fyi, text copy of Paul's "Honest Money Act"

["fair use," "teachable moment," "archival," Section 107(a), 1976
Copyright Act and 1998 Digital Millennium Act]

Bring Back Honest Money

by Rep. Ron Paul, MD by Rep. Ron Paul, MD 

Ron Paul in the US House of Representatives, July 25, 2003

Mr. Speaker, I rise to introduce the Honest Money Act. The Honest
Money Act repeals legal tender laws, a.k.a. forced tender laws, that
compel American citizens to accept fiat (arbitrary) irredeemable
paper-ticket or electronic money as their unit of account. 

Absent legal tender laws, individuals acting through the markets,
rather than government dictates, determine what is to be used as
money. Historically, the free-market choice for money has been some
combination of gold and silver, whenever they were available. As Dr.
Edwin Vieira, the nation's top expert on constitutional money, states:
"A free market functions most efficiently and most fairly when the
market determines the quality and the quantity of money that's being
used." 

While fiat money is widely accepted thanks to legal tender laws, it
does not maintain its purchasing power. This works to the disadvantage
of ordinary people who lose the purchasing power of their savings,
pensions, annuities, and other promises of future payment. Most
importantly, because of the subsidies our present monetary system
provides to banks, which, as Federal Reserve Chairman Alan Greenspan
has stated, "induces" the financial sector to increase leverage, the
Federal Reserve can create additional money, in Mr. Greenspan's words,
"without limit." For this reason, absent legal tender laws, many
citizens would refuse to accept fiat irredeemable paper-ticket or
electronic money. 

Legal tender laws disadvantage ordinary citizens by forcing them to
use money that is vulnerable to vast depreciation. As Stephen T.
Byington wrote in the September 1895 issue of the American
Federationist: "No legal tender law is ever needed to make men take
good money; its only use is to make them take bad money. Kick it out!"
Similarly, the American Federation of Labor asked: "If money is good
and would be preferred by the people, then why are legal tender laws
necessary? And, if money is not good and would not be preferred by the
people, then why in a democracy should they be forced to use it?" 

The American Federation of Labor understood how the erosion of the
value of money cheated working people. Further, honest money, i.e.,
specie, was one of the three issues that encouraged ordinary people to
organize into unions when the union movement began in the U.S. circa
1830. 

While harming ordinary citizens, legal tender laws help expand the
scope of government beyond that authorized under the Constitution.
However, the primary beneficiaries of legal tender laws are financial
institutions, especially banks, which have been improperly granted the
special privilege of creating fiat irredeemable electronic money out
of thin air through a process commonly called fractional reserve
lending. According to the Federal Reserve, since 1950 these private
companies (banks) have created almost $8 trillion out of nothing. This
has been enormously advantageous to them. 

The advantages given banks and other financial institutions by our
fiat monetary system, which is built on a foundation of legal tender
laws, allow them to realize revenues that would not be available to
these institutions in a free market. This represents legalized plunder
of ordinary people. Legal tender laws thus enable the redistribution
of wealth from those who produce it, mostly ordinary working people,
to those who create and move around our irredeemable paper-ticket
electronic money which is, in essence, just scrip. 

The drafters of the Constitution were well aware of how a government
armed with legal tender powers could ravage the people's liberty and
prosperity. That is why the Constitution does not grant legal tender
power to the federal government, and the states are empowered to make
legal tender only out of gold and silver (see Article 1, Section 10).
Instead, Congress was given the power to regulate money against a
standard, i.e., the dollar. When Alexander Hamilton wrote the Coinage
Act of 1792, he simply made into law the market-definition of a dollar
as equaling the silver content of the Spanish milled dollar (371.25
grains of silver), which is the dollar referred to in the
Constitution. This historical definition of the dollar has never been
changed, and cannot be changed any more than the term "inch," as a
measure of length, can be changed. It is a gross misrepresentation to
equate our irredeemable paper-ticket or electronic money to "dollars."


However, during the 20th century, the legal tender power enabled
politicians to fool the public into believing the dollar no longer
meant a weight of gold or silver. Instead, the government told the
people that the dollar now meant a piece of government-issued paper
backed up by nothing except the promises of the government to maintain
a stable value of currency. Of course, history shows that the word of
the government (to protect the value of the dollar) is literally not
worth the paper it is printed on. 

Tragically, the Supreme Court has failed to protect the American
people from unconstitutional legal tender laws. Salmon Chase, who
served as Secretary of the Treasury in President Lincoln's
administration, when he was Chief Justice of the Supreme Court,
dissenting in Knox vs. Lee, summed up the argument against legal
tender laws in twelve words: "The legal tender quality [of money] is
only valuable for the purposes of dishonesty." [emphasis added.] 

Another prescient Justice was Stephen Field, the only Justice to
dissent in every legal tender case to come before the Court. Justice
Field accurately described the dangers to our constitutional republic
posed by legal tender laws: "The arguments in favor of the
constitutionality of legal tender paper currency tend directly to
break down the barriers which separate a government of limited powers
from a government resting in the unrestrained will of Congress. Those
limitations must be preserved, or our government will inevitably drift
from the system established by our Fathers into a vast, centralized,
and consolidated government." A government with unrestrained powers is
properly characterized as tyrannical. 

Repeal of legal tender laws will help restore constitutional
government and protect the people's right to a medium of exchange
chosen by the market, thereby protecting their current purchasing
power as well as their pensions, savings, and other promises of future
payment. Because honest money serves the needs of ordinary people,
instead of fiat irredeemable paper-ticket electronic money that
improperly transfers the wealth of society to a small specially
privileged financial elite along with other special interests, I urge
my colleagues to cosponsor the Honest Money Act.

Dr. Ron Paul is a Republican member of Congress from Texas. 


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