Utah gold standard could become a reality

If inflation becomes a reality, though, the appeal of such a system might be worth the headaches. Just last month, J.P. Morgan announced it would take gold as collateral for loans. It’s a sign that more sophisticated gold and silver transactions could be on the way.

If you’re not convinced the threat of inflation in the U.S. is real, there’s a handful of Utah senators (17 to be exact) who respectfully disagree. The Utah Senate passed HB317 yesterday, 17-7, moving the state a few steps closer to a gold and silver standard. The bill allows businesses and individuals to exchange federally issued gold and silver coins instead of paper dollars in financial transactions.

The gold and silver would be valued at face price instead of the underlying value of the gold and silver. A state committee will now look at whether Utah should recognize an official alternate form of legal tender. Utah Governor Gary Herbert, who has not taken an official stance on the bill according to the Washington Times, will have the final say to veto or sign it into law.

If the bill ultimately becomes law, the implications would be interesting. On one level, it’s a symbolic move designed to send a message to Washington. On another, actually using gold and silver as legal tender would be difficult as users would have to file federally required transaction reports, according to the Deseret News.

If inflation becomes a reality, though, the appeal of such a system might be worth the headaches. Just last month, J.P. Morgan announced it would take gold as collateral for loans. It’s a sign that more sophisticated gold and silver transactions could be on the way.

Here’s a hypothetical (that won’t play out in Utah): what if employers could pay employees in gold and silver? That amount could be electronically deposited into employee accounts not in USD but in XAU (the currency symbol for gold) or XAG (the currency symbol for silver). Banks could then issue special debit cards so that purchases could also be made in XAU and XAG.

If a business didn’t directly accept gold or silver as tender, credit card companies could apply an exchange rate for the gold or silver in the account, charge a fee to the purchaser and convert the purchase amount to USD at prevailing prices.

If the dollar were in the midst of a free fall, the consumer who’s holding gold or silver in the bank rather than dollars, would win. Utah’s law is a symbolic step in the right direction, but until we can use gold and silver as currency based on the underlying value of the metal, we’ll still be a long way off from a true gold standard.

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