by Mike Maharrey
AUSTIN, Texas (April 4, 2017) – A bill introduced in the Texas Senate would establish gold and silver as legal tender in Texas. Passage of the bill would create currency competition in the state and serve to undermine the Federal Reserve’s monopoly on money.
Sen. Bob Hall introduced Senate Bill 2097 (SB2097) on March 10. The bill includes a number of provisions to establish gold and silver as legal tender in Texas. It declares specifically that certain gold and silver coins are legal tender, and prohibits any tax, charge, assessment, fee, or penalty on any exchange of Federal Reserve notes (dollars) for gold or silver. The bill authorizes the payment of taxes and fees in gold & silver in certain circumstances. It would also prohibit the seizure of gold or silver by state authorities. SB2097 also included provisions relating to gold and silver clauses in contracts, prohibiting payment in dollars if the contract calls for payment in gold and silver. Legally enforcing these contracts through state law would serve to encourage their use.
Along with the establishment of a Texas gold depository authorized in 2015, passage of SB2097 would set in place all four steps states can take to encourage sound money and take on the Federal Reserve.
AN IMPORTANT STEP FORWARD
While the debasement of the currency is the result of federal policy and banker collusion, the effect is broad and deep. While there has been talk about reform, or at least an audit of the Fed, it is virtually a certainty that the federal government will never relinquish the power it enjoys through control of the monetary system. That said, there are practical steps that can be taken at the state level to promote the use and acceptance of sound money and undermine the Fed’s monopoly on money.
Passage of SB2097 into law would mark an important step towards currency competition. If sound money gains a foothold in the marketplace against Federal Reserve notes, the people would be able to choose the time-tested stability of gold and silver over the central bank’s rapidly-depreciating paper currency. The freedom of choice expanded by the legislation would allow Texans to secure the purchasing power of their money.
Currently, all debts and taxes in Texas must be paid with either 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.”
SB2097 takes a step towards that constitutional requirement, ignored for decades in every state. Such a tactic would undermine the monopoly or the Federal Reserve by introducing competition into the monetary system.
Professor William Greene is an expert on constitutional tender and 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.
SB2097 was referred to the Senate Finance Committee where it must pass by a majority vote before moving forward in the legislative process.
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.