NASHVILLE, Tenn. (March 18, 2024) – Last week, a Tennessee Senate Committee passed a bill that would make gold and silver legal tender in the state. Passage into law would set the foundation for the people to undermine the Federal Reserve’s monopoly on money.
Sen. Frank Nicely introduced Senate Bill 2737 (SB2737) on Jan 31. Under the proposed law, “precious metal coins” would be legal tender in the state and recognized as a “medium of exchange for the payment of debts and taxes.”
Practically speaking, this would allow Tennesseans to use gold and silver as money rather than just as mere investment vehicles. On March 13, the Senate Commerce and Labor Committee passed SB2737 by an 8-1 vote.
Passage into law would make Tennessee 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.
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.
Rep. Bud Hulsey introduced the companion – House Bill 2804 (HB2804) – on Feb. 1.
The proposed law defines “precious metal coins” as “precious metal 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 metal in retail or wholesale transactions; or refined precious metal bullion, stamped or imprinted with its weight and purity and valued primarily based on its metal content and not its form.”
The legislation includes provisions requiring the acceptance of precious metal coins as legal tender if expressly authorized by law or contract. In practice, including this language would mean if parties voluntarily agree to be paid, or to pay, in gold and silver coin, Tennessee courts could not substitute any other thing, e.g. Federal Reserve Notes, as payment.
The committee changed a provision that would have required all state agencies to accept gold and silver as payment making it optional instead. The legislation would also make changes to a law passed last year that creates a process for the state to buy, sell, and hold gold and silver. The changes would facilitate this process.
BACKGROUND
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 Tennessee 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 passage of SB2737 would give Tennesseans an option and open the door to currency competition with Federal Reserve notes. It would be up to individuals to take advantage of the opportunity and start transacting business with sound money.
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.
Treating silver and gold as legal tender takes the first steps against 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. It also sets the stage for the people to undermine the Federal Reserve monopoly by introducing competition into the monetary system.
The next step would be for people to start using gold and silver instead of Federal Reserve notes.
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.
WHAT’S NEXT
SB2737 will now move to the Senate Finance, Ways, and Means Committee where it must get a hearing and pass by a majority vote before moving forward in the legislative process.
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