Gold, silver coins to be legal currency in Utah

[n2doc]

By JOSH LOFTIN, Associated Press

Sunday, May 22, 2011


(05-22) 19:06 PDT Salt Lake City (AP) --

Utah legislators want to see the dollar regain its former glory, back to the days when one could literally bank on it being "as good as gold."

To make that point, they've turned it around, and made gold as good as cash. Utah became the first state in the country this month to legalize gold and silver coins as currency. The law also will exempt the sale of the coins from state capital gains taxes.

Craig Franco hopes to cash in on it with his Utah Gold and Silver Depository, and he thinks others will soon follow.

The idea is simple: Store your gold and silver coins in a vault, and Franco issues a debit-like card to make purchases backed by your holdings.



Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2011/05/22/national/a122317D01.DTL


suckers.....

[the other one]

1. Already legal-tender nationwide

The US Mint has been making gold and silver Eagles since 1986.

A silver eagle is one ounce of silver and is denominated as one dollar and you can spend it anywhere. Problem is one ounce of silver is worth far moré than one dollar, so it would not be worth the transaction.

A gold eagle is $50, but is worth over $1500 in gold.

I doubt the guy at 7-11 would make change.

[quaker bill]

2. All money is fiction

"settled" money, "fiat" money, all of it is fiction. None of it is worth more than we believe it is. The faith in metals currently runs fairly strong, but faith in the fiction is all it is. Does backing the dollar with gold make the faith in paper more real, or the faith in the metal diminish? Only time will tell. There is no intrinsic reason that one outcome is more probable than the other.

[The Magistrate]

8. A Point That Cannot Be Made Too Often, Sir

Gold has no more inherent value than paper; both depend entirely for their value on people's willingness to exchange for them things like foodstuffs and labor and dwelling enclosures. That willingness is rooted in nothing more than a shared belief money is worth something....

[quaker bill]

14. precisely sir.

[ergot]

16. You are mistaken, gold (and all 'precious' metals) have much intrinsic value

perhaps not precisely or exactly on par with the current price but to compare them with paper is fairly ridiculous.
(I will retract my comment if you can tell me how to improve the electrical conductivity of a connection using a plating of paper)

[jmowreader]

17. Paper also has intrinsic value

Right now I am sitting in a building that contains 130 tons of paper in rolls and a $20 million printing press that is going to turn those rolls into newspapers, which we will then sell. I have also seen paper used in electrical parts (capacitors), in building materials, to wrap products...in reality, paper has more uses than gold, so paper should be worth MORE than gold. However, I understand why it's not.

This conversation, though, isn't about the industrial value of either gold or paper, but rather the value of gold or paper when used as a medium of exchange. In either case, the "medium of exchange" value of either one is limited to what the counterparties to the transaction believe the item is worth. (If I as a possible gold buyer believe an ounce of gold is worth $400 and you as a prospective gold seller believe it's worth $1500, you will continue to be a prospective gold seller because I won't buy it from you.)

[Art_from_Ark]

18. Some paper might have "intrinsic value", but it is minimal

How much is an ounce of loose leaf filler paper worth? Or an ounce of newsprint? An ounce of wrapping paper? Can you go to a dealer and sell it?

And you can print a newspaper on paper, but after a day or two the value of that paper, as well as the unsold copies, essentially goes to ZERO.

At the same time, if I am selling a one-ounce gold bullion coin, why should I sell it for $400 to someone who obviously is either trying to cheat me or who doesn't understand that I can sell the damn thing to a dealer for $1500? There is a long-established world market for gold bullion, so it doesn't matter if someone off the street does not or cannot recognize that little fact.

[jmowreader]

31. Paper isn't sold by the ounce. It's sold by the pound.

Yes, there is a difference between gold and paper. But if you forget about using them as media of exchange and concentrate on their utility, they're both industrial commodities.

Let me explain my $400/ounce comment. I believe gold is in a severe bubble right now. You got people like Glenn Beck running around pushing gold: "Gold is going to hit $5000 per ounce next year! Buy now and save $3500!" (It's been fixin' to hit $5000/ounce next year for the last ten years, but that's beside the point.) You have all these gold certificates and paper gold out there--so many of them that there's no way in hell there's enough physical gold in existence to cover them all. By the time the bubble pops, we're looking at a probable endpoint price level of $400 per ounce, if that. Because I believe gold is going to collapse to $400 probably 4Q2011 or 1Q2012, I wouldn't pay you $1500 for the gold you have. It makes no sense to buy at the peak--why throw away $1100 per ounce?

