South Carolina Lawmaker Seeks to Ban Federal Currency
(scstatehouse.gov)
As the Palmetto Scoop first reported, Pitts, a Republican, introduced legislation this month banning "the unconstitutional substitution of Federal Reserve Notes for silver and gold coin" in South Carolina.
In an interview, Pitts told Hotsheet that he believes that "if the federal government continues to spend money at the rate it's spending money, and if it continues to print money at the rate it's printing money, our economic system is going to collapse."
"The Germans felt their system wouldn't collapse, but it took a wheelbarrow of money to buy a loaf of bread in the 1930s," he said. "The Soviet Union didn't think their system would collapse, but it did. Ours is capable of collapsing also."
The lawmaker believes that a shift to an economy based on gold and silver coins would give the state a "base of currency" should that collapse come. 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."
In addition, since gold and silver regularly fluctuate in value, they could not easily function as stable currency.
But Pitts maintains that his state is better off with something he can hold in his hand and barter with as opposed to federal currency, which he described to the Scoop as "paper with ink on it." He says he resents what he considers the federal government's intrusions on states' rights.
Though he did not offer a timeframe, Pitts told Hotsheet that he anticipates a nationwide economic collapse "if our federal government continues the course it's been traveling under the previous administration and this administration."
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...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."...
This is completely a false statement. Congress, in initially outsourcing it's constitutional responsibility of creating our money to a private agency (the Federal Reserve) in 1913, overstepped it's constitutional bounds. It is well settled that Congress is empowered to pass an Act soley in the execution of a power specifically granted to it by the Constitution. Congress, therefore in 1913, went outside it's granted power when it turned over responsibility for the creation of America's money to a private organization; the Federal Reserve. Hence, any law created under these circumstances are NULL and VOID. Therefore, a state, under the 10th amendment, is free to decide which type of currency it will use at least or until Congress (derelict in its duty) takes over its constitutional responsibility again for creating the money supply.
(1) Paul Krugman, Currency Crises, 1997;
(2) Reuters, December 17, 2009;
(3) David Justin Ross, The Future of the Dollar and China: The Threat of Collapse and the Move Towards a New Reserve Currency, October 27, 2009, Radiant Asset Management, LLC;
(4) Ibid.
(5) Ibid.
(6) budgetreform.org, December 14, 2009;
(7) U.S. Department of Labor, February 5, 2010;
(8) IMF, January 31, 2010;
(9) The Department of the Treasury;
(10) MarketWatch, February 17, 2010;
(11) Bloomberg, February 1, 2010;
(12) Bloomberg, January 26, 2010;
(13) Bloomberg, January 8, 2010;
(14) Paul Krugman, Currency Crises, 1997;
(15) Bloomberg, February 4, 2010;
(16) FOX Business Network, June 24, 2009;
(17) The Economic Times, November 13, 2009;
(18) Reuters, October 26, 2009;
(19) Bloomberg, October 28, 2009;
(20) The Korea Times, October 28, 2009;
(21) The Three Trillion Dollar War: The Real Cost of the Iraq Conflict, book discussion, April 8, 2008;
(22) Reuters, December, 2009;
(23) RB.ru Russian Business, September 1, 2009;
(24) Bloomberg, March 24, 2009;
(25) Bloomberg, November 17, 2009;
(26) USA Today, March 25, 2009;
(27) Maurice Obstfeld and Kenneth Rogoff, Global Imbalances and the Financial Crisis: Products of Common Causes, November 2009;
(28) DealBook, September 7, 2009;
(29) The Associated Press, September 3, 2009;
(30) The New York Times, September 4, 2009;
(31) CommodityOnline.com, September 21, 2009;
(32) RosBusinessConsulting, November 6, 2009;
(33) NEWSru.com, October 28, 2009;
(34) Bloomberg, 26 October 2009;
(35) Vedomosti, 28 September, 2009;
(36) Bloomberg, 25 November, 2009;
(37) ChinaPro.ru / Vedomosti, 25 November 2009;
(38) The Globe and Mail, February 8, 2010;
(39) Ibid.;
(40) Ibid.;
(41) Bloomberg, November 3, 2009;
(42) Merco Press, October 29, 2009;
(43) Ibid.;
(44) Bloomberg, October 4, 2009;
(45) Bloomberg, October 24, 2009;
(46) Reuters, November 25, 2009;
(47) Ibid.;
(48) Reuters, November 2009;
(49) Venezuelanalysis.com, April 17, 2009;
(50) CNBC, October 14, 2009;
(51) ArabianBusiness.com, October 11, 2009;
(52) Bloomberg, November 25, 2009;
(53) Bloomberg, January 5, 2010;
(54) NewsMas;
(55) Bloomberg, November 17, 2009.
WAY OUT
Peterson-Pew Commission on Budget Reform suggests that ?the United States must show its creditors that it is serious about stabilizing the federal debt over a reasonable timeframe. Both spending cuts and tax increases will be necessary.?
