Digging for Gold: A Multivariate Analysis of the Passage of State 'Sound Money' Laws

Abstract

Since its inception, the U.S. Federal Reserve's monetary policies have led, directly and indirectly, to a decline of over 95% in the purchasing power of the U.S. dollar. As a result, there have been several attempts to curtail or eliminate the Federal Reserve's monopolistic powers; however, none have proven successful to date, due mainly to the constraints of strong political opposition at the national level.

In contrast to these attempts at the national level, this paper examines the levels of success and possible correlating factors of an alternative approach to ending the Federal Reserve's monopoly on money: "sound money" bills, introduced at the state legislative level, the purpose of which are to move each state that passes them in the direction of adherence to the U.S. Constitution's "legal tender" provisions of Article I, Section 10.

Since the financial crisis of 2008-2009, there appears to be a renewed interest in "sound money" bills across the United States, including "Constitutional Tender," "State Legal Tender," "Gold/Silver Sales Tax Elimination," and "State Bullion Depository" bills. Using multivariate analysis of state legislatures, this paper attempts to determine what factors are associated with the successful, and failed, passage of these type of bills.

Keywords: legal tender, constitutional tender, political economy, constitution, economics, gold, silver

JEL Classification: E52, E42, P16