[Art_from_Ark]

52. There is absolutely no way that gold is going to fall to $400

in 4Q2011. Absolutely no way. I've got news for you-- it ain't Glenn Freakin' Beck who's driving the gold market-- it's the Chinese, Indians, and various central banks that are the biggest players in this, and if gold drops a couple of hundred dollars, they'll see it as a buying opportunity. And "paper gold" is not "physical gold".

[Art_from_Ark]

64. And on the other hand

why should I sell you an ounce of gold based on some completely baseless prediction of $400 gold in the next 6-9 months, when I can sell it to a dealer for $1500 now?

[Recursion]

25. Gold has some limited industrial uses

So there is some intrinsic value in the potential use-value, but nowhere near what is justified by its price. NPR's planet money team pretty much established that gold is in a several-millennia long bubble by every accepted definition of "bubble".

[Art_from_Ark]

26. If it's several millennia long

then it's not a freaking bubble.

NPR's Planet Money "team" apparently knows diddly-squat about money :thumbsdown:

[quaker bill]

37. You sound like you own some

sorry

[Art_from_Ark]

56. Sorry?

What the heck are you talking about?

It's not like I've just been watching Glenn Freakin' Beck and suddenly decided to buy some overpriced foreign gold coins from his sponsor. I've been following the gold market since the '60s. Really, I don't care what Glenn Freakin' Beck says. I don't care what Ayn Freakin' Rand says. I don't care what Keynes says. I don't care what Krugman says. But I do care what the gold market says. And the gold market says that those British gold sovereigns that I bought a few years ago for $78 apiece are now worth more than 4 times that amount if I wanted to sell them. The US $10 gold pieces that were selling for $200 apiece in the '90s are now selling for well over $700 now. And the common $20 gold pieces that were selling for $400 in 1999 are now going for $1600 or more.

[The Magistrate]

33. It Has Some Industrial Worth, Ma'am

And so, in certain manufacturing endeavors, has some value paper does not. This is not the same thing as money worth, as people normally use the term, however.

[quaker bill]

38. Paper is "worth" far more than normal

when printed on in a very specific way. Thus the counterfeiting laws.

This particular brand of fiction seems to have some rather ardent believers here, sir.

[MattSh]

34. Under that definition...

nothing in life has any value at all. Yet I don't see people going around killing themselves in droves...

[The Magistrate]

43. You Are Conflating Meanings Of 'Value', Sir

When a man says he loves his wife, loves his daughter, and loves a good hamburger, he had better be meaning something different in each instance. 'Value' has a similar variety. The sort of things people value in life, finding them to be reasons to live, are the sort of things indicated by the old bromide 'the best things in life are free', in the sense that they cannot really be bought with money, and so have no price, huge though their worth might be..

Money, in whatever form it exists, has as its value only what it can be exchanged for, and the fact that it can be exchanged for anything depends on a widespread belief that it can be exchanged for things of real utility, now and in the future. When that belief is shaken, or when the utility of the thing desired by a purchaser is obviously greater at the moment than any future exchange likely to be managed with monies proffered might be, it becomes difficult if not impossible to exchange money for anything, and this applies not just to paper but to gold, cowrie shells, or anything else you could name.

Mr. Smith in 'Wealth of Nations' expounds at some length on the falsity of believing gold and silver have inherent value, and that their possession constitutes wealth in and of itself. He roots the real basis of price in grain, the essential foodstuff, reckoning gold or silver to be worth what they will exchange for in terms of grain, and in doing so follows (doubtless unknowingly) the practice of ancient China, in which the salaries of officials under the Han were reckoned in amounts of grain, so that a man was said to hold a 'hundred bushel' office, or a 'thousand bushel' office (the actual unit was the picul, a unit of weight rated at about 60 kilos, deriving from the largest load a porter could hold up under for any distance). There was plenty of coin in circulation at the time, copper cash were plentiful and in general use, and silver by weight as well as gold were used in trade, there was even some paper money issued; this 'weight of rice' standard was not a thing resorted to in the absence of the concept of money. The price of money was known to fluctuate; the amount of grain or of silver a pile of copper cash could be exchanged for was known to vary, year from year or season from season or place to place, but the value of grain was constant, in the number of meals it could provide, the amount of life it could sustain.