Most of the economists would suggest that the anti-inflation strategy of the United States should include:
* suppression of inflation expectations and stimulation of savings;
* reaching balance between budget receipts and expenditures;
* increasing the mass of commodities; and
* strengthening national currency by establishing an unconditional priority of inflation targeting over other government programs (such as military expenses, unemployment rate regulation, influencing the national currency market, etc.).
Will the U.S. assume such a pain by reducing spending and fighting the deficits? Probably not, taking into consideration the words of Sir John Templeton, the John Templeton Foundation, who said in 2005: ?The psychology all over the world is that people will not re-elect leaders who want them to be thrifty. The voters will elect the government that spends more money.? (54)
Many analysts are pretty sure that the weak dollar policy is beneficial to the U.S. Therefore, whatever the authorities say, there will be no resistance to dollar depreciation on their part.
Most experts already doubt that the solution of the problem depends much on the U.S. and call for global measures. ?We must reform the international monetary system,? Yu Yongding, a former Chinese central bank adviser, stated in mid-November 2009. ?A good monetary system should make us confident. But we don?t have confidence in the U.S. dollar now,? he added. (55)
George Soros, a global financier, is convinced that we ?need a new currency system and actually the Special Drawing Rights do give you the makings of a system," he told the Financial Times.
THE FUTURE OF THE DOLLAR
The future of the dollar is in jeopardy now as it is evident from the article.
This subject is the primary focus of futureofdollar.com. We follow latest developments in this area and provide our readers information from reliable sources.
This analysis was prepared by http://www.futureofdollar.com ?
February 24, 2010
In April 2009 the Latin American leaders signed into effect a new South American currency, to be called the ?sucre?. ALBA leaders (representing Venezuela, Cuba, Bolivia, Honduras, Nicaragua, and Dominica) say the sucre is necessary to help defray the regional effects of the world economic crisis by substituting their trade in dollars with a new alternative currency. The ALBA countries and their allies plan to use the virtual sucre by early 2010. (49)
In the second quarter ending in June 2009, central banks around the world invested 63 percent of their new cash reserves into euro and yen, and put only 37 percent into dollars. (50)
Kuwait, Saudi Arabia, Qatar and Bahrain signed in June 2009 an accord to create a joint monetary union council, a prelude to establishing a Gulf central bank and launching a monetary union and single currency. The remaining two members of the Gulf Cooperation Council (GCC), the UAE and Oman, did not sign after deciding to withdraw from the project. The GCC states have set 2010 as the target to launch the monetary union and single currency, but many experts believe that target is too ambitious and unrealistic. (51)
The International Monetary Fund sold 10 metric tons of gold to the central bank of Sri Lanka for about $375 million. The purchase is part of Sri Lanka?s plan to diversify its reserves and it has been gradually accumulating the metal in the past nine months. ?Gold is a good anchor and hedge to have in these volatile circumstances,? said Nivard Cabraal, the bank?s governor. ?We think it?s a good time to buy.? (52)
In the beginning of January 2010 Canada announced that it might sell about 1 billion euros of 10-year bonds, its first issue of debt in the European currency in more than a decade. This strategy will help attracting new investors, while debt denominated in U.S. dollars is becoming less popular among the creditors given the declining value of the U.S. currency. (53)
It is obvious that the trend of the diversification out of the dollar persisted through the whole year of 2009.
Brazilian Central Bank president Henrique Meirelles said the country is considering the gradual elimination of the U.S .dollar in trade with China, Russia and India. (42)
In October 2009, the Brazilian Central bank announced that an agreement was reached with Uruguayan economic authorities to apply the so called SML system in bilateral trade operations. (43)
Brazilian Finance Minister Guido Mantega said that Brazil would spend 10 billion US dollars on buying International Monetary Fund bonds to boost the fund's resources. This ?radical change? will help Brazil to diversify its resources, he added. (44)
4. Russia
The Central Bank of Russia increased the share of Japanese yen and Swiss franc in reserves in the middle of 2008. Japanese yen currently accounts for around 2 percent of Russia's reserves. The franc?s share is smaller because of the limited liquidity.
Russian reserves consist now mainly of the U.S. dollar and the euro. However, it is quite possible that Russia will add Chinese yuan in there, said Alexei Kudrin, Russian Finance Minister. The lack of convertibility of the China?s currency and of the free movement of capital was the main current obstacle. (45)
Brazil and India are interested in settling bilateral trade with Russia in national currencies, said Alexander Potemkin, an advisor to the Russian central bank chairman, echoing Moscow's drive for more use of national currencies and less of the U.S. dollar. "There was an initiative within the framework of the BRIC. These countries intend to create the conditions for direct payment for trade in national currencies," he said. He also said that Russia had a reach experience of reciprocal payments in national currencies with China. He estimated that settlements in yuan and rouble already account for around 2 percent of Russia's trade with China. (46)
Moscow also discusses trade in national currencies with other countries including Turkey and Vietnam. (47)
Russian central bank first deputy chairman Alexei Ulyukayev said in November 2009 that Russia was going to add the Canadian dollar to its gold and forex reserves in the next few months, but its share would be insignificant. (48)