Florida Declares Gold and Silver Legal Tender:
Does this Herald the Return of the Gold Standard?

Florida is taking a bold step in the evolution of money. There was no announcement of a Central Bank Digital Currency (CBDC) or adopting a cryptocurrency like Bitcoin, instead Republican Governor Ron DeSantis signed a bill to make gold and silver legal tender in the sunshine state. 

The landmark legislation, known as HB 999, is the latest chapter in a developing story of US states looking to restore the use of precious metals as money. Florida joins other states, including Utah, Arizona, Louisiana, Idaho, Wyoming, and Oklahoma, that have already passed similar measures recognising gold and silver as currency. 

In a post on X, Governor Ron DeSantis said ‘Today, I was pleased to sign HB 999, through which Florida will exercise its authority under the U.S. Constitution to recognize gold and silver as legal tender. HB 999 will give Floridians greater financial freedom and more tools to safeguard their hard-earned money. Moreover, this legislation supports inflation-proof assets, so Floridians’ wealth is not at the whim of our federal government’s reckless spending addiction.’[1]

A Long (and Noble) History

Article I, Section 10 of the US Constitution provides a foundation for recognising gold and silver as money. ‘No State shall... coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts...’.[2] 

But the Founding Fathers were not alone is recognising the unique properties of gold and silver that make them suitable to be used as money. From the early 1800s until the 1970s large swathes of the global population used currency explicitly linked to precious metals in a system known as the Gold Standard. But due to their particular characteristics, gold and silver have been used as money by diverse and disparate civilizations for thousands of years.  

Why Gold and Silver Make Ideal Money

The economist Adam Smith theorised that money has three functions: 

• To serve as a Medium of Exchange – be used to pay for goods and services.
• To Act as a Unit of Account – provide a consistent and repeatable way to measure value.
• To Preserve Value Over Time – protect purchasing power across years or even generations. 

In order to perform these functions, many economic theorists have argued that for something to be effective as money it should have the following properties.  

1. Durability – Money needs to be durable so it can pass through many hands and be stored in many conditions without losing its value. 
   Gold doesn’t rust. It doesn’t oxidise, corrode or react with most other elements. It’s almost indestructible. Gold, silver and platinum are part of a group of very durable metals known as the ‘noble metals’ that share similar properties needed to make good money.
2. Portability – Money must be easy to carry and store in order to facilitate trade and be accepted by buyers and sellers.
   Gold has a high value-to-weight ratio, enabling you can carry a lot of value in small and lightweight format. Silver is bulkier, but still very portable, particularly for lower values.
3. Divisibility – Money must be able to be split easily into smaller units so transactors can pay the correct value and receive change when required.
   Gold is one of the most malleable metals, meaning it can be stretched extremally thin without becoming brittle. Both gold and silver can also be alloyed with other metals and refined back to a higher purity relatively easily. Today, The Royal Mint produces coins containing just 0.8g of gold (1/40oz) and silver coins containing as little as 3.1g of silver (1/10oz).
4. Fungibility – Units of money need to be interchangeable, for example a £1 coin should have the same value as another £1 coin. This enables money to circulate. If units of currency weren’t identical in value then people would need to assess each one before accepting it. If you put aside any collectible value that may arise from a coin’s design or mintage, one ounce of 999.9 fine gold is worth the same as any other ounce of 999.9 fine gold. The same is true of silver. There is a widely accepted international price that ensures precious metal in bullion form is fungible. 
5. Acceptability – To function as money, the units must be widely trusted and recognised. Precious metals have been highly valued and sought after across history, cultures and borders. Coins can help enhance the acceptability of precious metals in a monetary context even further. For example, the gold Sovereign once circulated across the British Empire and became known as ‘the Chief Coin of the World’ because it was so widely recognised and accepted. The designs of bullion Britannia coins don’t change each year to enhance the coin’s recognition, while anti-counterfeiting features help traders authenticate that the coin is genuine and therefore contains the correct amount of metal or intrinsic value.
6. Scarcity – The traditional theory holds that money should be limited in supply. If everyone was able to print their own money it would rapidly lose its value and purchasing power.  Precious metals are finite, difficult to extract, and cannot be artificially created. This scarcity helps provide the ‘intrinsic’ value associated with gold and silver and has ensured they remain desirable throughout history. 

Gold and silver naturally have all of the qualities traditional economists would associate with sound money. And while the Florida HB 999 bill is more a symbolic move than a decisive step towards a new Gold Standard, given the distinctive properties of gold and silver, there is perhaps little wonder that there is still demand for precious metals as a form of currency today. 

Sources

[1] - https://x.com/GovRonDeSantis/status/1927494521790550232 

[2] - https://constitution.congress.gov/browse/essay/artI-S10-C1-3/ALDE_00001099/ 

Notes 

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