Precious metals have been used as money for centuries, predating even the earliest forms of paper currency. Many nations’ entire economies were built on a foundation of gold and silver, with currency based directly on the amount of metal held in reserve. Throughout the first two centuries of its existence as a sovereign nation, America operated under some form of a metallic standard whereby precious metals served as the primary currency backing. But over the past century, precious metals have taken a back seat to paper money, with governments around the world abandoning the gold standard in favor of the fiat system.
In the United States, the shift away from the gold standard can be traced as far back as 1933, when President Franklin D. Roosevelt signed Executive Order 6102, which outlawed the private ownership of gold bullion and coins. Policymakers at the time saw the gold standard as an impediment to economic growth, arguing that it limited their ability to expand the money supply. What was not understood at the time, however, was that the move would significantly erode the purchasing power of the dollar and ultimately lead to the inflationary trends that continue to plague our economy today.
Since then, precious metals have largely been relegated to the status of commodity, with their primary use as a tool for investment rather than legal tender. But recently, there has been a growing trend among states to reintroduce gold and silver as legal tender. As of 2023, around a dozen states have passed laws allowing for the use of precious metals in transactions, with many others considering similar legislation. By reintroducing gold and silver as a form of legal tender, state lawmakers are hoping to reestablish the historical tie between money and precious metals, a move that could serve to stabilize prices and protect their citizens from the damaging effects of inflation.
Fiat Currency – A Wolf in Sheep’s Clothing
When U.S. lawmakers decided to move away from the gold standard, they did so with the belief that it would free them up to expand their economies and increase growth. What they failed to realize, however, was that by tying the dollar’s value to a government-controlled paper currency, they were creating a system that would be vulnerable to manipulation, rampant inflation, and unsustainable levels of debt.
The implications of the move were not immediately apparent, as the dollar’s purchasing power remained relatively stable for much of the 20th century. But in recent years, consumers have begun to feel the full effects of the pitfalls of fiat currency, with prices for consumer goods rising sharply amid rapidly increasing levels of government spending. Since 1971, when President Nixon officially abolished the gold standard, the dollar has lost a staggering 87% of its purchasing power — a worrying trend that has many Americans questioning the long term value of the beloved greenback. The disciplinary mechanisms of the gold standard that once served to limit inflation were abruptly stripped away following the move, leaving consumers vulnerable to the whims of governments and central banks.
In response to this growing concern, state lawmakers have begun to take action, introducing legislation that would allow for the use of precious metals as legal tender. With this move, states are hoping to rein in the runaway inflation that has become so pervasive in our current economy and secure some semblance of economic independence from the ever-growing federal government.
States’ Bid to Reestablish Link Between Money and Precious Metals
The gold standard has long been viewed as a symbol of economic stability — a system that has allowed citizens to hold their wealth with confidence, secure in the knowledge that their money would hold its value over time. By introducing legislation that allows for the use of gold and silver as legal tender, states are seeking to recreate this sense of security, enabling their citizens to transact with a currency that is backed by something tangible and not subject to the whims of government policy.
Texas, one of the first states to pass such legislation, has been especially vocal in its support for gold and silver legal tender, declaring that it is necessary to “preserve, protect, and promote the economic security, safety, health, and welfare of the people of this state.” Under SB2097, gold and silver were officially recognized as legal tender in Texas — a move that could create currency competition while safeguarding the state’s citizens from potential inflation. More recently, Texas Rep. Mark Dorazio (R) introduced HB 4903, a bill that would establish a digital currency 100% backed by gold and silver. If passed, the bill would make Texas the first state to support a state-based alternative to the U.S. dollar, allowing Texans to transact with a currency that is rooted in sound money.
Other states have followed suit, introducing legislation that would allow for precious metals to be used as legal tender in their respective jurisdictions. Among them are Utah, Wyoming, and Oklahoma, all of which have passed bills not only recognizing gold and silver as legal tender but also exempting them from sales taxes. While the movement to make gold and silver legal tender is still in its infancy, the grassroots organizations and lawmakers pushing for this legislation have garnered a great deal of support — a sign that Americans are growing increasingly wary of the dollar’s value.
What’s Next in the Fight for Sound Money?
With dozens of state-level initiatives now gaining traction, the Fed’s monopoly on money may soon be broken — giving citizens a viable alternative to the U.S. dollar and restoring the link between money and precious metals that has been missing for decades. Already, 43 states have eliminated sales tax on gold and silver coins, with Mississippi as the most recent addition after unanimously passing SB 2862 in March. As one of the largest impediments to the use of precious metals as money is removed, the door has been opened for more states to embrace sound money legislation.
To further cement the legitimacy of gold- and silver-backed currency, lawmakers across the nation continue to draw on Professor William Greene’s Constitutional Tender Act, a model bill that seeks to protect citizens’ constitutional right to use gold and silver as money. Under the provisions of Article I, section 10, “No State shall..make any Thing but gold and silver Coin a Tender in Payment of Debts.” Under this Act, states would be required to recognize and accept gold and silver as legal tender in all transactions. Using Professor Greene’s bill as a blueprint and the Constitution as an anchor, states have a framework to create a monetary system that is based on sound money and rooted in the principles of economic liberty.
According to Professor Greene, as more states adopt legal tender legislation, 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.” With enough support, a return to constitutionally-backed money could soon become reality, a shift that could usher in a new era of state-level financial freedom.
Demand Poised for Growth
As the grassroots movement to make gold and silver legal tender continues to gain momentum, demand for the precious metals appears to be poised for growth, according to many analysts. Legislation in states like Missouri have mandated a minimum cash balance of gold and silver in their respective treasuries, a sign that could potentially spur greater demand for the metals as states take steps to protect themselves from the uncertain future of the U.S. dollar. New provisions under Missouri’s SB 100, “requires the State Treasurer to keep in the custody of the state treasury an amount of gold and silver greater than or equal to 1% of all state funds.” With a growing number of states now recognizing the need to include gold and silver as a part of their monetary reserves, demand for the metals could continue to increase in the near future.
Given the current state of the U.S. dollar, the push for “sound money” may be a natural response to the declining value of paper currency. Without exception, every fiat currency that once held sway has eventually failed. Now, as states are tasked with the responsibility of safeguarding their citizens’ economic future, gold and silver have reemerged as viable alternatives to the depreciating dollar.