AUGUSTA, Maine (Apr. 26, 2023) – On Monday, a Maine committee held a hearing on a bill to authorize the treasury to invest certain state funds in gold, silver, or other precious metals. This would create a way to help protect Maine funds from the impacts of inflation.
A group of 10 Republicans led by Sen. Eric Brakey (R) introduced Senate Bill 734 (LD734) on Feb 16. The proposed law would authorize the Maine State Treasurer to invest state funds located in the Maine Budget Stabilization Fund under chapter 142 and any pension fund administered by the treasury in gold, silver, or other precious metals.
Despite the fact that the legislation only allows for the state to invest funds in precious metals, but does not require it, the Maine Office of the State Treasurer lobbied against the bill in a hearing on April 26.
“Dollars coming from taxpayers directly to the State or through the Federal government must be invested with safety, liquidity and yield (in that order) in mind,” wrote State Treasurer Henry Beck in a letter opposing the bill. “Such investments are not sufficiently safe for the short-term investing conducted by State government.”
In effect, holding gold and silver would help secure state assets against the risks of inflation and financial turmoil. It would also reinforce the importance of sound money in the state’s financial system.
As JP Cortez noted while testifying in favor of a similar bill in Wyoming, “Proposals encouraging state gold holdings have come before the legislature since January 2019, but no bills have been passed. During the last four years of inaction on sound money, gold bullion, priced in declining dollars, has risen by 50 percent.”
In fact, central banks around the world have been buying gold to limit their dependence on the U.S. dollar. Last year, central banks bought 1,136 tons of gold. It was the highest level of net purchases on record dating back to 1950 and the 13th straight year of net central bank gold purchases. According to the World Gold Council, there are two main drivers behind central bank gold buying — its performance during times of crisis and its role as a long-term store of value.
It’s hardly surprising then that in a year scarred by geopolitical uncertainty and rampant inflation, central banks opted to continue adding gold to their coffers and at an accelerated pace.”
These factors are as relevant to Maine as they are to India.
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.” Currently, all debts and taxes in Maine are either paid with Federal Reserve Notes (dollars) which were 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 Federal Reserve destroys this constitutional monetary system by creating a monopoly based on its fiat currency. Without the backing of gold or silver, the central bank can easily create money out of thin air. This not only devalues your purchasing power over time; it also allows the federal government to borrow and spend far beyond what would be possible in a sound money system. Without the Fed, the U.S. government wouldn’t be able to maintain all of its unconstitutional wars and programs. The Federal Reserve is the engine that drives the most powerful government in the history of the world.
The passage of LD734 would affirm the importance of gold and silver in the financial system and undermine the Fed’s monopoly on money.
It would also take another step in the process of abolishing the Federal Reserve system by attacking it from the bottom up – pulling the rug out from under it by working to make its functions irrelevant at the state and local levels, and setting the stage to undermine the Federal Reserve monopoly by introducing competition into the monetary system.
In a paper presented at the Mises Institute, Constitutional tender expert Professor William Greene 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.
LD734 is currently in the Senate Joint Appropriations and Financial Affairs Committee. It must get another hearing and pass by a majority vote before moving forward in the legislative process.