TOPEKA, Kan. (Feb. 6, 2025) – A bill filed in the Kansas House would establish a state bullion depository and authorize the state to hold gold and silver reserves. The passage of this legislation would take a significant step toward financial diversification and greater independence from the Federal Reserve’s monetary system.
The Senate Federal and State Affairs Committee filed Senate Bill 115 (SB115). The legislation would authorize the state treasurer to “establish and administer bullion depositories to provide a secure location for the storage of bullion.” Any person or business entity would be able to open an account at the depository. The depository would be required to establish “electronic systems that meet current industry standards for the purchase and sale of bullion for depository account holders that cannot or choose not to travel to the physical location.”
SB115 does not include specific provisions for individuals or businesses to engage in everyday transactions using precious metals, but the establishment of a depository would lay the groundwork for such as system in the future. Even without a formal payment system, businesses and individuals could make payments to other parties in gold and silver by using the depository’s electronic transfer system if both parties agreed to do so.
GOLD AND SILVER RESERVES
The legislation would also authorize the state treasurer to invest up to 20 percent of “state moneys eligible for investment” in specie legal tender, defined as “gold or silver coin or bullion, including, but not limited to, gold or silver coin issued by the United States.”
The reserves would be held in the depository.
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 Kansas 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 Kansas as they are to any country.
Tennessee authorized gold and silver reserves in 2023 and Utah did the same during the last legislative session.
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
SB115 was referred to the Senate Committee on Financial Institutions and Insurance where it will need to get a hearing and pass by a majority vote before moving forward in the legislative process.
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