[Congressional Record (Bound Edition), Volume 149 (2003), Part 14]
[Extensions of Remarks]
[Page 18734]
[From the U.S. Government Publishing Office, www.gpo.gov]




                          THE HONEST MONEY ACT

                                 ______
                                 

                             HON. RON PAUL

                                of texas

                    in the house of representatives

                        Thursday, July 17, 2003

  Mr. PAUL. 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. As Dr. Edwin Vieira, the nation's top 
expert on constitutional monetary policy says: ``. . . 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 system to increase leverage, the 
Federal Government 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 to which it is 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 profits 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 unit redeemable in silver or gold. Instead, the government told 
the people that 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 a tyranny.
  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.

                          ____________________