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House Panel OKs Gold, Silver As Legal Tender

COLUMBIA, S.C. –

South Carolina residents would be able to use gold and silver coins as currency under a bill advanced Tuesday by a House panel.

The measure approved by the House Judiciary Committee would let people use the precious metals as money as long as businesses agree to take them. Legislators had made the argument that they didn’t want to force businesses to take the metals and have to figure out the worth of the coins from one day to the next and amended the bill to remove such a requirement.

Advocates of the measure say the metal coins are more stable than the dollar, although Rep. Greg Delleney, who chaired the subcommittee that studied the bill, has previously warned that, if the dollar collapses, people will be in trouble no matter what the metals are worth.

The bill that advanced Tuesday would also exempt the coins from any sales tax, a provision also included in the only other similar bill to become law in the country. Last year, Utah became the first state in the country to legalize gold and silver coins as currency, exempting the sale of the coins from state capital gains taxes. Several other states including North Carolina have explored similar bills.

The U.S. and many other countries largely abandoned gold-backed money during World War I because they needed to print more cash to pay for the war. Later, during the Great Depression, President Franklin D. Roosevelt took steps that essentially prohibited gold and silver as legal currency to prevent hoarding.

In 1971, President Nixon formally abandoned the gold standard. The U.S. Mint later began producing the gold and silver American Eagle coins, primarily aimed at investment portfolios and allowing people to trade them at market value but with capital gains taxes on profits.

The bill now moves to the House floor. Delleney has said that, while he sees no downside in the measure, putting blind trust in the value of gold and silver is misplaced.

“We’re basically creating an alternative currency,” Delleney, R-Chester, said Tuesday.

(Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

Posted: March 26, 2012

A bill that a South Carolina House committee will debate Tuesday would allow you to use gold and silver as currency instead of dollars.

Rep. Rick Quinn, R-Lexington, one of the co-sponsors of the bill, says,

“With the economy the way it is and with the amount of debt, the amount of national debt we have, many people are investing in precious metals, gold and silver specifically, to protect the value of their investment. And so this is really kind of an effort to look at possibilities of how we would have an alternate currency if that would kind of work for the state.”

The bill would set up a 9-member study committee to work out the details. That committee would be made up of three state senators, three House members and three members of the business community, at least one of whom would have to be a certified public accountant.

E. Ray Moore, Jr., a member of the SC Money Committee, a citizens’ group formed in 2010 to advocate and lobby for a return to the gold standard, says, “It’s basically a form of discipline, so we can anchor our South Carolina economy in a time of great difficulty if the dollar continues to erode and inflation increases, which it inevitably will. So South Carolina could have a stable economy with this legislation. It would anchor our economy and gives us a stable currency.”

South Carolina would be just the second state to allow gold and silver to be used as an alternate currency. Utah is the only state that has passed a law. Other states are talking about forming study committees similar to the one the South Carolina bill would create.

There are inherent problems with the bill, says Rep. Jim Harrison, R-Columbia, a member of the House subcommittee that passed it last Thursday. One problem is whether businesses would be required to accept gold and silver, since the bill would make gold and silver legal tender in the state. Supporters of the bill want to leave it up to each business to decide whether to accept gold and silver, and the bill is written to make it voluntary.

“If you look in Black’s Legal Dictionary or whatever, ‘legal tender’ means it must be accepted for a debt. So in the first paragraph we’re saying it must be accepted for a debt and then two paragraphs later we’re saying it doesn’t have to be,” Harrison said Thursday. But he said he’d vote for the bill in an effort to keep it moving through the legislative process.

Federal Reserve Chairman Ben Bernanke said last week that a return to the gold standard would not be practical, since the U.S. doesn’t have enough gold to cover its debts. And he says it wouldn’t make sense from a policy standpoint, because the federal government wouldn’t have the flexibility to respond to inflation, deflation or unemployment by controlling the amount of money in circulation.

And he says the U.S. economy was much more vulnerable to economic downturns when it was on the gold standard, with the U.S. having five major recessions from 1890 to 1905.

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