By Amanda J. Crawford -
Apr 8, 2013
Bloomberg.com
Distrust of the
Federal Reserve
and concern that U.S. dollars may become worthless are fueling a push
in more than a dozen states to recognize gold and silver coins as legal
tender.
Lawmakers in Arizona are poised to follow
Utah, which authorized bullion for currency
in 2011. Similar bills are advancing in
Kansas,
South Carolina and other states.
The measures backed by the limited-government
Tea Party
movement are mostly symbolic -- you still can’t pay for groceries with
gold in Utah. They reflect lingering dollar concerns, amplified by the
Fed’s unconventional moves in recent years to stabilize the economy,
said Loren Gatch, who teaches politics at the University of Central
Oklahoma.
“The legislation is about signaling discontent with monetary policy and about what
Ben Bernanke
is doing,” said Gatch, who studies alternative currencies at the
Edmond, Oklahoma-based school. “There is a fear that the government, or
Bernanke in particular and the Federal Reserve, is pursuing a policy
that will lead to the collapse of the dollar. That’s what is behind it.”
Bernanke has pushed
interest rates
to near zero since the 18-month recession that began in December 2007.
The Fed said in March it would continue buying $85 billion in securities
each month in a program known as quantitative easing that has ballooned
its assets beyond $3 trillion and is aimed at keeping long-term
borrowing costs low to support economic growth.
Tame Inflation
Consumer
prices rose just 1.3 percent in February from a year earlier, according
to an inflation measure favored by the Fed. That was below the central
bank’s 2 percent target and compares with occasional bouts of more-than
10 percent increases in the 1970s and early 1980s.
Bets that
inflation would pick up because of economic- stimulus measures 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 set in July and monthly
increases of about 2 percent or less in the U.S. consumer price index
have curbed demand for bullion. Since reaching a record $1,923.70 an
ounce in 2011, gold prices have fallen 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 by Republican Governor
Rick Perry
to establish the Texas Bullion Depository to store gold bars valued at
about $1 billion and held in a New York bank warehouse. The gold is
owned by the University of Texas Investment Management Co., or Utimco,
which took delivery of 6,643 bars of the precious metal in 2011 amid
concern that demand for it would overwhelm supply.
The proposed
facility would also accept deposits from the public, and would provide a
basis for a payments system in the state in the event of a “systemic
dislocation in a national and international financial system,” according
to the measure.
Should Texas take such a step, it would offer
sovereign backing for deposits and make buying and storing gold easier,
said Jim Rickards, senior managing director at Tangent Capital Partners
LLC in New York and author of “Currency Wars: The Making of the Next
Global Crisis.” He said the coin measures, while impractical, have
symbolic value.
“We are seeing a distinct movement back to a world where gold is considered money,” Rickards said.
Inflation Protection
The
measures give “people the option of using money that won’t lose any
purchasing power to inflation,” said Rich Danker, economics director at
the
American Principles Project.
The Washington-based public-policy group supports the steps as well as a
return to the gold standard, which pegged the dollar’s value to
bullion. President
Richard Nixon formally ended the convertibility of U.S. currency to the precious metal in 1971.
“People
in these states find the idea of having the option to use hard
currencies appealing over these policies they have no control over,”
Danker said.
The
U.S. Constitution
bars states from coining money and also forbids them from making
anything except gold and silver coin tender for paying debts. Advocates
say that opens the door for the states to allow bullion as legal tender.
The measure being considered in South Carolina would recognize foreign
or domestic minted coins as legal tender.
Utah’s law applies only to U.S.-minted coins, while other states are less clear on whether privately produced coins qualify.
Arizona leaves the door open for private coins if they are declared legal by a non-appealable court order.
Tax Breaks
In Utah and some other states, the measures also eliminate state capital gains or other taxes on the coins.
Critics
say the state measures are unwieldy. In Arizona, Senator Steve Farley, a
Democrat, unsuccessfully offered an amendment that would have
recognized as legal tender other state commodities, such as citrus
fruit, as well as sunbeams. The amendment was intended to reflect the
absurdity of the bill, said the 50-year-old lawmaker from Tucson.
“It
is simply grandstanding to get people afraid that somehow President
Obama’s agenda is going to drive us into hyperinflation and economic
collapse,” Farley said. “We have enough real problems to deal with. I
don’t see undercutting our entire financial structure as a priority.”
In
Utah, officials haven’t yet figured out how to accept gold and silver
for tax payments -- though some residents have asked to pay that way --
or integrate the precious metals into commerce, state Treasurer Richard
Ellis said. Lawmakers have established a task-force to study
implementing the law and to examine how the state can accept gold and
silver, with their fluctuating values, for payment, Ellis said. He’s not
optimistic that it will work, he said.
Regulatory Barriers
“People
point to Utah and say we are leading the way, but nothing much has
happened because regulatory hurdles have gotten in the way,” said Ellis,
a Republican. If gold and silver is being used in the state as legal
tender, it is probably only in transactions between individuals, he
said.
The
Utah Precious Metals Association,
established after passage of 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-pay service in which their accounts are held in gold,
said Lawrence Hilton, the group’s chairman. Hilton envisions a future
with an alternative monetary system based on precious metals in which
merchants accept silver coin while gold mostly backs electronic
transfers.
Gold Producers
The Arizona
measure, sponsored by Republicans, won preliminary approval in the
House of Representatives April 4 after passing the Senate on a party line vote Feb. 28. Gold is mined in both Arizona and Utah, while
Nevada is the largest U.S. producer, according to National Mining Association figures.
The
bill’s sponsor, Senator Chester Crandell, 66 of Heber, said he is
convinced the move is the “logical thing for the state of Arizona to
do.”
“I think you look at some of the things that are happening
and the amount of money printed by the Federal Reserve and who has
control of that money, and I think anybody would be concerned,” Crandell
said. “Gold and silver have been around a long time and people are
secure with it and we should give them an opportunity to use it.”
READ THE FULL ARTICLE HERE...
.jpg){kind=tracking}