[baldguy]

9. The true value of gold isn't any different from the true value of a chair

Or the true value of a slip of paper that says "legal tender" on it.

[quaker bill]

13. at certain desperate points in the economic cycle

the value of a loaf of bread exceeds all of this.

[Art_from_Ark]

20. That statement is absolutely, positively wrong.

There is no way to objectively determine the value of a chair. Unless your chair is a Chippendale or Louis XIV, it won't have much of a market value after you take it out of the store. And if it becomes damaged, it essentially becomes worthless junk if you can't fix it.

A slip of paper may say "legal tender" on it, but as the histories of so many countries (most recently Zimbabwe) have proven, when confidence in the issuing authority evaporates, or when the issuing authority is overthrown, or drifts off into oblivion, then the value of that paper can be greatly diminished, or even become totally worthless.

On the other hand, on the world market, the value of gold, in the thousands of years that it has existed as a monetary medium, has NEVER gone to zero. Never. And even today there is an established world market in gold bullion and a network of dealers who will pay prices for that bullion based on the world market price.

[quaker bill]

36. Sorry to poke at your bubble

The fiction related to the value of gold is more widely accepted, you are correct, but that only makes it seem more real. In essence, it is a shiny yellow metal that people believe is valuable, therefore it is. The fact that this faith is more broadly shared makes the fiction more stable, that is all. There is no magic in the particular substance. The substance could be any reasonable thing we all settle on as a store of value.

I like gold as an artistic medium, it melts and pours nicely, it is easy to work, and does not tarnish in the box when I am done. I just don't get the religion about it.

Perhaps my perspective is a bit "jaded". In that I have taken a $12 slab of rock from Madagascar and turned it into $2000 of gemstones in my spare time out in the carport, mounted them in sterling and gold, and sold them to buy more of the metal. I might look at all this a bit differently than most.

[Art_from_Ark]

53. Nonsense

I've been following the gold market for 40+ years. You may want to believe that it's "just a shiny metal" that doesn't deserve any special value, but the rest of the freakin' world has put a value on it for thousands of years, and will continue to put a value on it, because it best meets the criteria for a monetary medium. No matter how much you might want to believe the fiction that it is not valuable, it still has value around the world.

However, if you really feel it has no value, then I will gladly trade you a pound of .950 copper for an ounce of .999 gold, or even an ounce of .900 gold for that matter. After all, copper is an "industrial metal", so it must be more valuable than gold, right?

[Vinee]

27. It seems like it's only fictional when it stops representing goods and/or services.

We need paper money to facilitate trade. That's what it was created for. It seems as if that principle has been lost somewhere along the line which has resulted in "fictional" money. Bottom line, unless we revert to a pure barter system (not likely), some intrinsically worthless things will have to have a value ascribed to them. That will probably be paper currency and precious metals. Personally, I prefer gold and silver. I will gladly give you $35 to mow my lawn but I probably wouldn't trade you a silver eagle for the same service. Paper is a store of convenience. Gold and silver are stores of wealth.

[quaker bill]

35. No, all money is fiction

NPR "planet money" did a lovely explication of the concept not too long back. It dealt with the some hisoric studies and the origin of the Brazilian Real recently.

The Brazilian Real is an invented fiat currency that was invented specifically to stop hyperinflation. The currency it replaced was in hyperinflation to the extent of 1000, to 2000 percent a year. Everything was being repriced daily. Some PhD types from MIT were hired to fix the problem. They created a measure called the URV (Unit of Real Value) and fixed all prices in URV by law. The amount of the current currency it took to buy a URV changed daily, but the price of a loaf of bread remained one URV. They left it like this for a couple of years until folks got used to the price of bread being 1 URV every day. At a moment when the people had developed faith that the URV was the real price, they withdrew all the existing currency and introduced the Real at 1 Real = 1 URV. Inflation simply stopped because people actually believed that 1 Real = 1 Unit of Real Value.

