Legal Tender & 5 things I learned from D.C.

AOCS Executive Director Rob Gray testifies before the House Domestic Monetary Policy Subcommittee

As some of you know, I had a rare opportunity to testify August 2nd 2012 before the House Financial Services Subcommittee on Domestic Monetary Policy regarding parallel currencies. For a full video of the hearing, click the image on the left. It all passed so fast, and the reality didn’t set in until I left the chamber.

My first thought upon walking out of the building was really anti-climatic: “I spent all this time over the past week for that?” And to think I could have focused my time and energy somewhere else. Nonetheless, testifying in front of the House Domestic Monetary Policy subcommittee was a learning experience. Unfortunately, I don’t think they’re going to invite me back anytime soon. So here’s what I got out of it:

1) It’s easier to get in to congress than it is on a plane – Maybe it’s part of the new regime’s open-door policy, or maybe it’s always been like this, but apparently it’s really easy to enter the lion’s den. Simply walk in the front door, stick you cell phone and keys in a bowl, and walk right on through the metal detector, complete with shoes, jacket, belt, pocket change, lighter, liquids, gels (you don’t even need a 1-quart bag!) and anything else you feel like bringing in. There are no guard dogs, no intimidating desk clerks, and you don’t need an I.D. or boarding pass (or any other doc that proves you should be there).

2) Very few in government care – When you say House Financial Services Domestic Monetary Services Subcommittee to me, it sounds important. First, the domestic economy is in shambles, and our monetary policy is at the very root of this issue. Maybe you don’t know enough to agree with me, but certainly the members of the committee DO (or at least should). 30 seconds before the hearing was scheduled to start, we were still unsure if the hearing was going to start. Why? Because, as Ron Paul explained, “We need at least one other committee member here to call the session to order.” I’m sorry? No one shows up for this stuff? And that’s okay? At the scheduled hour, almost on the dot, we were lucky to be joined by Congressman Luetkemeyer, and the meeting was called to order.

Ten minutes in to the session, Congressman Al Green joined us, and then Congressman Schweikert. Congressman Green left after less than three minutes.

3) The most stressful part for me was wondering if I had enough time – You get 5 minutes. That’s it. My speech, in full and at the right tempo and tone, was 13 or so minutes. I cut more than half of it. I rushed at the end of the delivery just because I didn’t want to get cut off. 2 minutes after my time was up, I finally wrapped up my oral argument and realized they probably didn’t hear any of it. Except for Congressman Green, who walked out as soon as I mentioned “thieves”.

4) Ron Paul doesn’t understand legal tender laws or is up to something – It’s kinda a big deal to make an accusation like that, but I have a very hard time believing that he is completely ignorant of how the legal tender code actually reads.

“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. Foreign gold or silver coins are not legal tender for debts.” - 31 USC § 5103 – Legal Tender

I knew I should have printed this and brought it with me. Congressman Paul asked the panel of witnesses if we thought we needed to repeal the legal tender laws to make competing currencies a reality. When it was my turn to answer, I first asked Congressman Paul to summarize his understanding of the Legal Tender Laws – he said no. So, being only 99.9% sure of how the legal tender laws read, I said “Leave them alone.” They don’t need to be repealed.

A lot of inference was made to legal tender laws resulting in tax obligation, exclusive requirement and/or mandatory acceptance. Legal tender laws provide for none of this. In fact, I’ll go one step further and say (on a rare occasion) that I’m IN FAVOR of legal tender laws. Why?

Let’s suppose I go in to a restaurant with my family and order dinner. We enjoy our meal, ask for the check, and get ready to pay. Unfortunately, without sign or notice, the restaurant in Dallas exclusively accepts Korean Won. Since I do not carry won, I am unable to pay my bill. The police are called, and I’m arrested for theft. Not cool.

In the US, legal tender laws ONLY apply to debt obligations. To clarify, if you are in debt, as in you just ate your meal, in the US you must be able to satisfy that debt in federal reserve notes. Period. Legal tender laws protect you from a merchant getting creative on you and making it difficult or impossible to pay your bill. Good idea, right?

