Missouri H.B.1637, which “recognizes gold and silver as legal tender” and was previously introduced in the Missouri House of Representatives on February 2, 2012, was referred to the Ways and Means committee on Thursday, February 9th, by Rep. Paul Curtman. The proposed language of the bill, termed “Missouri Sound Money Act of 2012,” sets forth what is specifically mandated by Article I, Section 10 of the U.S. Constitution.
Article I, Section 10 of the U.S. Constitution:
“No State shall…make anything Thing but gold and silver Coin a Tender in Payment of Debts.”
Missouri H.B. 1637:
“2. Gold and silver issued by the federal government is legal tender in this state:”
The act also outlines the tax status of gold and silver as used as a legal tender, due process safeguards for those who own it as well as the the method of establishing its value for a given day’s transactions, among other things.
Missouri is one of many states that has recently introduced legislation recognizing gold and silver as legal tender.
The full text of the bill can be read here. It is brief and definitely worth the read.
The main info page of the bill, which summarizes other pertinent information such as past and scheduled actions related to it, can be viewed here.
Have a peek at this article. Probabl;y something you guys are already aware of, but worth a look in any case.
http://money.cnn.com/2012/02/03/pf/states_currencies/index.htm?source=yahoo_hosted
I get the whole sound money thing that the states are looking at doing, but don’t they have the cart before the horse? Basically, they are saying that the value of your gold or silver coins is based upon the par value of the FRN/fiat currency/toilet paper that you can currently use to buy the gold or silver which is on the verge of collapse. Instead, the value of the FRN/whatever should be rooted in the value of the silver or gold that is backing it up. It’s not a semantic difference, as it makes all the difference in the world.
If paper FRNs are facing a massive meltdown becoming worthless in value resulting in hyperinflation a la other fiat currencies like the Weimar Republic Mark or the Zimbabwe Dollar, then defining the value of gold or silver whose FRN price would likely skyrocket seems kinda pointless to me. Put another way, the value of gold and silver simply can’t be defined by the intrinsically worthless when people have come to lose all faith in the intrisically worthless.
Instead, if the states or the federal government want real money, they have to define the intrisically worthless (paper) in terms of gold and silver. I know that most of the people who read this website will already have some understanding of this, but I wanted to share a story of something that really opened my eyes last year when I was looking into the face value of AOCS medallions.
When Rob had asked me to be the Marketplace Director, I found myself talking to people pretty much every day trying to explain why it made sense to accept a 1 oz. round of AOCS silver for a face value equivalent of 50 dollars in trade for whatever good or service they were selling. It was a neverending struggle to get people to understand that a $30 hunk of silver (or whatever that day’s spot price was) could be worth 50 bucks. People always seemed to be defining the silver in terms of the spot value instead of the face value of the medallion, i.e. defining the worthwhile in terms of the worthless.
One day, it occurred to me that it couldn’t always have been this backwards in people’s minds when US (and Canadian/Mexican/pretty much everybody’s) coins were made of silver or gold, so I decided to do a little experiment. What I did was to get the annual historical spot price averages of silver from Kitco’s website. Combining that with information I found on coinflation.com, I built a spreadsheet comparing the face value of the pre-1965 coinage (halves, quarters and dimes) with the spot value of its silver content at that time. An important sidenote that I learned in this little experiment is that prior to 1965 $10 worth of dimes weighed exactly the same as $10 worth of quarters which weighed exactly the same as $10 worth of half dollars. That’s why dimes, quarters and halves are the size that they are. Put another way, the amount of silver you got from doing a transaction with any of those coins was exactly the same regardless of which coins were used. From 1916 through 1964, at no time did the spot value of the silver in those coins rise above the face value of the coins or the paper silver certificate equivalents. As a percentage, it ranged anywhere from a low of 18.37% spot/face to high of 96.65% in 1919 and 93.53% in 1963 & 1964. In general though, the spot value of the underlying silver versus the face value of the coins usually ranged in the 45-65% neighborhood. If you think about it, that’s not really any different than the face value of AOCS silver now. If a 1 oz. AOCS silver round has a face value of 50 and the spot value of the silver at this moment is $32.88, it works out to a ratio of 65.76%, more or less in line with what was happening prior to 1965. Again, the same if true for all AOCS silver medallions regardless of their size, 1/10 oz, 1/2 oz., 1 oz. or 5 oz, or whatever else, just like the pre-65 halves, quarters and dimes mentioned above.
As I mentioned before, the problem comes from people getting their thinking completely backward. In 1953 (or any other year prior to 1965), you would never have looked at a 90% silver half dollar and determined it’s value as being $0.30855 (its silver spot value in 1953) instead of its face value of 50 cents. Yet people do this all the time with AOCS medallions because they have come to accept FRNs as “real” money.
As it relates to the states accepting gold and silver as legal tender, I can only ask who cares. Sure, it’s a nice start, but it’s not any different than going down to the corner pawn shop, cashing in your silver and paying your taxes with intrinsically worthless FRNs. Sure, the pawn shop guy is going to want to gig you a little on the transaction, but it’s basically the same thing, isn’t it?
If the states or the federal government want to stop inflation dead in its tracks and preserve the value of the dollar, then it can only be done by defining the dollar in terms of some silver or gold (or some other intrisically worthwhile commodity) that is backing it up. Then, and only then, will we have sound money. Defining silver or gold by the worthless FRNs that can be used to by it right now may be practical for right now, but it is destined to fail in the long run and everybody knows it.