Not All That Glitters is Gold

Yesterday, I received a tip that the South Carolina Legislature is taking a bill to committee that would make all gold and silver legal tender for all debts in South Carolina. I was totally unaware that such a bill existed.

After doing a bit of digging, I found the most recent version of the bill.

The crux of the bill is that "Any person may employ gold or silver coin, or both, as legal tender in this State under its laws for payment of any debt to which that person is a party."

I get that people are worried about the prospect of inflation. I get it. But, is this a realistic solution? It seems like this is going to create more problems than it solves. My reading of subsection (E) is that you don't have to accept gold or silver if you don't want to. So what is the point of this bill? It seems like you can basically have a debtor and creditor agree that the medium of exchange will be gold or silver. Ok, so who benefits from this?

I can see why a creditor, who really believes the value of paper money will fall would agree to be paid only in gold or silver. If the value of the dollar plummets, it helps out debtors, right? Let's say you make a Promissory Note today for $100,000, to be repaid over a period of 30 years. If the value of the dollar drops by 50%, then you can essentially repay the loan for half of it's actual value. That's a windfall for the debtor, and the creditor has to eat the loss.

So who's driving this legislation? I can't imagine it's the banking lobby. It just doesn't make sense to me in any logical manner. If two parties wanted to contract for payment of a debt in gold or silver, (or #2 pencils for that matter) what's to stop them? Do we need a law specifically authorizing this?

Maybe someone out there can drop some knowledge on me, because I'm not seeing why this is so important. On a practical matter, I can't imagine going to a restaurant and paying for my food in gold or silver coins. I mean, the kids who work at some of these places have a hard enough time making change for my $10 bill. Now we're going to require them to start weighing, measuring, and determining the value of my proffered gold coin?

Maybe I'm just too simple to understand the logic behind this bill, but it seems like another classic case of our legislature doing something we don't really need them to do.

A photo of Bill 4128's main lobbyist