Earlier this month, the Arizona Senate Finance and Rules Committees voted to support legislation (HB 2014) officially defining gold, silver, and other precious metals as legal tender. The bill also exempts transactions in precious metals from state capital gains taxes.
The legislation, which previously passed the state House by a 35-24 vote, would eliminate state capital gains taxes on income “derived from the exchange of one kind of legal tender for another kind of legal tender.” The bill defines legal tender as “a medium of exchange, including specie, that is authorized by the United States Constitution or Congress for the payment of debts, public charges, taxes and dues.” “Specie” means coins having precious metal content.
Idaho, Texas, Tennessee, Virginia, and Maine are also considering similar legislation to establish some currency competition rooted in sound economic and constitutional principles.
The Constitution expressed a clear preference for settling debts with currency consisting of gold and silver. As the US moved away from these requirements and ultimately away from the gold standard, the financial system opened itself up to the vulnerability of a currency collapse.
According to former US Representative Ron Paul, the move away from a gold standard to a fiat currency has contributed to the “continuing decline in the dollar’s purchasing power accompanied by a decline in the standard of living of middle- and working-class Americans, a series of Federal Reserve-created booms followed by increasingly severe busts, and an explosive growth in government spending. Federal Reserve policies are also behind much of the increase in income inequality.”
The recent moves by the Arizona legislature are one of several high profile statements in strong support of gold. In a recent interview, Alan Greenspan, who served as chairman of the Federal Reserve Board of the United States from 1987 to 2006, had the following to say in a recent Gold Investor interview “I view gold as the primary global currency. It is the only currency, along with silver, that does not require a counterparty signature. Gold, however, has always been far more valuable per ounce than silver. No one refuses gold as payment to discharge an obligation. Credit instruments and fiat currency depend on the credit worthiness of a counterparty. Gold, along with silver, is one of the only currencies that has an intrinsic value. It has always been that way. No one questions its value, and it has always been a valuable commodity…”
Here at GSI Exchange, we could not agree more. In light of gold’s strong performance in 2016 and excellent start to the new year we are recommending our client’s review and rebalance their portfolios to ensure there is appropriate exposure to gold and silver coins and bullion.