib3991 said:
Anyone thinking about this should read about the panic of 1873. James

And numerous others. Deflationary events were common before the Federal Reserve

jmlanzaf

@CRHer700 said:

@Cougar1978 said:
I think it’s a crummy idea. Why not eliminate the cent, nickel, and dime?

Why the dime?

He hates dimes.

jmlanzaf

@Sapyx said:
To me, the US Constitution is quite clear:

Article 1 Section 10: "No state shall... coin money... [or] make any thing other than gold and silver coin a tender in payment of debts..."

States are not allowed to make their own coins. States are not allowed to make any object that isn't already a gold or silver coin legal tender - so they can't generically declare gold bullion to be legal tender, unless it's in coin form. The state will have to name the specific coins being legalized in their legislation. Which also means they can't make "medals" or "rounds" and unilaterally declare those rounds to be "coins", because (as mentioned) they can't coin money.

While it has never actually been tested or proven in a court of law, the common-sense definition of "gold or silver coin" is something like "a piece of gold or silver that has been stamped into a convenient form for circulation, and has been duly given legal tender status and/or a face value by an internationally recognized government". British sovereigns, Canadian maple leafs, Australian nuggets, South African krugerrands and Mexican onzas would all be "gold coins" under this definition. Goldback notes, gold ingots, Hutt River Province quasi-coins and private bullion rounds are not.

Section 10 is all about taking away the rights of states that they (theoretically) used to enjoy as quasi-independent member-states under the Confederation. Prior to 1789, states could and did issue their own coinages. Now, they cannot. The exemption clause about "gold and silver coin" is all about adopting foreign coinage in emergencies and contingencies. The Constitution's drafters knew that the Federal government was in no position to immediately replace the entire coinage supply with US money, and they wished to give states the power to declare whatever foreign coinage they could get their hands on as legal tender. But even here they wanted to limit this foreign coinage to gold and silver, rather than base-metal.

There is, of course, a way around this constitutional blockage: using another country as a flag-of-convenience.
- Make some quasi-coinage in the name of some impoverished third-world country. Liberia, Somalia, Angola... there's lots to choose from. Take your pick.
- You do not need to export your quasi-coins to that country or import them into the US, since making quasi-coinage in the name of another country is not illegal in the US.
- Have that country's government do whatever they need to do to declare your quasi-coins as legal tender in that country.
- Hey-howdy-hey, your quasi-coins are now fair dinkum true blue "coins", and your state can now make them legal tender.

Isn't there a middle ground which is occupied by scrip like "goldbacks"? You facilitate the optional use of alternate means of payment rather that state mandated "legal tender" use.

Sapyx

@jmlanzaf said:

@Sapyx said:
To me, the US Constitution is quite clear:

Article 1 Section 10: "No state shall... coin money... [or] make any thing other than gold and silver coin a tender in payment of debts..."

States are not allowed to make their own coins. States are not allowed to make any object that isn't already a gold or silver coin legal tender - so they can't generically declare gold bullion to be legal tender, unless it's in coin form. The state will have to name the specific coins being legalized in their legislation. Which also means they can't make "medals" or "rounds" and unilaterally declare those rounds to be "coins", because (as mentioned) they can't coin money.

While it has never actually been tested or proven in a court of law, the common-sense definition of "gold or silver coin" is something like "a piece of gold or silver that has been stamped into a convenient form for circulation, and has been duly given legal tender status and/or a face value by an internationally recognized government". British sovereigns, Canadian maple leafs, Australian nuggets, South African krugerrands and Mexican onzas would all be "gold coins" under this definition. Goldback notes, gold ingots, Hutt River Province quasi-coins and private bullion rounds are not.

Section 10 is all about taking away the rights of states that they (theoretically) used to enjoy as quasi-independent member-states under the Confederation. Prior to 1789, states could and did issue their own coinages. Now, they cannot. The exemption clause about "gold and silver coin" is all about adopting foreign coinage in emergencies and contingencies. The Constitution's drafters knew that the Federal government was in no position to immediately replace the entire coinage supply with US money, and they wished to give states the power to declare whatever foreign coinage they could get their hands on as legal tender. But even here they wanted to limit this foreign coinage to gold and silver, rather than base-metal.

There is, of course, a way around this constitutional blockage: using another country as a flag-of-convenience.
- Make some quasi-coinage in the name of some impoverished third-world country. Liberia, Somalia, Angola... there's lots to choose from. Take your pick.
- You do not need to export your quasi-coins to that country or import them into the US, since making quasi-coinage in the name of another country is not illegal in the US.
- Have that country's government do whatever they need to do to declare your quasi-coins as legal tender in that country.
- Hey-howdy-hey, your quasi-coins are now fair dinkum true blue "coins", and your state can now make them legal tender.

