AUSTIN, Texas (May 15, 2023) – Last week, the Texas House passed a resolution that would place a state constitutional amendment on the ballot supporting the right of the people to use to any mutually-agreed upon medium of exchange, including cash, bullion, digital currency and more. Passage of the amendment would open the door to currency competition in Texas and help undermine the Federal Reserve’s monopoly on money.
Rep. Giovanni Capriglione, Rep. Terri Leo-Wilson and Rep. Stan Gerdes introduced House Joint Resolution 146 (HJR146) on March 3. The passage of HJR146 would place the following proposal on the ballot to amend the state Bill of Rights:
“The right of the people to own, hold, and use a mutually agreed upon medium of exchange, including cash, coin, bullion, digital currency, or privately issued scrip, when trading and contracting for goods and services shall not be infringed. No government shall prohibit or encumber the ownership or holding of any form or amount of money or other currency. Nothing in this section shall be construed as restricting this state from choosing the medium of exchange the state will accept for payments made to the state.”
In effect, this amendment would bar the state of Texas from interfering with the use of cash or any cash alternatives, including gold, silver, or cryptocurrency in transactions within the state. This would set the state for currency competition in Texas.
On May 10, the House passed HJR146 by a 139-2 vote.
IMPACT
As Texas Constitutional Enforcement says, “An unstable dollar can destroy the wealth that Texans have spent a lifetime producing. Texas cannot allow global financial elites to force Texans to use and pay for their services, leaving all of their financial eggs in one basket, subject to devaluation and confiscation. And Texas cannot allow their financial privacy to be destroyed being forced into having every financial transaction they make subject to scrutiny by prying government officials, competitors, and employers.”
Broadly speaking, removing barriers to using gold, silver, cryptocurrency, or other mediums of exchange for regular, daily transactions by the general public would create the potential for a wide-reaching effect. Professor William Greene, an expert on constitutional tender, said in a paper for the Mises Institute that when people in multiple states actually start using other mediums of exchange 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 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 incentivizes hoarding. When you remove barriers, you level the playing field and allow gold to compete head-to-head with Federal Reserve notes. On an even playing field, gold beats fiat money every time.
This constitutional amendment would ensure the state couldn’t create barriers to using other mediums of exchange and encourage currency competition.
WHAT’S NEXT
HJR146 moves to the Senate for further consideration. It was referred to the Senate Business and Commerce Committee where it must get a hearing and pass by a majority vote before moving forward in the legislative process.
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