by Joseph P. Farrell, Giza Death Star:
This story was shared by W.G. (with our gratitude), and it’s one to watch closely, and that for two reasons, which we shall get into. As the headline notes, however, the small American state of Connecticut has become the most recent American state to be considering a state resolution and law recognizing gold and silver as money:
When one reads this article however, one notices a distinct lack of certain features that have made other states’ measures along similar lines so questionable, namely, the insistence on electronic transfer systems. In other words, in some state bills, what is being proposed is simply a system of state-authorized digital “currencies” that are supposedly bullion-backed. Not so the Connecticut bill; here is the heart of the measure, and the heart of my concerns today:
TRUTH LIVES on at https://sgtreport.tv/
SB1552 includes provisions to establish a state bullion depository to “encourage the investment in and ownership and use of gold and silver as mediums of exchange and wealth preservation and to promote economic stability through gold-backed financial instruments.”
The depository provisions are based on a similar law that was passed in Texas and signed into law by Gov. Abbott in 2015.
The law would authorize the despoitory to issue gold-backed certificates “as a sanctioned gold-backed medium of exchange within the state.” These certificates would be backed 100 percent by gold held in the depository and include the following features.
- Be redeemable for physical gold or its equivalent market value in United States currency;
- Be issued in standardized denominations recognized by national and international standards of weights and measures for gold;
- Incorporate advanced security measures, such as serial numbers, anticounterfeit holographic images, or government verification seals;
In illustration of what this means, the article refers to the Utah “goldback”, a “private” currency that I have blogged about before on this site (just search for Utah goldback on the site’s search engine):
The next step would be for people to start taking advantage of the status of gold and silver as money by using both as such instead of Federal Reserve notes.
The effect has been most dramatic in Utah, where the Specie Legal Tender Act opened the door for the development of a robust gold and silver economy in the state. With some legal hurdles cleared away by the state’s legal tender law, the United Precious Metal Association (UPMA), in partnership with Alpine Gold Exchange, set up the state’s first “gold bank.”
The Act has also led to the creation of the Goldback, a local, voluntary medium of exchange. Goldbacks are notes made from fractions of an ounce of physical gold. The company created a process that turns pure gold into a spendable physical form for small transactions.
New Hampshire also boasts a thriving gold and silver economy. While the state does not officially recognize bullion as legal tender, this has not deterred thousands of residents from using it in private transactions. Because there are no state tax barriers on precious metals, a favorable tax climate – combined with a population willing to embrace sound money – has positioned New Hampshire as another model for others to follow.
Now this is an important clue, for it highlights what remains to be done: is the gold and silver bullion backing to be calculated on more or less contemporary approximations of circulating money, and hence, is the circulating gold and silver to be but a very minimal physical amount, almost a trace amount, of gold or silver as with the Utah goldback? Or is there to be a massive re-valuation of paper in terms of circulating bullion? The latter would be somewhat deflationary depending on the severity of revaluation, while the former to my mind would eventually favor circulating silver and silver certificates more than gold, since the circulating silver would not be a mere trace amount, and hence people might tend to hoard both silver and silver certificates, thus defeating the purpose of the measure.
This highlights, I think, why much more thought must be given to such systems. While I applaud the fact that the Connecticut bill is dealing forthrightly with the issue of convertibility and of actual circulating physical media of exchange and not some lame “electronic transfer system” as some states, there remains much more thought to be given.
The bill, as recounted in the article, however, appears to be doing just that by noting that such certificates “be issued in standardized denominations recognized by national and international standards of weights and measures for gold” (and presumably, for silver). This is an essential step for another part of the process that I have been arguing must begin to be taken by these states: how is interstate commerce to be aided by these bullion-based currencies (and not merely systems of “electronic transfer”)? The answer is precisely the appeal to national and international standards of weights and measures and agreed compacts between several such states as to the valuation of their circulating certificates and that these be recognized by the several states as legal tender in other states.
