Note: This bill died in committee! Please educate yourself about the bill and get your friends to rally behind this bill so it can get pushed through during the next session!
There exists a bill (HB 3505) to create a Texas Bullion Depository. HB 3505 would establish the Texas Bullion Depository as an agency of this state in the office of the comptroller.
The Stated purpose written right into the bill is to:
- Provide basis for intergovernmental payments and transactions between persons.
- Create a process and mechanism by which to function in a systemic national or international collapse.
What the bill essentially does is create a means for intergovernmental transactions to occur in precious metals. Taxes could be paid in precious metals and it would allow people who receive payments from the government to elect precious metals for payment. It would also allow normal citizens to open an account and deposit their precious metals in the state depository. They could then use the electronic system to make payments to any other business or person who also hold an account.
All metals would be redeemable on demand. Fractional Reserve banking would be prohibited as well as all other types of banking or investment with the deposits.
The Texas Bullion Depository Bill was filed by Rep. Giovanni Capriglione (R-Southlake), and according to his office Governor Rick Perry is very interested in the idea.
Why This a Key Bill According to The Author
The man who initially drafted this legislation is Rick Cunningham of the Texas Center for Economics, Law, and Policy. Mr. Cunningham is not only the Executive Director of the Center, but he is a magna cum laude graduate of Texas A&M with a degree in Economics, as well as a graduate of the University of Chicago Law School, where he served as associate editor of the Law Review journal.
According to Mr. Cunningham,
“this proposal consists of two parts – the “depository” part and the “system” part. The “depository” part … provides simply for hedging the state’s investment risk by allocating a recommended portion of state and local investment assets to physical gold and other precious metals, and housing those metals in a state-operated facility….
“But the truly game-changing aspect of this proposal … lies in the “system” part. This would be an advanced, state-owned and operated system of electronic payments and settlements, denominated in ounces of precious metals, barred from engaging in lending, leasing, speculative or derivative transactions, and always maintaining a 100% ratio of bullion reserves to account balances. At full scale, not only could it sustain state and local government operations, it could potentially sustain large swaths of the Texas economy, even in the face of a national financial or currency crisis.”
He goes on to list some of the advantages of the depository. He says that “Bullion placed on deposit would become the property of the State of Texas, while depositors would … [receive] legally-binding, transferable rights to receive withdrawals on demand, guaranteed by a standard depository account contract, and backed by the state’s full faith and credit. The depository would be open for use by private as well as public depositors, whether individuals from other U.S. states and foreign countries, pension funds, trusts, … major corporations and financial institutions, and even foreign governments.”
Why This is A Key Bill For All of Texas!
James Rickards is the senior managing partner at Tangent Capital Partners, based in New York City. He is also the author of an intellectually rigorous and eye-opening book called Currency Wars, in which he lays out the historical evolution of gold as both a means of payment and a store of value over the past century and a half.
Mr. Rickards focuses not as much on what the depository does, but what advantages it holds for Texans in light of our current economic situation.
The question he asks is, in light of the dilemma facing investors today about how to protect savings and investments against inflation without risking massive losses, what options do they have? “Where can investors turn?”
“The answer,” Mr. Rickards explains, “is gold and other precious metals. These metals have a long history of preserving wealth in the face of many catastrophic outcomes, including inflation, war, civil unrest, and … asset freezes….
“Brokers may go bankrupt as happened recently to MF Global. Exchanges may be closed as also happened recently after Hurricane Sandy. Other forms of default, defalcation, and force majeure may arise. These risks are eliminated when the precious metals are held in physical form.
“However, many investors … are unfamiliar with gold and precious metals and are uncertain how to acquire them. In addition, concerns arise with regard to safe storage. Many investors do not want to place gold in the banking system because of the risk of confiscation as happened in the United States in 1933 by executive order…. But, investors also have legitimate concerns about home storage because of the risks of robbery.
“H.B. 3505 offers a solution to all of these problems. It allows state pension funds to purchase gold and precious metals in bullion form. It offers citizens a chance to invest in assets that protect them against Fed-sponsored inflation. It allows for safe storage in vaults controlled by the State of Texas. It offers Texas state sovereignty as a shield against federal confiscation.”
Why This Is A Key Bill In My Opinion
This is a key bill, because the bill will solve most all of the problems associated with using Gold or Silver as money.
If you read my post “Why We Don’t Use Gold And Silver As Money”, you will know there are 4 major reasons Gold and Silver are not used as money today in Texas.
1. There is not much of a Gold and Silver economic ecosystem. In other words there has to be a critical mass of places which will accept Gold and Silver before other places accept Gold or silver.
The Gold Depository bill solves part of that problem by establishing that at the very minimum everyone can pay their taxes using Gold or Silver. Plus it would open up the door for government employees and contractors to receive payment in Gold or Silver if they chose to do so.
2. People and businesses don’t want to incur the loss that happens when converting Federal Reserve Notes to Gold or vice versa.
The Gold Depository Bill resolves some of this problem by establishing a system of payments and receipts which never require a conversion to Federal Reserve Notes.
3. People are worried about how to figure their taxes, especially the Capital Gains Tax.
The Gold Depository Bill charges the Texas Comptroller to devise a means for calculating the Capital Gains Tax. This relieves the common people of the fear that they will be arrested by the IRS because the didn’t calculate their Capital Gains Tax properly. This bill will add a layer of protection for businesses and citizens of Texas who elect to use precious metals as money.
4. People and businesses don’t use Gold and Silver as money out of fear. Fear of being prosecuted, and fear of confiscation.
