The Governor of Oklahoma, Mary Fallin, has just signed into law a bill that will help to re-establish gold and silver as currency in the state. Many are wondering, as Oklahoma moves toward the gold standard, could other states soon follow? It turns out, the sea change is already underway. Since 2011, Utah has a similar law in place, which exempts sales tax on precious metals transactions and nearly a dozen other states have put forth similar legislation.
In 2011, Utah was the first state to pass a law with the intention of returning to the gold standard. Utah’s Republican State Representative Brad Galvez sponsored the bill as a protest against the Federal Reserve. “We’re too far down the road to go back to the gold standard,” said Galvez “[but] this will move us toward an alternative currency.”
Many other states have since put forth similar bills. Arizona is currently in the process of passing a law that will eliminate capital gains taxes on precious metals. Other states currently working on precious metals bills include Idaho, Minnesota, Kansas, Texas, and both North and South Carolina.
Utah’s program has already created business opportunities for gold companies. Craig Franco, the owner of Utah Gold and Silver Depository plans to offer special debit cards for those who store their gold in his vault. This will likely be the most practical implementation of “gold as currency” as the new laws in Oklahoma and Utah do not require merchants to accept gold coins at either their face value or their melt value.
“Making gold and silver coins legal tender sends a strong message to Congress and the Federal Reserve that their monetary policy is failing,” said Ralph Danker, the project director for economics at the Washington D.C.-based group American Principles in Action. “The dollar should be backed by gold and silver, so we have hard money.”
Lawmakers opposed to this type of legislation fear that a nationwide policy shift could trigger inflation or destabilize international markets by reducing the Fed’s ability to print money and control the value of the dollar. Carlos Sanchez, the director of Commodities Management for the CPM Group in New York said, “What backs currency is confidence in a country’s ability to pay debt.”
Proponents claim that with the weakening confidence in the dollar and snowballing national debt, that a return to a gold-backed currency will only strengthen the dollar.
The United States and most of the allied nations decided to eliminate the gold standard during World War I in order to print more money to finance the war. During the Great Depression, FDR put forth an Executive Order that prohibited using gold and silver as legal tender to prevent hoarding and called for the confiscation of all privately held gold. In 1971, President Nixon effectively abolished the gold backing of the dollar all together in favor of the “petrodollar.” Since then, the United States has seen the national debt rise meteorically while value of the dollar plummets in the face of unending inflation. It has long been understood by many economists to be an unsustainable model for growth. A return to the gold standard could be the only thing to save the U.S. economy.