The Fight of the Century

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Back in 2010, at the Austrian Economics Research Conference held at the Mises Institute, Professor of Political Science, William Greene, presented an interesting paper - “Ending the Federal Reserve from the Bottom Up: Re-Introducing Competitive Currency by State Adherence to Article I, Section 10”. In that paper, Greene laid out a plan for how the individual States could enact legislation that would gradually restore a gold (and silver) standard for US currency, while simultaneously eroding the Federal Reserve’s monopolistic control of our money.

A ”Bottom Up” Strategy to end the Tyranny of the Federal Reserve

Since Greene presented his idea, several States have, in fact, passed laws aimed at either –

1. Restoring gold and silver’s status as legal tender in the US, or
2. Removing the harmful financial penalties that the government imposes on precious metals investors

Greene provided a firm legal foundation for his plan’s argument, one found in the US Constitution – specifically, the negative mandate contained in Article 1, Section 10 of the Constitution, which states that, “No State shall... make any Thing but gold and silver Coin a Tender in Payment of Debts.” It may sound a bit extreme at first glance, but that declaration in Article 1 appears to suggest that accepting anything other than gold and silver (like, for example, Federal Reserve Notes) in payment of debts actually puts States in the position of being in violation of the Constitution.

Why try to return to the gold standard and knock out the Fed at the State, rather than at the Federal, level? Greene made what I think is a pretty convincing argument that any attempt to attack the Federal Reserve, its fiat currency, and the accompanying power to just print money out of thin air from the top down is virtually doomed to failure. The Fed just has too many friends and supporters in Washington, and is too solidly entrenched there. This is mainly due to the fact that it’s the Fed’s fiat currency system that enables the federal government to endlessly borrow money to finance wars and the pet social programs of members of Congress. Despite the fact that the Federal Reserve’s monetary policies have led to the US dollar suffering over a 95% loss in purchasing power since the creation of the Fed in 1913, it has managed to completely thwart every campaign mounted at the federal level to even slightly curtail its power.

(Yes, it was Woodrow Wilson, possibly the worst President ever, who ushered in the era of the Federal Reserve)

Therefore, Greene argues, the wiser course of action to pursue is to attack the Fed “from the bottom up” – i.e., working at the level of the individual States. The basic points of Greene’s argument for this State-based approach are as follows:

• First, taking action at the State level will avoid having to overcome the concerted political opposition to the gold standard that exists in Washington.
  
  
• Second, a more “local” approach also provides flexibility that will make it easier for legislative efforts to succeed. Strategies and tactics – specific legislative initiatives, and the way in which they are pursued, can be adapted to fit the current political climate and will in each state. For example, there may not be sufficient support in a given State at the moment for making gold and silver legal tender – but it might be possible to easily pass legislation that would eliminate tax penalties on buying and selling precious metals.
  
  
• Third, it would be much more difficult for the Federal Reserve to simultaneously combat dozens of legislative efforts, all being made in different States, than it would be for it to only have to fight against a single piece of legislation proposed in the Senate or House of Representatives.
  
  
• Finally, action at the State level has strong legal support from the Constitution’s legal tender mandate because that mandate is specifically addressed to the States.

Greene argued in his paper that the probability is that, as residents of a State begin to recognize that gold and silver coins maintain their purchasing power much better than Federal Reserve Notes, that “good money” gold and silver will begin to drive out the Fed’s “bad money”. Other natural consequences of a State re-introducing gold and silver as legal tender will follow – such as attracting an increased inflow to the State of wealth, investment, and banking business, as individuals and entities begin to see the financial gains that can be realized by handling transactions and banking business with sound money, rather than with fiat currency.

Texas Goes for the Gold (the Gold Standard, that is)

One week after the 2024 Presidential election, the State legislature in Texas is considering a de facto return to the gold standard.

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According to reporting from the Tenth Amendment Center’s Mike Maharrey, House Bill 1049 and House Bill 1056, filed by Representative Mark Darazio on November 12th, would direct the Texas State Comptroller to arrange the minting and issuing of gold and silver coins by the Texas Bullion Depository (not to be confused with the infamous Texas School Book Depository), and to establish gold and silver as transactional currency. The bills would further require the State’s Bullion Depository to hold gold and silver in sufficient amounts to provide 100% backing of the gold and silver currency issued.

