STAFF NEWS & ANALYSIS
States Treating Gold and Silver as Real Money Now
By Daily Bell Staff - February 22, 2017

State Deals Blow to Federal Reserve, House Passes Bill To Treat Silver and Gold as Money … As central economic planners at the Federal Reserve continue their vision of “prosperity” through crushing debt and dollar devaluation, some states are fighting back. The Arizona House took a major step toward sound money by passing a bill to eliminate penalties in the form of taxes on gold and silver specie. The move would be an important step toward currency competition and help undermine the Fed’s monopoly on money.

The Arizona House has removed a gold and silver inflationary tax. Meanwhile Utah and Oklahoma have declared gold and silver legal tender in their state, free from any taxation. Other states are mulling similar moves. It is a ways from being a major movement but the moves are “critical in dispensing with the idea that gold and silver are merely investments and speculation.”

More:

Several other rules exist around the country that provide further disincentive for sound money through specie. As the Tenth Amendment Center points out, dealers who buy gold and silver from the public are required to collect personal information from sellers and upload this information daily into law enforcement databases. Some dealers are barred from selling gold and silver to anyone for seven days, forcing them to tie up large amounts of capital and absorb market risk.

“Rep. Mark Finchem (R-Tucson) introduced House Bill 2014 (HB2014) on Jan. 9. The legislation would eliminate state capital gains taxes on income “derived from the exchange of one kind of legal tender for another kind of legal tender.” The bill defines legal tender as “a medium of exchange, including specie, that is authorized by the United States Constitution or Congress for the payment of debts, public charges, taxes and dues.” “Specie” means coins having precious metal content.

HB2014 was passed by a 35-24 vote.” Capital gains tax on gold and silver is especially misleading. It is more likely a tax on inflation than on the underlying metals. “This bill is an effort by one state to protect the people from such confiscation,” said Representative Finchem.

With this bill, the inflationary tax can be deducted from gross income on their state income tax. The bill now goes to the Senate.

Finchem argues that any perceived capital gain from gold and silver is not actually a gain, but a protection against losing money in the inflationary federal reserve system.

“It’s called inflation,” Finchem continued. “The Internal Revenue Service for many, many years has been taxing inflation as though it was a gain.”

The idea is that if more states can remove unjust taxation real currency competition will be in a position to return. “This isn’t going to end the fed’s monetary monopoly overnight, but it sets the foundation and opens the door for more market activity by the people,” Michael Boldin of the Tenth Amendment Center reportedly said. “

Forces at the state and federal level will want to kill the bill even before the Senate votes on it.  But William Greene, professor of economics at New York University is quoted as saying:

“Over time, as residents of the state use both Federal Reserve notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve notes do will lead to a “reverse Gresham’s Law” effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve notes). As this happens, a cascade of events can begin to occur, including the flow of real wealth toward the state’s treasury, an influx of banking business from outside of the state – as people in other states carry out their desire to bank with sound money – and an eventual outcry against the use of Federal Reserve notes for any transactions.”

Conclusion: The path back to real money is a slow one but states are embarking on it now. And as they continue, silver and gold are gradually seen as money again. That’s real progress.

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  • Doc

    “With this bill, the inflationary tax can be deducted from gross income on their state income tax.”

    What happens then if you sell gold and silver at a loss in USD terms?

    Why not simply aim at making gold and silver exempt from any capital gains tax? Is that a Federal tax making it difficult to get rid of?

    Anyway, this looks similar to the decriminalization of marijuana across states, so let’s hope it takes off.

  • robertsgt40

    Like Jefferson said, there are thousands striking at the branches and few at the root (of the problem). Until the root is destroyed (Fed), nothing will change.

  • rahrog

    Wonderful step in the right direction. A good example of how states do not have to kowtow to the federal government.

  • Libertarian Jerry

    The creation of the Federal Reserve and its debt based currency was to enable the Federal Government to have an almost unlimited supply of financing mainly for the Federal Governments’s Welfare/Warfare state. In exchange,the Federal Reserve Bank’s stockholders would have a perpetual profit on the interest created by debt based currency. Along with the establishment of the Federal Reserve,and its fiat currency,was the establishment of a Federal Income Tax and that tax’s enforcement arm the Internal Revenue Service that would force the collection of interest payments on the Bonds that were created. Basically Paper money conjured out of thin air backed by Bonds created out of thin air buying real goods and services in the market economy. Quite a racket. All backed by the “full faith and credit” of the Federal Government which is,of course,backed by the use of or threat of force upon the citizens of the United States. In the end,the American people in the wealth creation Economic Class have become the debt/tax serfs to the basically unproductive Political Class.
    The use of Gold and Silver as real money thus limits the amount of money that can be conjured out of thin air. Gold and Silver is one of the natural barriers against the growth and power of the Central government. This is one of the reasons that the Founders put the Hard Money Clause into the original Constitution. Without the financial means to run an Empire or to have domestic transfer programs the Federal Government would be forced to shrink in size and to dismantle the fascist/socialist State that has made serfs out of productive Americans. We can only hope and pray.

    • kenvandoren

      3/4 of the interest earned by the FED is turned over to the US Treasury. It is not interest on THAT money, created by the FED that profits FED members, it is the fact that the FED can and has put into member bank accounts, money that it (THE FED) has created. From there, through the miracle of fractional reserve banking, that deposit is the basis of member banks themselves creating money out of thin air, to the tune of 10 times (approximately) what the FED put into their accounts.

      • Bruce C.

