6 states want to create their own currency, bypassing Fed. Reserve Notes.

[dixiegrrrrl]

I stumbled across a bill being introduced in Virginia, to create "a study whether the Commonwealth should adopt a currency to serve as an alternative to the currency distributed by the Federal Reserve System in the event of a major breakdown of the Federal Reserve System."

And, in that bill, it mentions that "bills that have been or are being introduced in the legislatures of the States of Georgia, Indiana, Montana, New Hampshire, and South Carolina; "

The bill also focuses on fears of hyperinflation:

"WHEREAS, the present monetary and banking systems of the United States, centered around the Federal Reserve System, have come under ever-increasing strain during the last several years, and will be exposed to ever-increasing and predictably debilitating strain in the years to come; and

WHEREAS, many widely recognized experts predict the inevitable destruction of the Federal Reserve System’s currency through hyperinflation in the foreseeable future;"

Interesting read.

What do you think?

http://lis.virginia.gov/cgi-bin/legp604.exe?111+ful+HJ557

[jtuck004]

1. Funny

I mean, who do they think is gonna take it?

A note, backed by the full faith and credit of a state government that buys textbooks written by someone
who "found the information on the Internet". here...

They might be better off tearing down some buildings to create arable farmland...

[Pab Sungenis]

2. Nope. Unconstitutional.

The Constitution clearly forbids the states from coining (or printing) money.

[HereSince1628]

6. What's behind it?

Budget balancing or being in a state of rebellion? Both? The Frankling mint (wanting to sell rare coinage?)

You can't do interstate commerce with local currencies--is it fully intended to challenge the Constitution and thereby the state's membership in the Union?

[dixiegrrrrl]

11. Sounds as if they are thinking IN state commerce.

Not interstate.

[Art_from_Ark]

18. The Franklin Mint doesn't sell "rare coinage"

although it has had contracts ar various times with various small governments to mint coins for them, such as with the Bahamas in the 1970s.

Basically, the force behind this movement is a disgust with the inflation that has eaten away the value of unbacked paper money, especially since the 1970s, as well as a disgust with unofficial repeal of the Constitution's requirements for gold and silver coinage (which have never been officially repealed by a Constitutional amendment).

[Art_from_Ark]

17. Of course, the Constitution also prohibits the States

from accepting "any Thing but gold and silver Coin a Tender in Payment of Debts" (Article I, Section 10), but that little prohibition has been ignored for decades.

Incidentally, it was common for private companies in the 1830s-1860s to issue their own money, either in the form of gold coins (which were allowed as long as they were of the exact same standards as government-minted gold coins), and paper currency (which was ostensibly backed by gold and silver, but which often was not). During the Civil War and America's first Great Depression (the Panic of 1837), private mints also issued copper coins which were the equivalent of a cent in value. However, when a rail company in New York refused to redeem millions of cent tokens that it had issued, Congress was compelled to pass the Coinage Act of 1864 which effectively prohibited private coinage.

[notesdev]

25. True, but California got away with it

The IOUs they issued were a form of local currency paper money.

If things keep going the way they are going, states may have to coin their own money to retain a semblance of a functioning economy... the US dollar is being destroyed by Fed and fed.gov policies. You're seeing the effects in gasoline right now, in 3-6 months you're going to be getting the same sticker shock when you go to buy food.

[happyslug]

28. The Constitution only forbids coining of money to the states

No State shall enter into ...coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

http://www.archives.gov/exhibits/charters/constitution_transcript.html

Thus the States are forbidden to coin money. The real issue does the Constitution forbids states from issuing paper money?

Now, what we call "paper money" was called "Bills of Credit" during the 1700s and thus the states can NOT issue paper money directly. On the other hand private individuals and corporations can issue paper money. A bank that is a corporations wholly owned by a State can issue "Bills of Credit" in its own name even if it is clear such "bills of Credit" will be paid by assets of the State via the wholly owned State bank. i.e. the State can issue paper money via a wholly owned state bank, even while the Constitution forbids the state from doing so itself directly.

Thus it is possible to get around the Constitutional ban on State Issued Paper Money. There are federal laws that restrict any issue of "Bills of Credit" to the Federal Reserve and those laws may forbid the state from setting up its own banks and issuing paper money, but the Constitution does NOT forbid such mechanism around the constitutional ban (Through it is clear that Federal law can be passed that bans even such "private" paper money).