Additional legislation proposed by Representative Darazio would, if passed, require the State to hold precious metals as part of Texas’ official financial reserves. Specifically, it would require the State Comptroller to allocate funds to purchase $4 billion worth of gold bullion and $1 billion worth of silver bullion, to be held in the Texas Bullion Depository. Darazio and other supporters of the proposed legislation say that holding precious metals as financial reserves would help to protect Texas from the ongoing high inflation that is rapidly destroying the purchasing power of Federal Reserve Notes. The private pension fund, the Texas Teacher Retirement Fund, has already taken a step in that direction, investing hundreds of millions of its assets in physical gold.

It’s further argued that moving to establish gold- and silver-backed currency would also give the State of Texas greater financial independence – and perhaps be a significant step toward moving away from the Federal Reserve Bank’s monopoly on US money. When Texas created its Bullion Depository in 2018, a Professor at the University of Houston observed, “This is another in a long line of ways to make Texas more self-reliant and less tethered to the federal government.” Professor Brandon Rottinghaus added that a return to the gold standard would be a way to “circumvent the Federal reserve” and introduce competition, at the State level, into the nation’s monetary system.

The essence of the proposed legislation in Texas is that it would enable any individual or business to conduct transactions using gold or silver. Kitco recently reported that the Tenth Amendment Center’s Maharrey argues, “The passage of this legislation would create a sound money alternative to US dollars, in both physical and electronic form. Using gold and silver-backed transactional currency, any person or entity would be able to do business using a debit card that seamlessly converts gold and silver to fiat currency in the background...individuals and businesses would be able to purchase goods and services using assets held in the Texas Bullion Depository in the same way they use dollars held in a bank today.”

Maharrey cautioned that, “The key is to make it easier to use gold and silver in everyday transactions.” Currently, there are lots of barriers, such as taxes, created by governments that incentivize people to hoard gold and silver rather than spend it. But Maharrey is confident that when legal and tax barriers are removed, that will level the playing field and enable gold and silver to compete fairly with Federal Reserve Notes. And he firmly stated that, “On an even playing field, gold and silver (will) beat fiat money every time.”

The legislation being pursued in Texas can serve as a template that other States can use to enact similar laws. Multiple States coming on board with gold-backed currency could give rise to moving toward the desired goal of a rejection of Federal Reserve Notes as the nation’s currency. Ideal legislation would require a State to use only gold and silver for payment of debts owed by, or to, the State – such as taxes and fees. State‐chartered banks would be required to offer individuals and businesses accounts denominated in gold and silver.

Other States Moving to Support Gold and Silver as Legal Tender

The good news is that I cannot say that the following is a complete list of all of the moves being made in individual US States that are helping to advance a return to the gold standard. That’s because there are new legislative initiatives continually being launched all across the country, too many and too rapidly for me to keep up with.

So, having said that, the following is at least a partial list of the actions supporting gold and silver as legal tender that have been taken in various States. Legislative initiatives fall into two basic categories – 

1. Legislation making gold and silver legal tender that can be used in transactions
2. Legislation that removes tax penalties or other governmental burdens (such as capital gains taxes on sales of gold or silver) that hinder the use of gold and silver as sound money currency

Utah

In 2011, Utah became the first state in 80 years to make gold and silver coins once again legal tender in the State, which can be used as currency just like Federal Reserve Notes. The Utah Legal Tender Act also eliminated capital gains taxes on individuals transacting in gold and silver coins. The act limited its applications to gold and silver coins that are issued by the United States (i.e., Gold and Silver American Eagle Coins minted by the US Mint). The Utah legislation has since spurred the passage of similar legislation in several other states.

Louisiana

In 2013, Louisiana became one of the first States to eliminate charging sales taxes on purchases of gold and silver coins or bullion. Sales taxes on gold and silver are one of the primary government barriers to gold and silver being used in normal, everyday transactions. (The Louisiana bill also eliminated sales tax being charged on platinum bullion and on numismatic coins.)

