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From: eder@ssc-vax.UUCP (Dani Eder)
Newsgroups: net.legal
Subject: Re: Legal Tender and the U.S. Government
Message-ID: <16@ssc-vax.UUCP>
Date: Mon, 9-Jul-84 16:00:14 EDT
Article-I.D.: ssc-vax.16
Posted: Mon Jul  9 16:00:14 1984
Date-Received: Wed, 11-Jul-84 00:57:47 EDT
References: <256@ihopa.UUCP>
Organization: Boeing Aerospace, Seattle
Lines: 75

[9 July 1984]

U.S. Constitution, Article I, Section 8:

     The Congress shall have power . . .

2. To borrow money on the credit of the United States; . . .
5. To coin money, regulate the value thereof, and of foreign coin, . . .

Article I, Section 10:

1. No State shall . . . coin money; emit bills of credit; make anything
but gold and silver coin a tender in payment of debts; . . .

     The authors of the Constitution said what they meant to say in
clear concise language of the time.  "To coin" was a verb.  It meant
forming a coin of a precious metal with a specific metal content.
The government was guaranteeing that all the coins were of equal,
specific values.  Significantly, the rest of 5.  above reads
". . . and fix the standard of weights and measures;".  Weights and
coinage were related inthose days, so they were placed in the same
clause.
     Just a few years before, there had been a hyperinflation of the
continental currency (hence the phrase 'not worth a continental').
To prevent something like that from happening again, they prohibited
the states from emitting bills of credit (unsecured IOU's), and
required the use of gold and silver for debt payments.  For many
years these requirements were applied to the federal government too.
     Federal Reserve Notes are debt instruments of the Federal
Reserve Bank which issued it.  There are 12 FRB's, and the one which
issued a particular FRN is printed on it.  The FRB's in turn, are
privately owned by the member banks, although they are a regulated
monopoly.
     The backing for a Federal Reserve Note is mostly US Treasury
securities.

     Now, the question is, how must FRN's be treated?  They are required
to be accepted for 'all debts, public and private', and for payment
of taxes at the federal level.  Pre-1965 coins, which had silver in them,
and pre-1934 gold coins, command s substantial premium over FRN's, but
they are still legal.  You can logically assert that the older coins
have stayed fixed and the FRN has decreased in value (which is actually
what has happened due to inflation).  Thus, a FRN is only worth 10-20
cents.
     If you can get your employer to pay you in silver dollars, or arrange
to have a bank deliver such to you for your paycheck, you could claim
your income for federal taxation was only 1/10 as much as the IRS thinks
it should be.  They don't give you more than one dollar credit for taxes
paid if you pay with silver dollars, so you shouldn't have to get taxed
for more if you get them.  Another use would be to pay silver coin for
a house downpayment, and adjust the sale price downward accordingly.
The seller could avoid showing a gain on the sale, and you might get
property taxes reduced on the basis of the sale price.  
     
     The reason governments like paper money is they can make as much
of it as they like.  Every paper currency or debased coinage in history
(over 2000 years) has inflated to zero value, which is what they are
actually worth.  Governments can't make gold and silver, thus are forced
to be more responsible about spending.  The U.S. silver dollar stayed
at the same value from 1793 to 1964.  Compare that to the 66% that the
dollar has lost since 1967.  Gold and silver emerged among commodities
as the preferred form of money because of high value/unit weight, 
scarcity, stability (gold mined 2000 years ago is still around, I have
100 year old silver dollars that look brand new. compare to average life
of $1 paper money, which lasts 18 months.), and most importantly,
general acceptance.

     When all else fails, people will still accept gold and silver.  They
were used by Vietnam boat people, for example, to buy escape.  The
government would have you believe that gold is a 'barbarous relic'.
If that is so, then ask yourself why the US still owns 200 million ounces
of the stuff.

Dani Eder / ssc-vax!eder / Boeing Aerospace Company /