NASHVILLE, Tenn. (Jan. 21, 2025) – A bill introduced in the Tennessee Senate would establish a mechanism to facilitate the establishment of state-owned gold and silver reserves, including their purchase and sale. If passed, the measure could bolster Tennessee’s financial stability, hedge against inflation, and reduce reliance on the Federal Reserve’s fiat currency.
In 2023, the Tennessee legislature authorized the state treasurer to “purchase and sell gold or precious metal bullion or specie that will be directly owned by the state.” Filed by Sen. Paul Baily, Senate Bill 168 (SB168) would create a restricted account to facilitate the purchase and sale of gold and silver specie or bullion under this law.
This restricted account, set up within the existing “reserve for revenue fluctuations” account in the general fund, would receive an initial transfer “of not less than one percent (1%), but no more than three percent (3%), of the total funds” in the reserve for revenue fluctuations account to be allocated for the purchase of precious metal bullion or specie.
“On an annual basis thereafter, the restricted account must be valued based on the total funds in the reserve for revenue fluctuations account that may result in additional transfers from the reserve account to the restricted account.”
Language in the proposed law stipulates that “notwithstanding the state treasurer’s discretionary investment authority…the state treasurer, with the approval of the comptroller of the treasury, shall purchase and sell precious metal bullion or specie that will be directly owned by the state, and in the custody of the state treasurer.”
SB168 would create additional rules directing the process of selling gold and silver reserves.
IMPACT
Holding funds in gold and silver would protect the state’s cash reserves from the ravages of inflation caused by the rapidly depreciating value of Federal Reserve notes. Since 2020, the purchasing power of the dollar has dropped by nearly 20 percent. In that same period, the price of both gold and silver skyrocketed, reflecting the devaluation of the dollar.
Adding gold and silver in reserve could also create a pathway for Tennessee to maintain financial independence should the U.S. dollar collapse, a very real possibility as the world moves away from the greenback as its reserve currency.
In fact, central banks around the world have been buying gold to limit their dependence on the U.S. dollar. According to the World Gold Council (WGC), central banks’ net gold purchases totaled 1,037 tons in 2023. It was the second straight year central banks around the world added more than 1,000 tons to their total reserves. According to the WGC, there are two main drivers behind central bank gold buying — its performance during times of crisis and its role as a long-term store of value.
It’s hardly surprising then that in a year scarred by geopolitical uncertainty and rampant inflation, central banks opted to continue adding gold to their coffers and at an accelerated pace.”
These factors are as relevant to Tennessee as they are to any country.
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 most states 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 Federal Reserve destroys this constitutional monetary system by creating a monopoly based on its fiat paper 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.
State bills that facilitate and encourage the use of sound money create a playing field where people can push back against the Fed’s monetary malfeasance. Ultimately, it could create a scenario where people can drive out the “bad” fiat money with “good” sound money.
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
SB168 will be referred to a committee where it must get a hearing and pass by a majority vote before moving forward in the legislative session.
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