On June 2nd, I attended the ceremony at the Capitol Building acknowledging the signing of the Utah Sound Money Act. The act makes gold and silver coin legal tender in Utah. It is designed to allow a form of currency to be used that will have intrinsic value. Its value will not be tied to monetary policy.
The prediction now is that billions of dollars in capital will migrate into Utah because of the ability to purchase and store (in Utah) gold and silver as currency. By treating it as currency, any inflationary value increases to the gold and silver will not be taxed as a gain. You can’t tax money. It is now treated as money under Utah law.
Given all the recent, direful economic news, the idea of stabilizing monetary value by a precious metal form of currency seems prudent. Utah may be the first state to adopt the idea, but there are fourteen other states with similar legislation being considered.
The US Constitution allows a state to adopt gold and silver coin as currency for the state. Utah’s move is in keeping with that Constitutional power. It also seems wise, given the announced determination by the central bank to “monetize the debt” – meaning the debt will be paid by printing more dollars. The inevitable result of expanding the money supply, and not simultaneously increasing goods and services will be inflationary. When a nation resorts to financing national expenditures by printing paper money, sooner or later the paper money becomes valueless. Oftentimes dramatically.
The prudence of migrating some money into a form having more value than that bestowed on it by a printing press, managed by a profligate government, seems wise.