The 2011 session of the Utah Legislature is looking like uncommonly fertile ground for crackpot ideas. So far there is a bill to name an official state gun and two calling for conventions to amend the U.S. Constitution. But the most outrageous scheme to surface yet is the Utah Sound Money Act, a system of commerce within the state that would be based on gold and silver coins.
If your political antennae detect rants against the Federal Reserve and debased paper money, you're on the right the track. Among the legislative findings in the draft bill is this:
"Since the founding of the Federal Reserve Bank system in 1913, Federal Reserve Notes have lost more than 95 percent of their purchasing power. During that same period of time, from 1913 to the present, as well as throughout the entire course of recorded human history, gold and silver coin have reliably retained their purchasing power, although subject to periodic fluctuations in value."
This formulation conveniently understates the volatility of the international gold and silver markets. The price of a troy ounce of gold on the New York Commodities Exchange closed at about $1,413 on Wednesday. Five years ago, that price was just $522. In 1997, it briefly fell below $300. So, hitching your currency to the price of gold or silver is no guarantee of stability, though the Federal Reserve does keep a gold cache. The price of the dollar fluctuates. So does the price of gold. That's how markets work, especially today, when money can be moved around the world with the click of a mouse and governments employ fiscal and monetary policy to manage their economies.
Nevertheless, the author of the Utah Sound Money Act, Larry Hilton, an attorney who is not a member of the Legislature, clearly would like nothing better than to return the United States, or at least Utah, to the gold standard. But he can't do that, because the Constitution gives the power to coin money and regulate its value to Congress. It specifically forbids the states from coining money.
To get around that, the bill would create Utah Intrastate Commerce Cooperatives whose members would conduct transactions among themselves using gold and silver coins issued by the U.S. or other governments or by private mints. The state, meanwhile, would be required to accept payment of taxes from people who want to settle their obligations with gold and silver coins. The state treasurer would set the exchange rates of such coins, and a Utah State Defense Force would guard the state's hoard.
So far, the bill hasn't found a sponsor. Here's hoping it doesn't. Utah can't secede from the Union, and it shouldn't try to secede from the federal currency, either.