The Arizona Senate is poised to take a final vote on a bill to recognize gold and silver as legal tender in the state, but officials are at least a year away — if not longer — from setting up a system for Arizonans to use gold and silver to make purchases.
Utah was the first state to pass a measure recognizing gold and silver coins made by the U.S. Mint as legal tender. The Legal Tender Act of 2011 passed the Utah Legislature with Tea Party support and some backing from the Church of Jesus Christ of Latter-day Saints. But so far Utah has not found a way to implement gold and silver as a part of the everyday transactions residents make for goods and services.
In Arizona, SB1439 would recognize specie coin issued at any time by the U.S. government, as well as any other coin or bullion declared legal tender by the courts, as legal tender within the state.
A provision in SB1439 acknowledges that there’s still work to be done — the bill won’t take effect until 90 days after the 2014 Arizona Legislature adjourns sine die. The measure has passed both the House and Senate, but requires a final vote in the upper chamber.
Advocates of creating an alternate currency in the United States to the American dollar say the effectiveness of the bill is up to Arizona government agencies, like the Department of Revenue, and how willing officials are to work with the Legislature in creating a practical alternative to traditional dollars and cents.
Rich Danker, economic director for the conservative advocacy group American Principles in Action, said he’s optimistic that by next year, Arizona lawmakers will have approved follow up legislation that guides how transactions will be made with gold and silver.
Sen. Chester Crandell, the bill’s sponsor, said he’s closely watching what’s happening in Utah. His own legal tender legislation is modeled after the 2011 Utah act.
“We’ll take a look at what they’re doing, because I’ve been working with the person who actually got that through and following it pretty closely,” said Crandell,
R-Heber. “We’re looking at what they’re doing so we don’t fall into the same pitfalls.”
First of its kind
Utah’s law was the first of its kind, a measure fueled by conservative unrest with monetary policies in Washington, D.C. that some say threaten to ruin the U.S. dollar and cause the Federal Reserve to collapse. Recognizing gold and silver as legal tender provides a safety net, a failsafe in the event of such a catastrophe, proponents argue.
For others, transitioning to gold and silver currency is a stabilization of American monetary policy, according to Danker. Providing an alternate to the paper dollar gives residents a chance at keeping cash with better staying power, he said.
“The Federal Reserve will in 2013 create the same amount of new money as the projected deficit. That is not an anomaly but a chronic problem. Since the shift to a pure paper dollar in 1971, the Fed has been used as a means to enable deficit spending because it can print the money that Congress borrows,” Danker wrote in testimony to the Kansas Legislature for a similar bill.
The result, Danker argued in Kansas, is long term inflation that eats away at the purchasing power of the paper dollar.
“We know that gold maintains its purchasing power,” Danker told the Arizona Capitol Times. “People are just frustrated and some of them are fed up with the federal government’s mismanagement of the dollar… These bills are just one small step to try and get some stability in our monetary policy.”
The idea is catching on. In addition to Arizona and Kansas, bills similar to the Utah measure have been introduced in South Carolina, Indiana and South Dakota, among others.
Tea Partiers are quick to attach themselves to legislation questioning the federal government’s policies, Danker said. And in Utah, the Mormon Church’s strong propensity for the concept of preparedness helped provide a religious push for the measure, he said.
Utah now recognizes the exchange of gold and silver as legal tender, not a barter or trade, said Lawrence Hilton, a driving force behind the legislation in Utah. Hilton heads the Utah Precious Metal Association, or UPMA, an organization formed in the wake of the Legal Tender Act’s passage that promotes the use of gold and silver as cash. It has tried to help guide the state toward a sustainable method of doing so.
A long way to go
Pushing gold and silver as a viable alternate to the paper dollar has been difficult, Hilton acknowledged. UPMA works with some businesses and citizens to provide bill-paying services backed by gold and silver, but little else.
The Utah Gold and Silver Depository, formed shortly after the Legal Tender Act’s passage, is designed to work similar to a bank — deposit your gold and silver, and have its value available on a debit card.
The depository method is being discussed in Arizona in the event SB1439 is passed and signed into law. But so far Utah’s depository isn’t accepting any accounts, only pre-enrolled customers while the details are ironed out.
“This is something that is still developing,” Hilton said. “As you go back over the last 50 years, everything is focused on the Reserve Note dollar. That’s become the de facto standard by common practice. You obviously have a lot of inertia because of that.”
Ideas like the depository, debit cards, and computerized transaction in gold or silver dollars are the best chances of allowing transactions to take place in the near future, Hilton said. There’s still a long way to go before physical transactions in gold or silver can take place.
Questions of oversight
Arizona lawmakers and state agencies have concerns with the plan. Sen. Steve Farley, who pitched a farce amendment in the Senate to make cotton, cattle and sunshine legal tender in Arizona — a jab at what he called the absurdity of Crandell’s bill — said there’s serious questions to be asked when it comes to oversight of a new currency.
“Whose depository is it? It’s going to be a privately run depository, because I can’t imagine them wanting to expand the size and scope of government,” said Farley, D-Tucson. “Who’s overseeing this repository? Who’s in charge of the regulation? It’s not like we don’t have a history of people who pooled large amounts of money in retirement accounts and defrauded their investors.”
The Department of Revenue has concerns as well, primarily if the bill required them to start accepting gold and silver as payment for taxes. Sean Laux, legislative liaison for the department, said the legislation is simply too “ambiguous.”
“How would we determine what is the appropriate payment?” Laux said. “How do you measure the value of the gold and silver against a liability? Does that require an assayer, does it require scales? We kind of scratched our heads and wondered how we would implement it and accept that kind of payment.”
An amendment to SB1439 in the House removed language specifying that transactions made with gold or silver specie would have to be taxed in precious metals, leaving the Department of Revenue off the hook initially.
Crandell said he’d work with officials in the interim because at some point, they’ll have to be involved to make gold and silver currency a viable form of payment.
A more successful model
Danker said it was a fair amendment — the department needs more time to work out ways gold and silver can be used within the state’s financial structure. But if state agencies are willing to work with lawmakers on the issue, Danker said Arizona could prove far more successful a model for gold and silver specie than Utah.
“It’s not really hurdles in Utah, it’s just the government has not been proactive. They haven’t operationalized it,” Danker said, adding that Arizona could “take a more proactive approach’’ and pass follow-up legislation next year.
Crandell said the extra year could be enough time to get a system in order for Arizona to add gold and silver currency to residents’ wallets.
“Hopefully by the time the implementation date comes around, we’ll have legislation to actually put it in operation,” Crandell said.