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Author Topic: Fiat currencies, gold, silver and the US constitution  (Read 1809 times)
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March 05, 2013, 10:06:02 PM
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Just been reading about the Liberty Dollar - an alternative currency from about 10 years ago, based on warehouse bills, equivalent to bank notes, that could be exchanged for silver. The person who set it up was dragged through the courts by the US government claiming he was forging currency.

I subsequently read that in the US constitution that article I, section 8, clause 5 states that money cannot be freely printed and must be based on transactions of Gold and Silver...

Have I understood this correctly and if so why does the US have fiat currency?

Am I also correct in thinking subsequent governments can add to the constitution but not remove from it?

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March 05, 2013, 10:12:28 PM
 #2

To answer your last point first

http://en.wikipedia.org/wiki/Constitutional_convention_%28political_meeting%29

To answer your earlier point

http://en.wiktionary.org/wiki/willful_ignorance

The truth is that the constitution is just a piece of paper. The only power it has attains from the people who choose to adhere to it. Those in power find it convenient to pay it little more than lip service and those out of power have various reasons for being accepting of infractions.

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March 05, 2013, 10:19:34 PM
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I subsequently read that in the US constitution that article I, section 8, clause 5 states that money cannot be freely printed and must be based on transactions of Gold and Silver...

Have I understood this correctly and if so why does the US have fiat currency?

Because, quite frankly, the constitution is being ignored. The USA aren't what they used to be. The ideas of the founding fathers were great ones and make a lot of sense as we can observe know in this specific case. These people fled from the powers in Europe. Who do you think is behind the federal reserve system?

I tried to read a book called "The creature from Jekyll Island". Got about half way through. Quite enlightening. I can recommend it if you want to understand a whole lot more than I could ever tell you about American and World history especially regarding monetary issues.

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March 05, 2013, 10:21:16 PM
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What they said Grin  The constitution is like the Bible.  Take from that what you will.

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March 05, 2013, 10:44:48 PM
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Just been reading about the Liberty Dollar - an alternative currency from about 10 years ago, based on warehouse bills, equivalent to bank notes, that could be exchanged for silver. The person who set it up was dragged through the courts by the US government claiming he was forging currency.

I subsequently read that in the US constitution that article I, section 8, clause 5 states that money cannot be freely printed and must be based on transactions of Gold and Silver...

Have I understood this correctly and if so why does the US have fiat currency?

Am I also correct in thinking subsequent governments can add to the constitution but not remove from it?


He is in jail for "counterfeiting" the USD. Bernard Von NotHaus used words like "dollar" on his gold and silver. His organization is gone, however some of the members and mints who made his precious metals products created the American Open Currency Standard (AOCS). They are a lot smarter so their gold/silver is not "counterfeiting" USD. Amagi Metals is actually an official dealer of AOCS!

The definition of fiat currency is currency legislated by the government. So if we were on a gold standard through government legislation, the gold standard would be considered fiat currency.

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March 05, 2013, 11:15:42 PM
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I subsequently read that in the US constitution that article I, section 8, clause 5 states that money cannot be freely printed and must be based on transactions of Gold and Silver...

Not quite correct. The Constitution only prohibits state governments from coining money, but it doesn't prohibit individuals from doing so. It also prohibits state governments from declaring anything other than silver and gold coin as legal tender, but it doesn't prevent the federal government from declaring anything it wants to be legal tender. The feds have decided that they are the only ones that can produce silver and gold "coin" (by defining it), so the states cannot make AOCS or NWTM or any other sort of bullion be legal tender. That doesn't, however, prevent a state government from accepting them as non-legal-tender currencies.

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March 06, 2013, 10:02:22 PM
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To clarify: all of what I'm about to say is leaving my personal opinion out of it while trying to answer from an objective viewpoint, so don't take what I say as being for or against anything specific.

Just been reading about the Liberty Dollar - an alternative currency from about 10 years ago, based on warehouse bills, equivalent to bank notes, that could be exchanged for silver. The person who set it up was dragged through the courts by the US government claiming he was forging currency.

The FBI claimed that his currency bore too strong a resemblance to current US currency.

I subsequently read that in the US constitution that article I, section 8, clause 5 states that money cannot be freely printed and must be based on transactions of Gold and Silver...

I think you have a mix up of clauses. Article I, Section 8 states that "all duties ... shall be uniform throughout the United States":
  • To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures

Your source may have mixed that up with Article I, section 10, where it says:
  • No State shall ... coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts

The reason for this clarification was to prevent individual states from printing their own currency against the currency issued by congress. It may have been a cautionary effort brought on by worries of the early colonial paper dollars in the late 1600s and early 1700s. Many states issued their own bills of credit that quickly inflated. They may have also had concerns about the continentals that quickly devalued as well. Either way, this was a ruling against the states, not the congress.

