BATON ROUGE, La. (March 8, 2024) – A bill filed in the Louisiana House would establish state-issued gold and silver-backed transactional currencies. This would set the foundation for the people to undermine the Federal Reserve’s monopoly on money.
Rep. Raymond Crews filed House Bill 714 (HB714) on March 1. The legislation would require the state treasurer to “issue specie and establish a currency as determined practicable,” as authorized by Article I, Section 10 of the Constitution of the United States
Specie is defined in the bill as “a precious metal stamped into coins of uniform shape, size, design, content, and purity, 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.”
Currency is defined in the proposed law as “the representation of actual gold and silver, specie, and bullion held in a depository account by a depository account holder. Such representation shall reflect the exact unit(s) of physical specie or gold and silver bullion in the pooled depository account in its fractional troy ounce measurement as provided in this Chapter.”
Under the proposed law, this currency would be considered legal tender in the state.
In establishing the currency, the treasurer shall establish a means to ensure that a person who holds the currency may use the currency as legal tender in payment of debt or readily transfer or assign such currency to any other person or state by electronic means.
Specie gold and silver bullion backing the currency would be stored in an “approved” bullion depository which could include a state bullion depository, the Texas Bullion Depository, or a similar depository established in another state, or a private vendor located in Louisiana.
In practice, the passage of HB714 would allow any person to conduct business transactions using gold or silver.
IMPACT
In a nutshell, any person or business would be able to transact business using a debit card that seamlessly converts gold and silver to fiat currency in the background. Private individuals and entities would be able to purchase goods and services using assets in an approved depository 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.
Making gold and silver available for regular, daily transactions by the general public creates 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.
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 a transactional gold and silver currency 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.
WHAT’S NEXT
HB714 will be officially introduced and assigned to the House Committee on Commerce when the legislature convenes on March 11. It will need to get a hearing in the committee and pass by a majority vote before moving forward in the legislative process.
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