Ron Paul on Legal Tender Laws

by Ron Paul

I’ve discussed just a few benefits of sound money in the last two weeks, and contrasted them to the perils of fiat currency. Sound money keeps government spending in check, keeps trade fair and honest, which reduces the temptations, and many underlying causes, for governments to wage wars. It also gives you the peace of mind of knowing that your savings will be able to sustain you in your retirement.

So if sound money is such a good thing, what is stopping people from simply trading with each other in gold and silver? Why are you still being paid in fiat dollars, and why can’t you pay for gas in gold? The answer is that the government has enacted policies that provide considerable stumbling blocks to such transactions.

One of the main stumbling blocks is Federal legal tender laws, which state that government-controlled fiat currency MUST be accepted for many kinds of monetary transactions.

In light of this, Gresham’s Law takes effect. Gresham’s Law states that bad money drives out good money. Meaning, if someone is forced to accept your bad money, it is to your advantage to pass it off, like a hot potato, in exchange for something of value. Any good money you have, you will hoard. Eventually, real money is driven out of circulation and under people’s mattresses, so to speak. In the absence of legal tender laws, people are free to accept the medium of exchange of their choice, and are likely to insist on payment in something of real value.

Related to legal tender laws, contracts in gold are not enforced. Meaning if two parties agree to exchange goods or services for gold, and end up in a dispute, the courts will simply settle the dispute in Federal Reserve notes. Governments should do very little, in my estimation, but it should enforce contracts and property rights through the courts. But in this instance it shirks this basic duty, when it comes to gold, as one way to keep control of our economy and the medium of exchange.

One is also expected to pay sales tax on the purchase of gold. This is as ludicrous as if you paid sales tax at the bank when you converted dollars into quarters! The IRS also expects you to pay capital gains tax on gold, which is so backwards, since gains on gold really represent decline in the value of the dollar!

Legal tender laws should be repealed at the Federal level. Congress has the Constitutional duty to protect the integrity of our money. However, since it has passed this duty off, and the Federal Reserve has only debased our currency, Congress should no longer force Americans to do business in dollars if they would prefer to transact in gold, or silver, or cigarettes or seashells, for that matter.

Free people should be free to associate and do business in ways that benefit them. Instead they are forced to use the unstable dollar to their own detriment, and the benefit the government.

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  • PeoplePower

    Legal tender law, Federal Reserve notes & policy’s are illegal, the Us Congress has authority to create money.
    + we could add Bernanke to the world records, he will be remembered as the greatest thief of 20th / 21st century.

    Go Ron Paul 🙂


  • Camilo

    Gold won’t really stop government manipulation and deficit spending. As long as they can keep printing bonds, they will promise anything in them, they can still offer taxpayers’ blood or public US lands, etc, for repayment.

    For another take on Money, I reccomend Edwin C. Riegel’s ‘New Approach to Freedom’ and ‘Private Enterprise Money’.

  • LibForestPaul

    This statute means that all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor. There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services.

    Reread. RP assertion above stands. “which state that government-controlled fiat currency MUST be accepted for many kinds of monetary transactions.”

  • Brian Rabbit

    Far be it for Me to contradict the Physician’s teachings. But, no federal statute exists requiring acceptance of legal tender. The US treasury’s website explicitly state My assertion as fact: I do agree a misconception exists among People leading Them to believe They must accept federal notes. However, several cases exist illustrating the misconception as just that: a misconception. An Attorney would be in a better position than I to elaborate on this issue, though.

  • rodger

    the bailout is as R.Paul says. I despise any multimillionaire congress-person who votes for it. Just as bad as all those who voted for the patriot act without even reading it!!! notice how little you hear of Cheney or Haliburton these days. I’m disgusted by the super vague disclosure laws pertaining to politicians’ declaration of income & assets. Is our congress voting for the bailout because they themselves are heavily invested personally in these sinking ships? Do they ever REALLY vote for the consensus of those they are supposed to represent? In the interest of security to our nation, will G.W. use the financial corruption and failure to declare martial law?
    Kick out the ‘Federal Reserve Board’ and get back to gold or silver or fresh eggs. Restore our Constitution while there remains a chance.
    Get rid of the 2 Party system. You are merely Joe Blow representing the people of your district. People at the poverty level don’t benefit from tax credits. AGHHHHHHHHH

  • jeremy

    I think that the financial market problem was well timed for those in power. Everything begins to happen and receive media attention after the 2 presidential candidates had been decided. If these problems had been going on during the earlier campaigning, people would have been more likely to vote for Paul in the primaries. Now is the time for a 3rd party libertarian to rise onto the presidential scene. Is there no one willing or able to step up to the plate and receive some media attention so the american people know who he/she is?

  • michael

    Id just like to know your view of the apparrent agreement by both parties on the $700bn bailout, and i hope you(or someone near you) sees this comment so that you could give a reply.


  • jad

    I have never felt so patriotic my whole life. Reading your content and seeing your viewpoint is refreshing and inspiring. I intend to really research the Libertarian candidate, as I cannot stomach the republicrats any longer. I think that my values fall in line with the libertarian mind set, but I am still researching it. I am encouraging others to do the same.

    Thanks Ron Paul for speaking to me with truth and honesty in your messages!

  • Robyn

    Ron Paul is a genius. Too bad he is no longer running for president because he might have gotten elected and been able to do something about the mess we are in. All his posted discourses are fine and give us something to think about but, other than that, what do they really accomplish? Nothing. Thanks RP for dropping out of the race. Love ya.