Well, it doesn’t stop there. Legal tender laws are so un-important that most/all states have plenty of exceptions to the rule. For example, a gas station can refuse any bills larger than $20. A soda machine can only accept coins. A bus driver can only accept tokens. A business owner, who has an unlimited right to private contract, can negotiate a deal in gold, silver, copper, direct barter, or any other way they like. And if that’s not enough, states will recognize this contract even in the event of a default. For example, you negotiate a contract in ounces of silver, default on the deal and lose in court: the court will still enforce the original agreement!

What legal tender laws do NOT do is make the federal reserve note the exclusive form of payment in the US. You can pay any way you like, so long as it’s agreed and accepted before you incur a debt. Again, there is no law that requires you to spend or accept federal reserve notes. None.

The part where it starts getting weird is the contradiction between the state “Honest Money Legislation” and the Ron Paul “Free Competition in Currency Act”. They seem to be opposite. The state groups want to make gold and silver Legal Tender. Ron Paul wants to eliminate Legal Tender laws. Maybe someone should bring the two groups together and get on the same page. From the state perspective, how is requiring a business to accept gold and silver fair to the business owner? I thought we want to do away with the government telling business owners how they can accept payment. What if your bill is $18, and you whip out an ounce of silver to pay. The business now has to look up the price of silver and figure out how to make change for you? What if they don’t want the silver? Are you asking the government to force them to accept it?

Congressman Paul should know all of this. He’s been saying it long enough to know what the legal tender law actually means, and he should have known that it could have been explained at the hearing in less than 10 seconds. Instead, he refused to define the words used in his question. I don’t know what it means, but something smells fishy.

5) Not only do they not care, but they’re almost completely clueless – the committee members asked questions about consumer protection, consumer confidence and how the poor people would deal with community currencies. I’ll address these issues one by one here:

  • Consumer protection – this comes down to one thing: personal responsibility. “Alternatives” are not for everyone. Some people will never buck the system, or even try anything outside the box. The ones that will must be educated on the risks associated with operating outside the jurisdiction of government. That’s the way it goes with voluntary systems. Congressman Luetkemeyer brought up the FDIC, and how it guarantees deposits. Sure, the FDIC guarantees the deposit, but it can’t guarantee the deposit’s purchasing power. Take this example: the FDIC was crafted in 1933, when gold was about $20 per ounce. If you put that $20 in the bank, today it would be worth $20, even if the bank went belly-up tomorrow. Wanna guess how much gold you can get today for $20? Not a lot. Is that consumer protection?
  • Consumer confidence – people are pulling money out of the banks at an alarming rate. People don’t have confidence in the system because they are beginning to realize the currency is built on a foundation of debt, and that it all must be repaid. Gold & Silver, on the other hand, are debt-free, never need to be repaid, can’t be fractionally loaned, and buys more today (in most cases) than it did through history. Which system inspires more confidence? An honest one, or one that’s run behind closed doors?
  • The poor people – Do you know where the poorest area of the country is right now? It’s not Detroit, Cleveland, Kansas City or some other dried-up industrial center. It’s the Pine Ridge Indian Reservation, which boasts a whopping 95% unemployment rate, 22% male suicide rate, 42-year average male lifespan, and a 75% illiteracy rate. And they decided to start their own community currency because they flat broke, not because they’re flooded with capital. It’s predominantly poor people that launch community currencies because they believe taking control of the issuance of their money will help them create economic opportunities, like producing, trading, and exporting goods and services in exchange for more capital.

All things considered, I had a great time. It was a lot of fun hanging out with [and a very special "THANKS" goes out to] Chris Duane from Silver Bullet & Silver Shield. Chris spilled the better part of a full glass of wine on a US Congressman of unknown identity at dinner.


 

 

We paid our respects to TJ at his memorial, and blasted around Georgetown. The primary goal was to [have fun and] get in front of the subcommittee and tell them the truth: we want to be left alone.

Mission accomplished.

About Rob

Rob Gray is the Executive Director of the American Open Currency Standard and a reputable expert on complementary currency and barter systems. Rob is currently exploring Southeast Asia with his wife and 2 children.

