Statement Introducing the Free Competition in Currency Act
This speech was presented before the
Over millennia of human history, gold and silver have been the two metals that
have most often satisfied these conditions, survived the market process, and
gained the trust of billions of people. Gold and silver are difficult to
counterfeit, a property which ensures they will always be accepted in commerce.
It is precisely for this reason that gold and silver are anathema to many
governments. A supply of gold and silver that is limited in supply by nature
cannot be inflated, and thus serves as a check on the growth of government.
Without the ability to inflate the currency, governments find themselves
constrained in their actions, unable to carry on wars of aggression or to
appease their overtaxed citizens with bread and circuses.
On the desk in my office I have a sign that says: "Don't steal – the
government hates competition." Indeed, any power a government arrogates to
itself, it is loathe to give back to the people. Just as we have gone from a
constitutionally-instituted national defense consisting of a limited army and
navy bolstered by militias and letters of marque and reprisal, we have moved
from a system of competing currencies to a government-instituted banking cartel
that monopolizes the issuance of currency. In order to reintroduce a system of
competing currencies, there are three steps that must be taken to produce a
legal climate favorable to competition.
The first step consists of eliminating legal tender laws. Article I Section 10
of the Constitution forbids the States from making anything but gold and silver
a legal tender in payment of debts. States are not required to enact legal
tender laws, but should they choose to, the only acceptable legal tender is
gold and silver, the two precious metals that individuals throughout history
and across cultures have used as currency. However, there is nothing in the
Constitution that grants the Congress the power to enact legal tender laws. We,
the Congress, have the power to coin money, regulate the value thereof, and of
foreign coin, but not to declare a legal tender. Yet, 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.
Historically, legal tender laws have been used by governments to force their
citizens to accept debased and devalued currency.
These actions also give rise to the most pernicious effects
of inflation. Most of the merchants and peasants who received this devalued
currency felt the full effects of inflation, the rise in prices and the lowered
standard of living, before they received any of the new currency. By the time
they received the new currency, prices had long since doubled, and the new
currency they received would give them no benefit.
In the absence of legal tender laws,
The second step to reestablishing competing currencies is to eliminate laws
that prohibit the operation of private mints. One private enterprise which
attempted to popularize the use of precious metal coins was Liberty Services,
the creators of the Liberty Dollar. Evidently the government felt threatened,
as Liberty Services had all their precious metal coins seized by the FBI and
Secret Service in November of 2007. Of course, not all of these coins were
owned by Liberty Services, as many were held in trust as backing for silver and
gold certificates which Liberty Services issued. None of this matters, of
course, to the federal government, which hates competition. The responsibility
to protect contracts is of no interest to the federal government.
The sections of US Code which Liberty Services is accused of violating are
erroneously considered to be anti-counterfeiting statutes, when in fact their
purpose was to shut down private mints that had been operating in
The final step to ensuring competing currencies is to eliminate capital gains
and sales taxes on gold and silver coins. Under current federal law, coins are
considered collectibles, and are liable for capital gains taxes. Short-term
capital gains rates are at income tax levels, up to 35 percent, while long-term
capital gains taxes are assessed at the collectibles rate of 28 percent.
Furthermore, these taxes actually tax monetary debasement. As the dollar
weakens, the nominal dollar value of gold increases. The purchasing power of
gold may remain relatively constant, but as the nominal dollar value increases,
the federal government considers this an increase in wealth, and taxes
accordingly. Thus, the more the dollar is debased, the more capital gains taxes
must be paid on holdings of gold and other precious metals.
Just as pernicious are the sales and use taxes which are assessed on gold and
silver at the state level in many states. Imagine having to pay sales tax at
the bank every time you change a $10 bill for a roll of quarters to do laundry.
Inflation is a pernicious tax on the value of money, but even the official
numbers, which are massaged downwards, are only on the order of 4% per year.
Sales taxes in many states can take away 8% or more on every single transaction
in which consumers wish to convert their Federal Reserve Notes into gold or
silver.
In conclusion, Madame Speaker, allowing for competing currencies will allow
market participants to choose a currency that suits their needs, rather than
the needs of the government. The prospect of American citizens turning away
from the dollar towards alternate currencies will provide the necessary impetus
to the
Congressman Ron
Paul of
To learn more about Congressman Ron Paul, visit his Congressional Home Page.
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