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Rethinking Utah's monetary policy

Troubling trends currently hamper America's prosperity. Many now recognize that one of the greatest threats lies in the precarious condition of today's U.S. dollar. Sadly, the mounting waves of currency debasement have become the central feature of U.S. monetary policy. Looming stagflation could signal a devastating financial tsunami first set off by America's final abandonment of the gold standard under Nixon in 1971.

Until our currency returns to safe harbor reconnecting with a reliable, proven anchor, we'll likely remain adrift in a monetary system that produces rising prices, financial disorder and runaway government spending.

Ronald Reagan once observed, "I do not want to go back to the past; I want to go back to the past way of facing the future." In that spirit, Utah has charted a way forward based on time-tested, proven principles. During the recent general legislative session, the Utah Legal Tender Act passed both chambers and was signed into law by Governor Herbert.

The bill essentially restores the hard money options enjoyed by generations past. American greatness rose on the strength of a dollar that was "as good as gold," and if our nation ever sinks, it will likely come in the wake of the dollar's demise.

The new Utah law derives its legal authority from Article I, Section 10, of the U.S. Constitution, which provides that no state shall "make anything but gold and silver coin a tender in payment of debts." This largely neglected constitutional check can, when actually exercised by the States, foster an important balance between concurrent state and federal monetary authority.

Our current paper money maelstrom has set in motion what Politico recently called a "surge of national interest" in gold-backed monetary reform. Others speak of the "currency revolution," which some have dubbed the "Utah Spring," with more than a dozen states considering a new, promising season of Utah-style monetary reform.

This fall leading legislators, economists, lawyers, bankers, financiers, academics and politicians will convene in Park City, Utah, for a "Sound Money Summit" to hammer out a declaration of guiding monetary principles.

With aggressive plans underway to open local depositories, the private sector has been quick to respond to the first monetization of a gold and silver coin by a state in more than a century. Essentially, these new institutions will afford citizens an effective way to "inflation proof" their dollars by making their everyday purchases with a debit card backed by the fair market value of their gold and silver coin holdings.

The Supreme Court recognized long ago, in McCullough v. Maryland, the inherent contradiction in taxing a medium of exchange. Thus, the Utah Legislature eliminated all state taxes on monetized gold and silver coin. Nevertheless, current federal law imposes a hefty 28 percent "collectibles" tax on such coins. In support of Utah and other states, such as South Carolina, which is currently pursing legal tender legislation, Senator Mike Lee. R-Utah, has joined his colleagues Jim DeMint, R-S.C., and Rand Paul, R-Ky., in introducing a bill to remove federal taxes on gold and silver legal tender.

"Good monetary policy is an important part of a healthy and prosperous economy," said Senator Lee on Tuesday. "Since the Federal Reserve Act of 1913, the dollar has lost approximately 98 percent of its value. This bill is an important step towards a stable and sound currency whose value is protected from the Fed's printing press."

As a final needed course correction in monetary policy, the DeMint/Lee/Paul bill could well guide the nation toward a sustainable monetary system. Having access to the full slate of constitutional currency choices — gold, silver and paper — consumers will then be free, through their daily buying decisions, to participate in an organic, ongoing currency arbitrage — one which may well guide our foundering dollar back to its original precious metal moorings through a de facto, naturally occurring return to the gold standard.

Larry Hilton, a Utah attorney, founded the non-profit organization Citizens for Sound Money. Rich Danker is project director of economics at American Principles in Action, a Washington policy organization.