Delegate Bob Marshall’s latest legislative proposal, to establish a committee to study whether Virginia should “adopt an alternative currency” to the familiar greenbacks in your wallet, is the kind of argument usually reserved to academic quarters or libertarian all-nighters. But as this is a real bill to be set before the General Assembly, it deserves attention.
According to this Washington Post write-up, Marshall is seeking to create a competing currency that will help steer the government, and the Federal Reserve, away from its recent, destructive policies. In that piece, where reporter Roz Helderman says the idea might come off as a bit wacky, Marshall is quoted as saying “’The only people who would say that are people who don't understand or reject the clear language of the Constitution, of the law and of court decisions…’”
Marshall’s bill is larded with citations of both court cases and the Constitution. The Constitution itself clearly prohibits the states from creating the competing currencies Marshall envisions. In Article I, Section 8, Congress is given the sole power to “coin Money” and “regulate the Value thereof.” Section 10 makes the ban even clearer: “No State shall…coin Money.”
In Federalist #44, James Madison made the case for why the states lost their ability to coin their own money: it was tried under the Articles of Confederation and failed.
Perhaps that’s why, in a separate interview, Marshall revised and expanded his remarks to make it clear Virginia might mint its own gold and silver coins, but not call them “money.” Marshall calls it a legal difference and is perfectly acceptable so long as the state meets weight requirements.
In other words, it’s a lot like the old Articles of Confederation arrangement Madison said was such a problem.
But Marshall goes on, calling for the possible creation of a Bank of Virginia, where residents (who would also be stock holders) could tap the value of their state-minted gold and silver coins, which would be too cumbersome to carry around, via a “debit system.”
This is highly reminiscent of a story Milton Friedman relates in his book “Money Mischief” regarding the Yap Islanders and their stone currency. A family was known to be wealthy, in possession of a stone of enormous size and quality. A family ancestor attempted to transport this valuable stone from the quarry across 400 miles of ocean to his home. A violent storm arose and the stone was lost. But upon his return, and assuring everyone of the stone’s magnificence, his neighbors accepted that it was real because it had been created according to custom. It was as valuable at the bottom of the ocean as it was leaning against his home.
Sort of like the bullion you might have in a Bank of Virginia.
It’s easy to understand why Marshall is interested in studying currency competition and perhaps, as an academic exercise, it may be valuable.
But as a policy prescription? No. Or at least, not quite yet.