Some interesting developments in the efforts by some U.S. states to return to some form of sound money can be found in this CNN/Money story that brings readers up to date in the New Year after a flurry of activity in 2011. Most interesting is the Utah initiative that could be on its way to a real parallel currency to the U.S. dollar.
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.
“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.
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. 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.
Of course, the dismal set thinks this idea is nuts, Vanderbilt economics professor David Parsley noting that it’s a “terrible” idea and that proponents of sound money may actually want to “destroy the country”. Yes, economists remain largely out-of-touch with reality…
There is a widening gulf in thinking about money these days and that theme is also clear in Floyd Norris’ New York Times offering In a Focus on Gold, History Repeats Itself.