Thursday, February 18, 2010

Funny Money

Over the past year there has been a lot of saber rattling by various states over states rights. Here’s an interesting concept out of South Carolina, a place where a lot of interesting things have come from in the past year:

South Carolina Lawmaker Seeks to Ban Federal Currency

"South Carolina Rep. Mike Pitts has introduced legislation that would mandate that gold and silver coins replace federal currency as legal tender in his state."

The article points out two problems with his legislation:

"As one expert told the Scoop, however, his bill would likely be ruled unconstitutional because it 'violates a perfectly legal and Constitutional federal law, enacted pursuant to the Commerce Clause of the U.S. Constitution, that federal reserve notes are legal tender for all debts public and private.'"

They are legal tender, but by the U.S. Treasury’s own admission, you don’t have to accept them:

Question: I thought that United States currency was legal tender for all debts. Some businesses or governmental agencies say that they will only accept checks, money orders or credit cards as payment, and others will only accept currency notes in denominations of $20 or smaller. Isn't this illegal?

Answer: The pertinent portion of law that applies to your question is the Coinage Act of 1965, specifically Section 31 U.S.C. 5103, entitled "Legal tender," which states: "United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues."
This statute means that all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor. There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services. Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise. For example, a bus line may prohibit payment of fares in pennies or dollar bills. In addition, movie theaters, convenience stores and gas stations may refuse to accept large denomination currency (usually notes above $20) as a matter of policy.
Source

That’s why, as one of our (very) small local businessmen here in Casey County found out recently, Frito-Lay was perfectly within their rights when they told him that they would no longer accept cash or checks starting in January of this year. This particular businessman is now faced with either setting up electronic payments with Frito-Lay (which he has no desire to do) or simply walking away from using them as a vendor.

So if a business can dictate the terms of how they will accept payment – including the mandated use of tokens, bus passes, or electronic payment – what would be so wrong about using silver and gold, other than the fact that the Federal Reserve vehemently does not want us to?

The article goes on to say:

"In addition, since gold and silver regularly fluctuate in value, they could not easily function as stable currency."

Okay, do I really need a reference for this one? I mean, c’mon; that statement is so ridiculous I have a hard time believing that it’s being passed off as a serious comment. Since when does the dollar not fluctuated in value?

Interestingly, the following article also came out recently. This one is a complete satire from “The Onion”, but while it is absolutely hilarious, I'll leave you to tell me how much of it is conceptually wrong.

U.S. Economy Grinds To Halt As Nation Realizes Money Just A Symbolic, Mutually Shared Illusion

I thought it was a pretty sad day when I realized that “The Daily Show” was the most unbiased news source on television. How much more so when we now see that the entire U.S. monetary policy has been nailed down tight by "The Onion”?

At least we can laugh about it. For now at least.

3 comments:

BegFookinScottishMatthew said...

more great head scratching stuff. I posted this on my FB page along with a link to your blog. Last time I did that, 3 other folks reposted it on their pages!

Blaine Staat said...

Thx! I probably wouldn't have posted any of it were it not for the Onion article. Too funny to pass up. I would pay money (gold) to see Bernanke do that!

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