CONCORD, N.H. (Dec. 19, 2023) – A bill filed in the New Hampshire House would make gold and silver legal tender in the state, which would increase currency competition, and set the stage for the people there to undermine the Federal Reserve’s monopoly on money.
Rep. Keith Ammon and five cosponsors filed House Bill 1674 (HB1674) on Dec. 15. As legal tender, gold and silver would “be recognized to pay private debts, taxes, and fees levied by the state of New Hampshire or any local subdivisions thereof.”
SPECIE LEGAL TENDER
Under the proposed law, specie would be defined as “bullion fabricated into products of uniform shape, size, design, content, weight, and purity, that are suitable for or customarily used as currency, as a medium of exchange, or as the medium for purchase, sale, storage, transfer, or delivery of precious metals in retail or wholesale transactions.”
Specie legal tender would be defined as “specie coin issued by the United States government at any time” and “any other specie designated by the state treasurer as legal tender pursuant to the monetary authority not prohibited by Article I Section 10 of the United States Constitution.”
By allowing the state treasurer to designate additional specie to be used as legal tender, New Hampshire could free its citizens from potential supply constraints imposed by the use of only United States-minted gold and silver coins. More importantly, the people of the state of New Hampshire would be able to define what specie is considered constitutional tender, further distancing themselves from potential control of their competing currency by Washington D.C.
Passage into law would make New Hampshire the fifth state to recognize gold and silver as legal tender. Utah led the way, reestablishing constitutional money in 2011. Wyoming, Oklahoma, and Arkansas have since joined.
TAX REFORMS
HB1674 includes provisions specifically excluding gold and silver bullion from taxation.
- Bullion shall not be characterized as personal property for taxation or regulatory purposes.
- The exchange of one type or form of legal tender for another type or form of legal tender shall not give rise to any tax liability.
- The purchase or sale of any type or form of bullion shall not give rise to any tax liability.
The legislation also includes changes to the state tax code and contract law that would make it easier for businesses in the state to operate using the “functional currency” of their choice.
Practically speaking, these provisions would allow New Hampshireites to use gold or silver in both physical and electronic form as money rather than just as mere investment vehicles. In effect, it would put gold and silver on the same footing as Federal Reserve notes.
The effect has been most dramatic in Utah where the legal tender law opened the door for the development of a gold and silver market in the state. With some legal hurdles cleared away by the state, the United Precious Metal Association (UPMA) in partnership with Alpine Gold Exchange set up the state’s first “gold bank.” The Utah Specie Legal Tender Act has also led to the creation of Goldbacks, a local, voluntary medium of exchange. Goldbacks are notes made from fractions of an ounce of physical gold. The company created a process that turns pure gold into a spendable physical form for small transactions.
A New Hampshire edition of the Goldback has been available since 2020.
BULLION DEPOSITORY AND BULLION-BACKED ELECTRONIC CURRENCY
Provisions in HB1674 would establish a state-run bullion depository.
A depository account holder would be able to purchase, sell, deposit, or withdraw bullion. It would include “electronic systems” for the purchase and sale of bullion for depository account holders who cannot or choose not to travel to the physical location.
The bill includes provisions for the creation of an electronic currency backed by specie legal tender or other bullion designated by the state treasurer utilizing an open blockchain. Electronic currency would be defined as “a representation of actual gold and silver, specie and bullion held in a depository. Such representation shall reflect the exact units of physical specie or gold and silver bullion in the depository account in its fractional troy ounce or gram measurement as provided in this chapter.”
This would open the door for people to use precious metals stored in the depository in everyday transactions.
“In establishing the electronic currency, the state treasurer shall establish a means to ensure that a person who holds the electronic currency may readily transfer or assign the electronic currency to any other person by electronic means.”
In a nutshell, through the depository, New Hampshireites would eventually be able to deposit gold or silver and pay other people through electronic means. Private individuals and entities would 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.
The section of 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.
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 to make 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.
WHAT’S NEXT
HB1674 was referred to the House Commerce and Consumer Affairs Committee where it is up for its first hearing on Jan. 9. It will then get another hearing and a vote before moving forward in the legislative process. An “ought to pass” recommendation would greatly increase the bill’s chance of passage in the full House.
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