The historical study dealt with an island economy were the currency was large limestone stone disks. THe disks eventually became so large that they were difficult to move, but people continued to use them as currency. The stones were not moved, title to them changed with each transaction. The "mint" was on another island where the limestone could be mined. One particularly large stone swamped the canoes and sunk into the surf. It did not matter, people used it as virtual currency anyway.

Silver was "worth" $50 and ounce two weeks ago, it is now "worth" $35 and change, next week it could be "worth" $25 or perhaps $40, whatever the market believes it is worth. It is a real thing, like the limestone disks, but its value is only whatever we believe it is at the moment, in essence, fiction.

[Vinee]

42. Carrying around chickens, bushels of wheat, and barrels of oil is a very cumbersome way to trade

were we to revert to pure barter, the world would collapse and many people would suffer and die; therefor, we must have something to act as a medium of exchange. That something has, for several thousand years, been precious metal coinage. Why? because it can not easily be manipulated and because, as stated previously, it is NECESSARY. It has always been necessary, it is still necessary, and it will always be necessary. So, yes, it can be considered fictional but it is a necessary fiction. The problem arises with fiat currency when government's increase in the money supply without increasing the quantity/quality of goods, services, and other commercial entities. This is what drives up the price of the "less fictional" currencies like gold as well as the price of other commodities like chickens, wheat, and oil. This is made even worse when it occurs in combination with decreasing quantities/qualities/availabilities of goods and/or increased demand for goods. Look at oil and gas prices for the perfect example of this.

[quaker bill]

45. Precious metal coinage

is not used much of anywhere anymore.

You seem to have this curious notion that there is some direct relation to the amount of money in existence and its value. It is a comforting concept, but false. Hyperinflation can be related to an increase in money supply, but can occur quite well with out it. Further, money supply can be increased dramatically without resulting hyperinflation. There is no definitive causal relationship. The theory is a lovely and popular nostrum but it is not essentially true in a way that is dependable.

Having a convenient way to exchange value for goods is quite useful. Grounding its value in a commodity: gold, diamonds, oil, copper, cotton, pork bellies, whatever, makes it no more stable or useful.

[Vinee]

47. Yet gold or silver coins can still be exchanged for the fiat currency of pretty much any country..

"You seem to have this curious notion that there is some direct relation to the amount of money in existence and its value...Hyperinflation can be related to an increase in money supply"
So, in other words, you're saying that money supply doesn't affect money value; however, money supply does affect money value? How do I respond to that kind of logic?

"Having a convenient way to exchange value for goods is quite useful. Grounding its value in a commodity: gold, diamonds, oil, copper, cotton, pork bellies, whatever, makes it no more stable or useful."
You say that as if you have a choice. The value of any commodity is, to a significant extent, inherently grounded in the current value of the medium of exchange provided no changes in supply or demand of the commodity have occurred.

[Taitertots]

46. Not only is commodity money not necessary, it was abandoned because it was a pathetic failure

Don't take my word, here is the former head of economics from MIT telling you. http://www.jstor.org/pss/2138201

You think the expandability of a currency is it's fault, when it is really the best feature about it.

[Vinee]

48. Gold traded for $1,526/oz today. Does that sound like an abandoned currency to you?

I'm not arguing for a gold standard btw. I'm just saying that the value of money is not some arbitrary product of our imaginations but, rather, a product of our money supply, the supply of our goods and services, and the demand for those goods and services. We can't really stuff a flock of chickens in our wallets or purses to take to the market to trade for whatever it is we want so we created a medium of exchange to facilitate the transactions and that, like most things is something that can be both good and bad (anything can be poisonous if enough of it is consumed). As far as gold/silver goes though, I still think it has a role to play in our economic lives like it or not (I love it personally). So long as our government is in the business of creating debt, gold will continue to appeal to investors. Furthermore, if I were to sell an ounce of gold today that I purchased a few years ago, I would make $500 profit and guess what, I wouldn't pay a dime in taxes on the capital gains unlike shares of stock in JP Morgan or whatever. That's what it's really all about. Speaking of JP Morgan, did you know they now accept gold as collateral for loans? An abandoned currency you say?

[eridani]

30. Bingo. What makes a silly superstition better just because it's been around longer? n/t

[Snoutport]

62. Pshaw! My seashell disks shall never lose their value!

[madrchsod]

3. yup...there`s one born every minute.

