SB 112: Buy Groceries with Gold and Silver

There’s gold in them thar c-store cash register drawers… or there will be under Senate Bill 112!

Pat Powers and I both ridicule rookie Senator John Carley’s (R-29/Piedmont) proposal to recognize gold and silver as legal tender in South Dakota and authorize a state bullion depository to facilitate gold and silver transactions. Powers ridicules Senate Bill 112 because he wants to portray the wingnutty faux-cons who threaten the hegemony of his mainstream GOP sponsors as wildly out of touch with South Dakota voters and incapable of confronting truly pressing policy matters. Powers is quite right in that assessment of both SB 112 and its sponsors, all 14 of them part of the radical right wing that would prefer to tear government apart and have us living in the End Times.

Senate Bill 112 won’t have South Dakota minting gold and silver coins. Senator Carley and his fellow goldbugs respect the U.S. Constitution Article 1 Section 10 Clause 1‘s ban on states coining money but want to take up that clause’s subsequent allowance for states to make “gold and silver Coin a Tender in Payment of Debts”. Per the example of Texas and a few other anti-dollar states, SB 112 doesn’t expect we’ll all be walking around with doubloons jingling in our pockets. Instead, SB 112 tells the state treasurer to either create or out-source a bullion depository where we could store all those ingots we currently have in our closets and sheds and buried chests and buy stakes in more hoarded glittery bars which we could cash out via debit card to buy our pizza and gas at Casey’s.

But wait: does Casey’s or anyone else really have to keep a new cash register drawer for gold and solver coins and allow customers to swipe their bullion depository debit cards? SB 112 Section 2 seems permissive, but its exception clause smells mandatory for most sellers:

Gold and silver specie are recognized as legal tender in this state and, beginning July 1, 2027, may be used for the payment of:

(1) Debts between private parties, if mutually agreed upon; and

(2) Taxes, fees, or other obligations owed to this state or a political subdivision, if the state or political subdivision agrees to accept specie as payment.

No person or entity is compelled to accept gold or silver specie as payment, except as provided in this section or by mutual agreement or where payments are made by an electronic payment system participant in gold or silver specie and the other party receives U.S. dollars utilizing traditional payment mechanisms [Senate Bill 112, Section 2, as filed 2026.01.22].

That last phrase, “the other party receives U.S. dollars utilizing traditional payment mechanisms”, seems problematic. In the unwieldy structure of the entire last sentence, that last phrase could be read to require that if a seller uses traditional payment mechanisms to take payment in regular dollars, that seller is compelled to accept not only the bullion debit card but any gold or silver specie—defined in SB 112 as the physical coin or bullion—that the buyer wants to plunk onto the counter. Under SB 112, those of us who don’t want to participate in the chaotification of currency can no longer say, “Dollars only, please.”

And if Carley and friends are really after “legal tender”, SB 112 has to mandate acceptance:

Unfortunately for advocates of “hard money” alternatives to “fiat currency,” we are a long, long way from seeing precious metal coins become actual legal tender. The reason is simple. States may promote gold and silver coins and other items as money, and may even encourage merchants and consumers to use them in commerce, but the concept of “legal tender” involves mandatory acceptance—a coin or certificate that is true legal tender must be accepted by a merchant or consumer [Armen Vartian, “U.S. Gold and Silver Coins as Legal Tender—What Gives?” Greysheet, 2025.08.18].

…which in turn mandates value chaos:

No U.S. state has gone that far yet, and we can see why. A gold coin has a value, but what is that value from one day to the next? How would a merchant price the items he or she sells in gold if the value of the gold changes from day to day (minute to minute, actually)? A baker might sell a loaf of bread at a profit in exchange for a 1/20 gram gold coin today, but accepting that same coin the next day might result in a loss to the baker. So the baker would not only have to deal with changing costs of the flour, yeast and salt needed to make bread, but also with the shifting value of the money customers are using to pay for that bread [Vartian, 2025.08.18].

