- Texas creates state gold depository – bringing gold home from New
York Fed- Move to remove gold from Federal Reserve highlights distrust-
Follows repatriation moves by Germany, Netherlands, Austria and others-
Legislation will prevent Federal government from confiscating gold- Includes
provisions that may lead to return to using gold as currency in the U.S.
- New gold electronic payments system protect from “national financial or
currency crisis”
- European, UK and Irish governments could learn from prudent monetary move
The state of Texas has just passed legislation to build its own gold
bullion depository, to repatriate $1 billion dollars worth of gold currently
stored by the Federal Reserve in New York and to create a new gold electronic
payments system to protect from “national financial or currency crisis”.
New York Federal Reserve Employees Auditing Gold?
The move is being widely perceived as a vote of no confidence in the
privately owned, bank owned central bank and the federal government.
Governor Abbott said that establishing this Depository means Texas will
be, “increasing the security and stability of our gold reserves and keeping
taxpayer funds from leaving Texas to pay for frees to store gold in
facilities outside our state.” (see Governor Abbott Signs
Legislation To Establish State Bullion Depository )
The law will go into effect immediately and the new Texas Bullion
Depository – soon to be built- will cater to businesses, state agencies
and citizens.
Representative Giovanni Capriglione who introduced the bill was
reported by the Star-Telegram as saying:
“People have this image of Texas as big and powerful … so for a lot
of people, this is exactly where they would want to go with their gold,”
leading some commentators to puzzle over whether New York was not “big and
powerful”.
Heretofore, it has been Venezuela
and European countries that have been repatriating
gold – Germany, the Netherlands and Austria have sought to bring their
sovereign gold home from New York amid fears that the Fed – whose gold stocks
have not been publicly audited since 1953 – may not be in possession of the
gold it claims to hold.
It is highly significant therefore that a powerful state from within
the U.S., such as Texas, should display such apparent distrust of the Federal
Reserve.
Two of Texas’ largest public pension funds from the University of Texas
(UoT) and the Teacher Retirement System (TRS) showed similar concerns in 2011
when they took delivery of $1 billion worth of gold bars out of storage with
HSBC in New York.
The asset had been held in an ETF but the pension funds were apparently
uneasy about not actually owning the physical gold. ETFs track the price of
gold and ETF speculators or investors are merely creditors of the ETF and
therefore, are very vulnerable to counter-party risk and exposure to the many
banks, who are custodians and indeed sub custodians.
The legislation even seeks to protect the state’s gold from
confiscation by the Federal government. Section A2116.023 of the bill states:
“A purported confiscation, requisition, seizure, or other attempt to control
the ownership … is void ab initio and of no force or effect.”
Under the Tenth Amendment the rights of the state trumps any order from
the federal government.
Also significant is a provision which may lead to a return to sound
money as proposed by Article 1, section 10 the constitution, i.e. gold and
silver. In one section the bill states: “depository account holder may
transfer any portion of the balance of the holder’s depository account by
check, draft, or digital electronic instruction to another depository account
holder or [to a person who at the time the transfer is initiated is not a
depository account holder.]” [underline]
The man who initially drafted this legislation is Rick Cunningham of
the Texas Center for Economics, Law, and Policy. Mr. Cunningham is
respected and is the Executive Director of the Center, but he is also a magna
cum laude graduate of Texas A&M with a degree in Economics, as well as a
graduate of the University of Chicago Law School, where he served as
associate editor of the Law Review journal.
According to Mr. Cunningham
“this proposal consists of two parts – the “depository” part and the
“system” part. The “depository” part … provides simply for hedging the
state’s investment risk by allocating a recommended portion of state and
local investment assets to physical gold and other precious metals, and
housing those metals in a state-operated facility…”
“But the truly game-changing aspect of this proposal … lies in the
“system” part. This would be an advanced, state-owned and operated
system of electronic payments and settlements, denominated in ounces of
precious metals, barred from engaging in lending, leasing, speculative or
derivative transactions, and always maintaining a 100% ratio of bullion
reserves to account balances. At full scale, not only could it sustain
state and local government operations, it could potentially sustain large
swaths of the Texas economy, even in the face of a national financial or
currency crisis.”
If gold and silver were to become widely circulating currencies in
Texas, the Federal Reserve issued and continuously devaluing dollar may
slowly fall out of favour. Not maintaining a currency monopoly could
ultimately lead to a return to using gold and silver as currency in the U.S.
In the coming months and years it is likely that the Federal Reserve
and the Federal government of the U.S. will come under increasing pressure
from Russia and China to back the dollar with something of intrinsic value
rather than simply increasingly empty promises.
If either of those two countries chose to back their currencies with gold bullion, of which they have been
accumulating vast volumes in recent years, the U.S. would be forced to follow
suit in order to prevent sharp falls in the value of the dollar and in an
attempt to preserve reserve currency status.
Now, it would seem, the Federal Reserve note – the dollar bill as
issued by a private central bank in defiance of the Constitution – may face
pressure from within the U.S. as ‘Lone Star’ state Texas begins to bring gold
back into the monetary system.
The days of paper and electronic currencies – backed by little more
than faith in governments that the public increasingly do not trust – are
numbered. Texas is preparing for this as are European nations such as
Germany, Austria and the Netherlands.
Preserve your wealth by acquiring an allocation to history’s only
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MARKET UPDATE
Today’s AM LBMA Gold Price was USD 1,182.10, EUR 1,050.06 and GBP
759.36 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,178.25, EUR 1,049.57 and GBP
760.01 per ounce.
Gold climbed $5.20 or 0.44 percent yesterday to $1,186.20 an ounce.
Silver rose $0.17 or 1.07 percent to $16.11 an ounce.
Gold in USD – 1 Week
Gold in Singapore for immediate delivery was marginally lower at
$1,185.6 an ounce towards the end of the day, while bullion
in Switzerland fell a dollar.
Gold inched down this morning but stayed in lock down in a very narrow
range. The yellow metal looks well supported at these levels with safe haven
bids increasing due to the unresolved Greek debt crises as the time runs out
before the deadline at the end of the month.
Some investors wait for more guidance from the U.S. Federal Reserve
during its meeting that begins today. Fed Chair Jane Yellen’s comments and
wording of the Fed policy statement tomorrow will be closely watched.
U.S. economic data is still weak. Yesterday’s data from
industrial production was poor underlining concerns about the U.S. economy.
The Bank of China has joined the ICE Benchmark Administration (IBA)
gold price benchmarking process. This increases the number of
participants to eight including – JPMorgan Chase Bank, Scotiabank, HSBC,
Société Générale, UBS, Barclays and Goldman Sachs in the LBMA Gold Price,
which formally replaced the London Gold Fix this spring.
In late morning European trading gold is down 0.16 percent at $1,184.87
an ounce. Silver is off 0.38 percent at $16.01 an ounce and platinum is also
down 0.15 percent at $1,086.56 an ounce.
