Some Colorado lawmakers are considering making gold and silver money again, but there is more than meets the eye going on here in SmartMoney’s article.
You will get screwed if lawmakers have their way. I guarantee that these politicians are not for a private gold coin standard.
If some lawmakers have their way, the future of money might not be a digital wallet, but a clinking gold coin.
How many Colorado state senators are sponsors of this bill? I’m guessing hardly any. Utah legalized the payment of taxes in gold coins at face-value. For example, if Utah claims you owe $500 in Utah state taxes, then you could pay with 10 one ounce gold coins with a $50 face-value each (market value $17,750). Thanks, but no thanks.
Colorado state senators are considering a bill that would legalize gold and silver as currency, a practice President Franklin Roosevelt banned to prevent hoarding. Currently, the metals are considered property, with capital gains taxes levied on the profits from their sale. Utah passed a similar measure legalizing gold and silver use last year, and a dozen other states are considering it.
There are two gold standards: a government gold standard and a private gold coin standard. The first barely offers any more freedom than the current system. The later offers privacy and freedom.
“It’s a message from the grassroots level that there needs to be a change in monetary policy,” says Rich Danker, economics director for American Principles Project, a conservative think tank. Investors often turn to gold as a way to preserve wealth in tough economic times, and supporters of such state laws have cited concerns about the strength of the U.S. dollar and the country’s growing deficit. A return to the gold standard, they say, would result in a stronger dollar.
Mr. Danker is not calling for a private gold coin standard in which prices are expressed in gold and/or silver weights. He wants the government to control the price of gold like after WWI and before the government confiscation of 1933. It is a fake gold standard if you can’t redeem dollars for gold at a bank.
Going with gold has its hurdles. “Gold and silver prices fluctuate dramatically throughout the day,” says Jack Plunkett, chief executive of Plunkett Research. “It would be difficult to figure out what your coin was worth at the moment you paid your bill with it.” Finding merchants willing to accept gold as payment isn’t likely to be easy, either. (Utah’s law, for example, doesn’t require merchants accept gold or silver as payment.) Those buyers would need to determine the precious metal content of items such as coins and root out counterfeits, which could cost them money on the transaction, he says.
The same could be said about the dollar. The dollar’s price fluctuates dramatically throughout the day. It would be difficult to figure out what your dollars are worth at the moment you paid you bill with it. The Federal Reserve could by inflating on the day you spend your dollars. Violently enforced legal tender laws make finding merchants that accept dollars easy, but that isn’t a detractor to gold and silver as money. Enterprising banks could issue gold/silver debit cards that guarantee the fineness and weights. Trust would become commonplace if gold was redeemable at any time. Dollars are counterfeits to gold and silver. Inflation destroys the purchasing power of dollars. This dwarfs transaction cost during a transition to a private gold / silver coin standard.
But supporters say those concerns are overblown. For one, they say the new state measures would allow consumers who have invested in gold or silver to spend it directly, rather than selling the metal first and incurring capital gains taxes, says Danker. That’s especially useful for older U.S. coins, which may have a higher value in metal content than their marked face value. It also may not mean walking around with a bag of precious coins, either — Utah Gold & Silver Depository is working on a debit card system that draws against the value of a customer’s deposited gold.
A repeal of legal tender laws would doom the dollar. People would be free of the politicians and the Federal Reserve. That isn’t what Colorado state senators want. They are wolves in sheep’s clothing.
(Thanks to Jim for the link)
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