Can’t Take This New Bill to the Bank

In an attempt to avoid hyperinflation caused by the Federal Reserve, South Carolina State Senator Lee Bright proposed a bill on Feb. 3 that would allow his state to adopt an alternative currency based on a gold or silver standard.
Even setting aside the huge constitutional issues, this is a move that would negatively affect the state’s economy. Gold, like any other commodity, has a highly volatile price: The discovery of a large gold mine would inflate the general price of money; conversely, if gold prices didn’t keep up with the growth of the general market, deflation would occur. The entire market, under Bright’s proposal, would lie in the hands of a single commodity instead of in a Federal Reserve that can tighten or loosen money as necessary.
Moreover, regardless of what type of currency South Carolina would use, the very existence of an alternative to the dollar would stifle free trade. The average American firm would have to trade in American dollars to buy something only produced in South Carolina, wasting precious time and incentivizing them to purchase from another state. Foreigners, too, would rather buy using the more trusted dollar than risk using an unstable new currency. As less money flows in to the state, there will be fewer jobs and even less tax revenue to support its citizens.
Considering the U.S. is closer to deflation than hyperinflation, an alternative currency is unnecessary, at best. At worst, a move like this would jeopardize and wreak havoc on the state’s economy.

— Saad Asad
Senior Staff Writer

All the Cool States are Doing It

While at first it seems comical to imagine stopping at the border of South Carolina to trade in $20 bills for equivalent South Carolina currency, the fine print’s worth reading: Such a currency would only take over if the U.S. currency ever collapses.
South Carolina is hardly the first state where this idea has surfaced.  Georgia and Virginia have already floated similar ideas, including authorizing the state to print additional money for in-state transactions. None of those ideas came to pass, and Senator Bright’s plan won’t likely make it past a committee. But alternative currencies — to an admittedly slight extent — do have a bit of history on their side. In fact, during the Great Depression, West Virginia produced made coins backed by the state government that could be used at certain markets within the state.

Ultimately, the U.S. Constitution is pretty clear about what the Fed can do and what the states can do, and Senator Bright’s proposal almost certainly won’t make it past the first appeal — but at least, for now, someone in power’s looking at a worst-case backup plan.

— Bridgett Rangel-Rexford
Staff Writer