Rights of monetary sovereignty
Right of legal tender
The right of legal tender grants the power to determine the currency deemed legal tender for payment of taxes and legal debts. Historically, states have operated on a variety of currencies (see History of Money) and a change in legal tender is typically the result of an economic/political revolution/crisis (see History below).
Right of issuance and retirement
The right of issuance and retirement grants the power to issue and retire the legal tender. The state generally extends this right to a variety of public and private institutions, for example private banks, depts. of the treasury, monetary authorities, finance ministers and central banks.
Right of currency monopoly
The right of currency monopoly grants the power to maintain a currency monopoly. This right is typically executed through the prosecution of fraud and counterfeiting, and the regulation of legal currencies, both foreign and domestic.
- Ancient Rome
- Shortly after Julius Caesar seized control of the Roman Republic in 49 BCE, he also seized partial monetary sovereignty by coining his own imperial currency and passing a law to restructure debts so that ultimately one fourth of all debts were eliminated.
- Jewish-Roman wars
- After the Roman Empire seized control of Jerusalem in 63 BCE, they usurped the monetary sovereignty of the Jews by forcing them to use the Tyrian shekel for payment of their Temple tax, despite the fact that the Tyrian shekel bore the image of the Phoenician god Baal. This was probably a contributing factor, when Jesus physically forced the money changers out of the Temple in the new testament story of the Cleansing of the Temple. In addition the thirty pieces of silver later given to Judas for the betrayal of Jesus to the Romans are likely to have been Tyrian shekels. After the Jews captured Jerusalem from the Romans both in the First Jewish Revolt of 66 CE and again in the Bar Kochba Revolt of 132-135 CE, they restored their monetary sovereignty by issuing the First Jewish Revolt Coinage and then the Bar Kochba Revolt coinage.
- Medieval England
- For hundreds of years the British Monarchy issued a currency of royal tally sticks (ie. debts to the crown). In the 17th century, the Bank of England began to add royal tally sticks to their capital reserves, but the royal tally system was officially retired in 1826.
- Plano Real
- In 1994 Brazil issued a new form of legal tender, the Unidade Real de Valor or Unit of Real Value as part of a set of measures, known as the Plano Real, intended to stabilize inflation of the Brazilian Real.
- European sovereign debt crisis
- When the European Union was formed in 1993, most member states chose the euro for legal tender. Since the European Central Bank controls issuance, retirement and to some extent monopoly rights on the euro, these states have partially transferred their monetary sovereignty to that bank. The current debt crisis has sparked debates about whether debtor states should reclaim full monetary sovereignty by leaving the euro.
United States history
1776 - 1790
- Colonial Scrip and Taxation Without Representation
- As the economy of the thirteen colonies developed, the early Americans utilized a heterogeneous mix of both foreign and domestic currencies. The domestic currency, generally known as colonial scrip, was issued by colonial governments, individuals and corporations. Since colonial scrip increased the liquidity of colonial debtors relative to the British pound, these currencies were widely popular within the colonies but strongly derided by the British. For example, Adam Smith denounced colonial currencies in his book, " The Wealth of Nations", as a "violent injustice" to the creditor and a "scheme of fraudulent debtors to cheat their creditors" (Book II, Chapter II). The British Empire reasserted its monetary sovereignty over the colonies with the Currency Acts of 1751 and 1764, which prohibited the use of colonial scrip as legal tender. As a source of further tension, the British Empire, heavily indebted from the Seven Years' War and seeking revenues to support British troops in North America, issued the Stamp Act of 1765 and the Townshend Acts of 1767, thereby intensifying taxation upon colonists lacking representation within the British state. This system of " Taxation without Representation" was explicitly forbidden by the Rights of Englishmen. In 1774 the First Continental Congress asserted the monetary sovereignty of the colonies by demanding redress for these and other Intolerable Acts.
- Continentals and Free Bimetallism
- In 1776 the Second Continental Congress issued the Declaration of Independence and then partially financed the ensuing American War of Independence by issuing continental currency. However, these "Continentals" rapidly devalued due to overproduction, poor management and economic warfare in the form of rampant counterfeiting. After the collapse of the continental currency, the War of Independence was primarily financed through the Bank of North America, established in 1781 with loans from France, Spain, the Netherlands and the "Financier of the Revolution", Robert Morris. When the Philadelphia Convention ratified the United States Constitution in 1787, they established a free bimetallic standard for legal tender, partially in order to avoid a repeat of the continental currency's inflation debacle.
1791 - 1811
- Alexander Hamilton - Debt, Taxation and Fixed Bimetallism
- In 1790 President George Washington appointed Alexander Hamilton as United States Secretary of the Treasury. During his time as Treasurer, Hamilton wrote a series of reports and letters promoting the expansion of federal sovereignty. Hamilton's proposals were generally opposed by Thomas Jefferson, James Madison and others who favored a small federal government with limited sovereignty as outlined by the United States Constitution. Although this conflict ultimately led to the formation of the American two-party political system, Hamilton was largely successful in extending the monetary sovereignty of the federal government through the passage of following policies:
1812 - 1831
1832 - 1860
- The Bank War
- President Andrew Jackson fervently opposed the Second Bank of the United States. He vetoed the renewal of its charter in 1832 and in 1834 he famously declared, "Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out!" When the charter of the Second Bank expired in 1836, it became a regular bank and eventually collapsed 5 years later.
1861 - 1900
- Demand Notes
- In 1861-62 Abraham Lincoln authorized the Dept. of Treasury's to issue debt-free demand notes as part of financing the United States Civil War.
- Crime of '73 and (un)Free Silver
- After silver was demonetized by the Coinage Act of 1873, the Free Silver movement aimed to remonetize silver and restore the bimetallic money system. The movement generally pitted debtors, who hoped that silver would provide them with an increase in liquidity, against creditors, who largely controlled the gold supply. Bimetallism was promoted by the Populist Movement, and William Jennings Bryan famously comdemned the monometallic gold standard in his Cross of Gold speech. The Farmers' Alliance also promoted bimetallism, since many farmers had fallen into debt through the crop-lien system. Bimetallism was opposed by a powerful group of creditors including railroad monopolies, banks, and commodity brokers, who eventually defeated the Free Silver movement with the establishment of the Federal Reserve System at Jekyll Island in 1910.
1900 - Present
- Executive Order 6102 and Gold Reserve Act
- On April 5, 1933, U.S. President Franklin D. Roosevelt issued Executive Order 6102 "forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates within the continental United States" and thereby criminalized the possession of monetary gold by any individual, partnership, association or corporation. The Gold Reserve Act of 1934 reinforced state control of gold both by ordering the transfer of all gold and gold certificates from the Federal Reserve to the Departement of Treasury and by changing the nominal price of gold from $20.67 per troy ounce to $35. In 1935 the Supreme Court judgment, Norman vs. Baltimore & Ohio Railroad Co., reaffirmed the state's currency monopoly by invalidating gold clauses.
- Executive Order 11110
- On June 4, 1963 President John F. Kennedy issued Executive Order 11110 granting the Secretary of the Treasury the authority to issue debt-free silver certificates. However in March 1964, a few months after President Kennedy was assassinated, the Secretary of the Treasury halted redemption of silver certificates for silver dollars and all redemption in silver ceased on June 24, 1968.
- Nixon Shock
- In 1971 U.S. President Richard Nixon asserted the right of legal tender by canceling the direct convertibility of the United States dollar to gold. In 1977 Congress reaffirmed the state's immunity from gold claims but legalized the use of gold clauses for private obligations (new contracts) in accordance with 31 U.S.C. § 5118(d)(2).
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