OKLAHOMA CITY, Okla. (Jan. 25, 2022) – A bill filed in the Oklahoma Senate would establish a state bullion depository. This would not only create a safe place to store precious metals; it also has the potential to facilitate the everyday use of gold and silver in financial transactions in Oklahoma, and set the stage to undermine the Federal Reserve’s monopoly on money.
Sen. Nathan Dahm (R) filed Senate Bill 1717 (SB1717). The legislation would create the Oklahoma Bullion Depository in the Office of the State Treasurer. The depository would serve as “the custodian, guardian and administrator of gold, silver and other precious metals transferred or acquired by the state, or an agency, political subdivision or other instrumentality of the state.” The depository would also accept deposits of gold and silver by private individuals.
Significantly SB1717 would establish a mechanism for individuals to engage in transactions using precious metals including gold and silver.
“In accordance with the rules promulgated under this act, a depository account holder may transfer any portion of the balance of the holder’s depository account by check, draft, or digital electronic instruction to another depository account holder or to a person who at the time the transfer is initiated is not a depository account holder.”
The legislation creates a regulatory structure for the depository and all transactions facilitated through it. It also establishes criteria for depository agents.
The bill is based on a similar law that was passed in Texas and signed into law by Gov. Abbott in 2015. The Texas depository received its first deposits in the summer of 2018. The following year, the state exempted precious metals in these depositories from taxation.
In a nutshell, through the depository, Oklahomans would be able to deposit gold or silver and pay other people through electronic means or checks. Private individuals and entities will be able to purchase goods and services using assets in the vault in the same way they use cash today. Doing so has the potential to open the market to sound money in day-to-day transactions. Ultimately, depositors will be able to use a bullion-funded debit card that seamlessly converts gold and silver to fiat currency in the background. This will enable them to make instant purchases wherever credit and debit cards are accepted.
By making gold and silver available for regular, daily transactions by the general public, a depository has the potential for a wide-reaching effect. Professor William Greene is an expert on constitutional tender and said in a paper for the Mises Institute that 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.”
Gresham’s Law holds that “bad money drives out good.” For example, when the U.S. government replaced silver quarters and dimes with coins made primarily of less valuable copper, the cheap coins drove the silver out of circulation. People hoarded the more valuable silver coins and spent the less valuable copper money. So, how do you reverse Gresham?
The key is in making it easier to use gold and silver in everyday transactions. The reason bad money drives out good is that governments put up barriers to using sound money in day-to-day life. That makes it more costly to spend gold and silver and incentivizes hoarding. When you remove barriers, you level the playing field and allow gold and silver to compete head-to-head with Federal Reserve notes. On an even playing field, gold and silver beat fiat money every time.
The Oklahoma Bullion Depository would also create an avenue toward financial independence. Countries around the world, including China, Russia and Turkey, have been buying gold to limit their dependence on the U.S. dollar. In a discussion about the Texas Bullion Depository, University of Houston political science professor Brandon Rottinghaus said a state depository can serve a similar function.
“This is another in a long line of ways to make Texas more self-reliant and less tethered to the federal government. The financial impact is small but the political impact is telling, Many conservatives are interested in returning to the gold standard and circumvent the Federal reserve in whatever small way they can.”
In 2014, Oklahoma took a step toward reestablishing a constitutional monetary system when it recognized gold and silver as legal tender. In most states, debts and taxes 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.
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.”
The creation of an Oklahoma Gold Depository would take another step toward that constitutional requirement, ignored for decades in every state. Such a tactic would undermine the monopoly of the Federal Reserve System by introducing competition into the monetary system.
SB1717 will be introduced when the Oklahoma Senate convenes on Feb. 7. At that time, it will be referred to a committee where it must pass by a majority vote before moving forward in the legislative process.
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