The Gold Depository bill functions as a shield for the citizens of Texas who wish to use Gold and Silver as money. It will provide a layer of protection for the citizens of Texas from any Federal charges of counterfeit. The bill also has protections from confiscations if such a law or executive order is ever given again. When the people feel safe to use Gold and Silver as money, it is our belief they will chose to do so again.
13 Pros of This Bill According To Rep. Capriglione
- 1. It would keep Texas’ gold in Texas.
- TX currently has over 6,500 gold bars stored at the Hong Kong Shanghai Bank in NYC. It is our right to keep what is ours close to us.
- Just as Rick Perry says: “If we own [the gold]… that’s not someone else’s determination whether we can take possession of it or not.”
- 2. It would decrease the uncertainty associated with allowing a private entity in another state to store and guard our gold.
- We cannot gain access to accurate information about the cost UTIMCO or other funds incur in storing their gold at HSBC Bank, but guidelines from Bloomberg lead us to believe the fees are between $5 and $12 mil/year.
- The state would incur far fewer fees in having it stored locally, away from the financial hub of NYC – especially if we are able, eventually, to outsource the security and insurance functions to private actors.
- 3. It would assist all our state agencies in diversifying their assets to hedge against a huge loss in value during a recession.
- In 2008-09, Texas lost $34.6 billion dollars in value on its investments.
- In that same time period, the value of gold increased over 31%. Diversifying our portfolio to include gold would have literally saved the state billions.
- (Now, obviously, those other investments are starting to come back, and the value of gold is dipping slightly. In times like these, gold would be less of a factor in our fund management, although this may be a good time for the state to buy gold while the value is down.)
- 4. Storing gold provides stability and hedges against the risk of a national or international financial crisis.
- James Rickards: “Gold never changes in value; currencies just go up and down” relative to it.
- In Greece and Cyprus recently, severe devaluation of their currencies led the governments to confiscate privately-held assets to finance their debt crises.
- The US credit rating was downgraded last year, and other financially reputable nations such as Germany are also on the verge of a credit downgrade.
- In such an interconnected global economy, crises spread rapidly.
- The New York Times recently said about our bill that “gold… remains the one currency that is accepted everywhere. In the event of a currency crisis, the gold could be quickly deployed in financial markets to help restore confidence.”
- 5. It would increase confidence in our state economy, which would be good for economic development.
- It incentivizes business to locate in our state, thus increasing employment rates and state tax revenue collections.
- It would also prevent a run on our banks from occurring. A run on the bank often occurs because of a lack of confidence, when people are worried there is nothing there to back up their deposits or accounts. As the Washington Post stated a few weeks ago in its article about this bill, “the [financial] system … is built on trust – that the New York Fed won’t suddenly be taken over by people with no respect for those nations’ property rights and seize it for their own use.” Having the ability to store gold in our state would increase confidence and would cure the problem of a run on our banks before it can happen.
- 6. Money currently being shielded from taxes in off-shore accounts would re-locate to Texas.
- Many tax havens have a residency requirement, so you would have to buy a house there before being able to store your assets. In TX, investors wouldn’t have to do that (at least not with this bill), so they would be incentivized to relocate their assets here.
- 7. The gold would be backed by the “full faith and credit” of the State of Texas.
- This is the ultimate backstop for an investor.
- It also avoids the need for certification by commercial exchanges such as COMEX and the fees and outside regulations that come with it.
- Membership in COMEX or other exchanges is only necessary when assets will be traded using futures contracts and other derivative transactions. Our depository would not allow such speculative activity.
- The bullion in the depository would not be lent out or lent against.
- 8. Setting up a depository may require an initial appropriation of funds for setup, but it has huge profit potential and will soon pay for itself and then some.
- It would likely result in a net revenue gain to the state.
- Administrative costs of running a depository can be outsourced to the private sector.
- These private “depository agents” would be licensed and overseen by the state, but would be able to charge their own fees to cover security and transportation costs incurred in storing and moving the gold.
- Having multiple depository agents would also spread the risk of theft between several different locations, thus driving down the costs of insurance and the insurance-related fees that are passed on to depositors.
- 9. Security for the depository location or locations would be outsourced to Brinks, Dunbar, or another independent security firm. These firms perform security functions better than banks.
- 10. This bill does not require the transportation or sale of our existing stock of gold bars. It simply sets up the infrastructure for the storage of bullion in our state and a system of gold-denominated payments between and among state agencies.
- Individual depositors would later be invited to deposit their bullion as well, but at least at first, state agencies would need to “prime the pump” with some of their assets until the system is more well-established.
- 11. The Committee Sub of this bill provides flexibility to the Comptroller in overseeing the depository system, by not mandating the percentage of assets each agency has to hold in gold, and by not mandating a certain percentage of an agency’s federal securities that must be divested.
- It gives the Comptroller flexibility and allows her investment officers to do their thing.
- 12. Other nations and states are already taking action.
- 13 other states have bills filed to make gold legal tender for the purchase of goods or services. Utah passed a legal tender bill in 2011.
- These remedies aren’t as good as a depository, since people in Utah will still have to pay federal taxes (in dollars). And their gold isn’t safe from confiscation by federal authorities in times of crisis.
- Germany has formally asked NYC banks to return its gold.
- Since the banks have lent out or otherwise encumbered Germany’s gold, it will take 7 years before the NY banks have enough gold to repatriate Germany’s share.
- Venezuela, Azerbaijan, , the Netherlands, Switzerland, and others are also taking their gold back from banks in London and NYC.
- China and Russia already store their own gold.
- China has actually made the export of gold illegal.
- 13. Geographically, Texas is well-positioned and uniquely poised to become a hub for gold deposits from all sides.
- Right in the middle of the east and west coasts, close to the offshore islands and tax havens of Central America.