Utah passes bill to make gold and silver legal tender

2011-MAR-24

Roman Baudzus writes --

Lawmakers in the US state of Utah have passed a bill that will make gold as well as silver coins accepted legal tender in the state. The bill awaits the signature of the state’s governor. Proponents of the law have argued that it’s urgently needed in order to hedge the state´s finances against the continuing erosion of the dollar. The legislation is supported by economists and market analysts.

Policy makers in several American states fear that the dollar is on the road to oblivion. Another nine state legislatures are debating similar bills, which seek the reintroduction of gold and silver as legal tender. Among these states are Montana, Missouri, Colorado, Idaho, Indiana, New Hampshire, South Carolina, Georgia and Washington. Utah’s bill will allow the state’s citizens to pay taxes with silver and gold. All state services as well as notifications of charges may also be paid for by precious metals.

The passage of the new law will lead to gold and silver competing with the Federal Reserve Note. Confidence in the dollar and the fiat money system among international investors could be hit by Utah’s new law; after all, why should foreigners buy American debt and other dollar securities when even American policymakers no longer have confidence in their own currency? Utah’s new bill, named The Utah Sound Money Act, explicitly rejects the existing paper money system. Until 1971, the United States was on a gold standard. President Richard Nixon abolished the last vestiges of the gold standard in order, supposedly, to make the currency markets more flexible.

In Virginia, lawmakers have just recently passed a bill that will allow the state to mint gold, silver and platinum coins. Virginia thus intends to hedge against a weakening dollar. If Utah governor Gary Herbert signs The Sound Money Act into law and more states follow the likes of Utah and Virginia, pressure could grow on politicians in Washington to follow suit. As Utah policymakers have explained, alternative monetary policy had to be pointed out to American citizens. The quantitative easing (QE) policies of the Federal Reserve (Fed) are distrusted by many across America.

According to several state and municipal law makers, the Fed is endangering the viability of the dollar, and the country’s rising debt and enormous deficits will likely lead to a crisis in the bond market. The market for municipal bonds has been under pressure for several months, and the Fed is now the largest buyer of US treasury bonds – a bigger buyer than entire nations like China and Japan. The central bank is monetising the issuance of Federal debt. In the long run this development will lead to a further devaluation of the dollar. Utah´s new legislation – if the governor signs it – could pave the way for groundbreaking monetary changes in the United States. It will probably not be much longer until other states follow Utah’s lead, which will lead to an acceleration of the dollar´s fall from grace.