Virginia - bill re: generating its own currency

[ashlynne39]

I read an article earlier today on Fox about a bill in Virginia about having its own currency and the article cites several other states considering the same. I'm not sure which forum this belongs in but I think we may have had another thread about this being considered in maybe Montana or Colorado. Just thought I would pass this article along for comment.

http://www.foxnews.com/politics/2013/02 ... latestnews

[wserra]

I read an article earlier today on Fox about a bill in Virginia about having its own currency and the article cites several other states considering the same.

Thanks to Art.I sec.10, it wouldn't be much more than Monopoly money: "No State shall ... coin Money; ... make any Thing but gold and silver Coin a Tender in Payment of Debts". Kinda devalues a currency if nobody has to take it.

[Pottapaug1938]

The Virginia "currency" would amount to state-issued scrip; and its value would fluctuate against the US dollar, most likely involving a discount to the former. It would circulate just like Disney Dollars do at Disney World, at best; and many would refuse them (as I would have done last November, when I was in Richmond, to save the hassle of having to exchange them for regular money before I left Virginia).

[Pottapaug1938]

Here is an interesting story about what happens when a country relies too much on gold as a store of wealth. Note particularly the part about how the lack of liquidity as a result of the hoarding of gold:

http://www.cnn.com/2013/02/12/business/ ... =obnetwork

[fortinbras]

India's experience with gold helps explain that "HJR 192" that the sovruns are all foaming about.

Prior to 1933, gold coins were in circulation although the coins themselves were not terribly numerous; most daily transactions used paper money such as gold certificates (which promised to be exchanged for gold coin at federal banks), silver certificates, United States Notes (a fiat currency authorized during the Civil War and issued in a very limited amount), and FRNs, as well as non-gold coins. However, it became terribly popular for all sorts of contracts and other commitments to have "gold clauses" - provisions that specified that the payment(s) must be made in gold coin and not any other kind of currency. These gold clauses became so extremely common that it became obvious that there was not enough gold coinage around to pay them all if all the gold clauses somehow came due on the same day. The requirement - essentially for ceremonial purposes - for gold coins to make payments caused gold coins to acquire a much higher value than their exchange rate or the market value of their metallic content. This struck directly at the Constitutional authority given Congress to regulate the value of currency - the gold coins were effectively being sold as commodities (and at an elevated price) rather than circulating normally as money.

The Constitution forbids States to impair the obligation of contracts (Art. I, sec. 10, cl. 1), and Congress was similarly hesistant to exercise such power -- but if some contractual provision were held to violate "public policy" then that provision would be unenforceable. So Congress adopted House Joint Resolution 192 in 1933, declaring that it found that gold clauses violated public policy and henceforth would be unenforceable to compel payment in gold, and additionally that gold was no longer a medium of exchange, but that any contractual provision for a dollar amount in gold would be paid, dollar-for-dollar, by the same face value of any other form of US currency. This Joint Resolution was upheld by the US Supreme Court and continued unabated until around 1977, when most of the Joint Resolution was repealed.