Outlawing legal tender

Free Money

When Rep. Ron Paul (R-Texas) introduced a bill to audit the Federal Reserve, the measure won 317 cosponsors, earned heavy press coverage, frightened Fed Chairman Ben Bernanke, and was incorporated into the House's major financial services bill of 2009 (though it has not yet passed). But the libertarian-leaning Paul has always had more ambitious plans to strike at the economic power of the nation's central bank, which he blames for inflation and the boom-bust economic cycle.

Another Paul bill, one that had gleaned no cosponsors a month after he introduced it in December, would end the government's monopoly over the nation's currency. The Free Competition in Currency Act—whose short-term prospects are vanishingly small—would repeal the section of the U.S. code which compels people to accept Federal Reserve notes as payment for debts. To level the playing field for competing currencies, Paul's bill also would prohibit levies such as capital gains or sales taxes on "any coin, medal, token, or gold, silver, platinum, palladium, or rhodium bullion, whether issued by a State, the United States, a foreign government, or any other person."

"Allowing for competing currencies will allow market participants to choose a currency that suits their needs, rather than the needs of the government," he said on the floor of the House when he introduced the bill. "The prospect of American citizens turning away from the dollar towards alternate currencies will provide the necessary impetus to the U.S. government to regain control of the dollar and halt its downward spiral."