There has been a growing unease regarding the once mighty U.S. dollar. So much so that a few states, Utah, Minnesota, Tennessee, Iowa, South Carolina, North Carolina, Georgia, among others and now Virginia, are at various stages of exploring the use of Gold Currency as a default if, or should it be said ‘when,’ the Federal Reserve Note otherwise known as the dollar goes belly up.
The Washington Post recently reported that Virginia’s House of Delegates approved legislation requiring the state to spend $17,440 to study the feasibility of returning to a precious metal money standard against the advent of Fed policies or cyber attacks causing the crash of the dollar.
To date, only Utah has passed a law recognizing nontraditional currency. Which is an odd way of stating it because it depends how far back you want to go to define traditional currency. It was not that long ago that the traditional currency was gold and silver.
In 1971, President Nixon formally abandoned the gold standard. Around the same time he also signed legislation that loosened the stranglehold the government had forbidding citizens from owning gold. Although the public could have bought old $20 gold pieces all along, those at least were not prohibited.
Later on, the U.S. Mint started minting the gold and silver American Eagle bullion coins, basically directed at investment portfolios and made it possible for people to trade them at market value but with capital gains taxes on the gains.
Utah is now allowing the coins to be used as legal tender while imposing no taxes.
Some see this event as detrimental. “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.” What is strange about that statement is that Mr. Sanchez doesn’t decry the government and Fed policies that destroy confidence in the government and instead gets upset with anything that shines a light on it. It’s OK to have an elephant in the middle of the room, just nobody pull out a bag of peanuts or in this case, gold currency.