The age-old issue of legal tender has been reignited with the introduction yesterday of State Senator David Shafer’s “Sound Money in Banking Act”, SB 416.
This is an issue that was a central one in the Civil War and “Wild West” eras and per my history books was largely settled by the turn of the 20th century via a couple of acts of Congress and several Supreme Court cases.
But there are those who to this day want to revert our monetary systems back to the “good old” days when Cotton was King and the Stars and Bars flew high and proud. They claim that legal tender laws are unconstitutional and that paper money is not “sound”.
The thing to remember here is that the concepts of “money” and “currency” are entirely constructs of the human mind. An object – whether it be a colored piece of linen or a stamped metal disc or some kind of stone or anything else – has value only because the human mind gives it that value. Now, there are personal and cultural influences at play here, no doubt about that. But at the end of the day, an object can only be valuable to an individual because that individual chooses for it to be.
Thus value is, like beauty, in the eyes of the beholder.
Because of this, NO systematic form of money or currency will EVER be truly “sound”. As people’s opinions change about what they value, so too will the value of various potential currencies rise or fall. As we say in most other areas, you cannot base an objective decision on subjective rationale.
Now, if it were up to me, there would be absolutely no legal tender laws, one way or the other. Buyers and sellers would be free to negotiate prices using any item(s) they valued – whether it be colored strips of linen, stamped metal discs, cut rocks, their own bodies, or anything else.
People could even choose to accept livestock as payment, in similar fashion to the stories of the old country doctors we’ve all heard about. Think about it, you could accept your rebate from the government in some form that you found actual value in…
even government chickens!
