Apr 022013
Gold, silver coins to be legal currency in Utah (AP) – May 22, 2011 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. He plans to open for business June 1, likely the first of its kind in the country. “Because we’re dealing with something so forward thinking, I expect a wait-and-see attitude,” Franco said. “Once the depository is executed and transactions can occur, then I think people will move into the marketplace.” The idea was spawned by Republican state Rep. Brad Galvez, who sponsored the bill largely to serve as a protest against Federal Reserve monetary policy. Galvez says Americans are losing faith in the dollar. If you’re mad about government debt, ditch the cash. Spend your gold and silver, he says. His idea isn’t to return to the gold standard, when the dollar was backed by gold instead of government goodwill. Instead, he just wanted to create options for consumers. “We’re too far down the road to go back to the gold standard,” Galvez said. “This will move us toward an alternative currency.” Earlier this month, Minnesota took a step closer to joining Utah in making gold and silver legal tender. A Republican lawmaker there introduced a bill that sets up a special committee to explore the option. North Carolina, Idaho and at least nine other states also have similar bills drafted. At the moment, Franco’s idea would generally be the only practical use of the law in Utah, given the legislation doesn’t require merchants to accept the coins, either at face value — $50 for a 1-ounce gold coin — or market value, currently almost $1,500 per ounce. And no one expects people will be walking around town with (more…)
May 052011
By Kathleen Brooks 05 May 2011 If you take a look at the major dollar crosses then the decline in the greenback has been a multi-year event. If the dollar remains on this downward path then the natural question to ask is how long can it maintain its position as the world’s reserve currency? This is a potent question at the moment as the world tries to recover from the 2008/2009 financial crisis and, most importantly, starts to re-balance so the binge spending in the West and hoarding of savings in the East finds a more comfortable equilibrium. To answer this question it is worth considering what a reserve currency should be like. Firstly, it must be relatively stable and secondly, it must be immune from political intervention. Looking at the second point first, since late last summer when Federal Reserve chairman Ben Bernanke first touted the idea of a second round of quantitative easing the US has been accused of manipulating its currency lower. Of course a weak dollar is good for the US export industry, but it also has repercussions across the rest of the world in terms of commodity price inflation. Although prices have moderated slightly across the Middle East, inflation is still at a high level and countries such as Saudi Arabia, Kuwait and the United Arab Emirates will not want to see prices continue to rise because of a weak dollar. On this basis it would make macroeconomic sense if the dollar was no longer a reserve currency. While the US economy is going through its rebalancing process away from consumption and towards exports then the dollar needs to be weak. This will keep upward pressure on commodity prices for the foreseeable future. So what should replace the dollar as a reserve currency? Obviously there is the world’s reserve currency. But the single currency has many drawbacks. It is the currency of a monetary bloc not a political entity and the sovereign debt crisis has highlighted the limitations of its structure. The other contender is the Chinese renminbi; after all, China is set to become a bigger economy than the US in a few years’ time. But this looks unlikely. It will take years before the Chinese currency will be fully flexible and it is dubious whether the Chinese authorities would want the renminbi to become the world’s reserve currency. Beijing is at pains to (more…)