[Locrian]

4. The law also will exempt the sale of the coins from state capital gains taxes.

>>The law also will exempt the sale of the coins from state capital gains taxes.

That is a HUGE deal and will feed the mania.

The whole gold / silver market isn't just "hard currency" it's big time speculation. Imagine not paying capital gains on stocks.....

[Kolesar]

5. The gold buyers won't be able to write off the loss when they sell their gold at a loss

If the price of gold collapsed.

[no_hypocrisy]

6. How can you use gold and silver as legal currency?

First, isn't it federal law to have a sole currency that's backed by the Fed? And federal law supplants state law?

Second, the value of gold and silver is constantly fluctuating. If a vendor or a creditor accepted a gold coin at 9 a.m. at the value of $1500 and it fell to $1450 by 3 p.m., they'd have taken a loss. OTOH, they'd have a windfall if the value went up $50 in that time span. A business can't depend upon not knowing the value of its assets and needs a uniform value like federal currency.

[The Magistrate]

7. Please, Ma'am: Intrude No Pesky facts On the Gold Bug Fantasy....

When gold was an actual monetary standard, governments took great pains to keep its value stable, using their own large hoards of the stuff, and their role as principal customer for any mine. Even then, it was not possible to dampen down completely such fluctuatuions, and the specie value and denomination of coins did not always precisely agree

[Art_from_Ark]

22. In case you didn't know it, the Federal government is producing gold and silver coins

And if I am selling something with a price of $30 on it, I can easily say that I will accept either $30 in Uncle Sam's greenbacks, or a one-ounce Silver Eagle minted by Uncle Sam, and it's perfectly legal.

[sensate2000]

10. The nation of Deseret mints its own currency

[Avant Guardian]

11. Why doesn't Utah just toss out all its laws and replace them when RW talking points?

[Change Happens]

12. John Huntsman idea?

[roamer65]

15. Why would I pay anyone in hard currency when...

I can pay them in devalued dollars?

[Art_from_Ark]

21. Absolutely-- Gresham's Law

When given a choice, people will spend fiat money and save "hard" money.

Those of us who were around and paying attention in the '60s saw that up close. In the middle of that decade, 90% silver coins were being replaced with cheap-metal "clad" coins, and President Johnson claimed that they would circulate side-by-side for decades. However, by 1969, the vast majority of 90% silver coins, which had been made through the 1964 coinage year, had been taken out of circulation. Even the 40% silver half dollars that were made from 1965 through 1969 were not circulating because, even though their intrinsic silver value was much less than their face value, they still "contained silver".

[Recursion]

41. Minted gold and silver tender *is* fiat money

That's the part you don't seem to get. That's not some philosophical point; that's part of Gresham's law which you quoted. That's why foreign specie currency is not legal tender.

[Art_from_Ark]

49. Gold and silver tender is NOT fiat money

That is the part YOU don't get. You can't put a face value of $10 on a one-ounce gold coin, and $10 on a 1/2 ounce gold coin, and expect them to circulate, because their intrinsic value would far exceed their face value. Ergo, it would NOT be fiat money, unlike paper or base metal coins whose face value greatly exceeds their intrinsic value

[Recursion]

51. Yes, it is. It just is.

Try to spend a foreign gold coin in Utah.

[Art_from_Ark]

54. You don't understand the definition of "fiat money"

Fiat money is, by definition, money that is not backed by something else, usually precious metals. Gold, by definition, is therefore NOT a fiat currency.
Whether or not I can spend a foreign gold coin in Utah is moot. I can take that gold coin to a coin shop in Utah and trade it for legal tender, and its value will be based on the prevailing price of gold on that day, not on what some government decides its value is.

[Recursion]

55. Go ahead. Try to spend a foreign-minted gold coin in Utah

Until you learn what "fiat money" actually means in a legal sense, this is a pointless conversation.

[Art_from_Ark]

58. Once again, that is not what "fiat money" is

Gold, whether foreign or domestic, is not fiat money because its value is not determined randomly by the government. Rather, its value is determined by the world market based on its weight and fineness (purity).

