In 1971, the US went off the gold standard, which meant that it no longer had the responsibility to redeem its bank notes for real money—i.e., precious metals. It also meant that, as long as it could get people to accept the essentially worthless bank notes as currency, they could print as much as they liked. They took full advantage of this fact and transformed the US from the world’s greatest creditor nation into the world’s greatest debtor nation in under forty years.
The rest of the world followed this extraordinarily bad example and, as a result, nation is now on a gold standard and nations are in debt, many of them beyond redemption.
Today, the chickens are about to come home to roost in the form of a worldwide economic crisis. Some countries—particularly in Asia—are preparing for the debacle by loading up on gold, so that when the collapse comes they’ll be able to float gold-backed currencies that will allow trade to continue.
Interestingly though, some countries are pursuing this wise move on a non-national level. The US in particular has, in recent years, seen several of its states pass laws allowing precious metals to once again be used as currency.
The most interesting of these developments took place in Wyoming recently, where the Wyoming Legal Tender Act (WLTA) has removed forms of state taxation on gold and silver coins and bullion, and reinstates precious metals as currency.
The act stipulates that transactions made in gold and silver, “shall not give rise to any tax liability of any kind.” And yes, this is intended to include income tax, property tax, capital gains, and sales tax.
Wyoming is not the first state to reinstate the use of precious metals as currency. Arizona and Utah have also declared precious metals free of income tax, and more than thirty-five states have declared gold and silver free from sales tax. (Precious metals are free from form of taxation in only four states—Wyoming, Oregon, Texas, and South Dakota.)
But, will the citizens of these states actually choose to transact purchases in gold and silver, when paper money is so handy?
Well, they , and for the best of reasons—they’ll have to hand over less of their money to state governments. If, for example, someone were to pay for a new car in gold, he would not have to pay the state an additional 4%. (Some municipalities charge 6%.) This is an incentive.
But that, of course, would not put precious metals into every pocket in Wyoming. What would achieve that would be smaller purchases, such as a bag of groceries, or a tankful of fuel for the car. Paying with coins would most certainly be more of a nuisance than paying with bank notes, but the prospect of trimming 4–6% off every bill would mean that paying in gold and silver might well become the norm for those who value frugality.
So, what has been the motivation for bringing back the “barbarous relic?”
In House hearings for the bill, the Sound Money Defense League’s Jp Cortez stated:
With the abuses of the Federal Reserve’s paper money system becoming increasingly obvious, we’re seeing more legislators across America advance sound money legislation.
Stefan Gleason, president of Money Metals Exchange, stated in support of the bill:
In reality, Federal Reserve Notes are “fake money” because they have counterparty risk. Restoring gold and silver as money will solve many of the problems we are seeing with inflation and runaway debt.
More pointedly, when Arizona was dealing with its own bill on taxation of precious metals, then Representative Ron Paul said, “We ought not to tax money… It makes no sense to tax money… Paper is not money, it’s fraud.”
Clearly, legislators in each state that’s created similar legislation recognize that the Federal government is nearing the crisis stage and are hoping that they can avoid going down with the ship. By having precious metals in place before a collapse, they potentially provide their states with an insurance policy that will allow them to continue to make transactions at all levels, regardless of the machinations of Washington and the central banks.
In discussing the Wyoming Act with a colleague who’s a noted writer and advisor on precious metals, his first reaction to me was, “What do they mean by coinage? If they mean coins that have a face value stated on them, and that face value must be recognized as the value of the coins, there’s no chance that this will solve the problem.”
An excellent point. But closer inspection of the act confirms that specie is defined as “having gold or silver content, or refined bullion, coined, stamped or imprinted with its weight and purity.” A stated denomination is not relevant, nor is it a requirement.
That being the case, a Canadian maple leaf would be as acceptable as an American eagle. And a Mexican libertad, which has no denomination on its face, only a weight, would be just as acceptable for use in transactions.
Under the US Constitution, “No state shall… make any Thing but gold and silver Coin a Tender in Payment of Debts.” Therefore, it would be difficult for the Federal Government to make a case that states should be forced to repeal any law allowing gold and silver as currency, and this may well be why the central government has not yet created significant pushback against the trend toward states’ rights to use precious metals.
They cannot, however, be pleased at this development, at a time when they themselves are supporting the central banks’ initiative to do away with physical currency of any kind—to enslave the American people to bank-generated electronic transactions for virtually all purposes.
If all those states where gold and silver has been reinstated as money were to begin using precious metals on a regular basis, as they are indeed incentivized to do through these laws, it would effectively end the federal monopoly on money… and quite possibly derail the central banks’ effort to do away with cash.
So, why then, has a movement not begun in the over thirty-five states where some form of legislation has been passed to reinstate the use of silver and gold as money?
It may be that the average guy on the street doesn’t really understand how precious such legislation is to him. Possibly, even though the average American no longer trusts his central government, nor the banks, he is too complacent to act on his own predicament.
If this is the case, we can certainly expect that when the debt crisis hits him full-force, he will belatedly say, “Somebody something,” as he finds that he’s unable to function normally when buying groceries or filling up the tank in his car.
If the individual states do not, by that time, have in place and in common use, the average American will find himself in a similar situation as the average Greek today—at the mercy of his bankers as to how much of his money he actually has access to.