Incremental Steps Toward Sound Money

State Lawmakers Rediscover a Long Unheeded Constitutional Provision

If you want a pocketbook example of how far the United States has strayed from the supreme law of the land, look no further than the nation’s money.

Today’s dollar is nothing like it was intended when the U.S. Constitution was written and ratified nearly 240 years ago.

“No State shall . . . make any Thing but gold and silver Coin a Tender in Payment of Debts,” reads a passage from Article I, Section 10, Clause 1, known as the contract clause.

Repeatedly circumvented and undermined by subordinate federal and state statutes, the constitutional provision has been disregarded, negated and violated almost since the ink was dry on the now faded, yet foundational, legal document. Not surprisingly, many of the details and directives in the nation’s highest law remain a mystery to many elected officials.

“Most [state lawmakers] have never read the Constitution or heard of sound money,” said Jp Cortez, executive director of the Charlotte, N.C.- based Sound Money Defense League. “Only one or two in every state understand monetary history.”

Though disheartening, the unfortunate fact is being confronted. Advocacy and educational efforts by Cortez’s organization, along with grassroots campaigning by precious metal proponents, are reducing the level of constitutional illiteracy among state authorities. They’re also raising awareness about the monetary attributes of precious metals, namely that physical gold and silver retain value and can’t be debased like printed currency and digital dollars.

Economic factors and financial concerns are contributing to the sound money cause, prompting state leaders to take a fresh look at the nation’s degenerating, debt-based monetary system and unsustainable financial trajectory.

Troubled by the federal government’s record deficits and mushrooming debt, debauched dollar and incessant inflation, and declining confidence in the U.S. currency both abroad and domestically, state lawmakers and fiscal officers are assessing their own public finances, and some are rediscovering a new appreciation for gold and silver, the only money mentioned in the Constitution.

Amid economic uncertainty, state officials are reexamining the precious metals stipulation in the contract clause; reconsidering their own sworn oaths of office, which include a pledge to uphold the nation’s supreme law; and taking incremental steps to restore the monetary metals to their rightful role as legal tender.

Reaffirming Gold & Silver as Legal Tender

Eight states—Alabama, Arkansas, Idaho, Louisiana, Oklahoma, Texas, Utah and Wyoming—have formally reaffirmed gold and silver as legal tender, beginning with the Beehive State in 2011. Though seemingly superfluous given the straightforward language in the contract clause, the affirmations confirm renewed support for hard currency and sustainable money among forward-thinking state leaders and legislative bodies.

“While inflation continues to erode the purchasing power of the U.S. dollar, encouraging stable, time-tested and constitutional alternatives like gold and silver is a commonsense step,” said state Sen. Tim Melson, who introduced the Alabama Legal Tender Act earlier this year. “This bill upholds their constitutional status and supports sound money for our citizens across the state.”

Some state legislatures also are removing impediments to precious metal purchases, ownership and sales; authorizing and encouraging their use as mediums of exchange; and acknowledging gold and silver as viable investments for the general public and state governments.

Forty-five states provide exemptions or charge no sale tax on precious metal purchases. Fourteen states don’t levy capital gains taxes on constitutional money.

Texas has gone a step farther. In 2018, the Lone Star State opened the nation’s first state-administered bullion depository to offer storage to precious metal owner. Legislation enacted last month will allow Texans to use their gold and silver deposits in electronic financial transactions beginning in 2027.

Earlier this year, Wyoming established a strategic gold reserve, allowing the Cowboy State to invest at least $10 million of taxpayer funds in precious metals.

Moreover, dozens of pieces of precious metals-related legislation are winding their way through statehouses this year, signaling that the sound money movement, despite periodic setbacks, is gaining attention and traction across the country.

Unbacked Paper Notes Replaced Hard Currency

So how—and why—did the states drift so far from recognizing gold and silver as legal tender, and accepting the monetary metals as payment of debts in the first place?

The process was incremental and insidious, and began when paper bank notes were substituted for specie or hard currency.

Eventually gold and silver were supplanted and replaced by paper currency that wasn’t fully backed by the monetary metals or exchangeable for them. The shift toward unsound and unstable currency began with the chartering and establishment of state, national and central banks, including the Federal Reserve.

To expand credit and pursue higher profits, banks commonly issued and lent paper notes without sufficient precious metal backing. Excessive credit produced by unbacked paper currency stoked inflation, fueled market speculation, contributed to economic meltdowns and financial panics, and led to hoarding of gold and silver coins.

Gold and silver were driven out of the monetary and financial system in an illustration of Thomas Gresham’s law or principle: “Bad money drives out good.” In other words, savers prefer holding superior money rather than inferior currency.

