Utah Has The Right Idea

From Utah News:

Legislation proposes Utah adopt a gold-based system

Imagine paying your next parking ticket in gold Krugerrands or renewing your driver license using American Gold Eagles.

A proposal
in the Utah Legislature would require the state to allow just that, requiring government agencies to accept gold for transactions, and creating a parallel monetary policy for intrastate commerce tied to the price of gold.

Under the legislation that has been drafted, Utah residents could mint their own gold or silver coins, a storehouse would be created to stockpile the precious metal and the Utah Defense Force, an arcane state militia that may be called and armed by the governor, would be responsible for securing the inventories.

“I think it has merit,” said Rep. John Dougall, R-Highland, who had the proposal brought to him by a constituent and committed to opening a bill file. Another representative will probably end up sponsoring the legislation.

“Fundamentally, what it comes down to is people’s concern about the fundamentally reckless policies at the federal reserve and what it does long-term to the financial standing of the country and giving folks another choice of monetary tools for their financial transactions,” Dougall said.

The concern is that the large U.S. debt and policies designed to increase liquidity by putting more dollars in the market have devalued the national currency.

“It’s really about creating an option,” said Larry Hilton, an attorney and insurance salesman who authored the “Utah Sound Money Act” and took it to Dougall. If the dollar falters, he said, it would be beneficial to the state to have an alternative.

Comments:

A proposal in the state of Utah for a parallel monetary system shows considerable merit in my view. The idea of an option for the continuation of commerce in the event of a fiat currency collapse is not only sound, but wise.

The callous, reckless disregard for preserving the value of the US dollar shown by the Federal Reserve is mitigated with this approach.

As sovereign debt in Europe unravels once the bond market collapse ensues, the cost of the spasmodic extravagance of municipal, state, and federal governments will increase rapidly.

While I anticipate that the US dollar will rise in the near term as the Euro suffers, the medium to long term outlook for the dollar is poor.

For those skeptics that believe I am too pessimistic in some of my views, consider this quote from Harvard professor Niall Ferguson:

When Franklin Roosevelt became president in 1933, the deficit was already running at 4.7 per cent of GDP. It rose to a peak of 5.6 per cent in 1934. The federal debt burden rose only slightly – from 40 to 45 per cent of GDP – prior to the outbreak of the second world war. It was the war that saw the US (and all the other combatants) embark on fiscal expansions of the sort we have seen since 2007. So what we are witnessing today has less to do with the 1930s than with the 1940s: it is world war finance without the war.

Consider that the present US budget deficit is running north of 9% and debt to GDP is more than 80%. Yet, there is no world war the US is fighting.

These figures alone should convince most to protect themselves with precious metals.

If this is not enough evidence, well, nothing will be enough.

Comments

  1. One question how will Utah deal with forgery? It may sound ridiculous but gold is remarkably easy to fake, especially with gold around $1,400 an ounce.

    As an example, the United Arab Emirate no longer tests gold "out of Africa" since it assumes that it is always fake!

    Will every office in Utah have a scales and specialized instruments to ensure that the gold it receives is real gold?

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  2. A very good day to you PW.

    INDIA OFFERS TO PAY FOR IRAN OIL WITH GOLD

    "It appears that gold's isn't really a currency... until it is. The Economic Times reports that India is attempting to ensure steady crude oil supplies from Iran. In doing so it is doing everything it can to pay Iran in a way that avoid loopholes associated with recent US sanctions. And the stunner: "India could settle crude oil import transaction using gold in the short term, while efforts to resolve the deadlock continue." But does Iran realize they can't possibly eat all that gold? Or that The Fed has no way of diluting to oblivion? Or that, unlike the dollar, it is currently not involved in a global race to bottom in which every central bank will have no choice but to print ever more of its linen-infused currencies? Something tells us that the answer to all three is yes."

    ...article...
    http://www.zerohedge.com/article/india-offers-pay-iran-oil-gold

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  3. This is a sound question Frozen.
    Certainly Krugerrands, Gold Eagles and Maple Leaf coins can be used extensively with minimal testing. The idea of melting some gold in a backyard kiln and presenting the results to the department of motor vehicles for payment could pose some issues. Acid test or electronic test kits are available at reasonable cost as the link shows- http://www.quicktest.co.uk/acatalog/Complete_Sets.html, so this would be one way to address the purity/moral hazard problem.
    Coins remain a superior alternative.

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  4. Very interesting development PW

    "Commonwealth of Virginia introduced House Resolution No. 557 to establish a joint subcommittee to "to study whether the Commonwealth should adopt a currency to serve as an alternative to the currency distributed by the Federal Reserve System in the event of a major breakdown of the Federal Reserve System." In other words, Virginia will study the fallback plan of a "timely adoption of an alternative sound currency that the Commonwealth's government and citizens may employ without delay in the event of the destruction of the Federal Reserve System's currency" and avoid or "at least mitigate many of the economic, social, and political shocks to be expected to arise from hyperinflation, depression, or other economic calamity related to the breakdown of the Federal Reserve System." Most importantly as pertain to the currency in question, "Americans may employ whatever currency they choose to stipulate as the medium for payment of their private debts, including gold or silver, or both, to the exclusion of a currency not redeemable in gold or silver that Congress may have designated 'legal tender'."

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  5. Bill, that indeed is a fascinating development. The states of the union are beginning to exert their 10th Amendment rights in the face of a reckless Federal Reserve and Federal Government. I will look into this resolution in more detail in the near future.

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  6. PW,

    Did you watch Steven Colbert show when he bought up this news? Was so hilarious, had a good laugh. if you haven't try it will help, among all this crazy things going on.

    Walter.

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  7. Walter, that was funny!
    Gold leaf on a chocolate cake sounds pretty good.

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  8. Seems the powers that be called the Governor on the Bat Phone and said " I dare you".

    http://www2.newsadvance.com/news/2011/jan/11/gov-mcdonnell-wont-back-marshalls-state-currency-b-ar-767296/

    RICHMOND, Va. (AP) - Gov. Bob McDonnell says he can't support legislation to consider adopting an alternative currency to the dollar should the federal reserve system collapse.

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  9. Well Bill, I suppose this should not surprise us. The power brokers have a very long reach. How long they will be able to maintain the charade is another question.

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  10. crashjpmorgan.com

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