Texans May Be Writing Gold-Backed Checks Early Next Year
Texans’ writing checks as good as gold is just a few months from reality.
In June, Texas state authorities selected the builder/operator and administrator for a depository that will store gold and other precious metals. The builder/operator, Austin-based Lone Star Tangible Assets, has an existing vault in North Austin that will be refitted and begin accepting precious metals in January while the depository is under construction. The depository is scheduled to be finished in December 2018.
State government leaders are not pushing the idea of an alternative currency, but all the elements are there for the creation of one, political scientists and economists have noted. The legislation creating the depository, signed by Gov. Greg Abbott two years ago, includes provision for precious-metal depositors to write checks or make electronic transfers.
The declining purchasing power of money, which has its genesis in the creation of the Federal Reserve in 1913, frustrates many Americans, including those living on small and fixed incomes. Sound-money advocates envision a future of alternative currencies supported by gold and depositories in various states challenging the monopoly of Federal Reserve Notes.
Federal Reserve Notes, the dollar bills commonly found in people’s pockets, lost their connection to gold in 1971 when President Richard Nixon removed the last vestige of the gold standard. The dollar has been considered a fiat currency ever since.
Texas’ experiment could be a new dawn for alternative currencies.
“I’m cautiously optimistic that Texas is laying the groundwork that the feds won’t be able to counter, and we’ll be able to put the Fed out of business over time,” William Greene, a political science professor at South Texas College, said in May of this year.
Ron Paul, retired Texas congressman and ongoing critic of the Federal Reserve, is among those praising moves to alternative currencies. He testified in support of legislation in Arizona that allows people to use gold, silver, and other precious metals as legal tender and exempts them from capital-gains taxes.
“There is no more justification for forcing individuals to use government-created money as there is to force them to drive government-manufactured cars,” Paul said in May, celebrating the passage of HB 2014. “The passage of this bill will … help make more attractive Arizona to the growing number of people seeking alternatives to fiat money in order to protect themselves, their families, and their businesses from the effects of Federal Reserve policy.”
He called upon other states to pass similar laws.
Paul’s inspiration, Ludwig von Mises, favorably compared currencies backed by gold to paper money without such backing. The two are simply “not the same,” Mises said many times, including in his last public lecture.
Meanwhile, the Fed, home of the unbacked dollar, claims to be succeeding in boosting financial stability, according to a June 27 speech by Vice Chairman Stanley Fischer.
“There is no doubt that the soundness and resilience of our financial system has improved since the 2007–9 crisis,” he said. “We have a better-capitalized and more-liquid banking system, less run-prone money markets, and more robust resolution mechanisms for large financial institutions. But it would be foolish to think that we have eliminated all risk.”
In the face of central bank optimism, Texas continues the nation’s most visible decentralizing effort.
A chain of precious-metals depository offices in Texas is an idea agreed upon by the depository builder/operator and state Comptroller Glenn Hegar. The network will feed gold and other precious metals to the main depository, which is expected to be built in the state capitol of Austin or nearby. The depository and its network will accept gold, silver, platinum, palladium, and rhodium, according to Lauren Willis, spokesperson for Hegar.
To serve the liquidity needs of large depositors, Lone Star Tangible Assets plans to work with a “major banking partner,” according to a press release issued by Hegar’s office. A partnership agreement has not yet been signed, Willis said.
The recently selected administrator of the depository, Tom Smelker, has been the state’s director of treasury operations for the past 10 years and worked for the Texas State Treasury for close to 30 years. The idea for the depository was first proposed in 2013, and Smelker has been advising it since then.
Hegar, who oversaw the process that resulted in selection of Lone Star Tangible Assets from among six bidders, and Smelker are among those emphasizing asset safety.
“This is a great moment in the history of our state,” Hegar said. “The Texas Bullion Depository will be yet another example of why Texas is the greatest state in the nation and a leader when it comes to economic innovations. People will be able to sleep at night knowing the state of Texas is protecting their gold.”
Emphasizing the uniqueness of the facility, Smelker said: “I am honored to have been asked to serve as the first administrator of the first-ever state-run gold bullion depository. I am looking forward to meeting the challenges ahead and creating a safe and secure facility where Texans and Texas businesses can store their gold.”
Lone Star Tangible Assets, founded in 2008, maintains a Class 3 rating on its current vault, which is the highest possible. Its brands include the United States Gold Bureau and International Trade Bullion.
With paper money’s future precarious in the minds of many, the Texas experiment bears watching and deserves cheering.