Isn't there a middle ground which is occupied by scrip like "goldbacks"? You facilitate the optional use of alternate means of payment rather that state mandated "legal tender" use.

The way I see it, either something is a legal tender, or it isn't. There isn't really any middle ground. I don't see any capacity for a state government to "facilitate the optimal use of alternate means of payment" that isn't a de-facto and de-jure declaration of legal tender.

If people want to conduct business between themselves using precious metals - either Goldbacks or other chunks of physical metal - as a medium of exchange, they already can go right ahead and do that right now, without the need for state government legislation. Nobody's forcing anybody to use US dollars in a transaction. What would a state government bring to the table for this transaction, that would actually be helpful and welcomed?

A neutral third-party opinion on what the current bullion prices are, or an "official exchange rate" between bullion and US currency? You already have that from the precious metals market.

Some kind of mandate that forces someone to accept bullion in payment, even if the recipient does not want to be given bullion? That would become de-facto legal tender.

The ability to pay your state taxes in bullion? I seriously doubt that any of the advocates for monetization of bullion are going to want to hand over bits of their bullion hoard to the state government, and I seriously doubt state governments really want to increase their own costs by starting to handle and stockpile PMs themselves.

State government agreement to collect taxes on bullion transactions, as if they were cash transactions? Again, I'm pretty sure the advocates of bullionization aren't keen on maximizing their tax bill.

Official state recognition of Goldbacks, or some similar bullion-based private currency? Again, how would a state officially recognize such currency without backing it or agreeing to prop it up if it threatens to collapse? And how would such backing not become a de-jure legal tender declaration, and thus unconstitutional? And if it isn't actual "backing" of the private currency with no responsibility accepted by the state, then what exactly is it? How would such "recognition" be any more meaningful than the state government giving the private currency its "thoughts and prayers"?

Don't get me wrong, I'm all for encouraging the use of private currencies like Goldbacks, if that's what people want to get into. But I just don't see any mechanism whereby a state government can take part in such encouragement without violating the Constitution.

People are drawn to private currencies because they are private. No government involvement. All fine and well, but "no government involvement" means no government oversight or control, and no government safety net responsible for managing the currency through the inevitable hard times. Either use government money, with all the pros and cons of that system, or use private money, with its own list of pros and cons. There is no possible middle ground, that I can see.

jmlanzaf

@Sapyx said:

@jmlanzaf said:

@Sapyx said:
To me, the US Constitution is quite clear:

Article 1 Section 10: "No state shall... coin money... [or] make any thing other than gold and silver coin a tender in payment of debts..."

States are not allowed to make their own coins. States are not allowed to make any object that isn't already a gold or silver coin legal tender - so they can't generically declare gold bullion to be legal tender, unless it's in coin form. The state will have to name the specific coins being legalized in their legislation. Which also means they can't make "medals" or "rounds" and unilaterally declare those rounds to be "coins", because (as mentioned) they can't coin money.

While it has never actually been tested or proven in a court of law, the common-sense definition of "gold or silver coin" is something like "a piece of gold or silver that has been stamped into a convenient form for circulation, and has been duly given legal tender status and/or a face value by an internationally recognized government". British sovereigns, Canadian maple leafs, Australian nuggets, South African krugerrands and Mexican onzas would all be "gold coins" under this definition. Goldback notes, gold ingots, Hutt River Province quasi-coins and private bullion rounds are not.

Section 10 is all about taking away the rights of states that they (theoretically) used to enjoy as quasi-independent member-states under the Confederation. Prior to 1789, states could and did issue their own coinages. Now, they cannot. The exemption clause about "gold and silver coin" is all about adopting foreign coinage in emergencies and contingencies. The Constitution's drafters knew that the Federal government was in no position to immediately replace the entire coinage supply with US money, and they wished to give states the power to declare whatever foreign coinage they could get their hands on as legal tender. But even here they wanted to limit this foreign coinage to gold and silver, rather than base-metal.

There is, of course, a way around this constitutional blockage: using another country as a flag-of-convenience.
- Make some quasi-coinage in the name of some impoverished third-world country. Liberia, Somalia, Angola... there's lots to choose from. Take your pick.
- You do not need to export your quasi-coins to that country or import them into the US, since making quasi-coinage in the name of another country is not illegal in the US.
- Have that country's government do whatever they need to do to declare your quasi-coins as legal tender in that country.
- Hey-howdy-hey, your quasi-coins are now fair dinkum true blue "coins", and your state can now make them legal tender.

