* taxation;
* borrowing by the State;
* payment of State legislators, officials, employees, contractors, suppliers,
and so on (that is, public spending);
* payment for takings of private property through exercise of the power
of eminent domain; and
* payment of judgments, fines, penalties, and other monetary awards
in the State's courts.
Moreover, by specifying the use of gold for receipts
and payments in these areas, the New Hampshire bill plainly operates
on the basis of "gold-clause contracts". So, both constitutionally
and statutorily, the bill removes the State's monetary policy from control
by Congress, the Department of the Treasury, or the Federal Reserve.
To be sure, Article I, Section 10, Clause 1 of the Constitution imposes
absolute limits on a State's monetary policy:
No State shall * * * coin Money; emit Bills of
Credit; [or] make any Thing but gold and silver Coin a Tender in Payment
of Debts * * * .[4]
In using electronic gold currency as her medium
of exchange, however, New Hampshire will not be "coin[ing] Money",
merely employing a private "Money" over the creation of which
she has no control. And even the gold or silver coins into which the
bill requires that an electronic gold currency be freely convertible
are not "Money" that the State herself has "coin[ed]".
Neither will the State be "emit[ting] Bills
of Credit" when she employs electronic gold currency as her medium
of exchange. For such a currency is not anyone's mere "Bills of
Credit" that only promise to pay gold, but consists instead of
the actual gold that is the very stuff of payment.
And when the State offers electronic gold currency
"in Payment of [her] Debts", she will in effect "Tender"
such "gold and silver Coin" as her creditors may desire to
receive by the statutorily required conversion of their electronic gold
currency into coinage. Thus, her creditors, not the State, will fix
what shall be the exact form of the gold or silver that functions as
the final "legal tender" for their own transactions.
2. The New Hampshire bill does not require that
everyone use only electronic gold currency in their financial transactions
with the State. Although, consistently with Article I, Section 10, Clause
1, the State could do just that: For in reciting that "[n]o State
shall * * * make any Thing but gold and silver Coin a Tender in Payment
of Debts", that Clause plainly reserves to each State her original
sovereign power to "make * * * gold and silver Coin a Tender",
to the exclusion of everything else. Rather, in keeping with the principle
that the question of which media of exchange are best suited to people's
needs should be decided through open and fair competition in the free
market, the bill leaves the choice to use electronic gold currency,
or not to use it, to each individual or enterprise (with the exception
of a small class of taxpayers and parties subject to certain judgments
adjudicated in the courts, to be discussed below). Thus, New Hampshire
will have a system of parallel and competing media of exchange, to the
exact degree her own citizens and businessmen desire it.
As those citizens and businessmen increasingly
realize that gold is a medium of exchange far superior to such political
currencies as Federal Reserve Notes and base-metallic coinage, the State
will enjoy numerous benefits. For example,
•The use of electronic gold currency in
people's financial transactions with the State will encourage and facilitate
its use in their general commercial transactions, because people who
receive that currency from the State will want to spend it directly
for their own purposes; and people who need electronic gold currency
to make regular payments to the State will want to receive it directly
in their own businesses and employment.
•People’s increasing use of electronic
gold currency in financial transactions other than those involving the
State will encourage the expansion of the new financial institutions
the New Hampshire bill recognizes, as well as promoting entry into the
field by existing banks, which will recognize the advantage--and soon
the necessity--of offering such services.
•These financial institutions and reformed
banks can be expected in short order to offer, not only deposit accounts,
but also investment or loan accounts, in which customers deposit electronic
gold currency that the depositaries then loan to other clients, sharing
the interest-earnings with their depositors. (These investment or loan
accounts, of course, will have to be strictly segregated from the institutions'
and banks' gold deposit accounts, and not be allowed to serve as a basis
for issuing gold currency units.) Long-term loans for capital development
will especially benefit from being denominated in gold, because of the
low rates of interest that payments guaranteed in that medium will allow.
And,
•The development of an economy in which
gold plays an important role as a medium of exchange for capital investment
will encourage new investment in New Hampshire, because capital tends
to flow towards a stable economy, and foresighted investors always consider
an economy to be more stable the more stable its medium of exchange,
and the more supportive of that medium and its stability the government
is.
Thus, this bill can significantly contribute
to a solid foundation for New Hampshire’s economy for a long time
to come. Is that too optimistic a forecast? Hardly as optimistic as
the degree to which one must be pessimistic (or just plain realistic)
about the future of the present monetary and banking regimes.
B. Some particulars of the New Hampshire bill
merit attention, too.
•"Section 6-D:3 Duties of the Treasurer"
defines the special duties the State's Treasurer must fulfill with respect
to New Hampshire's use of electronic gold currency. This provides guidance
to the Treasurer, and sets standards by which his performance can be
evaluated. After all, the State's use of electronic gold currency will
be both novel and controversial. Without precise directions, the Treasurer
may not understand the extent of his authority and how he is to exercise
it. He may also find himself under adverse political pressure, or even
be personally unsympathetic or antagonistic to the idea of gold as currency.
A clear statement of his duties will contribute to the Treasurer's proper,
efficient, and even-handed execution of his responsibilities.
•"Section 6-D:4 Electronic Gold Currency
Payment Providers" establishes strict qualifications and standards
of operations for the private firms that will supply electronic gold
currency for the State's use. This weeds out any "fly-by-night
operators", particularly those who might attempt to employ a fractional-reserve
scheme in their issuance of gold currency units. An important goal of
the bill is to insulate the State herself (and, eventually, New Hampshire's
whole economy) from the dangers inherent in the present Ponzified regime
of fiat currency and fractional-reserve central banking. This purpose
would be defeated if the firms supplying electronic gold currency were
permitted to function in that unsound manner.
