PHOENIX (Feb 27, 2015) – An Arizona bill ensuring that people can use gold and silver as legal money in the state passed through an important Senate committee this week. It already passed the House and has just a few hurdles left before getting to the Governor’s desk.
Introduced by Rep. Mark Finchem and six cosponsors, House Bill 2173 (HB2173) recognizes legal tender as:
1. Legal tender authorized by Congress.
2. Specie coin issued by the United States government.
3. Any other specie that a court of appropriate jurisdiction rules the specie to be within the scope of state authority to make a legal tender.
The legislation also provides that “legal tender is considered money, not subject to taxation or regulation as property other than money.” The bill would open the door for people in Arizona to pay debts and taxes with gold or silver coins, and it would prohibit the government from taxing it as an asset. The legislation would not compel use of gold or silver coin but put it on equal footing with federal reserve notes.
HB2173 passed through the Senate Financial Institutions Committee by a 4-2 vote on Feb. 25. It previously passed through the state house by an overwhelming 34-23 margin.
Currently, all debts and taxes in Arizona must either get paid with Federal Reserve Notes (dollars), authorized as legal tender by Congress, or with coins issued by the U.S. Treasury — very few of which have gold or silver in them.
But the United States Constitution states in Article I, Section 10, “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts.”
HB2173 takes a step towards that constitutional requirement, ignored for decades in every state. Such a tactic would undermine the monopoly the Federal Reserve system by introducing competition into the monetary system.
Professor William Greene is an expert on constitutional tender and said when people in multiple states actually start using gold and silver instead of Federal Reserve Notes, it would effectively nullify the Federal Reserve and end the federal government’s monopoly on money.
Over time, as residents of the state use both Federal Reserve notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve notes do will lead to a “reverse Gresham’s Law” effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve notes). As this happens, a cascade of events can begin to occur, including the flow of real wealth toward the state’s treasury, an influx of banking business from outside of the state – as people in other states carry out their desire to bank with sound money – and an eventual outcry against the use of Federal Reserve notes for any transactions.
Once things get to that point, Federal Reserve notes would become largely unwanted and irrelevant for ordinary people. Nullifying the Fed on a state by state level is what will get us there.
HB2173 must now pass through the Senate Rules Committee before the state senate can concur with the state house and the bill can be put on Gov. Ducey’s desk to be signed into law.