CHEYENNE, Wyo. (Jan. 21, 2018) – Three bills introduced in the Wyoming House would authorize the state to diversify its financial holding into gold and silver. Passage of these bills would build on a foundation laid last year and create another pathway to undermine the Federal Reserve’s monopoly on money.
The three bills authorize the state treasurer to derisk the state’s financial holdings with modest allocations of physical gold and silver in the state’s pension fund, reserve fund, and mineral trust fund.
Rep. Roy Edwards (R-Gillette), along with 16 Republican cosponsors, introduced House Bill 174 (HB174) on Jan 16. Titled the Wyoming Sound Money Trust Act, the legislation would empower the state treasurer to hold at least 10 percent of the Permanent Wyoming Mineral Trust Fund in physical monetary metals.
“Specie held under this subsection shall be maintained securely in a depository for precious metals constructed with a UL-rated class two vault door in this state or another storage arrangement in this state with equal or greater security construction standards.”
The Permanent Wyoming Mineral Trust Fund ranks as the state’s oldest and most well-funded permanent fund with over $8 billion in assets.
Rep. Mark Jennings (R-Sheridan), along with six Republican cosponsors, introduced House Bill 156 (HB156) on Jan. 16. Titled the Wyoming Sound Money Pension Act, the legislation would require at least 10 percent of Wyoming Pension System assets to be held in the form of gold or silver specie.
Rep. Scott Clem (R-Campbell) introduced House Bill 190 (HB190) on Jan. 16. Titled the Wyoming Sound Money Reserve Act, the legislation would require that at least 10 percent of Wyoming’s Legislative Stabilization Reserve Account be held in gold and silver.
Together, these three measures would help the state hedge the risks of holding stocks, bonds, and short-term debt instrument with an allocation to gold and silver – a bedrock asset carrying no counterparty risk and proven to maintain its purchasing power.
The Sound Money Defense League and Campaign for Liberty both back these bills. Sound Money Defense League policy director JP Cortez said the measures would protect Wyoming’s accounts by insulating them with the only money proven to protect against the ongoing devaluation of Federal Reserve notes.
“Furthermore, an allocation to precious metals is proven to increase overall returns over time, reduce volatility, and reduce drawdowns.”
Wyoming is a leader in sound money policy. Last year, the state enacted the Wyoming Legal Tender Act. The law defines gold and silver specie as “legal tender,” meaning it is now recognized as a medium of exchange for the payment of debts and taxes in the state. Practically speaking, gold and silver specie is treated as money, putting it on par with Federal Reserve notes in Wyoming.
Passage of these three bills would build on that foundation and grow the role of gold and silver in the state’s economy. It would also expand the market for “sound money” in Wyoming.
If sound money gains a foothold in the marketplace against Federal Reserve notes, the people would be able to choose the time-tested stability of gold and silver over the central bank’s rapidly-depreciating paper currency. The freedom of choice expanded by these sound money policies could eventually undermine the Fed’s monopoly on money.
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.” States have simply ignored this constitutional provision for years. It’s impossible for a state to return to a constitutional sound money system when it taxes gold and silver as a commodity.
The Wyoming Legal Tender Act reestablished gold and silver as legal tender in the state and took a step towards that constitutional requirement, ignored for decades in every state. This sets the stage to undermine the monopoly of the Federal Reserve by introducing competition into the monetary system.
Constitutional tender expert Professor William Greene said when people in multiple states actually start using gold and silver instead of Federal Reserve Notes, it could create a “reverse Gresham’s effect,” drive out bad money, 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.
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