Comments

  1. The tricky thing about legal tender laws, as I understand them, is that they allow a judge to extinguish a debt if the debtor offers to settle the debt using legal tender and the lender refuses the offer. Importantly, this is true *even if the debt contract requires repayment in the form of a particular commodity.* If I borrow some silver from you, I can pay you back in dollars, and you have to take it, even if our contract says I am only to pay you back in silver. That’s the effect of the legal tender laws.

    The gray area seems to be around what types of transactions set up a debt obligation. For instance, I’m not sure your example of dining at a restaurant and paying the bill after you’ve eaten is properly a debt. There is no promissory note. It is a single transaction that spans your entire time there.

    Transactions are not the same as debts. Transactions are unaffected by legal tender laws. For instance, if I offer to sell you my car for silver, and you offer me dollars instead, I can simply walk away, and you can’t force me to take your dollars. On the other hand, if I sell my car to you for a promissory note in which you promise to pay me back in silver, and then you offer me dollars to repay the note, legal tender laws compel me to accept your dollars.

    • Matt W.
      Yes, judge can settle a non fiat debt with fiat because of Legal Tender laws,
      BUT ONLY when the proper contract settling alternative doesn’t exist. For example, he can’t pay you back a live specifically named Bessie the cow, therefore you MUST accept the dollar value of the (now dead) Cow. Seems like a decent way to resolve otherwise unsolvable issues.

      AND common law has a very good long history of defining DEBT, “offer, acceptance, fulfillment/payment”. YEs, things still need defining, but that is ALWAYS true when people deal with each other. That is one of the few legitimate functions of Courts.

  2. Silver Shield says:

    I had a blast and it was a great experience to be a part of.
    Thanks brother!

  3. Jered Morgan says:

    I agree 100% with your assessment of Legal Tender laws, and the restaurant example is spot on. I have had the police called on me TWICE for refusing to show ID with my MasterCard after eating at 2 separate locations. In order to be guilty of defrauding an inn keeper you must actually intend not to pay, in the case of plastic, when a merchant posts signs showing that they accept MasterCard as a form of payment, there is an implied agreement that they accept said form of payment, and that they agree to abide by the rules governing that payment method. In my case, MasterCard rules explicitly prohibit merchants from requiring identification as a condition to processing a MasterCard card when a signed, valid MasterCard is presented for payment. I have never been cited for the charge, but I have come close to it do to the fact that law enforcement does not understand this, and the ONLY method to discharge the debt in such a case or face imprisonment/fines for such case would be to instead fork out FRNs.

    http://consumerist.com/2008/04/ihop-threatens-to-call-the-police-because-you-refuse-to-show-id-with-credit-card.html

  4. Thank you for your words to congress, and thank you for not sugar coating it. I may have turned of a few, but they were not open to having out of the box money thoughts enter their mind. I posted the same thing on my page about how sad it was that the room was so empty. Who will pick up the torch when Ron Paul retires? Keep on doing what you are doing. In the next decade, after I retire from the Navy, I hope to have some small business and I really hope I can work barter and AOCS into my operation. Thanks again for what you do. P.S. I first heard you and about you from our friend Jack S and the Survival Podcast.

  5. 1. Lesson you should have learned: Speak to people in language they understand, not in your own language that will make them feel alienated.

  6. The legal tender laws have the effect of giving one form of money an artificial preference by making that form of money acceptable for the payment of taxes. Therefore, it indirectly puts forms of money without legal tender status at a disadvantage because people will perceive the ‘legally’ preferred monetary unit as having an underlying value greater than zero. That is why I oppose legal tender laws.

    The dollar is currently ‘backed’ by its standing armies and the recursive loop of payment for tax debt.

  7. The difference between RP’s legislation and the various states’ is a valid and constitutional issue. RP wants to repeal FEDERAL legal tender laws, as they are unconstitutional, while recognizing the constitutional authority of the states to make gold and silver coins legal tender. I think this is where most of your confusion is coming from, you’re neglecting our constitutional federal republic of states and just lumping state and federal together into “government”.

    Could you explain the apparent contradiction between your statements defending legal tender laws in the restaurant example and then opposing state attempts at legal tender laws?

