Missouri Bill Would Take Steps Toward Treating Gold and Silver as Money
A bill introduced in the Missouri Senate for the 2023 legislative session would take important steps toward treating gold and silver as money instead of as commodities and would set the stage for currency competition in the Show-Me State. Sen. William Eigel (R) filed SB100 last month. The legislation would take several steps to encourage the use of gold and silver as money in Missouri, including making it legal tender, eliminating the state capital gains tax on gold and silver, and establishing a state bullion depository. Legal Tender and Tax ReformsUnder the proposed law, gold and silver would be accepted as legal tender and would be receivable in payment of all public and private debts contracted for in the state of Missouri. Practically speaking, this would allow Missourians to use gold or silver coins as money rather than just as mere investment vehicles. In effect, it would put gold and silver on the same footing as Federal Reserve notes. Missouri could become the fourth state to recognize gold and silver as legal tender. Utah led the way, reestablishing constitutional money in 2011. Wyoming and Oklahoma have since joined. The effect has been most dramatic in Utah where United Precious Metals Association (UMPA) was established after the passage of the Utah Specie Legal Tender Act and the elimination of all taxes on gold and silver. UPMA offers accounts denominated in US-minted gold and silver dollars. The company was also instrumental in the development of the “Utah Goldback,” described as “the first local, voluntary currency to be made of a spendable, beautiful, physical gold.” SB100 would also exempt the sale of gold and silver bullion from the state’s capital gains tax. Missouri is already one of 41 states that do not levy sales tax on gold and silver bullion. Exempting the sale of bullion from capital gains taxes takes another step toward treating gold and silver as money instead of commodities. Taxes on precious in metal bullion disincentivize investment and erect barriers to using gold and silver as money by raising transaction costs. Imagine if you asked a grocery clerk to break a $5 bill and he charged you a 35-cent tax. Silly, right? After all, you were only exchanging one form of money for another. But that’s essentially what a sales tax on gold and silver bullion does. By eliminating this tax on the exchange of gold and silver, Virginia would treat specie as money instead of a commodity. This represents a small step toward reestablishing gold and silver as legal tender and breaking down the Fed’s monopoly on money. “We ought not to tax money – and that’s a good idea. It makes no sense to tax money,” former US Rep. Ron Paul said during testimony in support an Arizona bill that repealed capital gains taxes on gold and silver in that state. “Paper is not money, it’s fraud,” he continued. The proposed law includes a provision that would bar any state agency, department, or political subdivision from seizing gold or silver bullion. Bullion DepositorySB100 would also establish a state bullion depository. This would not only create a safe place to store precious metals; it also has the potential to facilitate the everyday use of gold and silver in financial transactions in Missouri. The depository would be established in the Office of the State Treasurer. The depository would serve as “the custodian, guardian and administrator of gold, silver and other precious metals transferred or acquired by the state, or an agency, political subdivision or other instrumentality of the state.” The depository would also accept deposits of gold and silver by private individuals. Significantly, SB100 would establish a mechanism for individuals to engage in transactions using precious metals including gold and silver. The legislation creates a regulatory structure for the depository and all transactions facilitated through it. It also establishes criteria for depository agents. The bill is based on a similar law that was passed in Texas and signed into law by Gov. Abbott in 2015. The Texas depository received its first deposits in the summer of 2018. The following year, the state exempted precious metals in these depositories from taxation. In a nutshell, through the depository, Missourians would be able to deposit gold or silver and pay other people through electronic means or checks. Private individuals and entities will be able to purchase goods and services using assets in the vault in the same way they use cash today. Doing so has the potential to open the market to sound money in day-to-day transactions. Ultimately, depositors could be able to use a bullion-funded debit card that seamlessly converts gold and silver to fiat currency in the background. This will enable them to make instant purchases wherever credit and debit cards are accepted. Practically speaking, all of the provisions in SB100 would open the door for people to begin using specie in regular business transactions. This marks an important small step toward currency competition. BACKGROUNDThe United States Constitution states in Article I, Section 10, “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts.” Currently, all debts and taxes in the US are either paid with Federal Reserve Notes (dollars) which were authorized as legal tender by Congress, or with coins issued by the US Treasury — very few of which have gold or silver in them. The Federal Reserve destroys this constitutional monetary system by creating a monopoly based on its fiat currency. Without the backing of gold or silver, the central bank can easily create money out of thin air. This not only devalues your purchasing power over time; it also allows the federal government to borrow and spend far beyond what would be possible in a sound money system. Without the Fed, the US government wouldn’t be able to maintain all of its unconstitutional wars and programs. The Federal Reserve is the engine that drives the most powerful government in the history of the world. Sales tax repeals knock down one of the tax barriers that hinder the use of gold and silver as money, and could also
