I have encouraging news in the state of Arizona where lawmakers back gold, silver as currency.
The measure is Arizona's latest jab at the federal government, which prohibits states from minting their own money. It also reflects a growing distrust of government-backed money.
The bill, which advanced in a 4-2 vote by a House committee Monday, states that gold and silver should be legal currency not subject to tax or regulation as property. The Republican-led Senate gave the bill its blessing in February in a 17-11 partisan vote.
The bill would let people use the precious metals as money as long as businesses agree to take them. If made law, it would take effect in 2014.
Democrats oppose the measure. They say it would be a bureaucratic nightmare because businesses don't have the equipment to determine the value of gold and silver.Bureaucratic Nightmare?
The bill is well written and extremely well thought out. It does not force companies to accept gold or silver (nor should it), it merely allows businesses to do so if they want. Any company that does not want to deal with gold or silver will not have to. So where's the nightmare?
States will not be minting their own money under such a proposal (nor should they) so there is no conflict on that part of Federal law.
I commend this bill, expect Arizona lawmakers to pass it, and urge the Governor to sign it. When that happens, gold will once again be legal money.
I support gold as money and believe gold is money whether or not the bill passes.
There is significant reason for people to distrust government-sponsored fiat currencies backed by nothing. I made the case recently in Fraudulent Guarantees; Fictional Reserve Lending; Comparison of US to Cyprus; What About New Zealand?
Here is a brief synopsis, but I encourage you to read the full article.
- Base Money Supply: $2.9 Trillion
- M1: 2.4 Trillion
- M2: 10.4 Trillion
- Total Credit Market Debt Owed: $56.3 trillion
Clearly far more money has been lent than exists. How can it possibly be paid back? If it can't be paid back, how good is a government guarantee on deposits?
In 2010 Bernanke proposed ending reserve requirements completely, but long-time Mish readers understand what Bernanke proposed is the de facto state of affairs already. (see the above link for an explanation).
Five Key Points
- In a Fractional Reserve Lending scheme, the notion there are meaningful reserves is ridiculous.
- Far more money has been lent out than really exists (the rest is a fictional accounting entry).
- Fractional reserve lending constitutes fraud (just as lending something you do not own is fraud).
- There is no way for all this money to be paid back (so it won't be).
- The Reserve Bank of New Zealand has the most sensible policy on deposit insurance of all the world's central banks. (NZ offers no deposit insurance). See my article for a full explanation.
In the sake of full disclosure, I own gold, silver, platinum, as well as shares in various mining corporations.
Mike "Mish" Shedlock