Washington State proposed bill to make gold and silver legal tender

I agree Mr. Idaho, but that wasn't done by me. People will do and say anything to defend the Universe they create for themselves. Regardless how you try to distract from the fact that you didn't know what you were talking about, it's state law in Utah. Nothing untrue about this at all. Nothing untrue about the stated reasons on why they did it.

Close to 1/4 of the states are in some stage of considering the same thing and I suspect more are to follow. IMO, it's very bullish for gold & silver buyers.

 

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OK, Section 8 of the Constitution (Powers of Congress); "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures"

Currently gold is $42.2222 an ounce and is coined at $50.00. Everything else is speculation. http://www.fms.treas.gov/gold/index.html

Section 10 of the Constitution (Limitation of State Powers); No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

So the states are just restating the Constitution.

Tell me how does this work? Do I owe my state 27 ounces of gold just for property tax this year? Even if congress revalues gold and silver, how is there enough to run the economy? Even when the gold standard was in full force, part and parcel of it were such fine institutions like script and the company store. Will my paycheck turn into a debit card to Walmart?

Maybe we should change the constitution? I'm a big fan of the first 10 and the 13th, not to hot about the 12th or 17th change.

 

ROFL - you have really swallowed hard.

 

The valuation of gold in terms of asset value to the USA is $42.22/ounce This is the value expressed in USD as issued by the US Treasury and not the Federal Reserve. US Treasury notes and Federal Reserve notes were at parity with each other until 1971 when the link was broken due to the end of the gold standard, and the US Treasury stopped issuing $s.

Since that time the Federal Reserve system has increased the supply of Federal Reserve $s at an exponential rate and that is why, in part, gold expressed in FRN $ is ~$1735 and when expressed in the non-existent USN $s is $42.22. Federal Reserve Notes are not obligations on the United States. The US IRS has made it clear that it considers the market value of gold coin, and not the face value of gold coin to be the correct amount when it comes to tax assessment.

It's unclear what would apply, but keep in mind that in terms of the US Constitution, there has never been a definitive court case case that addresses these ambiguities with the fiat money supply being created by a 3rd party nor on the dichotomy created by issuing coins with legal tender values that are minuscule vs the value of the coin. (hint: they did it this way for this very reason)

 

this is time for this thread to be shut down. It's too eating to shoot fish in a barrel

 

Here's one interesting case. In the 2003 case of Robert Kahre vs IRS, the courts ruled that the United States operates a dual system of currency and that it is permissible to pay employees in gold and silver coins at face value. In other words, I may make only $3000.00 a year, but I end up with a stack of 60 gold eagles but only pay on $3000.00 in pay roll tax. I of course would have to pay capital gains on any conversion, have a team of accountants and lawyers, and also expect be on the IRS most likely to be audited list. Mr Kahre was later convicted for 1099'ing employees. So, getting back on track.....

Should the two systems become fixed (Nationalize the FED and set gold at $2000.00 an ounce), then a massive reduction of the money supply would be required leading to an economic SHTF scenario. If we set the price of gold to match the number of FRN's, then the treasury debt holders are Edited Rul*s (a.k.a. the world) and no one would be able to buy any of that really expensive stuff from China. If we try a fractional reserve approach, then you can kiss the private ownership of gold goodbye. The ultimate problem with gold currency remains the same as it was back in the late 1890's when they first started talking about coming up with another paper backed system. There simply isn't enough gold to bring in the harvest.

 

I'm familiar with that 2003 case. I think that Mr. Kahre had a perfectly valid argument but the IRS and associated agencies decided to provide their own interpretation and came down on him hard without letting him have his day in court first. He didn't have a chance and the case was never decided on Constitutional bounds.

I think if there was ANY alternative currency system in the USA, and the people permitted allowed to use it, then I think you would see droves of people moving towards it. Of course this will never be allowed to happen because it strikes right at the heart of the Federal Reserve system. It's why they came down hard on Mr. Kahre and why they squashed the Liberty dollar as they did. i don't think the amount of physical gold is an issue. In a gold backed currency, there can be paper & digital currency but the key is that a exchange rate is set, and it can't change unless the real economy grows.

