Distrust of the Federal Reserve and concern that U.S. dollarsmay become worthless are fueling a push in more than a dozen statesto recognize gold and silver coins as legal tender.

Lawmakers in Arizona are poised to follow Utah, which authorizedbullion for currency in 2011. Similar bills are advancing inKansas, South Carolina and other states.

The Tea Party-backed measures are mostly symbolic — you stillcan't pay for groceries with gold in Utah. They reflect lingeringdollar concerns, amplified by the Fed's unconventional moves inrecent years to stabilize the economy, said Loren Gatch, whoteaches politics at the University of Central Oklahoma.

“The legislation is about signaling discontent with monetarypolicy and about what Ben Bernanke is doing,” said Gatch, whostudies alternative currencies at the Edmond, Oklahoma-basedschool. “There is a fear that the government, or Bernanke inparticular and the Federal Reserve, is pursuing a policy that willlead to the collapse of the dollar. That's what is behind it.”

Bernanke has pushed interest rates to near zero since the18-month recession that began in December 2007. The Fed said inMarch it would continue buying $85 billion in securities each monthin a program known as quantitative easing that has ballooned itsassets beyond $3 trillion and is aimed at keeping long-termborrowing costs low to support economic growth.

Consumer prices rose just 1.3 percent in February from a yearearlier, according to an inflation measure favored by the Fed. Thatwas below the central bank's 2 percent target and compares withoccasional bouts of more-than 10 percent increases in the 1970s andearly 1980s.

Bets that inflation would pick up because of economic stimulusmeasures helped fuel a 78 percent jump in gold since December 2008.The dollar's rise to less than 1 percent below a one-year high setin July and monthly increases of about 2 percent or less in theU.S. consumer price index have curbed demand for bullion. Sincereaching a record $1,923.70 an ounce in 2011, gold prices havefallen and are near a bear market.

Gold futures for June delivery fell 1.2 percent last week, to$1,575.90 an ounce on the Comex in New York, after touching$1,539.40 April 4, a 10-month low for a most-active contract.

Texas Depository

In Texas, lawmakers are considering a measure supported byRepublican Governor Rick Perry to establish the Texas BullionDepository to store gold bars valued at about $1 billion and heldin a New York bank warehouse. The gold is owned by the Universityof Texas Investment Management Co., or Utimco, which took deliveryof 6,643 bars of the precious metal in 2011 amid concern thatdemand for it would overwhelm supply.

The proposed facility would also accept deposits from thepublic, and would provide a basis for a payments system in thestate in the event of a “systemic dislocation in a national andinternational financial system,” according to the measure.

Should Texas take such a step, it would offer sovereign backingfor deposits and make buying and storing gold easier, said JimRickards, senior managing director at Tangent Capital Partners LLCin New York and author of “Currency Wars: The Making of the NextGlobal Crisis.” He said the coin measures, while impractical, havesymbolic value.

“We are seeing a distinct movement back to a world where gold isconsidered money,” Rickards said.

The measures give “people the option of using money that won'tlose any purchasing power to inflation,” said Rich Danker,economics director at the American Principles Project. TheWashington-based public-policy group supports the steps as well asa return to the gold standard, which pegged the dollar's value tobullion. President Richard Nixon formally ended the convertibilityof U.S. currency to the precious metal in 1971.

“People in these states find the idea of having the option touse hard currencies appealing over these policies they have nocontrol over,” Danker said.

The U.S. Constitution bars states from coining money and alsoforbids them from making anything except gold and silver cointender for paying debts. Advocates say that opens the door for thestates to allow bullion as legal tender. The measure beingconsidered in South Carolina would recognize foreign or domesticminted coins as legal tender.

Utah's law applies only to U.S.-minted coins, while other statesare less clear on whether privately produced coins qualify. Arizonaleaves the door open for private coins if they are declared legalby a non-appealable court order.

Tax Breaks

In Utah and some other states, the measures also eliminate statecapital gains or other taxes on the coins.

Critics say the state measures are unwieldy. In Arizona, SenatorSteve Farley, a Democrat, unsuccessfully offered an amendment thatwould have recognized as legal tender other state commodities, suchas citrus fruit, as well as sunbeams. The amendment was intended toreflect the absurdity of the bill, said the 50-year-old lawmakerfrom Tucson.

“It is simply grandstanding to get people afraid that somehowPresident Obama's agenda is going to drive us into hyperinflationand economic collapse,” Farley said. “We have enough real problemsto deal with. I don't see undercutting our entire financialstructure as a priority.”

In Utah, officials haven't yet figured out how to accept goldand silver for tax payments — though some residents have asked topay that way — or integrate the precious metals into commerce,state Treasurer Richard Ellis said. Lawmakers have established atask force to study implementing the law and to examine how thestate can accept gold and silver, with their fluctuating values,for payment, Ellis said. He's not optimistic that it will work, hesaid.

“People point to Utah and say we are leading the way, butnothing much has happened because regulatory hurdles have gotten inthe way,” said Ellis, a Republican. If gold and silver is beingused in the state as legal tender, it is probably only intransactions between individuals, he said.

The Utah Precious Metals Association, established after passageof the 2011 law to advocate for the use of gold and silver coins,has about two dozen members enrolled in a two month-old bill-payservice in which their accounts are held in gold, said LawrenceHilton, the group's chairman. Hilton envisions a future with analternative monetary system based on precious metals in whichmerchants accept silver coin while gold mostly backs electronictransfers.

Arizona measure, sponsored by Republicans, won preliminaryapproval in the House of Representatives April 4 after passing theSenate on a party line vote Feb. 28. Gold is mined in both Arizonaand Utah, while Nevada is the largest U.S. producer, according toNational Mining Association figures.

The bill's sponsor, Senator Chester Crandell, 66 of Heber, saidhe is convinced the move is the “logical thing for the state ofArizona to do.”

“I think you look at some of the things that are happening andthe amount of money printed by the Federal Reserve and who hascontrol of that money, and I think anybody would be concerned,”Crandell said. “Gold and silver have been around a long time andpeople are secure with it and we should give them an opportunity touse it.”

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