Bill Allowing Gold and Silver as Money; Bureaucratic Nightmare?

Townhall.com ^ | March 30, 2013 | Mike Shedlock

[Kaslin]

I have encouraging news in the state of Arizona where lawmakers back gold, silver as currency.

The measure is Arizona's latest jab at the federal government, which prohibits states from minting their own money. It also reflects a growing distrust of government-backed money.

The bill, which advanced in a 4-2 vote by a House committee Monday, states that gold and silver should be legal currency not subject to tax or regulation as property. The Republican-led Senate gave the bill its blessing in February in a 17-11 partisan vote.

The bill would let people use the precious metals as money as long as businesses agree to take them. If made law, it would take effect in 2014.

Democrats oppose the measure. They say it would be a bureaucratic nightmare because businesses don't have the equipment to determine the value of gold and silver.

Bureaucratic Nightmare?

Nonsense.

The bill is well written and extremely well thought out. It does not force companies to accept gold or silver (nor should it), it merely allows businesses to do so if they want. Any company that does not want to deal with gold or silver will not have to. So where's the nightmare?

States will not be minting their own money under such a proposal (nor should they) so there is no conflict on that part of Federal law.

I commend this bill, expect Arizona lawmakers to pass it, and urge the Governor to sign it. When that happens, gold will once again be legal money.

I support gold as money and believe gold is money whether or not the bill passes.

There is significant reason for people to distrust government-sponsored fiat currencies backed by nothing. I made the case recently in Fraudulent Guarantees; Fictional Reserve Lending; Comparison of US to Cyprus; What About New Zealand?

Here is a brief synopsis, but I encourage you to read the full article.

Monetary Recap

• Base Money Supply: $2.9 Trillion
• M1: 2.4 Trillion
• M2: 10.4 Trillion
• Total Credit Market Debt Owed: $56.3 trillion

One Giant Ponzi Scheme

Clearly far more money has been lent than exists. How can it possibly be paid back? If it can't be paid back, how good is a government guarantee on deposits?

In 2010 Bernanke proposed ending reserve requirements completely, but long-time Mish readers understand what Bernanke proposed is the de facto state of affairs already. (see the above link for an explanation).

Five Key Points

1. In a Fractional Reserve Lending scheme, the notion there are meaningful reserves is ridiculous.
2. Far more money has been lent out than really exists (the rest is a fictional accounting entry).
3. Fractional reserve lending constitutes fraud (just as lending something you do not own is fraud).
4. There is no way for all this money to be paid back (so it won't be).
5. The Reserve Bank of New Zealand has the most sensible policy on deposit insurance of all the world's central banks. (NZ offers no deposit insurance). See my article for a full explanation.

In the sake of full disclosure, I own gold, silver, platinum, as well as shares in various mining corporations.

[wrench]

:::

Can you chop it into microns? One Dollar US 1 micron!
Or one grain of gold dust?
Who would even fathom of putting Gold for currency!

:::

Easy, you buy inb multiples of the PM coin you are using. You do not buy 1 pound of feed for 30 FRN cents, you buy 100 pounds for a Silver Eagle.

Same for any other product.

Every itemI have sold on line lately is priced in Silver Eagles or Gold Eagles. You would be surprised how much of these metals are trading hands right now.

Any cellphone can get up to the minute PM values.

[Iron Munro]

Some businesses have tried paying employees in gold coins. IRS did not take “but we only paid them $50/week!” well.

I would like to get paid in coins - dimes, quarters and half dollars will be fine.

As long as they are pre-1965.

It is legal tender, coined for everyday use so how could anyone complain?

[research99]

Robert Kahre was convicted in 2009 of conspiracy to defraud the IRS, after paying employees of his construction companies in Las Vegas with gold coins and reporting their legal tender value ($50 per ounce) as the rate paid, for employment taxes.

[Mister Da]

This makes no sense to me.

Stores will have to deal with exchange rates between gold & the dollar. Why? Because the goods they sell they pay for in dollars, their books are in dollars - much easier math than Troy ounces, & the gubmint expects to see the books - audits & taxes - in dollars. So, even if a business trades in gold, they still have to do the conversion - often.

Anyone who has had to deal with exchange rates in retail stores in foreign countries KNOWS that the stores make a big profit by taking dollars in addition to the native currencies. I have seen stores side by side with different exchange rates. Banks, too.

People paying for retail goods in gold, especially for small purchases, will lose badly with the store's exchange rate & rounding, not to mention faulty/fraudulent store scales.

With the price of gold fluctuating daily, how will the frugal shopper compare prices among stores with different exchange rates without doing some serious math for every potential purchase? At ~$51.32/gram today, how will you buy a Happy Meal for the kids at McDs with a fifth of a gram or less of gold without some serious, accurate scale work? Measuring out gold dust isn't the same as counting bills & change. Be careful in the wind!

The financial value of gold is in holding it as a hedge against inflation. That is, holding it, not spending it to buy groceries & consumer goods.

[Conserev1]

No you buy foriegn currency prob the yen! Or yang whatever is highest on the market and then convert to the dollar!

[ctdonath2]

The point is US gold coins - real currency with real declared value - have a face value of $20 per 1 oz (or so). $1 is legally 1/20th of one ounce of US Mint issued gold coin. The fact that the market values it at around $1600/oz rather complicates the issue ... and the IRS doesn’t like people playing games with that dichotomy.

[Elsie]

Nana; you got out in time!!

http://globaleconomicanalysis.blogspot.com/2013/03/fraudulent-guarantees-fictional-reserve.html

[Lurker]

“No State shall make anything but gold or silver coin as payment for tender of a debt.” US Constitution.

[Travis McGee]

In the Coin Act, the penalty for deviation was death.

[qman]

Prior to fiat money, people used gold, and the value of gold waxed and waned based on it’s supply. We currently have a fiat system where the money supply is determined by men who are corruptible and can be influenced by intimidation, envy, or a myriad of other personal corruptions that the fallible man is subject to. In the last 5 years, Bernanke has increased the money supply 4 times, rescuing his friends who dug themselves a hole from which they could not escape, the only reason we have not felt the loss of value in the dollar that would be justified is the game continues. A massive fleecing of the treasury is proceeding apace. I suspect the house of cards collapses in the very near future!

[Toddsterpatriot]

Prior to fiat money, people used gold, and the value of gold waxed and waned based on it’s supply.

And the demand. People always forget about demand.

We currently have a fiat system where the money supply is determined by men who are corruptible and can be influenced by intimidation, envy, or a myriad of other personal corruptions that the fallible man is subject to.

If you take out a loan from the bank, you've increased the money supply. Are you "influenced by intimidation, envy, or a myriad of other personal corruptions that the fallible man is subject to"?

Bernanke has increased the money supply 4 times, rescuing his friends who dug themselves a hole from which they could not escape, the only reason we have not felt the loss of value in the dollar.....

Is that the demand for cash and cash equivalents has soared. And despite the increase in reserve balances held at the Fed, financial firms continue to deleverage.

A massive fleecing of the treasury is proceeding apace.

How?