When Ignorance Is a Central Banker’s Only Defence
To invest in gold and silver is to invest outside of the system. When you buy gold bars or silver coins you are choosing to hold assets that can protect other assets in your portfolio from the poor actions taken by counterparties. For example: money printing by central banks, inflationary government policies, mismanagement of a company, even strikes from workers. We would argue that the need to invest in gold bars or to store silver coins has become even greater in recent years as those who are responsible for areas like monetary policy, security or taxes are no longer incentivised to just act for the greater good. Rather, there appears to be an increasing number of policy makers who are also incentivised to personally benefit from their decisions, the same decisions that elsewhere are wreaking havoc for many others. With such behaviour the need to hold the safe havens that are gold and silver is even more crucial. “Power tends to corrupt, and absolute power corrupts absolutely“ The 19th century British politician Lord Acton coined the phrase, but the idea was not new to him. The idea was aimed at monarchies that all power is given to, or as was generally the case, power taken by monarchies. In today’s advanced economies this phrase could now apply to central bankers. U.S. Federal Reserve Atlanta President Raphael Bostic is the latest of high-ranking Fed officials to say that his personal investing activities broke ethics rules. Let’s not forget that those rules exist to prevent the kings of central banking from unfairly serving themselves ahead of their duty to us. “Atlanta Federal Reserve President Raphael Bostic said that over the last few years some of his personal investing activity inadvertently happened in periods where it was forbidden by U.S. central bank ethics rules at the time. Bostic explained in a note that accompanied revised financial disclosure forms going back to the start of his tenure as Atlanta Fed president in 2017 that trades violating the ethics code were made by financial advisors and were not done under his direction.” Bostic plays ignorance – his excuse for the violations “Due to my reliance on a third-party manager, I was unaware of any specific trades or their timing, including a limited number that took place during Federal Open market Committee blackout periods or financial stress periods. Similarly, I was unaware of when my holdings of U.S. Treasury funds in 2021 exceeded the limits set forth by the FOMC’s trading and investing rules”Reuters, 10/16 Of course, as the lip service to the public goes, The Fed spokesman has released a statement that Fed Chair Powell “has asked the Office of Inspector General for the Federal Reserve Board (of Governors) to initiate an independent review of President Bostic’s financial disclosures.” And of course, this is the same Office of Inspector General that after an “independent” review cleared both Chair Powell and Vice Chair Richard Clarida of any violations; even though in February 2020 … “he traded between $1 million and $5 million out of a bond fund into stock funds one day before Chair Powell issued a statement indicating potential policy action due to the worsening of the Covid-19 pandemic.“Bloomberg, 10/2/2021 Don’t forget that his whole scandal broke in September 2021 – right as the Fed was announcing its plans to start tapering assets. Has the “independence” of central bankers imbued them with too much power? They are not elected officials – but appointed by politicians that, arguably, have many ethical and conflicts of interest of their own. Central banks now choose which corporations, banks, municipalities, and even what governments to save during a monetary crisis. These bankers are people who create a wide number of ‘special purpose vehicles’ and dole out funds to only those banks, corporations, municipalities, and governments they see fit to save. While other entities that don’t become deemed worthy for saving directly are forced to be swallowed up in liquidation deals brokered by none other than the central bank itself. The Fed, being the central banker to central bankers, seems to have let the power it has been afforded by the American congress corrupt many of its top officials. And since the investigation into these allegations is internal – so the consequences of unethical, if not illegal, behavior, has not appeared as of yet; maybe it never will. Yes, Richard Clarida resigned as Vice Chair of the Fed in January 2022, roughly two weeks before his term was up. But no fines were paid, no criminal charges laid, not even a proverbial mild reprimand was given. He simply resigned with return to abundant speaking fees and a tenured position at Columbia University. We’ll see what the ‘independent’ investigation of the Office Inspector General finds about Mr. Bostic’s trading activities, but we are not convinced that the Atlanta Fed President or the Office Inspector General have the public’s interest in mind when acting on their financial market bets. The power of the central bank has gone far beyond its intended reach. Today would be a great moment to remind readers that any single physical gold bar cannot front run the investment decisions of another gold bar. Physical metal investors understand that we are all equal, which is the best way to be fair. As always the central bankers reminded us this week that they often need to be ‘more’ equal than others. Article courtesy of GoldCore
Is Central Banks’ License to Print Money About to Expire?
