While paper money receives its value through governmental regulations and laws, the value of gold and silver is virtually universally accepted—and that perceived certainty has continued to be appealing long after the demise of the gold standard.
The proposed legislation is, in large part, a reaction to Chairman of the Federal Reserve Ben Bernanke’s policy of “quantitative easing.” Essentially, instead of following the well-worn path of manipulating interest rates and the money supply by buying and selling government bonds, Bernanke is attempting to promote lending among financial institutions by directly injecting a set quantity of money into the economy.
Searching for Stability
Supporters of the bill contend that Bernanke’s policy will set off inflation that destabilizes the value of the dollar, because more money will be available while the amount of goods for sale remains the same. So in order to protect against what they view as the potential collapse of the dollar, proponents are seeking stability in gold and silver.
Those opposed, however, are quick to point out that the dollar has remained stable in the aftermath of the 2008 financial crisis, and that the price of gold recently dropped to a two-year low. They argue that moving to a dual currency system would only cause undue problems for businesses throughout the state.
It is unclear at the moment whether Governor Brewer intends to sign the bill, but Arizona is not the first state to have this argument, and it is likely that they will not be the last. Utah legalized gold and silver as currency in 2011, and a handful of other states have proposed similar legislation in recent years.
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