Gold & Silver Coins to Be Legal Currency in Utah

[Rydher Profile]

SALT LAKE CITY (AP) — Utah legislators want to see the dollar regain its former glory, back to the days when one could literally bank on it being “as good as gold.”

To make that point, they’ve turned it around, and made gold as good as cash. Utah became the first state in the country this month to legalize gold and silver coins as currency. The law also will exempt the sale of the coins from state capital gains taxes.

Craig Franco hopes to cash in on it with his Utah Gold and Silver Depository, and he thinks others will soon follow.

The idea is simple: Store your gold and silver coins in a vault, and Franco issues a debit-like card to make purchases backed by your holdings.

He plans to open for business June 1, likely the first of its kind in the country.

“Because we’re dealing with something so forward thinking, I expect a wait-and-see attitude,” Franco said. “Once the depository is executed and transactions can occur, then I think people will move into the marketplace.”

The idea was spawned by Republican state Rep. Brad Galvez, who sponsored the bill largely to serve as a protest against Federal Reserve monetary policy. Galvez says Americans are losing faith in the dollar. If you’re mad about government debt, ditch the cash. Spend your gold and silver, he says.

His idea isn’t to return to the gold standard, when the dollar was backed by gold instead of government goodwill. Instead, he just wanted to create options for consumers.

“We’re too far down the road to go back to the gold standard,” Galvez said. “This will move us toward an alternative currency.”

Earlier this month, Minnesota took a step closer to joining Utah in making gold and silver legal tender. A Republican lawmaker there introduced a bill that sets up a special committee to explore the option. North Carolina, Idaho and at least nine other states also have similar bills drafted.

At the moment, Franco’s idea would generally be the only practical use of the law in Utah, given the legislation doesn’t require merchants to accept the coins, either at face value — $50 for a 1-ounce gold coin — or market value, currently almost $1,500 per ounce. And no one expects people will be walking around town with pockets full of gold and silver.

Matt Zeman, market strategist for Kingsview Financial in Chicago, expects more people will start investing in gold as America’s growing debt and bankruptcies in other countries continue to decrease the value of government-backed money.

“You’ve seen gold replacing these currencies as safety instruments,” Zeman said. “If I don’t feel good about the dollar or other currencies, I’m putting my money in precious metals.”

Some supporters, including the law’s sponsor, seek to push Congress toward removing the tax burdens that discourage use of the coins, such as a federal capital gains tax.

“Making gold and silver coins legal tender sends a strong signal to Congress and the Federal Reserve that their monetary policy is failing,” said Ralph Danker, project director for economics at the Washington, D.C.-based American Principles in Action, which helped shape Utah’s law. “The dollar should be backed by gold and silver, so we have hard money.”

The U.S. and many other countries largely abandoned gold-backed money during World War II because they needed to print more cash to pay for the war. Later, during the Great Depression, President Franklin D. Roosevelt took steps that essentially prohibited gold and silver as legal currency to prevent hoarding.

In 1971, President Nixon formally abandoned the gold standard.

Fifteen years later, the U.S. Mint began producing the gold and silver American Eagle coins, primarily aimed at investment portfolios and allowing people to trade them at market value but with capital gains taxes on profits.

Utah is now allowing the coins to be used as legal tender while levying no taxes.

Opponents of the law warn such a policy shift nationwide could increase the prospect of inflation and could destabilize international markets by removing the government’s flexibility to quickly adjust currency prices.

“We’d be going backward in financial development,” said Carlos Sanchez, director of Commodities Management for The CPM Group in New York. “What backs currency is confidence in a government’s ability to pay debt, its government system and its economy.”

Larry Hilton, a Utah attorney who helped draft the law, disagrees and says the gold standard would restore faith in American money at a time when spiraling debt is weakening confidence.

“We view this as a dollar-friendly measure,” Hilton said. “It will strengthen the dollar by refocusing policy matters in Washington on what led to the phrase, ‘the dollar is as good as gold.’”


Source: http://www.theblaze.com/stories/gold-silver-coins-to-be-legal-currency-in-utah/

[Rydher Profile]

I'm not sure I understand how this is currently working with this guy Craig Franco. Here is how it appears to work, from my understanding.

1. You buy gold and silver coins and place them in a vault. In this case owned by Franco.
2. No tax is collected on the sale of the coins, nor will the seller and buyer be required to pay state income taxes (I assume you have to pay federal still) on those coins.
3. You are then issued a debt??, credit??, or some type of card with a limit based on what the value of the coins you hold is?