For more details see the following:
http://supreme.justia.com/constitution/article-1/58-powers-denied-to-the-states.html
http://www.coins.nd.edu/ColCurrency/CurrencyIntros/IntroBillsofCredit.html
http://americanhistory.about.com/od/revolutionarywar/a/Currency-Act-Of-1764.htm
http://etext.virginia.edu/users/brock/Enquiry.htm

[Dr. Righteous]

37. BUT....

But they can declare gold and silver as legal tender and declare that Federal Reserve Notes are not legal tender - bypassing the federal law which unconstitutionally declares Federal Reserve Notes to be legal tender.

[lib2DaBone]

3. Get rid of the Fed... issue bonds payable in 20 years .....

..with the stipulation that they money ONLY be used for rebuilding infrastructure and creating jobs.... using AMERICAN made parts and AMERICAN labor. Must be AMERICAN suppliers with AMERICAN addresses.. (not in the Cayman Islands)

Collect taxes from Corporations.. end of recession/depression.

[golfguru]

30. +1000

[LiberalEsto]

4. It'll be worth as much as Conferedate dollars nt

[Art_from_Ark]

19. Today, Confederate paper dollars are usually worth more

than their original face value.

http://shop.ebay.com/sis.html?_nkw=Confederate+5+Five+Dollar+Bill+1864+Civil+War+Currency

[happyslug]

29. At the time of the Civil War, it was common on both sides to issue only paper money, as low as 3Cent

For more on Fractional Currency, i.e. three cent, five Cents, ten cents, 25 cents and even 50 cent notes see:

http://www.journalofantiques.com/June04/coinsjune04.htm
http://en.wikipedia.org/wiki/Fractional_currency

What I liked was why such fractional currency was adopted, when the Civil War Started people horded gold and silver coins, including the unpopular three cent coins (And many people even horded copper one cent coins). At first people used stamps as a substitute for the missing coins, when the Post Office started to refuse to redeem damaged stamps, the treasury found out it had to issue paper money down to three cent notes. The first issue clearly state such notes were only convertible to stamps, but the second issue ended that and made such notes cash-able by the US Treasury. This continued till well after the end of the Civil War. The Copper cent continued to be minted during the war, and then the Three cent Nickel in 1865 and then the five cent Nickel starting in 1866 (The Nickel replaced the silver "1/2 dime").

http://books.google.com/books?id=2AaJra9gtSUC&pg=PT4&lpg=PT4&dq=%22postal+currency%22&source=web&ots=PmboT9ERAV&sig=_LzXnNVHO5GnoG_L-VC2W-D0X3g#v=onepage&q=%22postal%20currency%22&f=false

For more on the five cent nickel:
http://en.wikipedia.org/wiki/Nickel_%28United_States_coin%29

Until 1869, the fractional currency were being printed and remained in circulation till the early 1870s, but as the supply of silver increased do to the Comstock Mine in Nevada (and the access to that Silver via the Transcontinental Railroad, completed in 1869) Silver coins again start to circulate and the fractional Currency was withdrawn from circulation. Thus Fractional Currency has a very short life, but it is part of US history of money.

[Art_from_Ark]

32. When the war started, cents were being made of copper-nickel

Copper nickel cents (consisting of an alloy of 88% copper and 12% nickel) had been produced in circulation quantities since 1857, when the large-size copper cents were discontinued. They were being hoarded mainly for their nickel content. Copper cents (or more accurately, bronze cents) made a reappearance in 1864 due to the popularity of copper cent tokens that had been issued by various businesses to compensate for the lack of circulating coinage.

[TreasonousBastard]

5. Not only is this idiotic scheme unconstitutional...

Section 8 - Powers of Congress

<...>
To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
<...>

Section 10 - Powers prohibited of States

<...>
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
<...>


(Looks like there's a loophole there, but any thinking about state coinage is insane-- no state has any way to control the value of silver and gold, so there's no way to know what your state coin is really worth from day to day.)

But, even if a state did manage to legally issue paper money, the states are in such lousy shape now that no sane person would buy the money.

(And, never, ever forget Gresham's Law!)

[dixiegrrrrl]

9. Vermont seems to have found the loophole.

From a 2007 article on Vermont coins:

Vermont Freedom Currency is a single pure silver coin worth 10 Credits.
A single coin is worth $10 with the State of Vermont for any service, fee or tax.

This assures Credits hold an established value for purposes of barter.
These coins would operate as a voluntary barter currency accepted by individuals and businesses that choose to accept them.
They are not legal tender and cannot be converted into dollars except by a mutually agreeable private-sector transaction, such as might be done through e-Bay or Craigslist.

http://www.vtcommons.org/journal/2007/08/steve-moyer-vermont-freedom-currency-towards-new-localized-economy

Has anyone heard how well that plan is working????

