Our Constitution sets forth –- and limits -- the government’s powers. Under Article I, Section 8, Congress is authorized to “coin money and regulate the value thereof” and also to “provide for the punishment of counterfeiting of the securities and current coin of the United States.”
Notice that no power is given for Congress to confer upon the government a monopoly in the creation of money. That matters because, prior to the drafting and ratification of the Constitution, private coinage was known and accepted, as we learn in this instructive Freeman article, “Private Coinage in America” by Brian Summers.
If the Founders had thought there was something wrong in allowing money to circulate besides that produced by the federal government, they would have granted Congress power to forbid that. They did not. As with almost every aspect of life, the people were to be left free to manage their affairs, including the freedom to produce money and accept whatever medium of exchange they desired. Only counterfeiting – that is, producing fake money or securities intended to deceive recipients – was to be illegal.
This history is pertinent to another of those increasingly frequent instances where the government has gone after a peaceful citizen on legally dubious grounds. The case involves Bernard von NotHaus, a man who produced and sold pure silver coins he called “Liberty Dollars.” He was arrested in 2009 and charged with violating federal criminal law, specifically 18 U.S. Code Sec. 486, which prohibits making coins “intended for use as current money.” The prosecution’s argument was that this statute gives the federal government the exclusive power to produce currency.
One more thing – the government also seized around $7 million worth of gold, silver, and other property from Mr. von NotHaus.
At trial, the defense argued that “Liberty Dollars” could not be mistaken for any current U.S. coinage because they are not the same size as any coin the government is producing and have different imagery. Von NotHaus’ coins weren’t deceptive and although they could be used in exchange for goods or services, they aren’t a substitute for “current money” any more than are foreign coins or silver bars are.
But Judge Richard Voorhees adopted the prosecution’s view of Sec. 486, instructing the jury that the law makes it a felony to mint coins Americans could use, even if they weren’t meant to deceive, because the government has power to coin money to the exclusion of everyone else. The jury thus had virtually no choice but to find the defendant guilty.
In a press release after the verdict, the U.S. attorney’s office took a victory lap and pontificated, “Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism.”
That notion is simply laughable. Coinage is an extremely small fraction of the nation’s money supply; whenever “real” money was exchanged for Liberty Dollars, that money did not disappear, but was spent in the business; and most significantly, the doubts that many Americans have about the stability of our monetary system, causing them to prefer money and other forms of wealth that don’t steadily erode in value long predated Mr. von NotHaus and will continue with or without his coins.
Although the trial was over in March of 2011, not until December 3, 2014 was von NotHaus sentenced – to six months of house arrest. At least the taxpayers will not be further burdened with pointless expenses.
Two questions present themselves.
First, will the government keep the property they seized? According to Judge Voorhees’ order, the government gets to confiscate much but not all of it.
Second, is it really the law that it’s a crime to produce money that could compete with the cheap coinage or Federal Reserve notes the government produces?
Judge Voorhees brushed aside the constitutional challenge to Sec. 486, ruling that because the Constitution prohibits the states from issuing money, it should be inferred that the drafters also meant to forbid private parties from doing so. That’s a mistaken understanding of how the Constitution works.
The drafters did not intend to allow the creation of governmental monopolies of any kind, and certainly not in the creation of money. There being no such enumerated power for Congress to do that, the Tenth Amendment applies: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
But the federal government has done many, many things that it has no constitutional authority to do, including the way it has shunted aside the Constitution’s prescribed monetary system in favor of the current system of irredeemable paper. (For an elaboration on that, see my review of Professor Richard Timberlake’s magnificent book Constitutional Money.) Judges often turn a blind eye to the Constitution when politicians wield power they are not supposed to, either because judges don’t want political confrontations or because they are imbued with the statist/progressive philosophy and believe in expansive government.
Therefore, we should not wait for the courts to declare Sec. 486 unconstitutional. Congress should rewrite the law to clarify that it is a crime to counterfeit U.S. money but not to compete with it.
While the prosecutor in this case might believe that monetary competition is somehow dangerous, the great economist F. A. Hayek disagreed. In his 1976 paper Choice in Currency, he wrote, “I have no objection to governments issuing money, but I believe their claim to a monopoly, or their power to limit the kinds of money in which contracts may be concluded within their territory, or to determine the rates at which monies can be exchanged, to be wholly harmful.” (Emphasis in original.)
Hayek was right. People should be free to compete with government in the production of money, not attacked as criminals and called “terrorists.”
Commenting on Sec. 486, constitutional lawyer and monetary expert Professor Edwin Vieira writes in his great treatise Pieces of Eight: The Monetary Powers and Disabilities of the United States Constitution, “Congress apparently imagines that its duty to supply the country with gold or silver coin – which it is not fulfilling in anything approaching a constitutional manner in any event – somehow licenses it to terrorize private parties with criminal penalties for issuing even honest specie coins of their own.”
That was written more than twelve years ago, but it applies perfectly to the government’s case against von NotHaus. Producing honest money should not be against the law.
(For a fascinating historical parallel regarding private coinage, read Professor George Selgin’s book Good Money, in which he details the rise of free market competition in the production of coins in Britain during the Industrial Revolution. For decades, private money was allowed and filled a market need, but eventually the Royal Mint asserted its legal monopoly on coinage and the private mints were forced to close.)
America needs to repeal a great many laws that interfere with people’s liberty to peacefully go about their lives and contract with others. With respect to monetary freedom, a bill that would put the country on the right path is H.R. 77, the Free Competition in Currency Act.
How about it, members of Congress? Are you willing to restore to Americans this aspect of freedom that should never have been taken from them in the first place?
