Warnings about “hyperinflation” didn’t persuade South Dakota legislators to endorse the use of gold and silver coins on Wednesday.
Rep. Dan Kaiser, R-Aberdeen, had asked the Legislature to declare U.S.-minted gold and silver coins to be “legal tender” that could be used to pay state taxes at their market value.
“Within the borders of South Dakota, for our intra-state commerce, we are going to reserve the right for our citizens to use gold and silver as currency, especially in some case of emergency, if the U.S. dollar is no longer trustworthy as a source of currency,” Kaiser said.
The bill, House Bill 1100, left it optional for private businesses to choose whether to accept gold and silver coins, but said the metallic currency “may be used… in satisfaction of any tax.”
The state Department of Revenue opposed the bill, saying it would cause serious complications for state operations.
Chief among the objections of David Wiest, a deputy secretary of the department, was the case of a coin that had different face values and market values.
“If you have a $5 gold coin, and you go to the store… and the gold coin has an intrinsic value of $50, the merchant is supposed to accept the $5 gold coin for its $50 intrinsic value,” Wiest said.
The bank in which the state keeps its money told him “we don’t want to deal with” the value of gold and silver coins, Wiest said.
Supporters of HB 1100 repeatedly criticized the current U.S. dollar, whose value is maintained by the Federal Reserve rather than tied to a commodity.
“When we have a chairman of the Federal Reserve who contradicts the Constitution by saying that gold is not money… it is time for us to question the Reserve and make up our own laws,” said Sen. Dan Lederman, R-Dakota Dunes.
Lederman cast HB 1100 as a minor measure that wouldn’t have much effect — but one that laid the groundwork for future monetary reforms.
“To be honest with you, I think this is just the first step,” he said. “I really would like to see us return to using commodities as the value of the dollar, tying the dollar to the real world, not policies set by the Federal Reserve.”
Skeptics on the House Commerce and Energy Committee pointed to the fluctuating value of gold and silver in past decades.
A majority of the committee’s members rejected the pro-gold arguments.
Rep. Jim Peterson, D-Revillo, cast HB 1100 as a “political statement” about state’s rights that could get South Dakota sued.
Rep. Kristin Conzet, R-Rapid City, said she had “too many questions and not enough answers” about the proposal, and worried it would force “merchants to be experts in gold and silver.”
Disagreeing, Rep. Stace Nelson, R-Fulton, argued that “fiat currency” not tied to the value of a commodity was bound to collapse.
But he ended up in the minority. HB 1100 was killed 9-4.
After the vote, Kaiser, a first-year lawmaker, said he was going to focus on researching the issue to better address criticism next year.
Rep. Dan Kaiser, R-Aberdeen.