The latest fad in monetary policy circles worldwide is CBDC or Central Bank Digital Currency, a government-created cryptocurrency exchanged on a blockchain.
Many fear that it would give governments complete control over individuals by allowing them to track, and even block, individual transactions and to impose taxes at will.
In the United States, though, “money” has a constitutional basis so firm that, despite its name, a US government CBDC would not be “money” or even “currency.”
It could exist as one payment system among many, but without violating the US Constitution it could not be forced on Americans as the sole final means of payment…
Article I, Section 8 gives Congress the power “to borrow Money on the credit of the United States” and “to coin Money, regulate the Value thereof, and of foreign Coin.”
It also gives Congress the power “to provide for the Punishment of counterfeiting the Securities and CURRENT Coin of the United States” and “to raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years.”
Article I, Section 9 stipulates that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Laws; a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”
Article I, Section 10 says that “no state shall… coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts.”
The reasons for those policies are well understood and uncontroversial. Americans wanted their new nation to be a common-currency area, so only the national government could have any monetary policy discretion.
The stickier question was always the extent of that discretion, particularly the federal government’s ability to issue bills of credit.
I believe, after much study, that the Founders and Framers would have tolerated temporary periods of fiat-money issuance during wartime or other major emergencies, but that they would not consider a permanent fiat system constitutional.
That position is obviously not the prevailing one, but it is also not necessary to establish the fact that a CBDC is not an electronic form of fiat money or any other type of “currency” under the Constitution.
As shown above, all three types of money specified in the Constitution – bills of credit, foreign gold and silver coins, and domestic gold and silver coins – were (and remain) physical bearer instruments.
In other words, they are “current” in the sense used in Section 8 above, meaning that mere possession provides sufficient proof of their ownership.
To tender current money is to turn over physical possession to another party in order to consummate a trade or pay a debt. Due to its physical nature and bearer-legal status, “money,” as used in the Constitution, can be used anonymously as a means of final payment.
In America’s constitutional context, a CBDC is a payment system, a means of exchanging money over physical distance.
The Framers were aware of the payment systems provided by eighteenth-century banks and merchants, but wisely made them no part of the Constitution. They did not conflate checks, bills of exchange, or other orders for the payment of money with money itself, and never made deposits or even banknotes a legal tender.
Can the Treasury or Federal Reserve proclaim that a CBDC is a new payment system that people may use instead of existing payment services? Yes, though it is not clear that a government CBDC will lower transaction costs enough to induce many to switch voluntarily.
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Can the government say that CBDC is now money and confiscate Federal Reserve Notes and bank deposits like it confiscated gold during the New Deal? No, not lawfully.
About the Author
Robert E. Wright is a Senior Research Fellow at the American Institute for Economic Research. He is the (co)author or (co)editor of over two dozen major books, book series, and edited collections, including AIER’s The Best of Thomas Paine (2021) and Financial Exclusion (2019).
Article cross-posted from Money Metals.
Independent Journalism Is Dying
Ever since President Trump’s miraculous victory, we’ve heard an incessant drumbeat about how legacy media is dying. This is true. The people have awakened to the reality that they’re being lied to by the self-proclaimed “Arbiters of Truth” for the sake of political expediency, corporate self-protection, and globalist ambitions.
But even as independent journalism rises to fill the void left by legacy media, there is still a huge challenge. Those at the top of independent media like Joe Rogan, Dan Bongino, and Tucker Carlson are thriving and rightly so. They have earned their audience and the financial rewards that come from it. They’ve taken risks and worked hard to get to where they are.
For “the rest of us,” legacy media and their proxies are making it exceptionally difficult to survive, let alone thrive. They still have a stranglehold over the “fact checkers” who have a dramatic impact on readership and viewership. YouTube, Facebook, and Google still stifle us. The freer speech platforms like Rumble and 𝕏 can only reward so many of their popular content creators. For independent journalists on the outside looking in, our only recourse is to rely on affiliates and sponsors.
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Even our faith-driven precious metals sponsor helps us tremendously while also helping Americans protect their life’s savings. We are blessed to work with them.
Independent media is the future. In many ways, that future is already here. While the phrase, “the more the merrier,” does not apply to this business because there are still some bad actors in the independent media field, there are many great ones that do not get nearly enough attention. We hope to change that one content creator at a time.
Thank you and God Bless,
JD Rucker