    Also, there seems to be a contradiction when you claim that legal tender laws don’t force anyone to accept a certain form of payment, but then claim if a state made gold and silver legal tender, it would be forcing businesses to accept gold and silver.

    BTW, I’m not trying to be adversarial, you and I have the same goals, just looking for some clarification.

    • Gordon – Thanks for the comment and disclaimer. I always welcome feedback and questions, especially when submitted as respectfully as you have done. Here are a few of my thoughts:

      The federal legal tender law, as codified in 31 USC § 5103, is not unconstitutional because it lacks any requirement or mandate. There is no part of that code that says federal reserve notes are the exclusive form of payment, or any mandate that requires a merchant to accept FRN’s. In fact, the US Dept of Treasury website goes on to say: “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.” The Federal Legal Tender law is irrelevant.

      As for the contradiction between statements defending and opposing legal tender laws, I’ll start by saying that in the example of an implied contract and establishment of a debt without agreement otherwise, it is fair that the buyer be able to discharge the obligation or debt with a common and respected form of money. For example, if I AM the restaurant owner, a patron comes in to my restaurant, orders food, eats, and then attempts to pay in a form of payment I don’t recognize (Korean Won), then I would like to have the right to refuse the payment and demand payment in FRN’s. In the absence of a pre-existing agreement, the buyer and seller can rest easy knowing that the Federal Reserve Note will be the default method of payment. On the other side of my statement, I am against the government requiring anything of me at all. So, back to the restaurant example, if I were to ever own a restaurant, I would make each customer sign a contract upon entering the restaurant specifying the terms of our upcoming transaction. I would say “I exclusively accept payment in AOCS Approved Silver.” It’s an extreme example, but the point is simple. If a state requires me to accept silver, and I incur an additional expense or effort to do so, then that’s annoying.

      The restaurant example is a strange example, because it is a rare opportunity for a debt to be established prior to an agreement for payment terms. Again, it’s an implied contract. There is little or no conversation between the restaurant and the customer. In most other types of businesses (especially retail), a debt can’t be established until you get to the payment discussion. Take a clothing store, for example: you pick out what you want, get to the cash register, and find out that the store only accepts credit cards. Don’t have a credit card? No problem – just put the clothing back and come back later with a friend that has a card. No debt established, unless you run out of the store without paying!

      As for the contradiction regarding the force of acceptance between federal and state situations, neither exists unless a debt is established without specified terms regarding method of payment. Again, the federal law says that FRN’s are legal tender for debts. The legal tender law doesn’t FORCE a debt obligation. As for the state side of things, the state efforts are trying to make gold and silver ALSO legal tender. The only type of transaction this affects is one where the debt is established prior to payment, as in our classic restaurant example. And in this example, if I’m a Utah restaurant owner unfamiliar with gold and silver, then I’m going to be annoyed if a patron walks in, eats my food, and says “HA! You MUST accept this! Legal tender LAW!” Now, I’ve got to figure out what it’s worth and try to make change for it, and then worry about the value of it going down [or up] between the moment I accept it and the time I get rid of it. Coincidentally, the Utah Legal Tender Act H.B. 317 “does not compel a person to tender or accept gold and silver coin”. Weird.

      The bottom line for me is pretty simple. If two people have an agreement for a private exchange with a particular form of payment or barter, there is nothing stopping them from making that happen or even enforcing it later. If a debt is incurred without a specific agreement for a particular type of payment, then it can be discharged with federal reserve notes. That’s all the legal tender law covers. Again, no need to repeal it, and no need to try adding to it. It does nothing; leave it alone.

      Thanks again for the discussion.

      • Fran Glacken says:

        Mr. Gray, I see a great problem with your logic here. I don’t mean to sound rude with any of this but, from the Department of Treasury; “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.” http://www.treasury.gov/resource-center/faqs/currency/pages/legal-tender.aspx

        Two more points:
        1. “It does nothing; leave it alone.” This is a contradiction, if the law doesn’t do anything, repealing it wouldn’t matter.
        2. As for your restaurant example; No one is forcing you to serve people before the payment is finalized. It’s rather easy to just put up a sign stating what kinds of payment you will accept. It’s a good example, but I fail to see it being a legitimate reason as why we would have legal tender laws, especially when the restaurant can refuse to accept Federal Reserve Notes.