Kansas

In 2013, Kansas followed Utah’s lead. The House Committee on Taxation passed legislation that made US-minted gold and silver coins both legal tender and tax-exempt.

Oklahoma

In 2014, Oklahoma’s governor signed into law a bill that, like the Kansas legislation, declared gold and silver US-minted coins as legal tender and tax-exempt.

Wyoming

In 2018, the Wyoming Legal Tender Act defined gold and silver coins issued by the US Mint as “legal tender” that can be used for the payment of debts or taxes in the state. The Act further prohibited the State or local governments from levying any sales, capital gains, or property taxes on gold or silver.

As noted, similar legislation has either already been passed, or is under consideration, in other States. In more than half of the States, there is pending legislation that would support the further legalization of gold and silver as legal tender.

Texas Legislation Goes for the Gold Standard - Conclusion

Is it a realistic goal to envision unseating the Federal Reserve and replacing its fiat currency with the gold- and silver-backed currency that was once the norm in the United States? It certainly may look a bit far-fetched, but that may be largely due to the fact that we’ve only and always lived under the Federal Reserve system. It’s important then to keep in mind that the Fed hasn’t always existed and that, for most of its history, the currency of the United States was indeed backed by real money gold and silver. So, perhaps returning to that gold standard isn’t such a far-fetched idea.

Let me reiterate that underlying and providing support for a movement by individual States to take actions to return to the gold standard is the firm legal foundation provided by Article I, Section 10 of the US Constitution, which decrees that, “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts.” In Professor Greene’s presentation at the Austrian Economics Research Conference, he argued that, “…a new tactic is needed, which could achieve the desired goal of abolishing the Federal Reserve system by attacking it from the ‘bottom up’ – ‘pulling the rug out from under it’ by working to make its functions irrelevant at the State and local level. That new tactic is the passage of the Constitutional Tender Act in individual States across the country.”

Professor Greene made a compelling case for taking action at the State level to turn the country back toward the gold standard and in the direction of ditching the Federal Reserve’s fiat currency system that has gradually destroyed the purchasing power of the US dollar. Since his presentation, several States, including Texas, appear to have taken his words to heart and made a concerted effort to restore gold and silver to the status of being legal tender in the US.

It remains to be seen whether legislation in Texas and other States supporting a return to the gold standard will produce a groundswell that ultimately leads to the demise of the Federal Reserve and the return to using sound money. But it’s undeniably a significant plus for gold and silver investors to have more and more State governments officially recognizing the value of gold and silver as real money.

Regardless of whether or not Texas chooses to strengthen its financial reserves with gold and silver bullion, you can choose to strengthen your own financial reserves with a Gold IRA right here at True Gold Republic. (Come on, admit it – that was a pretty clever way to slip in an advertisement for our services, right? - So do yourself a favor today and contact a TGR account executive who can answer all your questions about opening a Gold IRA and investing in gold and silver.)

• J.B. Maverick

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Sources:

https://www.kitco.com/news/article/2024-11-22/texas-proposes-gold-and-silver-backed-currencies-compete-fiat-money

https://mises.org/mises-wire/ending-federal-reserve-bottom

https://mises.org/articles-interest/ending-federal-reserve-bottom-re-introducing-competitive-currency-state-adherence-article-i-section-10

https://www.forbes.com/sites/nathanlewis/2023/11/07/us-states-leading-the-move-to-a-golden-dollar/

https://worldpopulationreview.com/state-rankings/gold-and-silver-legal-tender-states

https://tenthamendmentcenter.com/

https://legiscan.com/TX/bill/HB1049/2025

https://legiscan.com/TX/bill/HB1056/2025

https://legiscan.com/TX/bill/HB1062/2025

https://en.wikipedia.org/wiki/Utah_Legal_Tender_Act

https://www.soundmoneydefense.org/gold-silver-laws-wyoming

https://en.wikipedia.org/wiki/History_of_the_Federal_Reserve_System

https://einvestingforbeginners.com/fiat-money-vs-commodity-money-daah/

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