Have I understood this correctly and if so why does the US have fiat currency?

Congress' explanation for fiat currency is based on the same section of Article I you mentioned earlier.

Again from Article I, Section 8:
  • ... to borrow Money on the credit of the United States

A US dollar is a legal liability of the United States. Put simply: it is an obligation of the US to pay the holder "lawful money" on demand, which can be any handful of assets held by the Federal Reserve but nowadays is usually some form of a treasury security.

Am I also correct in thinking subsequent governments can add to the constitution but not remove from it?

A new law can be added to the constitution through an amendment. Old laws are not "removed" from the constitution as much as they are "overwritten", so to speak. For example: Section 1 of Article II explained the election process for the President and Vice President. Put simple, whoever came in second place would become the VP. Terrible system. So congress passed the 12th amendment in 1803 that gave a new system for electing the President and Vice President. This amendment didn't "erase" the old law, but just superseded it.

The closest thing to an amendment being "removed" is the 18th amendment, which was simply repealed by the 21st amendment.

At any rate, yes: the government can add to the constitution through an amendment that passes through congress, but they can also "overwrite" old parts of the constitution if needed with an amendment as well. The "problem" with this is the difficulty in getting anything passed through congress these days, let alone anything as big as a constitutional amendment.

Bringing an opinion into things here: today we see most politicians essentially "interpreting" the constitution differently to suit their needs in order to avoid the amendment process.
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March 06, 2013, 10:04:08 PM
 #8

I tried to read a book called "The creature from Jekyll Island". Got about half way through. Quite enlightening. I can recommend it if you want to understand a whole lot more than I could ever tell you about American and World history especially regarding monetary issues.

Molecular, if you liked that book, you will probably like this one (if you haven't already seen it):

http://mises.org/money.asp

You'd probably also like The Case Against the Fed:

http://lewrockwell.com/rothbard/rothbard202.html

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March 10, 2013, 02:59:47 AM
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Have I understood this correctly and if so why does the US have fiat currency?

This is a giant rabbit hole. You may want to watch this 15 minute speech by Dr. Edwin Vieira who is the leading scholar on monetary jurisprudence and author of Pieces of Eight which is 1,700 page tome all about monetary jurisprudence.

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March 12, 2013, 07:59:03 PM
 #10

Just been reading about the Liberty Dollar - an alternative currency from about 10 years ago, based on warehouse bills, equivalent to bank notes, that could be exchanged for silver. The person who set it up was dragged through the courts by the US government claiming he was forging currency.

I subsequently read that in the US constitution that article I, section 8, clause 5 states that money cannot be freely printed and must be based on transactions of Gold and Silver...

Have I understood this correctly and if so why does the US have fiat currency?

Am I also correct in thinking subsequent governments can add to the constitution but not remove from it?


He is in jail for "counterfeiting" the USD. Bernard Von NotHaus used words like "dollar" on his gold and silver. His organization is gone, however some of the members and mints who made his precious metals products created the American Open Currency Standard (AOCS). They are a lot smarter so their gold/silver is not "counterfeiting" USD. Amagi Metals is actually an official dealer of AOCS!

The definition of fiat currency is currency legislated by the government. So if we were on a gold standard through government legislation, the gold standard would be considered fiat currency.

I believe that Fiat Currency is recognized as having no physical medium backing such as gold or silver - eg Fiat money is money that derives its value from government regulation or law.
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March 12, 2013, 08:04:27 PM
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I subsequently read that in the US constitution that article I, section 8, clause 5 states that money cannot be freely printed and must be based on transactions of Gold and Silver...

Not quite correct. The Constitution only prohibits state governments from coining money, but it doesn't prohibit individuals from doing so. It also prohibits state governments from declaring anything other than silver and gold coin as legal tender, but it doesn't prevent the federal government from declaring anything it wants to be legal tender. The feds have decided that they are the only ones that can produce silver and gold "coin" (by defining it), so the states cannot make AOCS or NWTM or any other sort of bullion be legal tender. That doesn't, however, prevent a state government from accepting them as non-legal-tender currencies.

The text of Article I, Section 8, Clause 5 is:
 To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

To finance the Civil War, the federal government in 1862 passed the Legal Tender Act, authorizing the creation of paper money not redeemable in gold or silver. About $430 million worth of “greenbacks” were put in circulation, and this money by law had to be accepted for all taxes, debts, and other obligations—even those contracted prior to the passage of the act.
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March 14, 2013, 01:29:39 PM
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I believe that Fiat Currency is recognized as having no physical medium backing such as gold or silver - eg Fiat money is money that derives its value from government regulation or law.

Any money that you have to accept by force is fiat money, even gold and silver.

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