        • Fran – your respectful feedback is always welcome:

          1) there is no contradiction. The law does nothing, therefore there is no need to allocate resources to eliminate it. Sure, repeal it if you like….so long as you can do so easily without asking for donations or in-kind contributions.

          2) you’re arguing the side of the merchant. As the legal tender law(s) are written, the merchant can specify what type of payment it accepts. There is no disagreement here.

          • UnkleSkunky says:

            By this same notion, any person can refuse payment in gold or silver, and demand super saver coupons if they like.
            If they advertise acceptable currencies prior to forming a business relationship with the diner, how can they “lawfully” alter it mid meal?
            Your premise is flawed, as it is legal tender laws that force contracts that may or may not be beneficial to the party’s.

  8. Melody stang says:

    Congrats to all of you for making history! Its a great start!

  9. people are pulling money out of the banks at an alarming rate

    Can this rate be expressed in numbers over time and compared to the same parameter from 10, 20 years ago? Thank you.

    Congratulations on having safely made it into – and out of – the epitome of uselessness.

  10. John Galt says:

    Rob, you are doing a great job.

    Your testimony with Sen. Paul and the work you do is to be proud of(You guys hire to Mulligan mint?). I learned about this place through Chris Duane’s channels. However after watching your the testimony session, I have one burning question.

    I get the silver power. I get the Ignore the Fed. I get winning with opposite contentiousness. But – if we tell the looters that they don’t have to change anything, that they can have multiple currencies and tax silver and gold at same percentage as dollar – but in that currency (charge 6% sales tax if we deal in dollars or tax 6% in silver if we deal in silver) – how is that changing anything? All we would agree on is that they can steal no matter what the physical form of money is.

    Imagine this. A Doodle country, where the only type of currency and money is 1 doodle bill/coin. That’s the only thing the Doodle kings recognize for exchange (debt based or not). Now one day a white knight comes and brings a 50 Doodle bill/coin. Now that’s an unheard of money/currency type. But the knight explains to kings that they can use that as well – cause all it is – a rare form of money. All the kings have to do is declare it to be money! They can still claim their 6% in taxes whether people use 50 1 doodle coins or 1 50 Doodle coin. Mathematically there is no difference. Years pass. Bad money dilute good, rare money – and nothing changes. Moochers still waist the stolen coins – only now they need less space (think electronic today – cause it’s all on the ledger – vault size matters not).

    Help me understand this – how is this “of the of the opposite contentiousness”, as Chris likes to say? Help me see.

    • Mr Galt – your question seems to make the assumption that I’m okay with taxation. Many people believe that taxation (read: theft) is fair, just, moral, and part of the social contract. Many do not believe this, but are willing to “go with the flow”. Others are morally opposed to all forms of unapportioned taxation and protest with noncompliance. The way I deal with this and the advice I give to others are often very different. The honest money bills accomplish what you point out: that the king now starts taxing and taking away the better money. And in that scenario, you’re exactly right.

      Let’s take money (all forms of it) out of the equation for a moment. In simple barter, a fair trade isn’t a taxable event in any form. Most states will agree. If I trade you a lawn mower for a chainsaw, neither of us collects sales tax (we’re not even licensed to do so!), and neither of us has any profit to report since it was an even exchange. No tax obligation. Now, add silver tokens to the equation: we’re still trading property for property, neither of us is licensed to collect sales tax, and we believe the transaction to be even and fair. No tax obligation. Human to human barter. Man to man.

      Now, do you see why it’s important to make sure that silver is property and not “legal tender”?

      In the old paradigm, when you want to start a business, you go to the government and ask for permission. They give you a list of rules you have to follow, in exchange for protection. Oh, and you have to pay them. In the new consciousness, men will deal directly with other men without permission from parasites. What will they use as “money”? Property.