[Cornbread714 Profile]

Craig Franco

[Rydher Profile]

I'm thinking the same thing Corn, but if you're a gold and silver depository. Wouldn't you have to regulated somewhat? Have an insurance policy for the assets your holding, like banks have the FDIC. But this would be private insurance.

Assuming, the i's are dotted and the t's are crossed for the safety of both the vault and the investor. This seems like a great way for a citizen to keep some of their income. The Utah state income tax is 5%. Figure you make 40k a year. You purchase 5k in gold and silver. That puts an extra $250 in your pocket and you now own 5k in gold and silver. On the surface, seems like a great situation. Again, assuming everything is on the up and up.

But I'm guessing places like the Utah Gold and Silver Depository, that this guys owns, is insured sufficiently before this law came into effect. People that purchase enough gold and silver that don't feel comfortable keeping all that in their house. Wouldn't keep it someplace that wasn't protected. Right?

[Cornbread714 Profile]

Craig's brother Vinny is in charge of making sure that your deposits will be safe and sound.


Actually, I'm just taking the piss, I have no idea...

[Torofamily Profile]

China Prepares To Launch Gold ETFs As Utah Becomes First State To Make Gold And Silver Legal Tender
May 23, 2011


Source: Zero Hedge

Following Friday’s news that China has now surpassed India as the world’s largest buyer of gold, it is becoming increasingly obvious that the country is trying to capitalize on the popular interest in the precious metal by transferring the trading infrastructure away from US to domestic capital markets. First, it recently launched a 1 kilo gold futures contract on the HK Merc in an obvious attempt to undermine the Comex monopoly in the space, and next it seems that China has the GLD plain in its sights, as it plans to start exchange-traded funds, tapping rising demand in China, the world’s biggest investment market for the precious metal. Often blamed for the recent volatility in the price of gold, precious metal ETFs have been primarily an instrument available to those with access to the US market. That appears to be ending, and with an entire nation suffering from gold fever (as inflation continues to be goalseeked by the China politburo above expectations in what appears to be a programmed attempt by the Chinese central planners to push its population into gold hoarding) and about to be offered a simple way of investing in (paper) gold, it is likely that the price of gold (and soon thereafter all other commodities) will see unprecedented spikes in price in either direction as millions more are given direct exposure to trading the non-dilutable currency equivalent.

From Bloomberg:

“There are some complexities, as the central bank is in charge of gold management, while we still need to go through the procedures for launching new exchange products,” Wang Zhe, chairman of the bourse, said at a Shanghai forum. There is no timetable and the exchange is working with regulators on the plan, Wang said. China is the world’s largest gold producer and second-largest in overall consumption.

China doesn’t have gold ETFs and investors usually choose to buy physical gold, or invest through contracts traded on the Shanghai Gold Exchange, the Shanghai Futures Exchange or through banks. Lion Fund Management Co. in January said it raised more than 3.2 billion yuan ($483 million) for China’s first gold fund to be invested in overseas exchange-traded products.

Investment demand in China jumped 123 percent to 90.9 metric tons in the first three months. Total consumption including jewelry gained 47 percent from a year ago to 233.8 tons, the council said. That still lags behind India’s 291.8 tons. China demand may double before 2020, the council said.

Global investment increased 26 percent to 310.5 tons in the quarter. While bar and coin purchases climbed 52 percent to 366.4 tons, holdings in exchange-traded products backed by the metal declined. ETP assets dropped 69.9 tons from December through March, according to data compiled by Bloomberg, after reaching a record 2,114.6 tons.

Of course this merely opens up the path to currency “optionality” – after all it is not Guangdong or some other Chinese province, but Utah which just voted to make gold and silver legal tender: a previously preposterous (and very much illegal) idea. AP reports:

Utah legislators want to see the dollar regain its former glory, back to the days when one could literally bank on it being “as good as gold.”

To make that point, they’ve turned it around, and made gold as good as cash. Utah became the first state in the country this month to legalize gold and silver coins as currency. The law also will exempt the sale of the coins from state capital gains taxes.

Craig Franco hopes to cash in on it with his Utah Gold and Silver Depository, and he thinks others will soon follow.

The idea is simple: Store your gold and silver coins in a vault, and Franco issues a debit-like card to make purchases backed by your holdings.