On the other hand, the government gives one piece of paper a value of $1, while another piece of the same size and type of paper is given a value of $100, and neither is backed by anything except confidence in the issuing authority. Or the government gives one disk of copper-nickel alloy a value of five cents, while another disk of only slightly heavier copper-nickel alloy is given a value of 25 cents, and neither one has intrinsic value that is at least equal to its face value. Those are textbook examples of fiat money.

[Recursion]

63. Sigh

So many microeconomics (or even macroeconomics) textbooks I should point you to. As it is, it's not worth it. You're just wrong.

[Art_from_Ark]

65. For crying out loud

I've been following the gold market for 40+ years. You have absolutely no idea what "fiat money" is. If your micro/macroeconomics textbooks claim that gold is "fiat money", they are full of shit. Period.

[roamer65]

59. You are absoutely right, Art.

Fiat money or currency is money by government decree.

[Art_from_Ark]

60. I think some people here are making up their own definitions

They really should study about the history of fiat money and not just parrot some talking points from some anti-gold web site.

[jmowreader]

19. I read the bill. I don't get it.

This is the bill...http://le.utah.gov/~2011/bills/hbillenr/hb0317.htm

Check this out:

59-1-1502. Gold and silver coin.
1. Gold and silver coin issued by the federal government is legal tender in the state.

(Well, yes, it would be: it is also legal tender in the other 49 states that decided to stop working on banning abortion or busting unions long enough to write this kind of a law.)

2. A person may not compel any other person to tender or accept gold and silver coin that is issued by the federal government.

(And this is the part I do NOT get--if accepting this money is optional, why have this kind of law in the first place?)

The reality of this law is, it is just to exempt gold and silver transactions from capital gains taxes. They talk about spending money to study the possibility of creating a form of legal tender for use within the state, but the Constitution that Republicans claim to revere says, very plainly, that states will not coin money. (Article I, Section 10, paragraph 1. The freepers claim "no state shall make any thing but gold and silver coin a tender in payment of debts" legalizes making your own coins--our embarrassment Phil Hart wrote a law around this clause--but "no coining your own money" comes two prohibitions before it; the "nothing but gold and silver coin" is there to keep Virginia and North Carolina from taking tobacco for tax payments.) So obviously, this study should take about a minute.

[LadyHawkAZ]

23. I've heard rumors from several ex-Mormons

here in town, that the Church has quite a bit of precious metal squirreled away in the tunnels under the Temple. No way to know if it's fact or fantasy of course, but the state government here does nothing that is not blessed by or designed for the benefit of the LDS Church.

I had dismissed the stories as just cool stories, like the inevitable ghost in an old building, but now I'm starting to wonder if they might be right.

[Recursion]

24. So... after 400 years of Western economics crawling out of the trap of specie-based currency...

...they jump back in. Awesome.

[Art_from_Ark]

28. Just what the heck is that supposed to mean?

I have absolutely no idea what you're talking about.

[Recursion]

39. Yeah, it sounds like you don't

I'd start with Ferguson's The Ascent of Money.

[Art_from_Ark]

61. And I'd start you off with Hungary, 1946; Poland, 1995;

Yugoslavia/Serbia, 1993; Germany, 1944; France, 1950s; Italy, post-war era until euro introduction.

[Art_from_Ark]

29. Gold and silver coins made by Uncle Sam are already legal tender everywhere

As per the Coinage Act of 1965, every coin ever produced by the US Government since 1793 is considered to be legal tender. That includes all silver and gold coins produced by the various US Mints.

[Recursion]

40. Well, sure, but you'd be stupid to use an old coin at its tender rate

Then again, a 1870 dollar bill is legal tender and you'd be stupid to spend that at its tender rate, also.

[Art_from_Ark]

50. Sure, it would be stupid to use them at face value

but they are STILL legal tender. My comment was made in regard to the original post, which makes it seem like gold and silver legal tender is something dreamed up recently by a state.

[divvy]

32. so ..... trade a pinch of gold dust for a pack of cigarettes?

the "good old days" were not so good.

[Shagbark Hickory]

44. It's brilliant! Get consumers to spend more of their savings with a credit card and let the credit

card companies make a fortune on all those purchases.

:sarcasm:

[sendero]

57. Unless they are going to base..

.... the value on spot price rather than face value, you'd have to be an idiot to use gold/silver.