PHOENIX (Apr. 2, 2015) – Today, new Arizona Gov. Doug Ducey vetoed a bill that would have allowed gold and silver to be used as “legal tender” in the state, as required by the Constitution.
Introduced by Rep. Mark Finchem and six cosponsors, House Bill 2173 (HB2173) re-affirms gold and silver as legal tender in the state of Arizona on a voluntary basis. It reads, in part: “Legal tender is money and is not subject to taxation or regulation as property other than money.”
HB2173 passed the state House by an overwhelming 34-23 margin and the Senate concurred with a 17-12 vote. According to the Associated Press, Ducey said “he didn’t feel the bill was appropriate at this time.”
“Anyone who supports the Constitution should be outraged at Ducey,” said Mike Maharrey, national communications director of the Tenth Amendment Center. “If he thinks following one part of the Constitution is ‘inappropriate’ at this time, what other parts does he think are inappropriate – the 2nd or the 4th Amendment, maybe?”
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.”
Finchem said he sponsored the bill to further protect the state’s buying power and consumers’ rights to use precious metals as an alternative to paper money.
“There seem to me be this belief that the Federal Reserve note is the only thing we can use to transact business,” Finchem said. “Essentially the Federal Reserve note is something other than gold and silver so basically we are using fiat currency in order to transact business.”
HB2173 takes a step towards that constitutional requirement, ignored for decades in every state. Such a tactic would help 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.
The House and Senate could override the governor’s veto with a two-thirds majority vote in each chamber, but with previous votes going down party lines, such a move appears unlikely.