Tuesday, June 28, 2011

Ohio needs a state currency!

One buckeye sterling
 I am close to retirement age. Saving for retirement has not been easy for me, as I am sure it has not been easy for many Ohioans. Yet I see that the Federal Reserve is priming to go on another binge of buying federal debt that is, in effect, printing money.

Those of us who have followed the issue understand that, at some point, the dollar will not be accepted abroad because it has lost so much value. When that happens, inflation will rage out of control, and all of our savings in cash or bonds will be wiped out. Gold and silver are good hedges, but could prove impractical to convert in an emergency situation. I also would not rule out an attempt by the federal government to seize individual holdings of gold and silver as it did with gold by Executive Order 6102 (1933).

There is a way to prevent this for the people of Ohio, but it will take political courage. We need a state currency. On the face of it, the idea sounds illegal and highly unconstitutional, but if we handle it correctly, we can pass legal muster and protect ourselves from the hyperinflation to come.

The United States Constitution, Article I, Section 10, states, “No State shall … coin money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts…” Of course, we can argue that the feds have violated the Constitution a thousand ways to Sunday; but they will be sure to enforce it on us. So here is the workaround:

I am recommending that the currency of the State of Ohio shall be the “buckeye sterling,” to be defined as one United States dollar according to the Coinage Act of 1837 (412½ grains, 90% silver – the remainder was copper for durability). The silver content is thus 371.25 grains or 0.7734375 troy ounce. Since our currency will consist mostly of pre-1965 United States silver coins, the state will not be minting anything. The State can accept silver bullion in payment of taxes and fees at a fixed rate of 1.2929 buckeyes sterling per troy ounce of silver. Assayers could convert silver in other forms, such as jewelry, into (almost) pure silver suitable for coinage or bullion, which could still be created by private mints under their own names and designs. Keep in mind that the Constitution intended the U.S. dollar to be a measure of the silver content in its currency. There is nothing sacred about the fact that a particular “dollar” was issued by the U.S. Mint.

Most of the circulating money, however, would be in the form of silver certificates, just as one-dollar bills were prior to 1965. They would not have to be stated as “legal tender,” because gold and silver are, according to the Constitution and the Ohio Revised Code (section 5701.04), by definition, legal tender in payment of debts and taxes. For circulating money, the state can issue certificates backed by the silver on hand in the state treasury. Because the certificates are backed by silver, they are not "bills of credit," as our Federal Reserve Notes are now.

There will have to be some provisions to “jump start” the deposit of silver in the state treasury Perhaps a 5% silver discount in payment of taxes would be sufficient – the state will recoup the temporary loss in a short time as the value of silver continues to appreciate. The Treasurer of State might have to negotiate with Ohio banks to begin accepting silver and state-issued silver certificates for deposits, perhaps into separate buckeye sterling-denominated accounts, or converted into dollars at a market rate from a mutually acceptable source.

Such an act will provide a badly-needed inoculation from the deadly virus of inflation. I realize that many Ohioans will think this idea is ridiculous; but now, more than ever, we need vision to avoid the catastrophe. We have no time to lose. As soon as the budget is settled, the General Assembly needs to begin work on appropriate legislation.


Harold Thomas said...

Some readers may wonder why I did not mention gold. One of the problems that bedeviled the United States prior to 1933 was an attempt to maintain an artificial ratio between gold and silver. This problem can be corrected by creating a separate currency unit, that I call the "falcon" (after Ohio's peregrine falcon) which would be exactly equal to one "eagle" or $10 gold coin (.48375 troy ounce of gold). The state and its banks could accept gold on the same basis as silver, using an agreed-upon method of determining market price for gold and silver, then converting for accounting purposes into U.S. dollars or buckeyes sterling. In the computer age, this should be a piece of cake.

Harold Thomas said...

For what it's worth, if we had our state currency today, based on the Monex silver price this morning of $33.86 per troy ounce, the buckeye sterling would be worth $26.18. Gold at Monex was quoted as $1,502 per troy ounce, which would place the value of the falcon at $726.59.

As a further aside, gasoline on the Columbus east side was $3.45 per gallon, which would be 0.13 buckeyes sterling -- less than the 0.17 silver dollars that it cost in 1921.