One of the biggest reasons for people deciding to buy gold bars or to own silver coins is because of the folly of central banks and government. It seems bizarre to most people that we are all aware that money doesn’t grow on trees and yet those responsible for financial stability have forgotten this basic life-lesson. But, what has felt even more bizarre (and maddening) is for how long this foolishness has been allowed to continue. Well, it seems this won’t be the case for much longer. Below, we outline how central banks and governments are coming to the end of their experiment, not necessarily by choice and certainly not without consequence. Central banks have been printing money non-stop for the last 15 years – since the 2008-09 Great Financial Crisis. The central bank purchases assets in exchange for newly printed money. The main asset being government bonds. The European Central Bank (ECB), Bank of England (BoE), and the US Federal Reserve (Fed) are holding close to $12 trillion in government bonds on their balance sheets – more than half of these bonds purchased since the 2020 covid pandemic took hold. Central banks sucked up government bonds in order to keep yields from rising so governments could continue to issue bonds … and this circle worked for as long as bond prices continued to stay the same or rise. Central banks’ buying of government bonds was a win for the government too, as governments benefited through the low yields that central bank buying created. This allowed governments to continue spending well beyond their revenues, thereby increasing already large debt loads without the consequence of rising yields. However, the combination of supply chain issues, large supplements to household income from governments, and Russia’s invasion of Ukraine, has pushed inflation to 40-year highs and central banks, although slow to react, have started raising interest rates at a rapid pace. This in turn has sent bond prices lower – to the tune of 18% lower since the beginning of 2021. The Bank of England has already stepped in to help support UK Gilt prices and has delayed selling bonds off its balance sheet, to continue supporting the government. And now with the Fed not sucking up the excess US Treasury issuance – Janet Yellen, US Treasury Secretary, is discussing a buyback program to help with liquidity in the market – there is a problem. The problem is that since the Fed has been one of the main buyers of US Treasuries over the last 15-years that “the capacity of broker-dealers to intermediate in the market has not grown in line with the market’s size”. More details on the Treasury’s plans for the buyback and liquidity are scheduled to be released on November 2. Since the central bank bond buying spree started in earnest the Federal Reserve has made money on its investments – it earned more in interest and payments from banks than it paid out to banks for holding their excess reserves at the Fed. These earnings by the Federal Reserve were then turned over to the US Treasury to spend. However, the bond selloff has triggered paper losses for the Fed (and other central banks). The falling bond prices are becoming a huge issue for central banks – their assets are losing value. Last year the Fed remitted about $100 billion to the US Treasury – and in contrast estimates are that the potential Fed loss this year could be upwards of $75 billion. This ‘paper loss’ can sit on the balance sheet for some time but eventually the loss must be addressed. And guess who foots the bill …. That’s right it’s the governments that issued those bonds in the first place … or to be more precise the taxpayers to those governments. As losses mount and economies weaken further the large quantitative easing programs are likely to come under scrutiny, ironically the criticism will mostly come from the same governments that the large programs supported. Nonetheless, the losses could spur additional calls for central banks to not enjoy the high level of ‘independence’ and power that they currently have. Recall that central bank independence has always been a joke. No entity is independent of the political system which names its head banker, or sets the mission statement, and requires semi-annual visits to parliament or congress. Investors who hold physical silver and gold should take comfort in the fact that no central banker is needed to validate their wealth since central bankers are merely politicians with a penchant for helping other politicians before anyone else. Article courtesy of GoldCore, release date of article was 27 October 2022
The 5,000 year History of Gold and Silver
