It is widely understood that competition among private enterprises gives us technological improvements in all kinds of products, delivering higher quality at lower cost. For example, the competitionPostal Service in package delivery has been of great benefit to American consumers. Currency users also benefits from competition. My research indicates that currency has been better provided by competing private enterprises than by government monopoly. For example, private gold and silver mints during the American gold rushes providedtrustworthy coins until they were suppressed by legislation. Scientific appraisals have found that the privately minted coins were produced even more precisely than the coins of the US Mint. Privatebank currency was the most popular form of money around the world until government-sponsored central banks, with few exceptions, gained exclusive note-issuing privileges.We do not rely on the Treasury or the Federal Reserve, but rather private financial institutions, to provide our checking accounts,and traveler’s checks. The consumer benefits from the competition in payment services among banks. Consumers would likewise benefit from free and fair competition among coin issuers. Although FederalNotes and Treasury coins should of course be protected from counterfeiting, there is no good case for them to enjoy monopoly privileges in the market for currency.would give currency competition a chance. It would not remove the Federalthe currency market, but it would give the Fed a stronger incentive to deliver the kind of trustworthy money that consumers want. The dollar already faces salutary international competition from goldsilver, the euro, the Swiss Franc, and other stores of valuewould allow salutary domestic competition between the Federal The Fed will have little to fear from competition so long as it provides the highest quality product on the market. Continuing to ban competition from the domestic US currency market, or keeping it at a legal disadvantage, limits the options of American consumers who use money, to their disadvantage.What sort of competition might we see if currency were free from legislated restrictions? Here is one example. In 1998 a non-profit organization launched the “American Liberty Currency,” a private silver-based currency intended to compete with Federal In the year 2000 I wrote an article about the project, published by The Foundation forwould attract many users, absent high inflation in the dollar. But I noted then, and I reiteratethat in a high-inflation environment “silver-backed currency with widespread acceptance would provide a useful alternative to the Federal Reserve’s product. Then, if you don’t like the way the federal government managesthe value of the fiat dollar, you aren’t limited to complaining. You can switch to the private alternativeIf double-digit inflation should unfortunately then the American public, as I wrote, would “find a very practical advantage in a silver-backed alternative to the free-falling Federal the Act repeals 31 USC, §5103, which presently declares that “US coins and currencyare legal tender for all debts, public charges, taxes, and duesWhat are the likely economic consequences of removing legal tender status from US Treasury coins and FederalThe immediate consequences would be minimal. New forms of currency will not be introduced into the market any faster than the public is prepared to accept them.Thelonger-run consequence will be to enable a more level playing field for competition in the issue of currency.Legal tender status is more limited in its scope than is sometimes believed. That Federal Treasure coins have status does not mean that they are the only legal way to pay. Any seller or creditor mayvoluntarily accept payment by transfer of bank-account balances, that is, by ordinary bank check, debit-card transfer, direct deposit, or wire transferTraveler’s checks or cashier’s checks may be accepted. The seller or creditor may even accept foreign currency or barterare a tiny share of all final payments in the United States (less than 20% of consumer payments, nearly 0% of business-to-business and financial paymentsThe great bulk of payments are electronic transfers of non-legal-tender bank balances.Nor does legal-tender status mean that acceptance is mandatory when offered at a point of sale in aspot transactionVending machines refuse pennies. Mail-order sellers may refuse cash of any denomination. Millions of legal-tender one-dollar coins are piling up in the Federal vault in Baltimore because nobody wants them.
There is already an important exception, however. Debts in gold-clause contracts, made since 1977, are not unilaterally discharged by offer of US coin or Federal 31 U.S.C. §5118(d)(2) An obligation issued containing a gold clause or governed by a gold clause is discharged onUnited States coin or currency that is legal tender at the time of payment. This paragraph does not apply to an obligation issued after October 27, 1977.”That is, the holder of a gold-clause bond is free to insist on receiving payments in gold, or in an amount of dollars indexed to the price of gold, whichever the bond contract specifies.Removing legal-tender status from US Treasury coins and Federal Reserve notes generally, as Section 2 of the Act does, essentially broadens the gold-clause exception to allow contractual obligations to specify payment in, or indexed to, any medium that is an alternative to Treasury coins and Federal It opens the competition not just to private checks and banknotes, but also to gold units of foreign currency, Consumer Price Index bundles, wholesale commodity bundles, Bitcoins, and whatever else a lender and a borrower might agree upon. If they prefer a unit for denominating their debt contract other than the Fed or Treasury dollar, they would be free to write a specifically enforceable contract in the unit of their choice.
the Act rules out federal or state taxes on precious-metal coins, whether minted by a foreign government or by a private firm. This section would allow precious-metal coins to compete with the US Treasury’s token coins made of base metals, and denominated in fiat US dollarswithout tax disadvantagessales taxes on acquisition and capital gains taxes on holding, from whichthereby a level playing field for competition among monetary standards. the Act repeals Title 18 §486relating to uttering or passing coins of gold, silver, or other metaland §489 (making or possessing likeness of coinsSection 486 is a relic of the Civil War, part of an effort to bolster the use of the wartime papercurrency by banning competition from the private gold coins I previously mentioned§486, combined with the previous section, would allow silver and gold coins to compete with the Treasury and the Fed on a level playing fieldI previously mentioned the American Liberty Currency project. The mover of that projectas convicted in March 2011 of violating §486, and presently awaits sentencing, for the victimless crime of producing one-ounce silver coins, of original design, that he hoped wouldcompete
There is already an important exception, however. Debts in gold-clause contracts, made since 1977, are not unilaterally discharged by offer of US coin or Federal 31 U.S.C. §5118(d)(2) An obligation issued containing a gold clause or governed by a gold clause is discharged onUnited States coin or currency that is legal tender at the time of payment. This paragraph does not apply to an obligation issued after October 27, 1977.”That is, the holder of a gold-clause bond is free to insist on receiving payments in gold, or in an amount of dollars indexed to the price of gold, whichever the bond contract specifies.Removing legal-tender status from US Treasury coins and Federal Reserve notes generally, as Section 2 of the Act does, essentially broadens the gold-clause exception to allow contractual obligations to specify payment in, or indexed to, any medium that is an alternative to Treasury coins and Federal It opens the competition not just to private checks and banknotes, but also to gold units of foreign currency, Consumer Price Index bundles, wholesale commodity bundles, Bitcoins, and whatever else a lender and a borrower might agree upon. If they prefer a unit for denominating their debt contract other than the Fed or Treasury dollar, they would be free to write a specifically enforceable contract in the unit of their choice.
the Act rules out federal or state taxes on precious-metal coins, whether minted by a foreign government or by a private firm. This section would allow precious-metal coins to compete with the US Treasury’s token coins made of base metals, and denominated in fiat US dollarswithout tax disadvantagessales taxes on acquisition and capital gains taxes on holding, from whichthereby a level playing field for competition among monetary standards. the Act repeals Title 18 §486relating to uttering or passing coins of gold, silver, or other metaland §489 (making or possessing likeness of coinsSection 486 is a relic of the Civil War, part of an effort to bolster the use of the wartime papercurrency by banning competition from the private gold coins I previously mentioned§486, combined with the previous section, would allow silver and gold coins to compete with the Treasury and the Fed on a level playing fieldI previously mentioned the American Liberty Currency project. The mover of that projectas convicted in March 2011 of violating §486, and presently awaits sentencing, for the victimless crime of producing one-ounce silver coins, of original design, that he hoped wouldcompete
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