EDITOR NOTE: It appears as if the state of Idaho is on its way to allowing its State Treasurer to convert its “idle moneys” to gold as a hedge against inflation. Considering the ultra-low interest rate environment in bonds, the state has very few options besides maintaining its reserves in cash whose values are steadily eroding in the current pro-inflationary monetary environment. It’ll be interesting to see what this leads to once the bill is passed--namely, taxation laws concerning monetary metals and whether gold and silver may be considered legal tender in the state. Though nothing close to a Gold Standard, the passing of this bill would be a small step toward the mainstreaming of monetary metals, bringing money closer to how it was conceived and how it operated since the founding of the nation. As an investor, it's important to anticipate the possibility that other states may begin taking similar steps once inflation shifts into high gear, eroding the dollar's value and encouraging international investors to increase their rate of de-dollarization. Buying non-CUSIP gold and silver now would be a prudent and pre-emptive step toward protecting your wealth, as some states have already begun to do so.
The Idaho State House today overwhelmingly approved a bill which enables the State Treasurer to protect state reserve funds from inflation and financial risk by holding physical gold and silver.
State representatives voted 51-19 to pass House Bill 7, the Idaho Sound Money Reserves bill, sending the measure introduced by Representative Ron Nate (R-Rexburg) and Assistant Senate Majority Leader Steve Vick (R-Dalton Gardens) to the Senate for a hearing.
Backed by the Sound Money Defense League and others, HB 7 would permit – but not require – the State Treasurer to hold some portion of state funds in physical gold and silver to help secure state assets against the risks of inflation and financial turmoil and/or to achieve capital gains as measured in Federal Reserve Notes.
Testifying earlier before the House State Affairs Committee, Rep. Nate said, “With new concerns about financial instability, it makes sense for investors, and it makes sense for states, to turn to real assets, especially in terms of precious metals, to protect their funds.”
The Idaho Treasurer is given very few options for holding, managing, and investing Idaho’s “idle moneys” (which currently amount to several billion dollars). H7 adds physical gold and silver so long as they are held in a secure depository in Idaho or a neighboring state.
Jp Cortez, Policy Director of the Sound Money Defense League, said, “Because of market conditions and statutory constraints, Idaho’s reserves are invested almost exclusively in low-yielding debt paper – such as corporate bonds, tax-anticipation notes, municipal bonds, repurchase agreements, CDs, treasuries, and money market funds.”
“These debt instruments appear to have low volatility, but they carry other risks – including pernicious inflation and the steady erosion in real value of principal, coupled with interest rates that are negative in real terms,” Cortez continued.
By holding almost nothing but low-interest debt paper, Idaho’s reserves have mustered a return well below 2% -- a negative rate of return when adjusted for inflation.
H7 simply adds the authority to hold physical gold and silver directly – and in a manner that does not assume the counterparty and default risks involved with other state holdings. Meanwhile, H7 bill does not grant any authority to buy stocks, futures contracts, or other financial instruments.
“An allocation to physical gold and silver fits squarely within the objective of protecting Idaho ‘idle moneys’ against financial risks and would logically be included in a list of safe investment options,” said Stefan Gleason, President of Money Metals Exchange, an Idaho-based national precious metals dealer named this year by Investopedia as the best overall precious metals dealer in the United States.
The monetary metals can provide a hedge against inflation, debt default risks, and stock market declines – and have historically boosted investment returns while also reducing volatility,” said Gleason.
House Bill 7 is expected to be heard before the Senate State Affairs Committee as early as next week.
Originally posted on GoldSeek.com