Past American experience with high inflation and recent large-scale monetary expansion by the Federal Reserve has prompted a new appreciation for money that cannot be debased, gold in particular. The U.S. Constitution in Article I empowers the states to make gold and silver coin legal tender. In 2011, Utah passed such a law and a dozen others considered similar bills through this year’s legislative session. Utah has opened up a pathway toward a legitimate alternative to the paper dollar that offers citizens a way to save and transact in money of objective value.
The Founders held the unanimous belief that hard money (gold and silver) should be the backbone of the monetary system because it could not be manipulated by the government. After four decades of a pure paper dollar, America is turning its attention to our constitutional roots on money. While a gold standard would take significant federal reform to enact, states have the power to treat gold and silver coin as legal tender and encourage its usage as currency. Removing taxes on the exchange of such coin is the primary precondition needed in order to bring this about.
Advances in electronic payment systems hold the potential for hard currency to be used more easily and efficiently than ever before. Debit cards could link customers and vendors into a precious metal system revolving around American Eagle coins, which were first authorized by President Ronald Reagan in 1985. Such technology will allow the coins to be used as money – rather than simply an investment.
The state movement to designate gold and silver coin as legal tender is a low-risk, high-reward initiative to give citizens a prudent choice in currency. While the federal government has only offered more of the same (money printing), the states are in a position to create a different path and point America back to its sound money foundation. It is a state solution to a national crisis that can no longer be postponed.
Rich Danker is the Economics Director at American Principles Project. This article is his executive summary of a white paper he recently wrote which you can read below.