NASHVILLE, Tenn. (April 20, 2016) – Today, the Tennessee Senate unanimously gave final approval to a resolution setting the stage for creation of state bullion depository, an important first step toward establishing gold and silver as money in the state.

By Mike Maharrey / 10th Amendment Center

Rep. Bud Hulsey (R-Kingsport) introduced House Joint Resolution 516 (HJR516) in January. The resolution declares support for creation of a gold bullion depository in the state.

The State of Tennessee supports the safekeeping and storage of gold and precious metal bullion and coins in a Tennessee bullion depository or other such similar facility.

The Senate approved the resolution Wednesday 26-0. Last month, the Tennessee House passed the resolution 95-0. Approval of HJR516 in both the House and the Senate puts every member of the Tennessee legislature on record as supporting a gold bullion depository in Tennessee.

A bill to establish a depository should be introduced and passed during the next legislative session. There appears to be no barriers to getting this done. Now it’s up to activists in Tennessee to keep the pressure on and ensure the legislators follow through.

In 2015 Texas Gov. Abbott signed a bill into law to create just such a facility. The new Texas Bullion Depository will also establish a means for Texans to conduct transactions using these metals.

A depository account holder may transfer any portion of the balance of the holder’s depository account by check, draft, or digital electronic instruction to another depository account holder or to a person who at the time the transfer is initiated is not a depository account holder.

In a nutshell, through the depository Texans will be able to deposit gold or silver – and pay other people through electronic means or checks – in sound money. Doing so has the potential to open the market to sounds money in day-to-day transactions.

Passage of HJR516 sets the stage to create a similar gold bullion depository in the Volunteer State. While the resolutions does not carry the force of law, and does not guarantee creation of a depository, it makes such a move in the near future much more likely.

Gold and silver transactions

By making gold and silver available for regular, daily transactions by the general public, the new law would have the potential for wide-reaching effect. Professor William Greene is an expert on constitutional tender and said in a paper for the Mises Institute that when people in multiple states actually start using gold and silver instead of Federal Reserve Notes, it would effectively nullify the Federal Reserve System and end the federal government’s monopoly on money.

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 the flow of real wealth toward the state’s treasury, an influx of banking business from outside of the state – as people in other states carry out their desire to bank with sound money – and an eventual outcry against the use of Federal Reserve notes for any transactions.

Once things get to that point, Federal Reserve notes would become largely unwanted and irrelevant for ordinary people.

Creating a depository won’t nullify the Fed’s monetary monopoly on its own, but it would represent an important step forward in that direction.

The constitution

Currently, all debts and taxes in Tennessee must either get paid with Federal Reserve Notes (s-called dollars), authorized as legal tender by Congress, or with coins issued by the U.S. Treasury — very few of which have gold or silver in them.

The U.S. Constitution states in Article I, Section 10, “No State shall ***

make any Thing but gold and silver Coin a Tender in Payment of Debts.”

Creation of a Tennessee Gold Depository would take a step toward that constitutional requirement, ignored for decades in every state. Such a tactic would undermine the monopoly the Federal Reserve System by introducing competition into the monetary system.

Mike Maharrey writes for the 10th Amendment Center.