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NEW YORK (CNNMoney) — A growing number of states are seeking shiny new currencies made of silver and gold.
Worried that the Federal Reserve and the U.S. dollar are on the brink of collapse, lawmakers from 13 states, including Minnesota, Tennessee, Iowa, South Carolina and Georgia, are seeking approval from their state governments to either issue their own alternative currency or explore it as an option. Just three years ago, only three states had similar proposals in place.
“In the event of hyperinflation, depression, or other economic calamity related to the breakdown of the Federal Reserve System … the State’s governmental finances and private economy will be thrown into chaos,” said North Carolina Republican Representative Glen Bradley in a currency bill he introduced last year.
Unlike individual communities, which are allowed to create their own currency — as long as it is easily distinguishable from U.S. dollars — the Constitution bans states from printing their own paper money or issuing their own currency. But it allows the states to make “gold and silver Coin a Tender in Payment of Debts.”
To the state legislators who are proposing state-issued currencies, that means gold and silver are fair game, said Edwin Vieira, an alternative currency proponent and attorney specializing in Constitutional law. And since gold has grown exponentially more valuable, while the U.S. dollar continues to lose ground, the notion has become increasingly appealing to state lawmakers, he said.
The state gold rush: Utah became the first state to introduce its own alternative currency when Governor Gary Herbert signed a bill into law last March that recognized gold and silver coins issued by the U.S. Mint as an acceptable form of payment. Under the law, the coins — which include American Gold and Silver Eagles — are treated the same as U.S. dollars for tax purposes, eliminating capital gains taxes.
Since the face value of some U.S.-minted gold and silver coins — like the one-ounce, $50 American Gold Eagle coin — is so much less than the metal value (one ounce of gold is now worth more than $1,700), the new law allows the coins to be exchanged at their market value, based on weight and fineness.
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“A Utah citizen, for example, could contract with another to sell his car for 10 one-ounce gold coins (approximately $17,000), or an independent contractor could arrange to be compensated in gold coins,” said Rich Danker, a project director at the American Principles Project, a conservative public policy group in Washington, D.C.
South Carolina Republican Representative Mike Pitts proposed a currency system that would allow people to use any kind of silver or gold coin — whether it’s a Philippine Peso or a South African Krugerrand — based on weight and fineness. Pitts said in the bill, which currently has 12 co-sponsors, that the state is facing “an economic crisis of severe magnitude.”
Republican representatives from Washington State followed suit in January, introducing a bill that would also allow any gold and silver coins to be considered legal tender based on metal values. Minnesota, Iowa, Georgia, Idaho and Indiana are also considering similar proposals.
Many of the bills would make it possible for residents to exchange the physical coins for goods and services, so you could use coins to buy anything from groceries to a car as long as the store chooses to accept them.
However, most people aren’t going to walk around with such valuable coins in their pockets, said Vieira. Plus, calculating the value of the coins — especially if they come from different parts of the globe and are of different sizes and shapes — will get tricky.
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It’s more likely that the states will create electronic depositories and accounts for the coins to make transactions easier, when and if the initial bills are passed, he said.
Utah Gold & Silver Depository is already developing a system where customers could use debit cards linked to their gold holdings. When customers swipe their debit cards to make transactions, physical gold and silver coins would be transferred between accounts in privately-owned depositories (or vaults) based on the market value of the metals.
Before deciding on a specific form of currency, some states — including Minnesota, Tennessee, Virginia and North Carolina — are considering proposals that would first require a committee to review their alternative currency plan.
The future of U.S. currency: The states’ proposals have been gaining steam among Tea Partyers and Republicans, many of whom also endorse a nationwide return to the gold standard, which would require the U.S. dollar to be backed by gold reserves.
Tea Party “father” Ron Paul is sponsoring the “Free Competition in Currency Act,” which would allow states to introduce their own currencies, and rival Newt Gingrich is calling for a commission to look at how the country can get back to the gold standard.
But it will be the individual states that could really get the ball rolling, said Vieira. Even if several of the current proposals get killed, the introduction of so many bills at the state level is drawing national attention to the issue, he said.
