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States have the ability to defend sound money

States have the ability to defend sound money

Idaho Freedom Foundation staff
August 10, 2016

By Jp Cortez & Stefan Gleason | Special to Idaho Freedom Foundation

While the debasement of the U.S. currency is the result of federal policy and banker collusion, the effect is broad and deep. Though there has been talk about reform, or at least an audit of the Federal Reserve, it is virtually a certainty that the federal government will never relinquish the power it enjoys through control of the monetary system.  

That said, there are practical steps that can be taken at the state level to promote the use and acceptance of sound money and undermine the Fed’s monopoly on money. State legislatures can take steps to insulate their citizens from the effects of the coming currency crisis.

The Tenth Amendment of the U.S. Constitution was put in place for a reason. “States’ Rights” is not an empty platitude, and states absolutely have the right — even a constitutional obligation — to pursue sound money policies.

States should follow the lead of a few states that have bolstered the legal tender status of gold and silver, removed sales taxes on precious metal purchases, and even, in one case, created a state gold depository to store the state’s precious metals while offering protected storage to its citizens.

U.S. citizens don’t have to depend on state government alone, they can take action at the individual level. Even as sound money advocates push state legislatures to enact reforms, the average person can also take direct steps to avoid being a sitting duck. Gaining protection from a manipulated, devalued currency starts with the individual. That first step is to switch a portion of their savings into gold and silver bullion.

Establishing state depositories and money exchange systems outside the clutches of federal bureaucrats 

Perhaps the most high-profile, pro-sound money reform in recent years comes out of Texas. The pension fund for the state’s retired teachers has long held a position in gold bullion valued at nearly $1 billion. That gold had been stored on Wall Street at considerable cost and risk.

Last year, Texas enacted legislation that calls for the building of a Texas precious metals depository, chartered by the state, for storage of its own gold and the gold of its citizens. It’s contemplated that Texans can open an account at this depository to both store their precious metals for a fee and make transactions with them.

Enforcing private "gold clause" contracts to protect against currency debasement

A final tool that can be used by sound money advocates is the “gold clause contract.” Per Title 31 of the United States Code, a gold clause is a provision that gives parties to a contract the option to require payment in gold rather than Federal Reserve Notes.

Gold clauses are particularly useful when designing long-term contracts as protection against the ongoing devaluation of volatile fiat currency. If more consenting individuals decide among themselves to require payment in gold, it would be hugely beneficial in broadening the use and acceptance of sound money.

For gold clause contracts to truly gain a foothold, however, they must be fully enforceable in state courts. So states could pass strong protections for requiring performance of parties to gold clause contracts.

Though the federal government has more control over the states and the people than the Founding Fathers could have imagined, that does not mean all hope is lost. There are meaningful steps states, and individuals alike, can employ to reclaim some measure of autonomy.

More than that, creating a state-based foundation for sound money is a vital part of making states and individuals more resilient in the event of a financial catastrophe.

Idaho Freedom Foundation
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