•"Section 6-D:5 Independent Specie
Vaults" establishes qualifications and standards of operations
for the private firms that will hold in safekeeping the actual gold
on the basis of which the Electronic Gold Currency Payment Providers
will furnish electronic gold currency. This eliminates any and all fractional-reserve
practices, guaranteeing instead that the system operates exclusively
on the safe principle of "bailment"--whereby the depositaries
hold their customers' gold or silver not as the depositaries' property,
to which the depositors have only a claim for the payment of a debt,
but as the depositors' property, in which the depositaries can assert
no proprietary interest whatsoever.
•"Section 6-D:6 Specie Exchanges"
establishes qualifications and standards for the private firms that
will engage in free-market exchanges of electronic gold currency for
gold and silver coin, or Federal Reserve Notes. This makes gold and
silver coin the ultimate media of payment into or out of the system.
Thus, electronic gold currency units can be created from, and converted
into, gold and silver coin--and while those units are in existence,
they will represent an exact, insured equivalent of actual gold bullion
held in safekeeping.
•"Section 6-D:7 Use of Gold and Silver"
establishes the State's policy of not requiring any person or enterprise
that deals with the State to use anything but electronic gold currency
as a medium of exchange; lists the State's essential sovereign functions
as to which such currency will be employed; and offers to enter into
"gold-clause contracts" with all creditors of the State to
the extent the Treasury holds sufficient gold to pay out at that time.
This takes the State out from under the national legal-tender law,[5]
and empowers her people, to the degree they desire to exercise that
power, effectively to "demonetize" Federal Reserve Notes and
base-metallic coinage in their financial transactions with the State.
•"Section 6-D:8 Use of Gold and Silver;
Taxes and Other Public Charges" requires that State tobacco taxes
be paid in electronic gold currency. Although tobacco taxes are relatively
small in amount (estimated to be somewhat less than 10% of New Hampshire's
annual revenue) they will provide the State with a regular income in
gold that will enable her to pay the first creditors who desire to receive
gold. If, on the one hand, more creditors request payment in gold than
the tobacco taxes can satisfy, the Treasurer may convert holdings of
Federal Reserve Notes into electronic gold currency, or advise New Hampshire's
Legislature to mandate that other taxes or public charges be made payable
in gold. If, on the other hand, tobacco taxes prove more than sufficient
to satisfy creditors' requests, the residual amount of gold held by
the State can be treated as an investment, or can be converted into
Federal Reserve Notes or other assets as necessary.
•"Section 6-D:9 Use of Gold and Silver;
Loans, Bonds, and Notes" allows for State debt to be denominated
and paid in electronic gold currency. Use of gold as the guaranteed
medium for payment of her bonds will enable New Hampshire to borrow
at low interest rates for long periods, stabilize her long-term indebtedness,
and increase her credit rating.
•"Section 6-D:10 Use of Gold and Silver;
Purchase and Sale of Property by the State" permits the State to
buy and sell property of all kinds for electronic gold currency. As
the process of governmental purchase and sale sets prices in gold for
various types of property, it will assist in expanding the use of electronic
gold currency in similar private commerce throughout the State, by providing
the base on which a general structure of prices denominated in gold
can be built.
•"Section 6-D:11 Use of Gold and Silver;
Expropriated Property" allows payment in electronic gold currency
for property taken by the State through exercise of her power of eminent
domain. This will eliminate the incremental confiscation that can occur
when "fair market value" for such property is purportedly
paid in a chronically depreciating currency such as Federal Reserve
Notes. Full payment of "fair market value" for any property
requires payment with a truly free-market, not a political, currency.
•"Section 6-D:12 Use of Gold and Silver;
Damages, Fines, and Penalties" allows, and in some cases requires,
judicial damages, fines, and penalties to be paid in electronic gold
currency. This curtails the ability of judges arbitrarily to decide
what shall be the tender for these payments on the basis of their erroneous
interpretations of monetary law, either requiring that the tender be
gold, or leaving that choice to the private parties involved.
•"Section 6-D:13 Use of Gold and Silver;
Contracts, Wages, and Fees" allows public employees and public
contractors to be paid in electronic gold currency. This will assist
in further expanding the use of such currency in private commerce throughout
the State, by providing more foundational blocks upon which a general
structure of prices denominated in gold can be erected.
•"Section 6-D:14 Notification of Choice
of Medium of Payment" and "Section 6-D:15 Limitations on Payments
of Gold and Silver by the State" require persons or enterprises
desiring payment in electronic gold currency to elect such payment on
a timely basis, and limit total payments of that currency to the amounts
the State holds at that time. This is necessary because, when the statute
is first implemented, the State's only gold income will be relatively
small, deriving solely from tobacco taxes and judicially imposed fines
and penalties. The State cannot be required to convert its larger holdings
of Federal Reserve Notes into gold in order to pay its creditors in
the latter medium of exchange--for that would be to compel New Hampshire
to redeem in gold the very notes the Federal Reserve System and the
Department of the Treasury have refused to redeem since the 1930s. As
more creditors of the State request payment in gold beyond the amounts
collected through tobacco taxes and fines, however, public pressure
will compel New Hampshire's Legislature to designate more taxes and
other forms of State income payable exclusively in gold, until eventually
the State, her debtors, and her creditors will deal solely in that medium
of exchange.
To be sure, the New Hampshire electronic currency
bill is long and somewhat involved, because it tries to foresee and
address every problematic contingency, leaving as little as possible
to chance. In principle, though, the bill is very simple, because it
promotes monetary freedom and the honesty such freedom imposes on the
government in the most straightforward manner possible: free competition
among media of exchange in the open market. That alone should be enough
to warrant its support by every patriot.