He plans to open for business June 1, likely the first of its kind in the country.

“Because we’re dealing with something so forward thinking, I expect a wait-and-see attitude,” Franco said. “Once the depository is executed and transactions can occur, then I think people will move into the marketplace.”

The idea was spawned by Republican state Rep. Brad Galvez, who sponsored the bill largely to serve as a protest against Federal Reserve monetary policy. Galvez says Americans are losing faith in the dollar. If you’re mad about government debt, ditch the cash. Spend your gold and silver, he says.

His idea isn’t to return to the gold standard, when the dollar was backed by gold instead of government goodwill. Instead, he just wanted to create options for consumers.

“We’re too far down the road to go back to the gold standard,” Galvez said. “This will move us toward an alternative currency.”

Utah is first but certainly not last:

Earlier this month, Minnesota took a step closer to joining Utah in making gold and silver legal tender. A Republican lawmaker there introduced a bill that sets up a special committee to explore the option. North Carolina, Idaho and at least nine other states also have similar bills drafted.

At the moment, Franco’s idea would generally be the only practical use of the law in Utah, given the legislation doesn’t require merchants to accept the coins, either at face value – $50 for a 1-ounce gold coin – or market value, currently almost $1,500 per ounce. And no one expects people will be walking around town with pockets full of gold and silver.

Matt Zeman, market strategist for Kingsview Financial in Chicago, expects more people will start investing in gold as America’s growing debt and bankruptcies in other countries continue to decrease the value of government-backed money.

“You’ve seen gold replacing these currencies as safety instruments,” Zeman said. “If I don’t feel good about the dollar or other currencies, I’m putting my money in precious metals.”

Some supporters, including the law’s sponsor, seek to push Congress toward removing the tax burdens that discourage use of the coins, such as a federal capital gains tax.

“Making gold and silver coins legal tender sends a strong signal to Congress and the Federal Reserve that their monetary policy is failing,” said Ralph Danker, project director for economics at the Washington, D.C.-based American Principles in Action, which helped shape Utah’s law. “The dollar should be backed by gold and silver, so we have hard money.”

So, uh, does that mean that NORFED’s Bernard von NotHaus can now change his facebook status from “incarcerated terrorist” to “visionary revolutionary”? And one can be quite confident that as soon as China (inconjunction with Russia and other countries, not to mention Zimbabwe) will soon proceed to allow the same “option” for their own consumers, as increasingly more countries realize that the $6 trillion in dollar-denominated assets continue to place the world at the exclusive mercy of the Fed, as any global “risk flaring” episode would require the activation of the Fed’s FX swap lines designed to meet ‘short-term’ dollar deficiency needs… which just may not be activated for those which Hillary Clinton deems to be “terrorist” or “dictatorial” regimes at any given moment.

[99socks Profile]

I'm hesitant about this... "gold as good as cash"? So who determines how much gold will buy you, if it is pegged to fiat currency? This reeks of a lot of the problems with the liberty dollar scam.. you buy gold from guys who put it in a vault and issue you paper equivalent to dollars.. but the thing is, as the dollar devalues, so does that gold certificate in your hand, while the guys at the vault reap the profits.

Literally, the only way it would work is with a debit card that was on a system that could update and adjust for value 24/7. We see that with currency conversions now with credit card transactions over seas... They try to tell you it's a deal because the credit card offers a "more favorable" exchange rate, but by they time they add their 3-7% on top on any transaction, you're getting raped.

But if merchants are not required to accept this, then who is going to use it? Example; once I was in Canada, needing one last tank of gas to get back home and I had literally nothing but Canadian coins in my pocket and US dollars in my wallet. The man at the gas station refused to accept my credit card, he wanted cash instead.. but for his trouble of course, he wanted the face value of the US currency in Canadian dollars, even though the exchange rate at the time was something like 1.00US/1.80CAN. I had no problem giving him a tip for his trouble of actually having to take my cash to the bank (*gasp*) but I thought an additional 80% was ridiculous. So anyways, this makes me wonder how difficult merchants will make the purchase process with paper certificates? Once again, they would HAVE to use an electronic system. Gone goes what little privacy you have... in the name of adopting the gold standard of course!

[Thebluecanary Profile]

No sir, I don't like it.

I'll keep my gold coins right where they are, thanks. In a big mayonnaise jar buried in the back yard.