KANSAS JOINS THE BULLION AS LEGAL TENDER FLOOD: SCENARIOS
W.G. spotted this story, and we thank him for passing it along. As regular readers know, we've been following the story of American states passing "constitutional money" resolutions for quite some time. But what began as a trickle is now becoming a flood. So before we indulge my high octane speculations of the day about this story and where it fits with the wider trend, first the story itself:
So what does it mean? For one thing, it's an indicator of how serious this movement has become, and a little anecdotal evidence is in order to explain why: Kansas was, when I was growing up, my second home. My mother hailed from there, one of her brothers (and hence, many of my cousins) lived there, and our thanksgivings were spent visiting them all in Topeka. One thing always struck me about Kansans, and it was a characteristic common to most mid-westerners: it took a major exertion of energy to get Kansans to sign on to "the latest thing." There's a no-gliztiness-no-nonsense aspect to Kansas culture that is very hard to describe, but I suppose it's good to remember at this point that Kansas' two major contributions to American presidential politics were Alf Landon and Bob Dole, and other than the nest of progressive nuttiness in Lawrence (KU) and its political outpost in Topeka, the rest of the state is...well, not just conservative, but stodgy. It just doesn't jump on any bandwagon too readily, even conservative ones like bullion legal tender resolutions and bills.
The fact that it is considering doing so therefore makes me sit up and take notice.
Which brings me to my high octane speculations of the day. This movement began to really capture my attention when the state of Texas moved beyond mere bullion resolutions to the actual creation of a state bullion depository. That was the first sign that something serious was afoot. Texas was joined shortly afterward by Utah, where yet another state bullion depository was created, and a private currency started, the Utah goldbacks. I blogged about that story at the time on this website, and noted that the creators of the Utah goldbacks had decided to release their currency not only in Utah, but also in Hong Kong, then one of the world's largest markets for coin and currency collectors. A smart move, in other words. These two states were quickly followed by others, and Tennessee, Mississippi, Missouri, Oklahoma and Wyoming are all either considering establishing bullion depositories, or various legal resolutions or actual laws establishing it as legal tender, the most recent being Wyoming which has recently passed a law authorizing payment of state taxes in bullion. And let's not forget that within the last couple of years we saw Texas Governor Greg Abbot also make a serious bid to woo the NASDAQ stock exchange's data center away from New York city, to Dallas, a huge step that would, effectively, mean that the NASDAQ was abandoning New York City, and moving the exchange itself to Dallas.
And now Kansas.
When taken all together, what does this mean? In this respect, I've advanced various ideas, not the least of which is that one is looking at state pushback and potential nullification of federal overreach, especially with the federal budget. It is intriguing to note that after the passage of FASB56 regulations, more states began seriously to consider such bullion legal tender resolutions; the two, in other words, in my opinion are inextricable connected events, the one - FASB 56 - being a cause of the other - state bullion depositories and bullion-legal-tender resolutions. Such laws imply that it is a crime to refuse the tender of bullion in cash form in payment of a debt. For businesses planning to go cashless, that's a problem. The coupling of the spurt of states considering bullion depositories and bullion-legal-tender bills, strongly suggests that states - while not stating so publicly - suspect that the federal bookkeeping is so egregiously flawed, if not downright criminal, that financial trustworthiness can no longer be maintained. Starting private currencies - Utah - and trying to woo one of the major stock exchanges - the Nasdaq - to one of those states, is by now the unmistakable sign that the states' "deep states" so to speak, sense a financial crisis is looming, and that they are taking the practical steps to keep financial clearing going, by the "old fashioned" mechanism of bullion depositories.
So is this trend a positive one or not? It depends on how these states handle the next step, which is the issue of currency: Are they willing to enforce the use of bullion as a medium of exchange? What enforcement mechanisms have they put into place? and so on. In the main I regard these moves as positive, but thus far there's been little discussion of the enforcement issue. Therefore I have a caution and caveat: we have all read or heard about central banks wanting to introduce their own "digital 'currencies'", and there have been studies on how to "back" these with gold. We therefore might be watching a "clever" ploy to bypass the national central banks and introduce such "backed" digital "currencies" via such state and regional depositories. Legal tender resolutions and laws would then be a means of grandfathering in the "legality" of such digital currencies. The key here is convertibility: can one easily convert one's crypto-digital currency for actual physical bullion, and can one in turn use that bullion as actual physical and legal tender in the purchase of goods and services? if not, then it's not a currency. It's merely a digital blip version of a federal reserve note, created from thin air, and backed by nothing but brute force and whim. If the states are serious about their bullion depositories - and a key indicator of whether they are or not - is whether these depositories will be able to issue certificates of deposit payable to the bearer on demand of a certain amount of value of physical gold or silver. That's the next logical step if they really mean to protect a physical medium of exchange as legal tender. In short, I can remember, as a boy, spending these:
You'll note there are two statements on this certificate, one dealing with the legal tender matter, and the other with convertibility:
"This certificate (not NOTE!) is legal tender for all debts public and private", and the all important convertibility statement beneath the George Washington oval: "One dollar in silver payable to the bearer on demand".
In other words, thus far, states have only been dealing with the first of these two essential statements. But it's that second one where the issue of sovereignty and seigniorage really lie. When such bearer certificates of deposit are issued by those state bullion depositories, then, and only then, is the real game afoot, because then and only then will people start trading them for goods and services...
See you on the flip side...
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