Former US Treasury Secretary Hank Paulson, responsible for frightening Congress into passing the $700 billion bank bailout in 2008, is now urging the Chinese government to let Chinese companies fail. There’s a word for that: hypocrisy. Is it any wonder that other countries don’t take the US seriously when it tries to lecture them? Or consider the case of the G20 meeting this past weekend in which the US Treasury urged the G20 nations to use all means at their disposal to boost their economies, including monetary and fiscal stimulus. But Treasury Secretary Lew proceeded to lecture the Chinese that they shouldn’t devalue their currency because monetary stimulus isn’t a license to engage in beggar-thy-neighbor policies. Of course, that’s easy for him to say because he can’t be blamed for anything the Federal Reserve does with regard to heavily accommodative US monetary policy. But US policymakers, in other words, are saying “We want your government to spend more money that it doesn’t have and engage in looser monetary policy, but only as long as it does things that benefit our economy and help us.” Gee, I wonder how many countries will take them up on these suggestions?
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Today we bring you Part IV of “A Brief Monetary History of the United States” from the Ron Paul Monetary Policy Anthology. The full series can be found at the following links:
Legal Tender CasesThe government understood the need to return to specie redemption, but was loath to let go of its issue of greenbacks. After all, greenbacks were an interest-free form of debt that circulated as money and could be used to pay off creditors, thus saving the government from having to use its valuable gold and silver. However, from the very inception of the Legal Tender Act, the constitutionality of legal tender paper currency had been called into question. That question was finally resolved after the decisions handed down in a series of Supreme Court cases known as the Legal Tender Cases.
Today we bring you Part III of “A Brief Monetary History of the United States” from the Ron Paul Monetary Policy Anthology. The full series can be found at the following links:
Coinage Act of 1857
As the 19th century progressed, the federal government sought to enhance its control over the banking industry and the monetary system. In 1857, Congress passed a coinage act which removed the legal tender status that circulating foreign coinage had until then enjoyed. All circulating foreign coins received by the Treasury were to be melted down and recoined. By driving foreign coinage out of circulation, Congress sought to ensure that only U.S. coins circulated, a step towards federal government dominance of the money supply. This was ostensibly to provide a uniform national currency, a stated goal of the federal government since the country’s founding. By “uniform national currency” the federal government did not mean adherence to a dollar defined as a specific weight of metal with coinage circulating by weight and valued in relation to that dollar. Instead, the federal government sought to ensure that only the United States Mint’s coins would circulate in commerce, regardless of what type of coins the market desired.
A further strike against market choice in currency came in 1864, when Congress passed legislation to prohibit private production of coins. The minting of any coins intended for use as current money was made illegal, even if the coins were of completely original design. This prohibition remains in force today, and was most famously used in recent years to prosecute the creators of the Liberty Dollar.