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A bill recently introduced in Texas seeks to obliterate the Federal Reserve's much-maligned monopoly on currency by establishing gold and silver as legal tender — but the groundbreaking legislation, if passed, would also prohibit those precious metals from being seized by State authorities.
[...] Senator Bob Hall introduced the bill last month, which, the Tenth Amendment Center explains, "declares specifically that certain gold and silver coins are legal tender, and prohibits any tax, charge, assessment, fee, or penalty on any exchange of Federal Reserve notes (dollars) for gold or silver. The bill authorizes the payment of taxes and fees in gold & silver in certain circumstances. It would also prohibit the seizure of gold or silver by state authorities."
Would this matter in a nation where money is mostly plastic nowadays anyway?
Source: http://thefreethoughtproject.com/texas-bill-gold-silver-money-federal-reserve/
(Score: 5, Interesting) by Anonymous Coward on Sunday April 16 2017, @02:46PM (2 children)
If you are not aware of it, the US dollar has been effectively backed by oil since the 70s. Due to a number of prescient agreements back then nearly all oil producing countries trade their oil pegged to the dollar. They also agree to purchase US securities with excess oil revenue. This has had an enormous stabilizing effect on the dollar. Imagine somehow the number of dollars in flow greatly increases - perhaps through quantiative easing measures. This would normally result in inflation as people end up having to pay more for the same amount. But the thing about the petrodollar, as it's called, is that so long as other countries are dependent upon oil they in turn end up having to increase their holdings of the USD to compensate for the inflation. The oil producing countries, such as Saudi Arabia, then invest that money buying up US debt. It ultimately ends up reducing the amount of USD in open circulation which, almost like magic, starts to reverse the inflation. And the same is equally true of deflation.
In short the petro dollar has made the USD an incredibly stable currency. This stability is a big part of the reason why USD has been, for decades, the dominant reserve currency [wikipedia.org] or the money governments keep tucked under their bed in case of a rainy day.
But now we have a little problem. The petro dollar is dying. Ever more countries are starting to threaten to trade their oil in currencies outside of the USD. Some examples that tried to do this were Iraq, Libya, and Syria. If you've ever wondered why we invaded. It wasn't about their oil - it was about our economy. Compare them for instance with Saudi Arabia. Saudi Arabia is one of the most backwards and oppressive regimes in existence, but they stick to the petrodollar like an old lapdog. We can't just keep overthrowing government and government over this. Even if we could, there's then renewables. Again if you've ever wondered why the USA is lagging so absurdly far behind [wikipedia.org] much of the rest of the developed world in migrating to renewables, you have the reason. The price of renewables continues to decline. Oil needs to continue to stay cheaper than renewables or it simply has no justification for existence whatsoever. And the problem is that it simply cannot. Things like fracking and tar sands are breaking even at around $30/barrel. Early last year the price of oil briefly dipped below that.
The point of this is that the future of our currency is extremely unclear. Directly backed currencies are a bad idea and tend to lead to a feedback cycle of deflation (something much worse than most would think at first) but on the other hand, currencies that have no backing whatsoever rely on massive trust and responsible governing and economic policy. Applying either of those traits to the United States now a days would be borderline satire. Numerous countries, including Germany and the Netherlands, have been repatriating gold stored in US banks and the same time other countries have been slowly divesting US debt. This doesn't mean the sky is falling or that they think the end of times is upon us, but as a simple prudent measure to ensure their own fiscal health is not directly contingent on the stability of US currency. I do not think gold is a desirable investment, but I think actually understanding the issues is important.
(Score: 4, Informative) by Azuma Hazuki on Sunday April 16 2017, @05:14PM
I wish I could mod you up more than once! This is so far the most informative and succinct summation of the problem I've ever seen and it really needs a +5. You should register a username.
I am "that girl" your mother warned you about...
(Score: 1) by fyngyrz on Thursday April 20 2017, @05:32PM
"stabilizing effect"
I'm not really on board with your implied meaning for these words. Other than the meaning "it would have been much worse otherwise", the huge increase in cost of living leads me to say that the value of the dollar has been both unstable and massively corrosive.
Since the 1970's, the value of a dollar has dropped considerably as in wages against costs, in that what it can do for you is much, much less in almost every corner of the economy with the exception of electronics and its subclasses, such as computers, cameras and AV gear, to ID a few. Those are certainly useful things, but the cost of a loaf of bread has risen from 36 cents in 1970 to $1.35; the median cost of a new home in 1970 was $22,300, and by 2012 (latest I could find government figures for), it had risen to $212,300. The cost of a gallon of gasoline has risen from 36 cents in 1970 to about $3.00 today. A (private) college education's yearly tuition has risen from $1,561 to $33,480 in 2017. The cost of an average new car has risen from $3,542 in 1970 to $33,560 in 2017. And so on.
Food looks a little less expensive in re wages (see below); other things tend to look a lot more expensive. And I have to say, having a little extra leverage to buy food doesn't make up for the lost leverage on all the other things one must buy to get along in a similar lifestyle as compared to the 1970's.
Working at McDonalds at the counter, in 1970 your hourly wage was likely $1.75, while today it's likely $8.37. That's the key metric by which the imposition of inflation upon the population should be measured, IMHO; it's a 4.7x increase. Anything larger than that for any given cost is a loss to the individual. Many of the common costs I cited above are in the 10x range. That tells you what's really going on. And stability... that's not any reasonable description of stability. A McDonald's wage is very likely a solid index for the bottom of the economy; that's where people experience the impact of the unstable, corrosive dollar the most. At the upper end, it's irrelevant -- if you're a millionaire or more, this stuff is laughably irrelevant (and those people tend to be the ones telling us the economy is fine. Imagine that.) Hence my application of the average or median expenses against the lowest wage earners.