[TreasonousBastard]

14. Near as I can tell, it hasn't happened-- just a pipe dream from this guy. But....

there have been other alternative local currency schemes, usually some variation of barter.

North Fork, California has its own local currency, as did Ithaca, NY and some other places. An actual state coin that could be used as currency has never happened that I know of. And these local efforts seem to have just kind of withered away.

(Apparently, some states tried it during the Civil War, but Lincoln stopped it by putting a 10% tax on the coins.)

[dixiegrrrrl]

15. "Lincoln stopped it by putting a 10% tax on the coins"

Wow...cool trivia. Love bits of info like that.
Thanks.

[Art_from_Ark]

22. I don't think that's quite true

No state that remained in the Union minted its own coins during the Civil War. Neither did any of the Confederate states. However, due to the scarcity of circulating coinage, private mints in both the North and South minted copper tokens and gold coins.

[Art_from_Ark]

21. Local currencies are called "scrip"

and they are legal up to a point.

Before the Mint started operations in 1793, a few States had minted their own coinage, including Massachusetts, Connecticut, New York, New Jersey, New Hampshire, and Vermont. States ended their coinage when they ratified the Constitution. Interestingly, there was no government source of coins until 1793, when the first cents and half cents were made.

There was no state coinage during the Civil War, but there was private coinage of copper tokens, and private gold coins were acceptable as legal tender as long as they contained the proper amount of gold.

[Art_from_Ark]

20. That article was written in August 2007

Since that time, the price of silver has almost tripled. So a coin that might "cost between $3-$5 each to produce, depending on the size of the coin and the cost of silver," would now cost 3 times that to produce. A $10 silver coin, at today's prices, would contain at most about 3/10 of a troy ounce of silver, or a little less silver than what's contained in 4 old (pre-1965) silver dimes.

[MineralMan]

7. Many bills are introduced. Few become law.

Any such proposal is a clear indication that the person introducing the bill has not read the US Constitution. Had that person done so, he/she would know that any such bill would be unconstitutional on its face.

[Historic NY]

8. They're going against the" Founding Fathers" ..... does the Secret Service know.....

they are making illegal currency.

[dixiegrrrrl]

12. They are not making it. The article clearly states they are doing a study of the idea.

[Art_from_Ark]

23. The US MInt (Treasury) is going against the "Founding Fathers"

since it no longer produces gold and silver coins for circulation.

[howaboutme]

10. At one time short term GO Muni Bearer Bonds

Bearer muni bonds and their accompanying coupons have not been issued since 1982, but some of the characteristics such as anonymity and portability backed by full faith of issuing authority are similar to that of fiat currency issued by Fed.

[qb]

13. LOL... we'd be the anti-EU!

[snot]

16. I'm v. concerned about the Fed's QE; but could these be RW conspiracy hype?

[Taitertots]

24. Who are the many widely recognized experts?

Where are they because the only people I've seen claiming hyperinflation are uneducated morans and tea baggers?

Even more relevant, what model do they claim to be using to generate these results?

[eridani]

26. There are a lot of local currencies in use already

http://en.wikipedia.org/wiki/Local_currency

[roamer65]

27. I like 5-10% inflation.

The American economy really starts to hum at that range of inflation.

If you want a store of wealth, buy gold or silver. Fiat currency is only a medium of exchange.

[fasttense]

31. If they are so worried about the solvency of the Fed.

I think they would be better served to start a State government bank then to simply print their own money.

[abelenkpe]

33. +1 for a sensible comment nt

[Art_from_Ark]

34. If they are so worried about the solvency of the Fed,

what good would starting a State government bank do, if the deposits were merely Fed dollars?

[dixiegrrrrl]

35. "IF" the deposits were Fed dollars...

The whole point of local currency would be to avoid using what is seen as fiat Fed bills.
So IF starting an independent state bank from that concern were to happen, I imagine they would not use Fed paper as money.
'Course I have no idea if states can run banks totally independent of Federal oversight/input/permission.

[Art_from_Ark]

36. States can't print their own money

so they would have to use Fed bills. The only way they could print their own money would be if they seceded. Of course, they could conceivably get around that by accepting deposits of precious metals, but since the prices of those metals fluctuates so much these days, I don't see how they could make that work.

[Bill USA]

38. here's the guy who thought this one up.....picture