      • What do you mean “the old paradigm”? The permission you are referring to is a license also known as a “letter of marque”. Unfortunately we still have this today in the form of liquor licenses, business licenses, dog licenses, DRIVER’s licenses, and many others. These letters of marque are specifically forbidden in Article 1 section 10 paragraph 1 of the US Constitution. I believe the goal of ridding ourselves of the Legal Tender Laws would put us back on the gold standard. Notes of receipt of gold in the bank are still fine. That is what a check book originally started out as. I could take this “receipt of gold” to the issuer and receive gold that was placed in the care of the banker. Any Federal Reserve Note printed for the use of the people of the United States is literally a contract to pay back that note with interest but the interest must be paid in FRN’s. One can not obtain more FRN’s without having the Federal Reserve print them. But wait doesn’t that make a catch 22 that can never be paid back. This country was built on the back of tariffs. Individuals would still pay taxes but it was once and at the end of the year and only for what was necessary to keep the Government running. Taxes were paid to the state and the state would pay the Fed’s. Useless agency’s like the FCC, FDA, EPA, ATF, FBI, and many others would not exist due to the fact that “We the People” would participate in self-regulation. We the people create the States. The States Create the Fed. It all boils down to one thing. You and I are both sovereigns (read: Kings). Gold and silver hedge against inflation. The value of Gold has not gone up, the over printing of debt has devalued the dollar.

        • …ER!? “Letters of marque…” I got to that point in your statement and couldn’t continue, because letters of marque, insofar as I’m aware, is an authorization by the king or sovereign to seize the ships and goods of other nations’ merchants and navies.

  11. I really enjoyed your testimony, Rob. Thank you for doing it. I just have one question about what you said here:

    “Let’s suppose I go in to a restaurant with my family and order dinner. We enjoy our meal, ask for the check, and get ready to pay. Unfortunately, without sign or notice, the restaurant in Dallas exclusively accepts Korean Won. Since I do not carry won, I am unable to pay my bill. The police are called, and I’m arrested for theft. Not cool.”

    How much do think this would actually happen in absence of legal tender laws? Would it not behoove business owners to make it easier for customers to pay and avoid such problems? I guess I have a difficult time seeing the justification for legal tender laws for this possibility.

    • SGO – thank you for the kind words. In answer to your questions:

      1) I think my scenario is quite unlikely. Think of this, though: ever been to a restaurant that didn’t accept credit cards and not find out until after your ate? I have, and it’s very embarrassing. Kinda opposite, but the same idea.
      2) I think that yes, it would behoove business owners to make it easy for customers to remit payment. That’s exactly why 93% of all transactions now are with a card.

      I’m not “for” legal tender laws. I wouldn’t go to the state or federal govt to get such a law on the books. We’re talking about the one that’s there now. They don’t have a mandate or require exclusively. Therefore, they have no affect on how we conduct business.

      Imagine if there was a code that said “red, white and blue are great colors for the USA.” Certainly, those that don’t like red, white or blue would be totally pissed that silver is not included in the list of great colors. But, it doesn’t say that silver isn’t a great color, and it doesn’t say that red, white and blue are the only colors. For better or worse, due to tradition or plain ignorance, most people associate red, white and blue with the USA. But that doesn’t make silver unpatriotic or illegal.

      The issue we have today is that most people (that are paying attention) think that legal tender laws are bad and ruining our country. Why? I’m encouraging you and them to explore the reality, that is legal tender laws are irrelevant. It’s as if they don’t exist. So, why bother working to repeal it? Can we invest our resources elsewhere for greater impact?

      • Just for sake of argument, Wouldn’t legal tender laws be gateway laws to compulsory tender. The Federal Government bought and paid for by old money (read: money built on prohibition), are just leading up to harder laws for drug control. I mean monetary control.

  12. Rob,

    Great Job. Your speech was excellent and so is AOCS contribution to this cause.

    Coming to the discussion at hand. I think there is one point you mentioned which needs more scrutiny. I hope you are right, because my own research is somewhat different. I’ll quote you first, and then comment.

    You said…”In simple barter, a fair trade isn’t a taxable event in any form. Most states will agree.If I trade you a lawn mower for a chainsaw, neither of us collects sales tax (we’re not even licensed to do so!), and neither of us has any profit to report since it was an even exchange. No tax obligation.”

