AUSTIN, Texas (Nov. 25, 2024) – A bill filed in the Texas House would require the state to hold precious metal reserves. This would create a foundation for the Lone Star State to achieve more financial independence and take a small step toward undermining the Federal Reserve’s monopoly on money.
Rep. Mark Dorazio filed House Bill 1062 (HB1062). The proposed law would require the state comptroller to purchase $4 billion in gold bullion and $1 billion in silver bullion during the biennium beginning Sept. 1, 2024, and appropriate funds for the purchase. The gold and silver would be held in the Texas Bullion 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 Texas 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 Texas as they are to any country.
When Texas opened its gold depository in 2018, University of Houston political science professor Brandon Rottinghaus made a similar point.
“This is another in a long line of ways to make Texas more self-reliant and less tethered to the federal government. The financial impact is small but the political impact is telling, Many conservatives are interested in returning to the gold standard and circumvent the Federal reserve in whatever small way they can.”
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.” But currently, most debts and taxes in most states are either 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 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.
HB1062 can expand the foundation for sound money in Texas by establishing gold and silver as important reserve assets.
It would also take another step in the process of abolishing 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 and setting the stage to undermine the Federal Reserve monopoly by introducing competition into the monetary system.
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
HB1062 will be referred to a House committee when the legislative session begins on Jan. 14
- Texas Bill Would Require State to Hold Gold and Silver Reserves - November 25, 2024
- Texas Bills Would Establish 100% Backed Gold and Silver Transactional Currency - November 20, 2024
- Defend the Guard Act Filed in the Texas House - November 19, 2024