The study, which would cost an estimated $17,440 to Virginia taxpayers, would create a 10-member commission to study “the need, means, and schedule for establishing a metallic-based monetary unit” in the event of “hyperinflation, depression, or other economic calamity related to the breakdown of the Federal Reserve System, for which the Commonwealth is not prepared.
Per the bill, rampant inflation or a cyber attack on the Fed would result in chaos for “the Commonwealth’s governmental finances and the Commonwealth’s private economy… with gravely detrimental effects upon the lives, health, and property of Virginia’s citizens, and with consequences fatal to the preservation of good order throughout the Commonwealth.”
While no states have the Constitutional authority to print money, the bill’s author, Delegate Bob Marshall, believes that Virginia could coin currency using gold and silver.
“Essentially, he wants to spend $20,000 on a study that could call for the state to return to a gold standard,” writes FoxNews.com‘s Barnini Chakraborty.
Marshall maintains that this bill arises out of concerns that recent actions by the Fed might result in the sort of hyper-inflation that proved disastrous in places like post-World War I Germany, where you might as well have lined your birdcage with currency for all it was worth.
But the Washington Post points out that inflation is below 2%, in spite of the fact that the Fed has tripled the amount of money in circulation during the last five years.
And in a column for US News, Susan Milligan makes this argument against inflation-related concerns:
When we worry about inflation, it’s generally a function of a few percentage points—problematic for consumers, but nothing like the experiences of people in countries where there has been hyperinflation, where a loaf of bread might cost six times as much in the afternoon as it did that morning. And while fiscal responsibility is an important goal, does creating a new, limited currency really the answer?
One George Washington University economist who says he, as a private citizen, supports the bill, seems to be of the opinion that this legislation is less about actually creating Virginia’s own currency than it is about sending a statement to the Fed and the administration.
“I think the most effective way to send a message is to say you’re prepared to do something,” he tells the Washington Post. “I view it as a kind of state-level expression of concern about the uncharted course the Federal Reserve has been on in monetary policy.”
The Virginia bill, which passed through the House with a 65-32 majority, now moves on to the Commonwealth’s Senate. It might have a harder time there, with the 40 seats split evenly between Democrats and Republicans.