Distrust of the Federal Reserve and concern that U.S. dollars may become worthless are fueling a push in more than a dozen states to recognize gold and silver coins as legal tender.
Arizona is poised to follow Utah, which authorized bullion for currency in 2011. Similar bills are advancing in Kansas, South Carolina and other states.
The measures backed by the limited-government Tea Party movement are mostly symbolic -- you still can’t pay for groceries with gold in Utah. They reflect lingering dollar concerns, amplified by the Fed’s unconventional moves in recent years to stabilize the economy, said Loren Gatch, who teaches politics at the University of Central Oklahoma.
“The legislation is about signaling discontent with monetary policy and about what Ben Bernanke is doing,” said Gatch, who studies alternative currencies at the Edmond, Oklahoma-based school. “There is a fear that the government, or Bernanke in particular and the Federal Reserve, is pursuing a policy that will lead to the collapse of the dollar. That’s what is behind it.”
Bernanke has pushed interest rates to near zero since the 18-month recession that began in December 2007. The Fed said in March it would continue buying $85 billion in securities each month in a program known as quantitative easing that has ballooned its assets beyond $3 trillion and is aimed at keeping long-term borrowing costs low to support economic growth.
Consumer prices rose just 1.3 percent in February from a year earlier, according to an inflation measure favored by the Fed. That was below the central bank’s 2 percent target and compares with occasional bouts of more-than 10 percent increases in the 1970s and early 1980s.
Bets that inflation would pick up because of economic- stimulus measures helped fuel a 78 percent jump in gold since December 2008. The dollar’s rise to less than 1 percent below a one-year high set in July and monthly increases of about 2 percent or less in the U.S. consumer price index have curbed demand for bullion. Since reaching a record $1,923.70 an ounce in 2011, gold prices have fallen and are near a bear market.
Gold futures for June delivery fell almost 0.2 percent today, to $1,573.20 an ounce on the Comex in New York and have lost 6.1 percent this year. The price touched $1,539.40 on April 4, a 10-month low for a most-active contract.
In Texas, lawmakers are considering a measure supported by Republican Governor Rick Perry to establish the Texas Bullion Depository to store gold bars valued at about $1 billion and held in a New York bank warehouse. The gold is owned by the University of Texas Investment Management Co., or Utimco, which took delivery of 6,643 bars of the precious metal in 2011 amid concern that demand for it would overwhelm supply.
The proposed facility would also accept deposits from the public, and would provide a basis for a payments system in the state in the event of a “systemic dislocation in a national and international financial system,” according to the measure.
Should Texas take such a step, it would offer sovereign backing for deposits and make buying and storing gold easier, said Jim Rickards, senior managing director at Tangent Capital Partners LLC in New York and author of “Currency Wars: The Making of the Next Global Crisis.” He said the coin measures, while impractical, have symbolic value.
“We are seeing a distinct movement back to a world where gold is considered money,” Rickards said.
The measures give “people the option of using money that won’t lose any purchasing power to inflation,” said Rich Danker, economics director at the American Principles Project. The Washington-based public-policy group supports the steps as well as a return to the gold standard, which pegged the dollar’s value to bullion. President Richard Nixon formally ended the convertibility of U.S. currency to the precious metal in 1971.
“People in these states find the idea of having the option to use hard currencies appealing over these policies they have no control over,” Danker said.
The U.S. Constitution bars states from coining money and also forbids them from making anything except gold and silver coin tender for paying debts. Advocates say that opens the door for the states to allow bullion as legal tender. The measure being considered in South Carolina would recognize foreign or domestic minted coins as legal tender.
Utah’s law applies only to U.S.-minted coins, while other states are less clear on whether privately produced coins qualify. Arizona leaves the door open for private coins if they are declared legal by a non-appealable court order.
In Utah and some other states, the measures also eliminate state capital gains or other taxes on the coins.
Critics say the state measures are unwieldy. In Arizona, Senator Steve Farley, a Democrat, unsuccessfully offered an amendment that would have recognized as legal tender other state commodities, such as citrus fruit, as well as sunbeams. The amendment was intended to reflect the absurdity of the bill, said the 50-year-old lawmaker from Tucson.
“It is simply grandstanding to get people afraid that somehow President Obama’s agenda is going to drive us into hyperinflation and economic collapse,” Farley said. “We have enough real problems to deal with. I don’t see undercutting our entire financial structure as a priority.”
In Utah, officials haven’t yet figured out how to accept gold and silver for tax payments -- though some residents have asked to pay that way -- or integrate the precious metals into commerce, state Treasurer Richard Ellis said. Lawmakers have established a task-force to study implementing the law and to examine how the state can accept gold and silver, with their fluctuating values, for payment, Ellis said. He’s not optimistic that it will work, he said.
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An Argentine man who thought he bought a pair of poodles at an outdoor market in Buenos Aires brought them home to the vet only to be told they were actually ferrets on steroids, reports the Daily Mail.
The man, a retiree from Catamarca, purchased the animals at La Salada, Argentina’s largest bazaar.
The veterinarian informed him the ferrets “had been given steroids at birth to increase their size and then had some extra grooming to make their coats resemble a fluffy toy poodle,” the paper says, translating a report from a local Argentine TV station. He paid $150 per poodle.