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Of all the state proposals circulating right now, Republican-controlled states including South Carolina, Georgia, Idaho and Indiana have the best chance of passing their proposed bills this year, said American Principles Project’s Danker. If just one or two states implement an alternative currency, it could have a Domino effect, he said.
“I think we could get a couple passed in this legislative session, and that would show this is mainstream, popular and it would be a justification for more of the risk-averse states for doing this,” he said.
There are, of course, many people who think the recent push for alternative state currencies should be stopped in its tracks. David Parsley, a professor of economics and finance at Vanderbilt University, said he thinks state-issued currencies are a “terrible” idea.
“Having 50 Feds” could debase the U.S. dollar and even potentially lead the country into default, he said. “The single currency in the United States is working just fine,” said Parsley. “I have no idea why anyone would want to destroy something so successful — unless they actually wanted to destroy the country.”
By Blake Ellis @CNNMoney
It is a new year and we can breathe a sigh of relief or can we? 2011 was a very rough year for the world as a whole. Governments are tightening the nooses on their citizens. People are feeling like their money is not buying them as much as it used to. Wages are stagnant for most of the working class. Many people who were once considered middle class who gave to help the poor are now in the position of asking for assistance.
What is happening to the world as we know it? The European Union is struggling to stay together. The USA is turning into a police state. The Middle East and North Africa is destabilized. Asia is struggling with natural disasters and a weakening China. Central and South America are emerging as commodity power houses. Russia seems to be reawakening. All this and we have more rumors of war. What can we do?
In times of uncertainty Gold has always been the money of choice. Gold offers you many benefits.
- Retaining Purchasing Power when governments print their fiat currency. Gold always retains a value to protect the holder. For Americans Gold has proven to consistently protect against Dollar weakness. Governments will try to hide the devaluation of their currencies.
- Diversification is key, have a portion of your portfolio in a hard asset such as Gold Bullion. I do not recommend all of your assets be tied to the US stock market. So this means if you buy Gold make sure to buy bullion, 100% allocated.
- As a Safe Haven, Gold is the asset that is considered safe. In volatile and uncertain times do you want your money exposed to a volatile stock market?
Alan Greenspan (Former Chairman of the Federal Reserve) once said,
“An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense that gold and economic freedom are inseparable”.
Gold has risen for 11 years straight. Some speculate that Gold is in a bubble similar to the early 1980’s. One thing that I see that is much different today than 30 years ago is the size of the market today. In 1980 the Gold bubble was primarily a Western phenomena. Today we see people from all nations participating. The Chinese have Gold fever, as well as the Indians, Russians, Arabian nations etc. Everyone can sense that it is time to put their money in a hard asset until the storm clouds pass.
How do we store the Gold that we purchase? Most people who start out with Gold ownership buy a few coins and store them at home or in a safety deposit box. The only reservation I have concerning this is the uncertainty of government. In the USA there is already a precedent set that the government can ask its citizens to turn in their Gold. This happened under President Franklin Roosevelt in 1933. Confiscation of the peoples Gold recently happened in South Korea and Thailand during the Asian financial crisis of 1998.
The other option outside of paper assets is to buy physical Gold Bullion and have it stored offshore in a safe secure facility. What are some benefits to offshore storage?
- Asset Protection
One program that can give a person of peace of mind is offered by Swiss Metal Assets. The benefits of partnering with Swiss Metal Assets include.
- Your Gold is stored safely and securely in the Zurcher Freilager in Switzerland.
- 100% insured by AXA Insurance.
- Your Gold will never be leased by bullion banks unlike many ETF’s
- The vaults are audited regularly by Swiss customs.
- Rapid liquidity of your metals
- Individual Retirement Account (IRA) eligible
This spring Swiss Metal Assets is opening another storage facility in Panama. This state of the art facility will be located in the Panama Pacifico Free Zone. This Free Zone is the old Howard Air Force base. This facility will have the benefits of an airfield to bring your holdings securely into the country.
Gold gives a person peace of mind like very few assets can. Let us hope that 2012 will be a safe and prosperous year for all of us.
By: Randy Hilarski - The Rare Metals Guy