The SHTF scenario is coming whether they like it or not and regardless what happens with gold being picked up as an alternative currency. This is why the states are starting to prepare for it.

 

If they had called it the Liberty Flagoon, I doubt anyone would have cared. As it is, hardly anyone cared anyway then, and not now. It would have just been another pretty bullion round. Sure you can find a small number of collectors and bullion lovers who did, but the "droves" of people did not and will not join. There is more of a chance that all currency will become digital/credit-debit card based than gold or silver ( oh, IMO, of course ). It does amuse, that you feel a state ( maybe yours) would want an alternate currency, and as well as your statement that the end of the world as we know it is coming for sure and the states wants to protect citizens by dealing in PM. Sure, I believe the end of the world is possible anytime. As a scientist, I am well aware of earthquakes, the rising of the Great cauldron in Yellowstone, rogue asteroids, and even possibly anti-matter meteorites, but precious metals can't protect us against those either. But I do not believe it would happen because of fiat money or lack of precious metal based currency. IMO.

 

Fatima, thank you for your interest in this. I have been trying to understand the practical application of this issue but have mainly run across more statements of belief than a plan on how it is all supose to work. In order to sign off on digital/paper dollars we would have to agree on a fractional reserve system (X gold allows XXX digital/paper dollars). If this is the premise, I have no problem with it. One would have to make it difficult to change, yet provide for an alternative in dire straits. The US violated the gold standard in 1944 when they printed unbacked dollars to pay for the war effort. A clearly marked Emergency Script with a limit and return date should be required for such rare events.

I agree that Mr. Kahre had a perfectly valid argument and the court agreed, failing to convict on any one of the 161 charges he and his co-defendants were facing. The primary issues were centered on using gold eagles at face value and whether or not they are legal tender, which the court deemed they were. The later trial has to do with employees being miss claimed as subcontractors, which unfortunately is all too common, but has nothing to do with the type of currency he was using. It is my premise that the United States does operate a dual system of currency (Gold based and FRN) but that the two are out of sync. If it is the goal of the States and the "Constitutional Money" crowd to sync the two systems and create a defined ratio, I would have no problem with that. In order for it to work, the face value of gold coinage will have to far exceed the world market price, less we find ourselves coinless like the British did when they tried to reinstate the gold standard at the end of WWI.
Desertgem, I think it's more about restoring faith in our institutions than averting disaster. And yes, most people won't even notice, but the may feel better.

 

that is a total fantasy.

 

Yellow Stone is the real deal and will likely bury most of that precious metal stored in Utah. A lot of good that will do. It is interesting that in every crisis, government and society is bailed out by paper money.

 

Interesting, I haven't read the law being proposed but I also wonder how exactly they would do the conversions between dollar/metal, how often it updates. People would try to play the ratio.. better to have one currency backed by metal.

I don't think gold supply is an issue for backing though. We don't have to have the same level of gold backing that we used to have, rather just a ratio of dollers per gold backing them, and then maintain that ratio. You could have it like each dollar is backed by 1 nanogram of gold, although the less backing per dollar the more gold is worth so there will likely be some sort of revaluation process depending on the details of that ratio, if that were to be done. That comes down to how much gold is in Ft. Knox, how much of that gold will be backing each dollar, and how many dollars are in circulation. Sure, the ratio could be really small and then every dollar could be backed without needing more gold, but then the price of gold will be much higher. If gold were $2,000/oz, that means that every dollar buys you 1/2000th of an ounce of gold. If the ratio of backing is any less than 1/2000th of an ounce of gold for every dollar, then the price will be higher than that by however much it needs to be. I'm sure somebody could figure out how much gold and how many dollars are in this equation and say what the backing level would be at current levels, but if dollars are removed from circulation then the numbers change.

 

It's not a new problem. The availability of physical gold (or rather, lack of) is one of the reasons that it is a great store of wealth and it's been used for much of history. The way it was commonly dealt with was the value of gold was expressed in terms of the value of another metal, namely silver. This is where the common, but now misused, 16:1 silver/gold ratio came from. Then from there, other metals or other forms of currency can be set against that. In the US, nickels and pennies (nickel & copper) were divisors of the silver dollar. As long as people could "cash out" then it doesn't change the electronic accounting that we have these days.