People today are less religious than in past centuries for reasons well beyond the scope of our weekly writings. Yet even today religions and wealth, and silver and gold are entwined within the minds of many. Additionally, below is a historical review covering some of the reasons why. Gold is a central feature in most religions around the world. As one of humanity’s first discovered precious metals, it has historically held great value. Its value has been in its beauty and its scarcity. As something that held great value and beauty, it’s only natural that it would be included in the most significant aspects of human life. Gold in the BibleWithin the three Abrahamic religions of Judaism, Christianity and Islam, gold historically and presently plays a prominent role in services and ceremonies. The Bible speaks extensively about ancient Israelite ceremony and liturgy, and gold was heavily featured. In terms of Israelite worship, God commanded Moses to collect gold from the people for the construction of the sanctuary—the centre of worship. “This is the contribution which you are to take from them: gold, silver, and bronze…Have them construct a sanctuary for Me, so that I may dwell among them.” (Exodus 25:3, 8-9 NASB). All of the furniture items in the tabernacle, including the ark of the covenant, the table of shewbread, the menorah, and the altar of incense were overlaid with pure gold. Clearly, gold played a central role in the practice of worship, in ancient times. Their gold was more than merely decorative. Firstly, the gold signified God’s magnificence and holiness. As the most valuable and precious metal in the ancient world, gold was chosen to adorn the Tabernacle and the items within it as a testament of God’s majesty and glory. The gods of other nations were also made from gold and other precious metals because everybody at that time knew what these metals represented – wealth since control over metals meant control over lands and technology. Gold in Judaism As in ancient Jewish worship where the scroll of the Torah would be beautifully adorned with gold and other precious things, the Christians would adorn the book of the Gospel with gold and other valuable jewels and metals. The use of gold in Christian worship continued with the items in the churches such as the chalices which would hold the Holy Emblems, the seven-headed candlesticks, the dishes for oblations, and the ornate golden vestments worn by the priests and bishops. All of this is a continuation of the instructions given to Moses for worship in the Hebrew Scriptures. Gold’s role in IslamThe last of the three major Abrahamic religions, Islam, also utilizes gold, albeit in different ways. Islam’s primary use of gold was in Qur’anic manuscripts and in the decoration of mosques. Moreover, some 9th-century Qur’anic manuscripts began to appear with golden calligraphy. However, there was great debate within Islamic sources as to whether such ornamentation was appropriate. Some mosques around the world are decorated with gold and contain majestic ornamentation to signify the majesty of Allah. Anything made with gold or with great beauty within Islam is meant to portray the greatness of God and inculcate a sense of awe and wonder in the worshiper. The Eternal Strength of GoldAs can be seen, gold has played a central role in the world’s three monotheistic religions. In each case, it has been used to communicate God’s greatness and majesty and to generate a sense of holiness and wonder in the believer. Human beings have always made a connection between gold and the divine, likely because of its splendour, brightness, and value. Perhaps the greatest human connection to gold and silver comes from the permanence of eternity. Since the metals are very stable chemically, they never rust, never lose their shine, and don’t chemically change into something else. Those features of course are direct variants to the birth, ageing, decline and death of humans. We see in these metals a permanence we cannot possess but understand the value of permanence for safety and wealth. In the centuries before this one silver and gold were ever-present as permanent and eternal objects. They served society as reminders of human generations both gone and to come. Perhaps nothing has really changed? Silver and gold still silently remind us that the schemes and money printing of our generation cannot sustain future generations and was rejected by prior generations. This is why here at GoldCore we have been proud to help nearly 15,000 customers to buy gold and silver bullion so that they can insure their portfolios against systemic risks. Moreover, we are not offering anything new, just gold and silver. The two assets that have been trusted for over 5,000 years, around the globe. Article courtesy of GoldCore