Isn't there a middle ground which is occupied by scrip like "goldbacks"? You facilitate the optional use of alternate means of payment rather that state mandated "legal tender" use.

The way I see it, either something is a legal tender, or it isn't. There isn't really any middle ground. I don't see any capacity for a state government to "facilitate the optimal use of alternate means of payment" that isn't a de-facto and de-jure declaration of legal tender.

If people want to conduct business between themselves using precious metals - either Goldbacks or other chunks of physical metal - as a medium of exchange, they already can go right ahead and do that right now, without the need for state government legislation. Nobody's forcing anybody to use US dollars in a transaction. What would a state government bring to the table for this transaction, that would actually be helpful and welcomed?

A neutral third-party opinion on what the current bullion prices are, or an "official exchange rate" between bullion and US currency? You already have that from the precious metals market.

Some kind of mandate that forces someone to accept bullion in payment, even if the recipient does not want to be given bullion? That would become de-facto legal tender.

The ability to pay your state taxes in bullion? I seriously doubt that any of the advocates for monetization of bullion are going to want to hand over bits of their bullion hoard to the state government, and I seriously doubt state governments really want to increase their own costs by starting to handle and stockpile PMs themselves.

State government agreement to collect taxes on bullion transactions, as if they were cash transactions? Again, I'm pretty sure the advocates of bullionization aren't keen on maximizing their tax bill.

Official state recognition of Goldbacks, or some similar bullion-based private currency? Again, how would a state officially recognize such currency without backing it or agreeing to prop it up if it threatens to collapse? And how would such backing not become a de-jure legal tender declaration, and thus unconstitutional? And if it isn't actual "backing" of the private currency with no responsibility accepted by the state, then what exactly is it? How would such "recognition" be any more meaningful than the state government giving the private currency its "thoughts and prayers"?

Don't get me wrong, I'm all for encouraging the use of private currencies like Goldbacks, if that's what people want to get into. But I just don't see any mechanism whereby a state government can take part in such encouragement without violating the Constitution.

People are drawn to private currencies because they are private. No government involvement. All fine and well, but "no government involvement" means no government oversight or control, and no government safety net responsible for managing the currency through the inevitable hard times. Either use government money, with all the pros and cons of that system, or use private money, with its own list of pros and cons. There is no possible middle ground, that I can see.

But there are states and localities that have and currently do use scrip. Local businesses use it because it has been "facilitated" by a local or state government.

Overdate

@seatedlib3991 said:
Anyone thinking about this should read about the panic of 1873. James

>
What panic?

Significant parts of the population in many places were worse off but the majority gained because of the rise in living standards brought about by technical innovation and the consequent ‘benign deflation’.

Overdate

@jmlanzaf said:
I see no reason why coins should be taxed differently than comic books or sports cards. Investment grade bullion is another matter.

>
What about gold and silver eagles? They are marketed as investment vehicles and stores of value. And bags of silver coins are mostly traded as "investment grade bullion", not as collectibles.

jmlanzaf

@Overdate said:

@jmlanzaf said:
I see no reason why coins should be taxed differently than comic books or sports cards. Investment grade bullion is another matter.

>
What about gold and silver eagles? They are marketed as investment vehicles and stores of value. And bags of silver coins are mostly traded as "investment grade bullion", not as collectibles.

I said, except for investment grade bullion.

derryb

US gold and silver coins are already money:

Each has a dollar value assigned to it.

Deathstar_69

@WCC said:

@jmlanzaf said:

Exchange rate fluctuate by the second. If silver is dropping by $1, as it did the other day, there is risk to both the buyer and seller in the exchange. You might go to the store with $2500 in gold to buy something only to find out that you only have $2450 in gold when you get there.

This is why I'm convinced that no "crypto" will ever become a functioning currency at any meaningful scale other than central bank digital currencies.

I see your point. Crypto's volatility and scalability issues make it hard to see them as a stable currency on a large scale. CBDCs seem like the way forward with government backing and stability. That said, decentralized cryptos might still have a place for things like cross-border payments or as an inflation hedge.

TwoSides2aCoin

@derryb said:
US gold and silver coins are already money:

Each has a dollar value assigned to it.

Right. A dollar that has 90+ % less buying power. We are rich in stupidity.

derryb

@TwoSides2aCoin said:

@derryb said:
US gold and silver coins are already money:

Each has a dollar value assigned to it.

Right. A dollar that has 90+ % less buying power. We are rich in stupidity.

Well, the OP did inquire about PMs being legal tender. I simply responded. And yes, by your standard I am very rich in stupidity.