Arkansas House Bill 1718, To Create The Arkansas Legal Tender Act; And To Reaffirm Gold And Silver Coin As Legal Tender, passed the House on April 3 and Senate on April 5. Governor Sarah Huckabee Sanders signed the bill into law on April 11, which goes into effect on July 6. The law will make gold and silver coins legal tender in the state.
The bill was sponsored by Rep. Robin Lundstrum (R) and Sen. Jonathan Dismang (R). There was overwhelming support in both houses from the Republic majority. The bill passed the House 82-8 and 32-0 in the Senate. The eight dissenting votes were from Democrats. Five Democrats and two Republicans did not vote on the bill.
What are the details?
The law amends the Arkansas legal code to include specie as legal tender, meaning gold and silver will be considered money. The bill makes prohibitions about compelling someone to pay or force acceptance of specie without a contract requiring such payment. Exchanging one form of tender for another will not be taxable (i.e., buying gold and silver with Dollars is forbidden from being a taxable event).
The following is how the bill defines the terms.
What is legal tender?
The code defines legal tender as "a recognized medium of exchange for paying debts and taxes.
What is a specie?
A coin having gold or silver content, or refined gold or silver bullion that is (i) coined, stamped, or imprinted with its weight (ii) valued primarily based on its metal content and not its form.
What constitutes specie?
Coins issued by the United States Government (Gold American Eagles, Gold American Buffalos, Silver American Eagles, Platinum American Eagles, and Palladium American Eagles) or other specie that an Arkansas court rules to be within state authority to make or designate as legal tender.
What does it mean?
Arkansas' move is an enormous movement toward sound money. Most politicians prefer to avoid sound money because they can't operate at a deficit. Instead, they like currencies. Even though word processing software may suggest money and currency are synonyms, there is a gigantic difference between the two. Money requires a supporting asset like gold. Money is the underlying asset upon which a financial system is based. Currencies are the means of transacting within that system.
Before 1971, the U.S. Dollar was sound money. It was backed by gold, so Dollars were convenient ways to exchange goods and services based on gold’s value. However, removing the Dollar from the gold standard changed the monetary system into a currency system. By definition, it was no longer money. It was only a currency of a system unsupported by a tangible asset. It became a currency based on nothing except air. Since air is infinite, politicians thought they could create unlimited amounts of currency in proportion to its underlying asset.
Let that sink in for a second. Since removing the Dollar from the gold standard, it has lost 87% of its purchasing power. The national debt to GDP ratio has grown from 35.36% to 120.21% of the economy at the end of Q4 2022. The national debt now exceeds the total size of the U.S. economy. The current national debt is more than $31.45 Trillion.
Every Dollar the government spends translates into a tax obligation. The obligation is met by taxing the labor force. The labor force is generally paid for their time, so measuring the national debt in years instead of Dollars is probably more relatable than numbers that don’t fit on a standard calculator. Suppose the government didn't create any new spending beyond what it already spent. To pay off the current debt, the government would need to confiscate every Dollar earned from every business for the next 1.2 years.
However, it would take longer than 1.2 years to pay off the debt. The government operates at a deficit and has an additional $95 trillion+ in unfunded liabilities. The real national debt is more than $126 trillion. The government would need to confiscate every Dollar earned from every U.S. business for the next 4.85 years to pay off all that debt, and that is if it stops spending new money today. Most people would not appreciate being told they needed to work five years for free, but that is the current math for the U.S. to get out of debt.
People are waking up to the dangers of a currency system without an underlying asset. Arkansas is the 15th state in the last decade to move toward a precious metal-backed currency to return sound money to America. Texas just proposed creating a gold-backed digital currency fully redeemable for gold or cash. The BRICS nations (Brazil, Russia, India, China, and South Africa) repeatedly state they are building a basket of currencies backed by gold and other commodities to compete with the Dollar. The Dollar is on borrowed time.
Good for Arkansas to vote to return to sound money principles. Will you vote to return your portfolio to sound money principles with a healthy allocation to precious metals, or are you more comfortable with paper supported by the air of politician promises?