This article first appeared at The McAlvany Intelligence Advisor on Monday, June 9, 2014:
Something that the lamestream media missed entirely happened on Wednesday, June 4, in Oklahoma: the governor signed into law a bill affirming what is already guaranteed to each state in the US Constitution: that gold and silver coin are legal tender. Historians looking back may recall that day as the day the Federal Reserve’s hegemony over money ended.
Article I, Section 10, the U.S. Constitution states simply that
“no state shall … make anything but gold and silver coin a tender in payment of debts….” The Founders didn’t like paper money and this was how they ensured that only real money would be allowed to circulate. And it worked for a very long while, right up until 1971. On August 15, 1971, then-President Nixon, in a Sunday night speech on national television, announced his unilateral decision to stop allowing foreigners to redeem his paper promises for our real gold. Up until then, price levels in the US, dating back to 1665 (more than one hundred years before the Constitutional convention met in Philadelphia) had remained constant.
A chart put together by a professor at Oregon State reveals that there was rather little fluctuation in the price level, right up until the summer of 1971. From there, once the connection – the link, or perhaps a better term, the anchor – between paper and gold was broken, the price level has gone nearly vertical, reflecting an 80 percent decline in the purchasing power of the dollar in just 43 years.
The language in the bill that Governor Mary Fallin signed into law last week is elegantly simple:
Gold and silver coins issued by the United States government are legal tender in the State of Oklahoma.
No person may compel another person to tender or accept gold or silver coins that are issued by the United States government, except as agreed upon by contract.
For taxable years beginning on or after January 1, 2015, there shall be exempt from Oklahoma taxable income, or in the case of an individual, the Oklahoma adjusted gross income, any amount of net capital gains … which result from the sale or exchange of gold or silver for another form of legal tender.
This nearly matches exactly the language used when Utah’s Governor Gary Herbert signed a similar bill into law back in March, 2011. This followed closely on the heels of similar legislation passed by Louisiana and Texas. Four down, 46 to go.
In his glee, Sean Fieler, Chairman of American Principles in Action, one of those heavily invested in the Oklahoma bill, came close to noting just how important the new law is:
I commend the people of Oklahoma, particularly Senator Clarke Jolley and Governor Mary Fallin, for asserting their state’s constitutional right to declare gold and silver [as] legal tender.
With the Federal Reserve actively suppressing interest rates and eroding the purchasing power of the U.S. dollar, it is welcome news to see one more state give its citizens free access to money that holds its value over time.
Freedom is defined as having options. In Oklahoma, up until last Wednesday, legal tender was what the federal government said it was: paper, paper, paper. Now Oklahomans have a choice: paper or real money. Once they get used to the idea of using money (saving, investing, holding, spending) that doesn’t lose its flavor overnight, they are bound to like it better than the other stuff. And that spells the death knell for Federal Reserve Notes.
One wouldn’t think that a professor from a major eastern university – especially one in the political science department – would have anything intelligent to say about what happened in Oklahoma, or what it will eventually mean to the Federal Reserve System itself, but one would be wrong. Professor William H. Greene looked on the Oklahoma signing as the beginning of the end of an age:
Over time, as residents of the state use both Federal Reserve Notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve Notes do will lead to a “reverse Gresham’s Law” effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve Notes).
As this happens, a cascade of events can begin to occur, including … an influx of banking business from outside the state … and an eventual outcry against the use of Federal Reserve Notes for any transactions (emphasis added).
It’s likely to be a cascading event, rather than a long drawn-out withdrawal a drug addict might experience once his source has dried up. Former Congressman Ron Paul has been pushing for this moment for decades. As a member of U.S. Gold Commission in 1982, Paul and his cohort Lewis Lehrman were permitted to publish a minority opinion entitled The Case for Gold in which they wrote:
Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset.
But [today’s] government bonds are not backed by tangible wealth [but] only by the government’s promise to pay out of future tax revenues….
In the absence of a gold standard, there is no way to protect savings from confiscation through inflation….
This is the shabby secret of the welfare states’ tirades against gold. [Unlimited] deficit spending is simply a scheme for the hidden confiscation of wealth.
Gold stands in the way of this insidious process.
Part of that was a direct quote from another remarkable source: the former chairman of the Federal Reserve himself, Alan Greenspan, before he was assimilated by the Borg. In 1966 Greenspan wrote a short article entitled Gold and Monetary Freedom in which he expounded on that shabby little secret:
In the absence of a gold standard there is no way to protect savings from confiscation through inflation. There is no safe store of value….
If everyone decided, for example, to convert all his [paper] bank deposits to silver [or gold]… bank deposits would lose their purchasing power and government-created bank credit would be worthless….
This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the “hidden” confiscation of wealth. Gold stands in the way of this insidious process….
If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.
The irony here is staggering. Here is the former chairman of the Federal Reserve, in an unguarded moment, explaining the Fed’s prejudice against gold, his comments being picked up by a little-known congressman from Texas writing a minority opinion following an obscure investigation into reestablishing a gold standard. From there, as the predicted degradation and depreciation of the currency takes hold and accelerates, members of state legislatures begin hearing from their constituents and begin passing bills allowing the states to do what they had every right to do all along: allow their citizens to use real money to pay their bills.
Folks at the Tenth Amendment Center can see what’s coming as well:
Once things get to that point, Federal Reserve notes would become largely unwanted and irrelevant for ordinary people. Nullifying the Fed on a state-by-state level is what will get us there.
46 more states – or perhaps just a majority of them – need to pass similar legislation and the cascade, the tipping point, will then expose the emperor for being naked all along. Federal Reserve Notes will then have only the value that collectors of historic relics would place on them: relics of a failed statist experiment in sophisticated stealing of wealth by stealth.
Mish Shedlock: Oklahoma Recognizes Gold and Silver Coins as Legal Tender
Amazon: The Case for Gold
Oregon State University’s graph: Price Level summary 1665 to 2013