Utah Sound Money Conference
I was interviewed on the Fox Business Channel regarding the Utah Legal Coin Act in early June 2011. Here is a little background and some interview questions.
For the first time since 1971, gold and silver are once again considered legal tender in at least one part of the United States. The State of Utah passed the “Utah Legal Tender Act,” which “recognizes gold and silver coins that are issued by the federal government as legal tender in the state and exempts the exchange of the coins from certain types of state tax liability.”
The law, signed by Governor Gary Herbert on March 25, is a voluntary system that provides an alternative to the fiat-based Federal Reserve notes that are created out of thin air in unprecedented proportions.
The most significant change from a practical perspective is that the Utah’s state tax code now considers gold and silver coins issued by the U.S. Mint as currency rather than an asset, which means since it is considered money it cannot be taxed. However, federal taxes still apply on these transactions.
The Utah Legal Tender Act (HB 317) is designed to reinstate gold and silver coin as an optional medium of exchange in Utah intrastate commerce. The bill recognizes the inherent and inalienable right of citizens to voluntarily employ these time-tested, inflation-proof, complementary currencies to foster economic development throughout the state. The bill draws its authority from Article 1, Section 10 of the United States Constitution which provides that no
state shall make anything but gold and silver coin a tender for payment of debts. Grounded in long-standing principles enshrined in the supreme law of the land, this statute addresses current, pressing monetary issues in modern American society—issues to which gold and silver coin solutions are uniquely suited.
Because the founders of our nation had experienced firsthand the ills attendant with unbacked fiat currency, they provided in Article 1, Section 10 of the United States Constitution that no state is to make anything but gold and silver coin tender for payment of debts. Unfortunately, we’ve departed from the wisdom they imparted, and embraced a medium of exchange that has no intrinsic value whatsoever. The value of today’s dollar is upheld by governmental edict, backed only by the indebtedness of our nation and its citizens. Because of sharp increases in our money supply, our national debt is on an upward trajectory, set shortly to eclipse our gross domestic product. Since there is no historical precedent for a totally fiat money system such as ours ever lasting more than a few decades, prudence dictates that alternative, sound means of exchange be put in place well in advance of any potential crises, such as those endured by the fiat-financed nations and empires of the recent and distant past.
Even absent the specter of catastrophic consequences, an alternative sound money system confers many benefits on citizens and state governments alike. Such a system serves as a refuge from the ills that fiat money produces, including the insidious “inflation tax” that our current monetary system imposes. Consider that the U.S. dollar has lost more than 95% of its purchasing power since decoupling from gold and silver backing. By contrast, sound money systems of the past continued virtually inflation-proof for centuries on end.
States that have tried in the past but failed to enact their measures
Virginia House Joint Resolution 557
Georgia Constitutional Tender Act
Ohio Honest Money Project
Idaho Silver Gem Act, Bill No. 633
South Carolina House Bill No. 4501
Missouri House Bill No. 561
Washington House Joint Memorial 4010
Colorado Honest Money Act (HB09-1206)
Indiana Senate Bill No. 453
Montana House Bill No. 639
New Hampshire Gold Money Bill 1.1.
Because of the co-dependent relationship between Congress and the Federal Reserve, the likelihood of any sound money reform coming out of Washington DC is remote indeed. Individual states, exercising their sovereign authority, are best equipped to restore sound money to its prior status as a trading currency. So look for a sound money comeback on a state-by-state basis. It makes sense to first support states that are well positioned to make sound money a reality today. Then as the movement gains momentum, reluctant jurisdictions will see the advantages of embracing sound monetary systems.
More information can be found at: www.utahsoundmoney.org.
We have received feedback on this from many people so far and many are of the belief that Gresham’s Law (http://en.wikipedia.org/wiki/Gresham’s_law) will mean that no one will spend real money (gold or silver) into circulation. We will not argue with the concept but will make the case that the market will decide and perhaps there will be some who want to “spend” their profits into the community. For example, when silver was approaching the $50 level there could have been (in theory) people who wanted to take advantage of that price and spend some profits for some good or service.
Also, we think that some merchants favorable to sound money principals might offer a discount for real money being used in a transaction. We can envision two prices — a silver price and a fiat price. Again, the market will decide and it is our hope that real money circulates enough to encourage other states to adopt such measures. We find it interesting that some of the opponents of the law come from the CPM Group:
We, of course, side on the principle of sound money and think the U.S. has not instilled confidence for a very long time. I am scheduled to fly to Utah and be with Governor Gary R. Herbert for a ceremonial signing of this law. We again are hopeful that other states will follow and the principle of fair weights and measures will once again be restored to the people.
Mexico at the National level
Another aspect of putting silver into circulation is one that graced these pages many times, the proposal led by Hugo Salinas Price to reinstitute silver as money along side the peso. This of course implies silver being used again as an alternate means of payment at a national level.
Mr. Price has written numerous articles about the possible return of silver money circulating along side the Mexican peso. Let me state that when we first put this into our report so many years ago we lost some very angry subscribers because “we” did not understand Gresham’s Law! Quite the contrary, but these quick-to- judge people would not take the time to read and understand the proposal in full.
Again we are NOT suggesting that this will catch on right away but will more likely develop momentum over time.