    There are two issues which need to be considered in the above statement.

    1) Sales tax, unlike income tax, is not based on profit, but based on revenue. If I buy something for $10 dollars, and sell it for $10, I may not make a dime, but I must still report a sales tax of 8%. State website says “You should calculate the amount of sales tax by multiplying the tax rate by the sales price of the taxable item.” And each sale of a taxable item is taxable unless a specific exemption applies. So there may not be any income tax to report on an exchange of a chainsaw with a lawn mower, but strictly according to the law, a Sales Tax is still due. State ignores private transactions happening on Craigslist, but legally, they are all taxable.

    2) The second point is a new implication or meaning of legal tender laws, which we are ignoring in the discussion so far which has focused upon debt obligation discharge only. This second aspect of legal tender laws is that anything which is not legal tender, is property, and thus its sale is taxable, even in barter transactions i.e. even in transactions where it is used as a means of payment, and not as a primary sale item. The law sees barter as two independent taxable transactions happening in terms of the legal tender. The law assumes that the chainsaw was sold for legal tender by A to B, and the lawn mower was sold for legal tender by B back to A. Two transactions. Both Taxable. This is the second advantage of legal tender laws, that money does not incur sales tax, but non-legan tender property does.

    So, either sales tax must be removed from gold or silver (as in Pennsylvania) or gold and silver must be made legal tender (as in Utah). But under current Texas laws, where gold is neither legal tender and nor is there a tax excemption on gold’s sale, an exchange of AOCS medallions for bread, incurs sales tax to be paid both on the sale of the medallions, as well as sale of the bread. Craigslist works without paying sales taxes not by statutory exemption, but the all States deliberately looking the other way, and choosing to ignore it. The only difference is that instead of Sales Tax, it is called Use Tax, because private sellers are not authorized to collect sales tax without having that tax certificate. However, the rate and purpose of Sales Tax and Use Tax are pretty much the same.

    Actually, thiis is the only thing which is holding us from using AOCS medallions in our community at a much wider scale then we currently are.

    I’m not sure if legal definition of money is depending upon legal tender laws, or is derived from a different set of laws, but if money (and its consequent exemption from being viewed as property for tax purposes) is defined and driven by legal tender laws, then this is one critical area where repeal of legal tenders laws (or inclusion of aocs medallions in it) would actually be beneficial. Indeed critical.

  13. This explains how use tax applies to craigslist type private sales. And must consequently apply to private exchange of medallions also.

    http://taxes.about.com/od/statetaxes/a/use-tax.htm

    • Muhammad, you raise one of the most challenging points in the full scale adoption of alternative currencies. Trading of gold and silver, lawn mowers and chainsaws can work under the radar as long as not too much of it occurs, in other words, as long as it doesn’t become too successful, but state laws must be changed like you mentioned in Utah or Pennsylvania to allow this to really take off. It would be nice to have the Federal LT capital gains tax eliminated as well, but that is a pipe dream in the short-term at least and most of us could live with that if the alternative is holding weakening FRNs. Rob, any thoughts as to which approach is best, Utah’s or Pennsylvania’s? Great work, BTW.

  14. Freedom costsaBuckOfive says:

    Chris Duane to unknown congressman: “Drinks are on you!” …. Splash…

    Rob…. On a serious note, your stats about Pine Ridge were a shock. How do they have the capital to start a bank? There are big costs I imagine: minting coins etc. It would seem that they’d just be on a barter system .

    Like most, I say kudos for your trip and effort to be heard in DC.

    • Thanks for the kind words! The start-up capital was earned from royalties collected through the profitable sale of Lakota silver, gold and copper medallions.

  15. Your speech and responses were excellent. Congressmen’s reactions and whether or not they heard you doesn’t matter- they’ve got their own game going. The crystal clear message you brought to the table, which is expanded on your site, will have a far greater and more appreciative audience than the sum of what was in that room. I stumbled on to your video from a Brandon Raub/illegal detention search on youtube. Hadn’t been paying enough serious attention to the dollar issue and now finally going to take appropriate measures due in large part to: YOU.Don’t underestimate the power and value of your participation in that hearing.

