If you are a farmer growing corn and a murder of crows descends upon your field one night and eats half your crop that is a misfortune of nature. If your neighbor comes in at night and takes half your crop, that is theft. Inflation is only possible with fiat money and, when enacted by legislature or central bank it is as much theft as the neighbor stealing your crop. When the government forces you to accept its paper as “legal tender”, it is not only robbery, it is armed robbery. In a free society, people are free to agree upon any currency they choose in which to conduct their business.
Government legal tender laws lead to some amazing contradictions that would be funny if not for the serious problems the contradictions expose and the real impact these laws have on everyday life. For example, in 2009, a Las Vegas businessman named Robert Kahre was convicted on 57 counts of tax evasion. His crime? Paying his employees in actual US dollars rather than in Federal Reserve notes. US law on face value of coins. Disparity between the laws
Why do I refer to one as “actual” US dollars and the other as Federal Reserve Notes? Primarily because the US Constitution does not give the federal government the authority to issue paper money. In fact, while the founders argued about nearly every point in the Constitution, on this point they were virtually unanimous. That the federal government should not be allowed to issue paper money. And they were clear when they authorized the monetary power:
Article 1, Section 8
The Congress shall have Power… To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
What kind of money is “coined” and why is the power to standardize weights and measures so intimately tied to it? Hard currency of gold and silver is coined. Paper money is not. When was the last time you weighed a stack of federal reserve notes to ensure they are what they appear to be? The power to set the standard of weights and measures is only important vis a vis the coining of money. So that when the US Mint coins a $50 Good Eagle of 1 oz of 22 karat gold today it has the same gold content as the same coin minted a year from now.
Article 1, Section 10
No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts
Not only does the printing of paper money exceed the Constitutional powers of the federal government, making it legal tender forces the States to violate the Constitution every day. When was the last time your state paid for road work using gold or silver? When was the last time you sent them gold or silver in payment of your taxes? And yet the state is not allowed to pay its debts or make you pay yours in anything but gold and silver coin.
But some guy tried to exploit a loophole and got nailed right? We will ignore the fact that the “loophole”, in the final analysis, happens to be the US Constitution. What impacts do these policies have on the rest of us?
Quite simply, the federal government and its quasi-governmental central bank, the Federal Reserve, have been stealing your corn crops for a hundred years. They inflate the currency and that steals directly from your wallet, your savings account, and your retirement. It also directly steals from anyone that buys US Treasury Bonds. Imagine if you could take out a loan and then manipulate the currency so you could pay it back with less valuable paper.
How does inflation steal from you? If you bought an item in 1916 for $100, the same item today would cost $2,204. In other words, the value of a $100 bill in 2016 dollars is worth $4 in 1916 dollars. The other $96 1916 dollars have been stolen by inflation. This directly saps the wealth of people who most need to save money. By the way, inflation since 1963 is over 700%. A US quarter made of 90% silver in 1963 with a face value of 25 cents is currently valued at over $3.60. So actual money retains its value. Even when paper money is massively inflated.