Addison Wiggin

“Is this just stupid? Or sinister by design?” We couldn’t help asking the question when confronted by a law that took effect in Louisiana on Aug. 15, 2011.

The short of it: In Louisiana, if you sell clothes or toys that your kids have outgrown for cash — more than once a month — you’re now breaking the law.

And… the why: Over the summer, Louisiana lawmakers decided that mere laws against theft might’ve been good enough for Moses and his people back in the day, but not for the Pelican State.

The state legislature crafted and passed a new law designed to target copper and scrap thieves specifically… but entrapped a host of housewives and flea market aficionados in the process.

Given the tenor of the public debate these days, we’re not sure what to make of the following details. You decide…

“Louisiana,” reports New Orleans CityBusiness, “is among a handful of states and cities to ban junkyards from purchasing scrap with cash as police crack down on copper and metal thefts.”

Unfortunately (perhaps), they’ve done much more than that.

“What sets the Louisiana law apart is its breadth,” CityBusiness goes on. “Louisiana law bans cash purchases for all secondhand goods.”

The letter of the law: “Anyone, other than a nonprofit entity, who buys, sells, trades in or otherwise acquires or disposes of junk or used or secondhand property more frequently than once per month from any other person, other than a nonprofit entity, shall be deemed as being in the business of a secondhand dealer.

“A secondhand dealer,” the law continues, “shall not enter into any cash transactions in payment for the purchase of junk or used or secondhand property.”

Huh?

[Ed note. One of the questions raised by the film we’re screening in Baltimore this evening: “When, in our culture, did ‘profit’ become a bad thing? When did the nonprofits become the good people… and ‘for profit’ mean that you’re bad?” We’ll let you know how our Reserve audience responds to the themes in the film later…]

“The broad scope of the definition [of the law],” writes a gentleman named Thad Ackel, “can essentially encompass everyone; from your local flea market vendors and buyers to a housewife purchasing goods on eBay or Craigslist, to a group of guys trading baseball cards, they could all be considered secondhand dealers.

“The added restrictions under this recent legislation have come about under the pretense of cracking down on crime and helping the government take care of you, all at the cost of your individual privacy, economic, civil liberty and freedom.”

Mr. Ackel’s article has gone viral in the last 24 hours.

It appears he is a principal in a Louisiana auctioneer and has a vested interest in overturning the law. But in this case, his interest coincides with that of, well, just about anyone except nosy government officials who want a way to track your transactions.

“If you wish to be paid in cash, you’re a criminal,” says attorney Danielle Waterfield of the Institute of Scrap Recycling Industries, representing more than 1,600 scrap dealers nationwide. “We have a problem with that.”

But if Ms. Waterfield hopes to challenge the statute in court, she’ll have an uphill climb. Federal courts have upheld similar statutes in New York, Mississippi and Tennessee. Those laws were more narrowly tailored to scrap metal, but in each case, they were challenged on the grounds that states and cities can’t ban transactions in legal tender, i.e., Federal Reserve Notes.

Each time, the challenges were thrown out.

“States are saying, ‘We have the right to specify the form in which the payments are made, then you can tender the check for any legal tender you want,’” explains Mark Beebe of the New Orleans law firm Adams and Reese. “They’re not saying this is the only medium you can use and that’s where it ends.”

It gets worse.

“For every transaction,” Ackel writes, “a secondhand dealer must obtain the seller’s personal information such as their name, address, driver’s license number and the license plate number of the vehicle in which the goods were delivered.

“They must also make a detailed description of the item(s) purchased and submit this with the personal identification information of every transaction to the local policing authorities through electronic daily reports.”

Many scrap dealers do this already. Most people selling their odds and ends on Craigslist do not. So not only are cash transactions banned — the better to create a paper trail — the transaction must also be reported to law enforcement in real-time.

Questioned about the breadth of the Louisiana law, its sponsor, State Rep. Clifton Richardson (R-Baton Rouge), says, “I’m always open to improving it, but I don’t want to weaken it.”

Really?

Regards,

Addison Wiggin
for The Daily Reckoning

Addison Wiggin

Addison Wiggin is the executive publisher of Agora Financial, LLC, a fiercely independent economic forecasting and financial research firm. He's the creator and editorial director of Agora Financial's daily 5 Min. Forecast and editorial director of The Daily Reckoning. Wiggin is the founder of Agora Entertainment, executive producer and co-writer of I.O.U.S.A., which was nominated for the Grand Jury Prize at the 2008 Sundance Film Festival, the 2009 Critics Choice Award for Best Documentary Feature, and was also shortlisted for a 2009 Academy Award. He is the author of the companion book of the film I.O.U.S.A.and his second edition of The Demise of the Dollar, and Why it's Even Better for Your Investments was just fully revised and updated. Wiggin is a three-time New York Times best-selling author whose work has been recognized by The New York Times Magazine, The Economist, Worth, The New York Times, The Washington Post as well as major network news programs. He also co-authored international bestsellers Financial Reckoning Day and Empire of Debt with Bill Bonner.