What it does change is that it ends the government's ability, via it's Federal Reserve creation, to create money out of thin air. It essentially requires the government to limit spending to taxes collected. If they want to fight a war, then they have to raise taxes and/or sell bonds for it. It forces investment banks to have real reserve requirements. This is why, if these states start to make serious moves towards this, you will see any and every attempt made by the Federal government to stop it and the Constitution won't matter. They will walk all over it.

This, IMO is why they cracked down on the Liberty Dollar. The name of the coin was irrelevant. The LD had setup the framework and had already gained a significant number of vendors who would deal in this currency. IMO, if this $ still existed there would be a lot of interest in it by now. The powers to be knew what was coming and suspected the same, this scared them, and the LD got cracked on the head. The entire process used was a travesty especially when one considers that $1.5B simply "disappeared" at MF Global, and not one person has been charged with breaking any law.

 

This is an interesting swag at it. It assumes the US has all the gold that it claims to have which is ~260,000,000 ounces. (Note that the sale of gold coins does not come from this supply) It assumes the best measure of available currency is M2 and I will use the number published by shadow stats.

[table='head']

Year End
M2
Gold Price/oz
Increase

2007
$7.50T
$28,409

2008 - QE1
$8.25T
$31,250
+10.0%


2009
$8.50T
$32,197
+3.03%

2010 - QE2
$8.75T
$33,144
+2.94%

2011
$9.70T
$36,742
+10.9%
[/table]

i.e. Money supply increased by 29.3% in just 4 years.

This very simple look at the situation is probably why an increasing number of states are looking to address the issue. This is a time bomb with very little time left on the clock. Very bullish for gold but unfortunately will end up destroying most every other kind of paper investment. Remember, if you don't hold it, you don't own it.

 

Let's say we back every dollar with a nano of gold to the tune of $40,000.00 per ounce and allow the free exchange of gold and dollars. This does not mean that the rest of the world will follow suit. What prevents me from taking my 1311 euros, buying an ounce of gold, trading it for dollars, exchanging the 40,000 dollars for 30,400 euros, providing I'm first in line, before the USD winds up in the decimal points and 40,000 dollars will only get me 1300 euros. This is the same problem, only not as bad, as the British had when at the end of WWI when they tried to go back on the gold standard. People took advantage of a favorable exchange rate and sovereigns fled to France. The only way I see it working is to have a fractional reserve and using gold as an anchor for the dollar.

 

That's exactly what led Nixon to take us off the gold standard. The Europeans were raiding US gold because it was cheaper to buy.

I assume the "gold standard" people have figured out a way around this - although I haven't spent the time to read how because I don't think the politicians will ever let it happen ... at least not in my lifetime.

 

That one is easy. You would not be able to trade $40,000 for 30,400 euros. If they did this, then what would happen is the FRN would be declared obsolete and there would be X amount of time to trade it in for USN. Only after that, would the free trade be resumed. And, most importantly, they may choose to limit the conversion. i.e. You get a 1:1 change out for the first $500K, then after that it starts to fall. Yes it would be a royal mess because they would have to pick who wins and who loses.

 

That isn't what happened. At that time we were already printing Federal Reserve notes which had no limitations on them like now. However they were still exchangeable for gold and that is what forced Nixon to close the gold window. On a pure gold standard, this couldn't happen.

 

World economics is not that simple whether a nation's money is fiat or backed by PMs. That's why economists go to college and still don't know everything! The PM market is so much more volatile today than it was say in 1964. Commodities bought with physical PMs or money backed by them are still subject to fluctuation in cost.

Let's say silver jumps up by 50% suddenly. The corner butcher bought a side of beef yesterday and figured on selling it piece by piece at an average of $5.99/lb. He's now only getting 2/3 the amount of silver value today as he would have if he sold the meat yesteday. So in essence he has to sell the meat at an equivallent of only $3.99/lb today based on the value of money yesteday. Of course the opposite could happen and the whole thing could be a winfall for the butcher.

 

I think you're saying the same thing. de Gaulle was raiding our gold, but the detail is unimportant. What is important is that there needs to be a "realistic" way to prevent this before we go on the gold standard again.