        I basically agree, but I think it’s really more about power. After all, if you own a “legal” counterfeiting machine then why go through any of those machinations if mere “profit” is all one seeks? Answer: By having people believe that borrowed money is real money owned by some one else (e.g., bank depositors) they take the pay back ritual seriously and are thus controllable.

    • davidnrobyn

      Good succinct overview.

    • Anne Martin

      Was there a welfare state in 1913?

      • libertarian jerry

        Anne Martin…………………. In 1913 there was basically no Federal Welfare state,however,there was a defacto Welfare state that consisted mainly of private charities,the church and other religious organizations,settlement houses,associations and clubs,insurance companies,extended families and,to a certain extent,local,county and state governments. The government contributions were basically limited to state and county hospitals,mental institutions and old age homes. Most of the Federal Government’s contribution was in the guise of government employee pension plans and military or veteran benefits. Of course life expectancy for the average citizen was only about 55 years,while today it is close to 80 years,and the intact,nuclear family was much more sound then it is today. Back in 1913 self reliance,self responsibility were,unlike today,in the forefront of the American Culture.

  • davidnrobyn

    My take: The FedGov will fight this one tooth and nail. There is no way they’ll stand for this limiting of their power.

    • esqualido

      You’re right, but the Feds have sat back as a number of states have de facto nullified federal law by making possession and sale of marijuana legal, and it never was illegal to use gold and silver in payment of debt. Proponents can argue for equal application of the law in addition to the many other legitimate arguments.

      • davidnrobyn

        They’re just biding their time and preparing, waiting for their opportunity.

    • Praetor

      Trump is no Obama nor the globalist stooges who set up the Fed Bank. He believes in state rights. He may just see what happens, like cannabis. Let the states decide. Times do change. Whether we believe it or not.!!!

      • Catfish4u

        Trump recently implied he will increase the federal enforcement of cannabis laws. 🙁

  • Bruce C.

    This reminds of something a few years back, that’s sort of an ironic counterpoint. I was inquiring about the cost of a custom suit with an independent tailor and he said it would cost about $1600 – “or one once of gold” (gold was selling for $1600/oz at that time.) I was happy and intrigued that he would say such a thing, but the funny thing was I wanted to pay him in dollars (aka FRNs) and not gold because I expected gold to continue to increase in buying power and FRNs to diminish. Thus far the opposite has happened, but I still feel the same about how things will eventually go. I would still rather spend dollars than PMs.

  • This is awesome, but who do I complain to that they mixed me up with the OTHER Professor William Greene (the one at NYU, not STC), the man who literally “wrote the book” on econometrics? I can’t imagine he’d be happy, either…

  • unbubbleslayr

    The Feds have been taxing inflation not just on metals but house sales and every other investment. It’s the biggest scam running.

  • robt

    I am trying to understand what Professor Greene means when he says ‘will lead to a “reverse Gresham’s Law”’. A ‘reverse Gresham’s Law’ would mean that the gold and silver coins would be in common circulation, i.e. dishoarded, driven out, and the Federal Reserve notes would be hoarded, i.e. they would be more valuable. It’s true that this is the reverse of the Law, but is in conflict with every rule of debased currency in history. Perhaps the professore needs to review the meaning of good money driving out bad.
    Rather than driving gold and silver to the State treasury, paper money would be driven to the State treasury – which of course is ludicrous, because the State would insist on payment in specie, though the preferred method of exchange for the public would be in the debased currency.
    An interesting example is provided in history, when the Roman privatized tax collection franchise system under Constantine made the law that any citizen owing taxes could pay the tax collector in debased official currency, but the tax collector could only remit his payments to the State treasury in gold, testament that whatever value the State assigns to its currency, it holds the value of gold the highest.

    Regarding precious metals in the form of coins being used in certain states that adopted the measure, these coins would have to have some nominal value in dollars in order to be used as currency in transactions. Federal law requires this..The problem of convertibility then arises if there were to be a nominal price for the specie in dollars. People from out of state, or those wishing to dis-hoard dollars could exchange paper for specie.
    A similar problem on a large scale is presented by calls for a gold standard for individual countries. Every currency in the world would have to be convertible for the standard to work – otherwise, disciplined countries would be drained of their gold by other countries exchanging their non-gold-standard currencies for gold held by by the responsible country.
    Though the USA was not such a ‘disciplined country’, by virtue of having a ‘reserve currency’ subject to convertibility, and this currency was debased by inflation, and the price of gold was fixed, by the early 1970s the drain on the US gold supply was such that Nixon had to default on convertibility.

  • Johningb

    Death to the Federal Reserve! For over 100 years the American people have been shackled by this evil outside the USA controlled organisation. I hope this is the stake in the heart they so richly deserve.

  • alohajim

    In a world of bad news, especially in regards to governments, this is fantastic! Great to see the comments – full of understanding and wisdom as to humanity’s core problem/issue.

    The moneychangers, seemingly all powerful, in complete control, have never been more vulnerable. They’ve had a good run with the money from nothing gig from which they have bought up the world’s assets and resources and harvested human capital through government force. Nothing is forever and their massive worldwide con is failing.

    Let each one do what he or she can to hasten this process along eh? – boycott, throw a wrench in the works, be self sufficient and self reliant, no debt, opt out, engage your neighbors, don’t watch tv or subject oneself to any msm, seek out truths that have been hidden and never taught, always favor your own common sense against anything peddled by the media, governments or academia, when appropriate help others understand the con, Boycott!

  • William

    That’s what they want you to believe as you a I now speak they are the ones buying up all the damb gold and silver they can buy .

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