Arizona Capitol

Arizona Senate Approves Recognizing Gold and Silver as Legal Tender

With all the hubbub over Arizona's Senate Bill 1062, you might be saying to yourself, "Self, don't these lawmakers have anything better to do?"

The answer to that lies in the fact that the senate voted on, and approved, a bill yesterday to recognize gold and silver as legal tender in Arizona.

Governor Jan Brewer vetoed a similar bill last year, but this year's version, Senate Bill 1096, comes with some expanded provisions, including authorizing escrow agents to deal with such transactions.

However, the legislation doesn't make gold and silver legal tender to the point that a guy who looks like "Stinky Pete the Prospector" from Toy Story 2 could take a chunk of freshly mined gold into his town saloon and demand an equivalent amount of whiskey (from a jug labeled "XXX," no doubt).

The legislation mostly refers to gold and silver coins minted by the federal government, but also "any other specie that a court of competent jurisdiction rules by a final, unappealable order to be within to scope of state authority to make a legal tender." The bill specifically refers to the American Buffalo coin, as well as the American Gold Eagle.

The bill specifically states that nobody has to accept gold and silver coins as payments, unless it's specifically outlined in some sort of contract, so you're not going to be exchanging gold coins for McNuggets any time soon.

Then what's the point? According to an explanation from the Tenth Amendment Center, which is supporting the bill, it's part of an effort to nullify the Federal Reserve. (The Tenth Amendment Center is behind several other nullification-like efforts in Arizona, including one bill aimed at nullifying federal gun laws.)

Part of the Tenth Amendment Center explanation can be found below:

Passage of the Constitutional Tender Act would introduce currency competition with Federal Reserve Notes. Professor William Greene explains further:

"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."



In her veto letter last year, Governor Brewer specifically cited that she didn't support the bill because it apparently created a tax loophole for transactions involving legal tender, but new language in this year's legislation appears to address that.

The bill passed the Senate yesterday on an 18-12 vote, with all Republicans plus one Democrat, Senator Barbara McGuire, voting in favor, and the rest of the Democrats voting against it.

Got a tip? Send it to: Matthew Hendley.

Follow Valley Fever on Twitter at @ValleyFeverPHX.
Follow Matthew Hendley at @MatthewHendley.

Matthew Hendley
Contact: Matthew Hendley