In addition to indirectly expelling precious metals from circulation and deterring their use as money, Congress passed a series of laws that nullified silver and gold as legal tender, and ultimately removed them from the nation’s monetary base.

An obvious example of a law that undermined the Constitution’s legal tender provision was the Coinage Act of 1873. The measure halted minting of U.S. silver dollars, limited the legal tender status of silver to smaller denomination coins and ended the bimetallic standard established by the nation’s founders. By creating a de facto gold standard and demonetizing silver, the law made it difficult—if not impossible—for states to adhere to the Constitution’s legal tender provision.

Sound money suffered several menacing and neutralizing blows during the Great Depression. In 1933, President Franklin Roosevelt signed an executive order outlawing most private gold ownership and requiring citizens to surrender their gold coins, bars and certificates in exchange for depreciating and devalued Federal Reserve Notes.

By ending the domestic gold standard, the decree nullified the legal tender provision and prevented the states, and all Americans, from offering or accepting gold for payment of debts. Congress supported the presidential order by invalidating all private and public gold contracts, and passing the Gold Reserve Act of 1934, which nationalized all monetary gold.

Another circumstantial and incidental way of getting the states to favor fiat currency over precious metals was introduced amid the 1930s’ deep economic slump. As part of Roosevelt’s New Deal programs, the federal government expanded its financial control and influence by distributing billions of dollars in emergency relief and financial assistance to the states.

The states grew accustomed—and addicted—to federal handouts, which often came with stipulations and implicit understandings, including the abandonment of gold and silver as constitutional money. Uncle Sam’s benevolent carrot became a stick.

As state lawmakers grew dependent on federal largess, which continues to this day in the form of government grants and “revenue sharing,” they disregarded the legal tender clause, ignored their constitutional oaths and acquiesced to federal monetary authority, which was bolstered by precedent-setting Supreme Court rulings.

Federalism trumped states’ rights and legal responsibilities, and by the 1940s more than half of the states had imposed sales taxes to boost revenue collections.

The defining nail was driven into the monetary metals coffin with passage of the Coinage Act of 1965 and a subsequent law in 1970. Combined, the measures eliminated the silver content in the nation’s coinage, thereby encouraging hoarding of silver coins and ending silver’s practical use as legal tender.

Prohibitions Lifted on Constitution Money

Prohibitions on precious metals began to reverse course in 1975 after President Gerald Ford issued an executive order legalizing private gold ownership. President Ronald Reagan continued the shift back to constitutional money a decade later by signing the Gold Bullion Act and Liberty Coin Act. The laws authorized the U.S. Mint to produce legal tender gold and silver coins.

While more than 700 million of the bullion coins have been struck and sold since 1986, they’re rarely used as legal tender today because the market price of gold and silver far exceeds their face value. That confining fact, along with laws that discourage precious metals purchases and sales, deter their use in financial transactions and their function as investment assets to protect savings from endless inflation.

Fiat money devotees and some legal scholars claim the Constitution gives the federal government authority to impose monetary dictates on the states, even if they limit or prohibit gold and silver as legal tender. They cite Article VI, Clause 2, known as the supremacy clause, which reads:

“This Constitution, and the Laws of the United States which shall be made in Pursuance thereof . . . shall be the supreme Law of the Land; and the Judges in every State shall be bound hereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.”

Rather than supporting the Constitution, however, subsequent statutes have invalidated the nation’s original legal tender requirement and produced an unsound dollar, burdensome national debt and unsustainable monetary system.

And while Article 1, Section 8, Clause 5 of the Constitution clearly states “Congress shall have the Power . . . To coin Money, and regulate the Value thereof,” the document makes no mention of paper money, or a central bank that conjures unbacked bills and digital currency into existence as legal tender on behalf of the deeply indebted U.S. government.

Today, Federal Reserve Notes represent U.S. dollars and serve as the nation and world’s predominant currency. The bank notes became “lawful money” upon passage of the Federal Reserve Act in 1913, and legal tender after gold was criminalized and demonetized 20 years later.

Arguing in favor of the supremacy of an ever-depreciating currency grows ever-more ridiculous as Federal Reserve Notes become increasingly worth-less, proving their inferiority to gold and silver, whose prices are rapidly rising in dollar terms.

Growing awareness of the Constitution’s legal tender provision and nation’s untenable fiscal path explains why state lawmakers and governments gradually are rediscovering—and acting upon—the common sense and enduring value of sound money.

As the timeless adage goes, better late than never.

© 2025 Stuart Englert. All rights reserved.

Englert is the author of “Rigged: Exposing the Largest Financial Fraud in History.”