Oh yeah, remember? We got off the gold standard because shiny metals don’t stabilize prices better than reliable monetary policy:

The phrase “create money out of thin air” refers to the Fed’s ability to create money at virtually zero resource cost. It is frequently asserted that such an ability necessarily leads to “too much” price inflation. Under a gold standard, the temptation to overinflate is allegedly absent, that is, gold cannot be “created out of thin air.” It would follow that a return to a gold standard would be the only way to guarantee price-level stability.

Unfortunately, a gold standard is not a guarantee of price stability. It is simply a promise made “out of thin air” to keep the supply of money anchored to the supply of gold. To consider how tenuous such a promise can be, consider the following example. On April 5, 1933, President Franklin D. Roosevelt ordered all gold coins and certificates of denominations in excess of $100 turned in for other money by May 1 at a set price of $20.67 per ounce. Two months later, a joint resolution of Congress abrogated the gold clauses in many public and private obligations that required the debtor to repay the creditor in gold dollars of the same weight and fineness as those borrowed. In 1934, the government price of gold was increased to $35 per ounce, effectively increasing the dollar value of gold on the Federal Reserve’s balance sheet by almost 70 percent. This action allowed the Federal Reserve to increase the money supply by a corresponding amount and, subsequently, led to significant price inflation.

This historical example demonstrates that the gold standard is no guarantee of price stability. Moreover, the fact that price inflation in the U.S. has remained low and stable over the past 30 years demonstrates that the gold standard is not necessary for price stability. Price stability evidently depends less on whether money is “created out of thin air” and more on the credibility of the monetary authority to manage the economy’s money supply in a responsible manner [Federal Reserve Bank of St. Louis, “The Gold Standard and Price Inflation,” 2014.08.14].

It seems gold and silver are for people who flunked both economics and history.

Senate Bill 112 represents the affinity radicals like Senator Carley have for avoiding the United States dollar. I’d think these candidates who make out with the flag would consider it their patriotic duty to stand for the most reliable currency in the world… but maybe they sense their godhead (or is that godfather?) Trump is destroying the market’s faith in the U.S. dollar and they need to trade in a currency that Trump isn’t undermining. (Note: German economists are arguing it’s not even safe to keep gold in American vaults.)

Or maybe the SB 112 metalheads just want to dodge more taxes. SB 112 includes this provision in Section 6:

The exchange of one type or form of legal tender for another type or form of legal tender, as provided in this chapter, does not give rise to any tax liability [SB 112, Sec. 6, 2026.01.22].

Since 2007, SDCL 10-45-110 has exempted the sale of coins, currency, and bullion from sales tax (at a loss to the state not disclosed, unlike numerous other “tax expenditures“, in our state budget). Maybe Senator Carley forgot that, or maybe Senator Carley just wants to make sure that if the budget gets tight and the Legislature starts repealing tax exemptions, his precious metal exchange remain outside the sales tax.

But Carley and his coiny friends will still face tax liability, at least until Trump and Russ Vought finish dismantling the IRS. If gold keeps going up, then every time you spend your gold under SB 112, you will enjoy a capital gain, and you have an obligation to pay capital gains tax. So SB 112 “no tax liability” clause is wishful fiction at the federal level and redundancy at the state level.

SB 112 also seems fixated on old-timey metals. If we really need alternative currency, why not broaden our opportunities? Why not allow South Dakotans to take payment in platinum, which rose in value 187% over the last year, beating gold’s measly 80% gain? Why not let metal investors tap their holdings of cobalt, rhodium, and palladium, all of which more than doubled in value last year, to do their daily business?

But before we go crazy with our currency and commerce, let’s return to Pat Powers’s sponsor-motivated yet reasonable critique: Why??? Who is asking for Senate Bill 112? What good does it do South Dakota shoppers, businesses, workers, anybody to promote buying groceries with gold and silver? How does SB 112 make life better even for gold and silver investors? Do investors really need a whole new system of state-regulated bullion depositories and special metal debit cards? Or can gold and silver aficionados just keep doing what they’ve always done: buy gold and silver, sit on it, sell it when the need/desire arises, and take their fistful of dollars to the store to buy whatever they want?

If legislators can’t think of good answers to those questions, they shouldn’t even think of letting SB 112 out of committee.