BATON ROUGE, La. (April 5, 2024) – Bills introduced in the Louisiana House and Senate would make gold and silver legal tender in the state, and establish state-issued gold and silver-backed transactional currencies. Passage would set the foundation for the people to undermine the Federal Reserve’s monopoly on money.
Rep. Raymond Crews introduced House Bill 929 (HB929) on April 2. The proposed law would require the treasurer to promulgate rules providing for the regulation of gold and silver bullion as currency, under which gold and silver bullion would be recognized as legal tender for all transactional purposes.
The impact of the bill would be similar to legislation pending in the Louisiana Senate.
Passage into law would make Louisiana 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. Practically speaking, this would allow Louisianians to use gold or silver coins as money rather than just as mere investment vehicles. In effect, it would put gold and silver on the same practical 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’s legal tender law, 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.
GOLD AND SILVER-BACKED TRANSACTIONAL CURRENCY
Sen. Valerie Hodges introduced Senate Bill 485 (SB485) on April 2. Rep. Kathy Edmonston introduced a house companion, House Bill 960 (HB960) in the House on the same day. The legislation would create a state-run platform to facilitate an electronic transactional currency fully backed by gold and silver.
“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 the 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 SB485/HB960 would allow any person or business 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
SB485 was referred to the Committee on Senate and Governmental Affairs. HB929 and HB960 were referred to the House Committee on Commerce. All three bills must get a hearing and pass their respective committees by a majority vote before moving forward in the legislative process.
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