Yes, I’m aware of that but I wonder if the governor and legislators of California are. California’s IOU’s sound very much like “bills of credit” to me.
It seems to me that California’s actions shouldn’t go unchallenged. It’s an awful precedent.
From the Constitutional annotations at Cornell website:
“Within the sense of the Constitution, bills of credit signify a paper medium of exchange, intended to circulate between individuals, and between the Government and individuals, for the ordinary purposes of society. It is immaterial whether the quality of legal tender is imparted to such paper. Interest bearing certificates, in denominations not exceeding ten dollars, which were issued by loan offices established by the State of Missouri and made receivable in payment of taxes or other moneys due to the State, and in payment of the fees and salaries of state officers, were held to be bills of credit whose issuance was banned by this section.”
Sounds illegal to me. I also note that some banks aren’t accepting the IOUs for fraud fears. One of the reasons we went to a national currency (besides paying for the Civil War) was to eliminate the huge losses from forged state bank notes.
After researching and considering the issue my preliminary conclusion is that whether California gets away with this depends on how serious the federal government thinks that California’s IOU’s constitute a threat to its own ability to borrow. I suspect that the critical issue is standing rather than the likelihood of success.
In the Craig v. Missouri (1830) case, which is essentially summarized in the annotation above, Justice Marshall ruled that Missouri’s IOUs were illegal and thus void. Maybe it’s because I lack the rich experience of living in Missouri in the 1820s, but a court ruling holding in these times holding that the California IOUs were void seems like a bubble that the court would bend over backwards not to pop, which brings into play standing. The longer this goes on the more likely some innocent is going to get hurt, and they’ll have standing to take it to court.
I notice the banks are slowly shutting the door on exchanging the IOUs. I’m thinking the lawyers have advised that $x in losses is worth the bad publicity of not buying the IOUs. $x squared is an insane risk.
“No state shall… make anything but gold and silver coin a tender in payment of debts†U.S. Constitution, Art. I, Sec. 10.
Longer version better: “No state shall . . . coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts …”
Yes, I’m aware of that but I wonder if the governor and legislators of California are. California’s IOU’s sound very much like “bills of credit” to me.
It seems to me that California’s actions shouldn’t go unchallenged. It’s an awful precedent.
From the Constitutional annotations at Cornell website:
“Within the sense of the Constitution, bills of credit signify a paper medium of exchange, intended to circulate between individuals, and between the Government and individuals, for the ordinary purposes of society. It is immaterial whether the quality of legal tender is imparted to such paper. Interest bearing certificates, in denominations not exceeding ten dollars, which were issued by loan offices established by the State of Missouri and made receivable in payment of taxes or other moneys due to the State, and in payment of the fees and salaries of state officers, were held to be bills of credit whose issuance was banned by this section.”
Sounds illegal to me. I also note that some banks aren’t accepting the IOUs for fraud fears. One of the reasons we went to a national currency (besides paying for the Civil War) was to eliminate the huge losses from forged state bank notes.
I’ll bet my entire net worth against yours this is a huge problem for CA, and they will prove illegal.
If you take the bet, you pay me in US currency. Of course, if I lose, I’ll pay you in “Austrian” notes. Wanna take the bet?
So that pretty much makes the case, eh? 😉
After researching and considering the issue my preliminary conclusion is that whether California gets away with this depends on how serious the federal government thinks that California’s IOU’s constitute a threat to its own ability to borrow. I suspect that the critical issue is standing rather than the likelihood of success.
In the Craig v. Missouri (1830) case, which is essentially summarized in the annotation above, Justice Marshall ruled that Missouri’s IOUs were illegal and thus void. Maybe it’s because I lack the rich experience of living in Missouri in the 1820s, but a court ruling holding in these times holding that the California IOUs were void seems like a bubble that the court would bend over backwards not to pop, which brings into play standing. The longer this goes on the more likely some innocent is going to get hurt, and they’ll have standing to take it to court.
I notice the banks are slowly shutting the door on exchanging the IOUs. I’m thinking the lawyers have advised that $x in losses is worth the bad publicity of not buying the IOUs. $x squared is an insane risk.