Monetary Tyranny: How Legal Tender Laws Built the Fiat Empire – and How Free Competition Can End It

One way that inflation-prone fiat currency took over the monetary system was legal tender laws, which obligate private citizens to accept currencies like the dollar even when they don’t want to. Without these policies, weak and eroding currencies would fall to the wayside, and more stable currencies would replace them.

The following article was originally published by the Mises Institute. The opinions expressed do not necessarily reflect those of Peter Schiff or SchiffGold.

Each day we are reminded of this legal imposition by the familiar phrase stamped on every US dollar bill: “This note is legal tender for all debts, public and private.” Innocuous on the surface, but these words conceal a profound immorality that strikes at the heart of voluntary exchange. If a man of sound mind agrees to settle a contract in X, then he should be obligated to pay X. Forcing him to accept anything other than X as payment is an egregious violation of contractual and property rights.

The state tramples on our natural rights through legal tender laws that grant fiat a privileged status. Contrary to the popular misconception, merchants are not obligated to accept cash. However, the exclusive ability to settle debts, public charges, taxes, and dues bolsters artificial demand, elevating fiat currencies to the preferred medium of exchange in most countries. By privileging fiat above alternatives, the state clears the way for unbacked issuance. When governments can print irredeemable notes, price inflation predictably ensues, turning money itself into a political instrument.