OKLAHOMA CITY, Okla. (Jan. 29, 2016) – A bill prefiled in the Oklahoma House would create a state gold depository, an important first step toward establishing gold and silver as commonly used legal tender in the state.
Sen. Nathan Dahm prefiled Senate Bill 1296 (SB1296) earlier this week for official introduction when the regular session begins on Feb. 1. The legislation would create the Oklahoma Bullion Depository. The depository would serve as the custodian, guardian and administrator of gold, silver and other precious metals transferred or acquired by the state, or an agency, political subdivision or other instrumentality of the state. The depository would also accept deposits of gold and silver by private individuals.
Most significantly SB1296 establishes a mechanism for individuals to engage in transactions with using precisious metals including gold and silver.
“In accordance with the rules promulgated under this act, a depository account holder may transfer any portion of the balance of the holder’s depository account by check, draft, or digital electronic instruction to another depository account holder or to a person who at the time the transfer is initiated is not a depository account holder.”
The legislation creates a regulatory structure for the depository and all transactions facilitated through it. It also establishes criteria for depository agents.
SB1296 is based on a similar bill that was passed in Texas and signed into law last year.
GOLD AND SILVER TRANSACTIONS
In short, a person will be able to deposit gold or silver – and pay other people through electronic means or checks – in sound money. Doing so has the potential to open the market to sounds money in day-to-day transactions.
By making gold and silver available for regular, daily transactions by the general public, the new law has the potential for 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.
Once things get to that point, Federal Reserve notes would become largely unwanted and irrelevant for ordinary people.
While SB1296 won’t nullify the Fed’s monetary monopoly on its own, it represents an important step forward in that direction.
Currently, all debts and taxes in Oklahoma 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.
But 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 the Oklahoma Gold Depository would take a step toward that constitutional requirement, ignored for decades in every state. Such a tactic would undermine the monopoly the Federal Reserve System by introducing competition into the monetary system.
SB1296 will be assigned to a committee once the regular session gets underway next week. It will have to pass that committee by a majority vote before moving on to the full Senate for consideration.
William Greene is the author of the original Constitutional Tender Act, a bill template that can be introduced in every State legislature in the nation, returning each of them to adherence to the United States Constitution’s actual legal tender provisions. He is an Assistant Professor of Political Science at South Texas College.