Virginia’s Golden Opportunity

For a glimpse of the avant-garde in the coming battle for monetary reform, one place on which to keep an eye is Virginia, where the general assembly — the oldest legislature in the hemisphere — is considering whether the Old Dominion might establish its own currency as a hedge against the collapse of the fiat dollar now being issued by the American government. A measure called Joint Resolution 557 has been introduced that would establish a committee “to study whether the Commonwealth should adopt a currency to serve as an alternative to the currency distributed by the Federal Reserve System in the event of a major breakdown of the Federal Reserve System.”

The new governor of the state, Robert McDonnell, has announced that he “can’t support,” as his position was characterized by the Associated Press, the legislation because the proposal violates the constitution. The Associated Press reports that Mr. McDonnell said that proposals like the one just made in Richmond stem from “fear about frightening levels of debt the federal government has taken on,” as the governor is paraphrased by the Associated Press. The newswire reports that the governor reckons that currency, as the AP put it, “is the responsibility of the federal government, not the states.”

The fact is that the Constitution does not make currency the exclusive responsibility of the federal government. It does give the federal government the power to “coin money” and regulate its value and the value of foreign coin and to fix the value of weights and measures, like the hour and the ounce. That’s in Article 1, Section 8. The Constitution does prohibit Virginia and the other states from making anything other than gold or silver coin legal tender. But it specifically leaves to the states the right to make gold or silver coin legal tender.

So out of sync with the Constitution was Mr. McDonnell’s statement that one can surmise that he misspoke. He has, after all, shown great regard in the past to the constitutional principles he is sworn to uphold; he was also attorney general before he was governor. In any event, one would have expected the governor — any governor — to defend, rather than cede in casual fashion to the federal government, the powers and privileges that are, under the Constitution, so pointedly reserved to Virginia and the other states.

The resolution that has been introduced in the state’s general assembly, moreover, would not establish a state currency. It would merely study the matter. The resolution — part of a nationwide turn to constitutional principles — couldn’t be more timely and appropriate. The value of the dollar has plummeted so fast and far in the past year that it is now worth only a bit more than a 1,400^th of an ounce of gold. It may have strengthened a bit in recent days, but there some who are predicting it could collapse to a 3,000^th of an ounce, which would be less than a tenth of what it was worth at the start of the century.

Myriad schemes are being advanced for setting up currencies to compete with the collapsing dollar. The Chinese communist party is talking about it; the president of China, Hu Jintao, is visiting America right now, with the dollar one of his big agenda items. The Europeans are talking about a parallel or replacement reserve currency even while their own scrip is in jeopardy of going out of existence altogether. Even the United Nations is trying to horn in on the idea of new currency.

What is significant about the proposal in Virginia is that it involves the idea that a parallel or competing monetary system should be set up not internationally but within the United States and by the states themselves. This idea is, by our lights, one of the most powerful ideas in the coming debate. It has been nursed for years by Edwin Vieira Jr., who has written extensively on it and on his plan for an electronic gold currency to be established precisely by the states.

It happens that Mr. Vieira lives in Virginia, at the north end of the Shenandoah. It would be a smart thing for Mr. McDonnell to visit Mr. Vieira and take the time to sit in his study and listen to the sage explicate the history of the dollar, the concept of the constitutional dollar, the centrality of the constitutional principles to the repairing our economy, and the distribution of the monetary powers and disabilities of the Constitution. We’ve made the trip to Front Royal, and it is hard not to think the governor would find it illuminating.

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America is at a remarkable moment in respect of the dollar. Suddenly a wide range of thinkers are waking up to the catastrophe that would be represented by the loss of the dollar. A former chairman of the Federal Reserve, Alan Greenspan, presented himself at the Council on Foreign Relations to warn that fiat money always goes to gold. The president of the World Bank, Robert Zoellick wrote an important op-ed piece in the Financial Times, of all places, to suggest that there may be a role for gold after all. The New York Times brought in no less a figure than James Grant to argue that the time has come to bring back the classical gold standard. The Wall Street Journal editorial page has been running a stream of important pieces on monetary reform. This week a committee has been set up to draft for the 2012 presidential campaign a candidate, in the person of Congressman Michael Pence, who might stand on a gold plank. The Congress of the United States has just put Ron Paul at the head of the subcommittee that oversees the Federal Reserve. What a golden opportunity for Virginia, which gave us so many fathers of the Constitution, to take the lead in studying what role the states themselves might have in a return to sound money.