On February 24, 2011, a bill entitled "H.B. 317 Substitute Currency" was introduced in the Utah State House of Representatives. The bill has captured the attention of other states and indeed the federal government.
There are two basic parts of the bill that pertain to general commerce and to those wanting to use gold or silver coin for the payment of debt or for the purchase of goods and services. First, though not compulsory, the bill allows merchants and the state to accept US minted gold and silver coin as legal tender based upon its current market value and not upon its face value. Second, the State of Utah will forego its tax on the capital gain of the precious metal coins as they are bought and sold.
A merchant in Utah, when presented with a US minted gold or silver coin may accept the coin based upon his own research as to the value of the coin and make change in the form of fiat currency if needed. This would require participating merchants to undertake their own due diligence of value on an almost hourly basis.
Although some have objected to allowing the practice to go forward, it offers a legal alternative in the Beehive State to the declining value of US currency. As the federal government prints more and more paper money to pay its debt, commodities such as gold and silver continue to rise. As the dollar weakens and its purchasing power declines, alternative forms of currency emerge to fill the gap and become a substitute for the weakened currency.
But will the signing of this bill change the way money is traded in Utah? For the most part, I think not...at least in the short run. The state's projected forfeited revenue in 2012 on capital gain from the tendering of gold and silver coin is about $260,000. Based on 5% of the gain, this would only amount to about $5,200,000 in capital gains for the metals in the projected year with an unknown value given to the total value of capital gains transactions. Even if this amount doubles it will still not be significant in a state with a population of 2,800,000.
In order for a currency to be completely replaced, there must be another practical currency to take its place. Gold and silver coin has become very attractive recently as a hedge against inflation but not as a form of generally accepted currency. Minted US coins are generally in weights and value too great to be used at the corner grocery store. It will require another form of minting to make the denominations necessary to make these precious metals viable for everyday trade.
There are two basic parts of the bill that pertain to general commerce and to those wanting to use gold or silver coin for the payment of debt or for the purchase of goods and services. First, though not compulsory, the bill allows merchants and the state to accept US minted gold and silver coin as legal tender based upon its current market value and not upon its face value. Second, the State of Utah will forego its tax on the capital gain of the precious metal coins as they are bought and sold.
A merchant in Utah, when presented with a US minted gold or silver coin may accept the coin based upon his own research as to the value of the coin and make change in the form of fiat currency if needed. This would require participating merchants to undertake their own due diligence of value on an almost hourly basis.
Although some have objected to allowing the practice to go forward, it offers a legal alternative in the Beehive State to the declining value of US currency. As the federal government prints more and more paper money to pay its debt, commodities such as gold and silver continue to rise. As the dollar weakens and its purchasing power declines, alternative forms of currency emerge to fill the gap and become a substitute for the weakened currency.
But will the signing of this bill change the way money is traded in Utah? For the most part, I think not...at least in the short run. The state's projected forfeited revenue in 2012 on capital gain from the tendering of gold and silver coin is about $260,000. Based on 5% of the gain, this would only amount to about $5,200,000 in capital gains for the metals in the projected year with an unknown value given to the total value of capital gains transactions. Even if this amount doubles it will still not be significant in a state with a population of 2,800,000.
In order for a currency to be completely replaced, there must be another practical currency to take its place. Gold and silver coin has become very attractive recently as a hedge against inflation but not as a form of generally accepted currency. Minted US coins are generally in weights and value too great to be used at the corner grocery store. It will require another form of minting to make the denominations necessary to make these precious metals viable for everyday trade.
SHARE
