As the U.S. dollar loses value, some states are proposing laws to legalize gold and silver as acceptable legal tender. Utah is the first state to test the resurrected system.
Effective as of May 10, 2011, a bill legalized gold and silver as acceptable currency in the state of Utah — one could pay for groceries with precious metal coins as they would have with U.S. paper dollar bills.
Signed by Governor Gary Herbert, the law will not require state residents to pay or accept payment in gold or silver. Additionally, the sale of the metals will be exempt from state capital gains taxes but not federal capital gains taxes.
Brad Galvez, Republican state representative and sponsor of the Utah bill, noted that American confidence in the U.S. dollar and monetary policy was deteriorating. “We’re too far down the road to go back to the gold standard,” Galvez said, according to the Associated Press. “This will move us toward an alternative currency.”
The bill comes as inflationary concerns remain in the minds of the American population and the dollar continues to drop in value. Precious metals, primarily gold and silver, have been popular commodities used by investors to hedge against the decreasing value of U.S. currency.
The Federal Reserve is nearing the conclusion of the $600 billion bond-buying program to spur economic activity as the country makes its recovery from the worst recession since the Great Depression.
A system under which the U.S. currency was backed by gold — the gold standard — was utilized until the Great Depression. In 1971, President Richard Nixon formally abandoned the gold standard and the nation’s currency has been backed by the trust in the government’s ability to repay its debts.
With the cost of everyday goods mounting and the government delayed action on the debt ceiling, it is not surprising that Americans have rekindled their trust in gold and silver.
Several other states are considering passing similar laws to allow purchases to be made in exchange for gold and silver.