Gresham’s Law – Private Money – Bitcoins

By: George Noga

Animadversions: King George III – Barack Obama – Eric Holder

A dozen states have introduced legislation enabling them to issue legal tender; Utah already passed such a law – albeit limited in scope.

Can states, banks and private citizens issue currency? Remember Gresham’s Law? How may it come into play as the US dollar plummets? How would you like a transnational currency that: (1) is confidential, anonymous, digital and stored on your computer; (2) does not involve banks and leaves no record; and (3) is beyond the reach of government and thus inflation proof? If so, bitcoins may be for you.

“States, banks and individuals legally can issue currency.”

You may have read news about Bernard von NotHaus, convicted of counterfeiting money by issuing silver coins called Liberty Dollars. Most who read this story jumped to the wrong conclusion, i.e. privately issued money is ipso facto illegal. Von NotHaus was convicted only because his coins were called dollars and resembled US coins. The judge in the NotHaus case refused to rule that private currency could not be issued in competition with the government.

Article I, Section 10 of the US Constitution specifically authorizes states to coin money provided it is in gold and/or silver. Moreover, private banks (and likely individuals) legally can issue currency as upheld by the Supreme Court in Briscoe v. Bank of Kentucky. Such private currencies flourished in the 19th century until Congress levied a 10% tax on notes issued by state-chartered banks; this tax was upheld by the Supreme Court in Veazie Bank v. Fenno.

Gresham’s Law May Come into Play

Since the fifth century BC (Aristopanes) humans have understood that bad money drives out good money; this has come to be known as Gresham’s Law (Sir Thomas Gresham 1519-1575). Should states, banks or individuals issue alternate currency, the good money will be hoarded while the bad money (US Dollars) will be spent into oblivion. Unthinkable even 5 years ago, this could happen because of the imminent crisis of spending, debt and deficits.

“Zimbabwe issued 100 trillion dollar notes – history’s largest.”

I recently purchased a supply of uncirculated $100,000,000,000 banknotes issued by Zimbabwe, the highest denomination notes in human history, as a reminder of what can happen. Even these now are worthless and the only thing accepted in Zimbabwe is foreign currency.

Back to bitcoins which exist today, albeit in limited quantities; however, they may be a stalking horse for our dystopian future. People are resourceful and I never would rule out a transnational cyber currency that is private and outside the banking system. Today bitcoins are used mainly for gray market transactions but maybe tomorrow the world. This is not your father’s Pay Pal.

The Constitution and the Debt Ceiling – Obama in 2006

Public statements of Treasury Secretary Geithner and President Obama demonstrate either a lack of understanding or intentional disregard for the Constitution. The 14th amendment (Section 4) forbids any default on federal debt. It’s in the Constitution and there is no wriggle room.

Nevertheless, Obama and Geithner have threatened a default in blatant violation of the document they took a solemn oath to uphold and to defend. They are scaremongering the public with talk of a default when they should know that is not an option under the law of the land. The following is from President Obama in 2006.

“Debating raising the debt limit is a sign of leadership failure. Leadership means the buck stops here. Instead Washington is shifting the burden onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore oppose the increase in America’s debt limit.”

King George III, Barack Obama and Eric Holder

Immediately prior to the revolution, Americans were boycotting British goods as a protest to the Stamp Act and the Intolerable Acts. The Solicitor General of England (the King’s attorney and functional equivalent of Eric Holder) testified before Parliament that under British law colonists could not be forced to buy British goods. At that time we were mere subjects of the crown but nevertheless could not be compelled to buy anything.

Fast forward 235 years. Today we have a president and an attorney general who believe it is legal and proper to compel private citizens to buy a private product. Even the tyrant George III realized that could not be done. Note: credit for this idea belongs to Ken Cuccinelli.


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