by Keith Weiner
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You’re getting onto a highway. You want to go to your destination but there are roadblocks. The barriers are stacked up in layers. Even if one is removed, you still can’t get anywhere. So is it worth it to start eliminating obstacles, even though it won’t clear the road yet?
On June 12, 2015 Texas said yes.
The road we’re talking about is the path forward to the gold standard. Texas Governor Greg Abbott signed HB 483, authorizing a state depository for gold (and other precious metals) and a payments system. This bill kicks two roadway barriers to the curb: a lack of infrastructure for gold payments, and widespread distrust.
Banking has evolved since the gold standard. We take for granted that we can swipe a card to pay for a ride, a beer, or anything else. Employees can receive their wages by direct deposit and pay their bills online. Businesses can send cash electronically. Some people wrongly think that in the gold standard we will have to go back to carrying coins, paying with little metal discs, and getting change in return. Opponents of gold paint this caricature to make you think that gold will bring us back to wearing sackcloth robes and rope belts with leather purses dangling.
The Texas bill provides the base layer of infrastructure for gold in the 21st century, by creating a depository to safely store people’s gold. And there’s also a means for payments and transfers, “by the presentment of a suitable check, draft, or digital electronic instruction…”
I should note that Texas is not the only player in the gold payments game. BitGold and AnthemVault are also working on payments solutions, including peer to peer, debit cards, and gold web shopping checkouts. Both companies have recently raised significant capital.
Distrust is an intangible but palpable force keeping gold out of the financial system, and hence out of circulation. Gold owners have at least two reasons to be wary about trusting third parties with their metal. One is simply a repeat of the US government confiscation in 1933. I don’t think this is coming, but opinion has hardened.
The Texas bill contains some extraordinary language, “A purported confiscation, requisition, seizure, or other attempt … [much legalese deleted—read the full text of the bill] is void ab initio and of no force or effect.” Texas will not allow the federal government to confiscate its depositors’ gold. Since you have to keep your gold somewhere, and there are risks to every location, this protection makes a strong argument for the Texas depository.
The other worry is the risk of counterparty default. If you own gold via a bank, or financial product such as GLD, then you’re exposed to a counterparty. The Texas gold depository, by contrast, will not deal in credit. Your gold just sits there, with no risk to the depository’s ability to deliver your metal on demand.
The Texas bill is necessary, but not sufficient. It’s a great first step, though there’s more to do. Texas is working on another bill to formally recognize gold and silver as legal tender and to clarify that they are not subject to state taxes. I testified before a Texas Senate committee about SB 1245. That bill did not pass out of committee, but there’s good reason to hope that a legal tender bill will be enacted into law in Texas soon. This is especially so, with the momentum created by HB 483.
Bit by bit, the road to gold is being cleared. Our friends in Texas are helping lead the way.
Here my testimony for the SB 1245 bill:
