By Ylan Q. Mui
The Washington Post
Virginia state Del. Robert G. Marshall fears that a financial apocalypse is coming and only one thing can save the commonwealth: its own currency.
The idea that Virginia should consider issuing its own money was dismissed as just another quixotic quest by one of the most conservative members of the state legislature when Marshall introduced it three years ago. But it has since gained traction not only in Virginia, but also in states across the country as Americans have grown increasingly suspicious of the institutions entrusted with safeguarding the economy.
This week, the proposal by the Republican from Northern Virginia's Prince William County sailed through the House of Delegates with a 2-to-1 majority.
"This is a serious study about a serious topic," Marshall said Tuesday. "We're not completely powerless."
So far, only Utah has approved a law recognizing nontraditional currency. Four other states have bills pending this year. Marshall said he is unsure of his proposal's prospects in the Virginia Senate. One Democrat derided it as a descent into "la-la land."
But the fact that the debate is happening at all reflects a deep-seated distrust in the very foundation of the country's economic system — the dollar.
Much of the anger is directed at the Federal Reserve, which controls the nation's supply of money. Since the financial crisis, the Fed has pumped trillions of dollars into the economy to help avert what Chairman Ben Bernanke believed could have been the next Great Depression. Critics worry the Fed won't ever stop.
Marshall believes that the result could resemble the Weimar Republic of Germany after World War I: a worthless currency, skyrocketing inflation and a crumbling government.
And those are only the problems that the Fed might create. Who knows what other threats may be lurking in the shadowy world of cyberattacks, Marshall said. The Fed acknowledged Tuesday that its computer systems were recently compromised, although the problems did not affect critical operations and have since been fixed.
"This is a lifeboat study; what happens if?" Marshall said.
Mainstream economics would suggest that America is in little danger of turning into postwar Germany. Inflation is below 2 percent even though the Fed has tripled the amount of money in circulation since the 2008 financial crisis. Investors view the dollar as a safe haven, buying up greenbacks when turmoil strikes around the globe. A single currency is one of the bedrock assumptions of modern economics.
But that doesn't mean Virginia shouldn't be ready, Marshall and his supporters believe. His proposal would create a 10-member commission to study "the need, means, and schedule for establishing a metallic-based monetary unit to serve as a contingency currency for the Commonwealth." The study would cost $17,440.
"The resolution is pretty modest," said Lawrence White, a George Mason University economics professor who said he supports the proposal as a private citizen. "It's 'consider the idea.' "
White doesn't subscribe to the doomsday scenario, but he's no optimist, either. He predicted that the inflation rate would rise to 5 percent before the end of the decade and eventually reach 10 percent.
"I think the most effective way to send a message is to say you're prepared to do something," White said. "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."
Some members of Congress have also denounced what they considered Fed overreach. Texas libertarian Ron Paul's book "End the Fed" hit No. 6 on the New York Times bestsellers list in 2009. A campaign by Sen. Bernie Sanders, I-Vt., dubbed "Audit the Fed" culminated in a report by the Government Accountability Office highlighting potential conflicts of interest within the institution.
Efforts to establish alternative currencies amount to an economist's version of a Fed boycott. But how the system would actually work remains murky. States do not have the constitutional authority to print money, but Marshall believes a potential loophole exists that could allow states to coin silver and gold.
Utah's law recognizes coins minted by the federal government from precious metals, intended for use as investments or collectibles, to be used as legal tender anywhere in the state. One Utah company even advertises the coins for use in 401(k) retirement plans.
Although the law hasn't changed what's in most residents' wallets, the measure became the poster child for those calling for a return to the days when money derived its value from gold. Today, money is backed by the authority of the U.S. government.
Economist Bernard Lietaer, author of "Rethinking Money," pointed out that a host of informal currencies have proved widely popular in the United States. For example, he said, there are 50 trillion airline frequent-flier miles in circulation, far surpassing the number of dollar bills.
The benefit of a single currency "has been drilled into our heads for about 300 years," Lietaer said. "I'm still looking for a book of economics that drops this assumption."
And of course, there is the open question of what a Virginia coin would look like. A tongue-in-cheek prototype made the rounds two years ago at an annual dinner for lawmakers and journalists in Richmond, the state capital. It was a wooden nickel, stamped with Marshall's likeness and emblazoned with the motto "In Bob We Trust."