  16. James Emiliani says:

    This is simple. Ron Paul’s goal with the legal tender law is TAXES! You CANNOT pay the US government in anything other than taxes, which forces the majority of transactions to occur in a Fiat currency that holds no tangible value.. The FED has the ability to make this elastic, and that’s the problem. They can tax you and devalue your currency.

    • Ah interesting, that makes a lot of sense to me. I’m not incredibly versed in monetary laws and taxes, but that has the ring of truth to it.

  17. I just watched the “committee” hearing, and I use the term committee loosely because you seemed to be the only one with any passion. You’re other panelists seemed to bring up some good ideas to the table but did not have the vigor to deliver. Maybe Mr. Ron Paul intimidated them. I just wanted to say ‘Thank You’ for being my voice. I’m just now getting into investing in precious metals, slowly but surely draining my brokerage accounts that aren’t doing much these days anyways, and investing in silver coins. I really like the creativity involved with a lot of them.

    Thanks again…

    - Orlando.

  18. In his testimony on H.R. 1098 The Free Competition in Currency Act of 2011, Dr. Lawrence White presents the value of competition in currency and the historical context of Sections 2, 3 and 4 of the then proposed Bill. His presentation starts at 16 minutes, 14 seconds into the video.

    Referring to:
    https://www.youtube.com/watch?v=1ChBR0mSWhI
    AND
    http://www.govtrack.us/congress/bills/112/hr1098/text

  19. The american consumer is paying down debt and SAVING money at rayes not seen in decades. This is one facto that is blamed by the government for the poor recovery. So saying that people are pulling money out of banks at ” an alarming” rate is self serving at best. At worst it is deceitful.
    I have used silver as currency and support its use as an altrrnative but I would hope that we can promote its use without baseless scare tactics.

Trackbacks

  1. [...] like producing, trading, and exporting goods and services in exchange for more capital. Source__________________________________________________ ______ Rob Gray is the Executive Director of the [...]

  2. [...] Gray of The American Open Currency Standard testifies before the House Financial Services Subcommittee on Domestic Monetary Policy regarding [...]

  3. [...] During his appearance in front of the House Subcommittee on Financial Services, Mr Grey of the American Open Currency Standard questioned Representative Paul understanding of legal tender laws and stated that he is in favor of leaving them in place. He explains is stance on the issue in a blog post along with a few interesting notes on his experiences at the House hearing. http://www.opencurrency.com/5-things-i-learned-from-d-c/ [...]

  4. [...] and he is right to say “leave our money alone” but I fundamentally disagree with his stance on legal tender laws. He believes that the only effect of legal tender laws is that if a debt is incurred without a [...]

  5. [...] right to contend “leave a income alone” though we essentially remonstrate with his position on legal proposal laws. He believes that a usually outcome of authorised proposal laws is that if a debt is incurred [...]

  6. [...] guys testify before the House Committee http://www.opencurrency.com/5-things…rned-from-d-c/ A lot of interesting things in this article, but this one strikes me:"When you say House [...]

  7. [...] Rob did a great job and learned a lot of things behind the scenes of the congressional machine, mainly that it isn’t as big a deal many times as we are led to believe and that it is in fact easier to get into Congress then to get on a plane.  You can read about his experience on the AOCS website here. [...]

  8. [...] are even growing movements to advance parallel currencies. For example, Open Currency recently testified before the U.S. House Financial Services Subcommittee on Domestic Monetary Policy regarding parallel [...]

  9. [...] are even growing movements to advance parallel currencies. For example, Open Currency recently testified before the U.S. House Financial Services Subcommittee on Domestic Monetary Policy regarding parallel [...]

  10. [...] and he is right to say “leave our money alone” but I fundamentally disagree with his stance on legal tender laws. He believes that the only effect of legal tender laws is that if a debt is incurred without a [...]

  11. [...] addressing members of congress, it's definitely worth 7 minutes to listen. Here's sort of an AAR Legal Tender & 5 things I learned from D.C. __________________ "Let the dead bury their own [...]

  12. [...] Legal Tender & 5 Things I learned from D.C. [...]

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