Texas moves to create gold-backed digital currency
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Holding gold would appeal to me but is impossible. I won't dedicate my life, hell or high water, to one country. You can't just up and carry stuff across nation borders. It is a total nightmare. In fact, every time I enter Thailand (and who knows how many other countries) I break the law. The limit for undeclared personal affects is exceeded by a single tshirt or pair of jeans in my luggage, since, well I wear all designer. Strikes me as beyond absurd how the world works ever since the idiocy of passports, permission, and visas was introduced:(
One of the worst inventions in history imo.
I think Ukraine should remind us all not to trust everything to one country. All your eggs in one basket
As opposed to what? Roaming tribes of mongols, and castles where you couldnt leave if the king didn’t let you?
What did you think happened if you left your tribe in hunter gatherer tribes? You got eaten by a jaguar on the next tree, or you starved.
What romantic notion do you hold of the world before visas and passports?
I imagine it was similar to what it was like: 1. Before police patrolled in America 2. Before driver's licenses (you can still experience this in Cambodia, low CC scooters don't require a license) 3. Before tattoo artists needed a medical license in Japan and Korea
Ya know, liberty and basic rights that have now been abrogated to such a degree that the herd not only doesn't remember what they were like, but actually questions the validity of even being that "free". (Populations like China tend to think a central authority not controlling speech is absurd too.)
- a system of independent, redundant audits of the reserves (independent as in: they would not live in Texas)
- a blockchain to track and record for all eternity the state of the currency *and* the audits
- a guarantee etched in stone in the Texas constitution that the e-currency is - by law - instantly convertible to the real thing (and by that, I mean actual gold, not the current market rate equivalent in toilet paper).
But again, there are so many ways to cheat and lie when you manage a gold "reserve", including storing fake gold, that - indeed - while this would be a lot easier to handle and trade with than real gold, it would still not replace it.
Do you have more insight here? I'd never heard of E-gold before today.
> The value of each unit of the digital currency will be determined at the time of a transaction and “must be equal to the value of the appropriate fraction of a troy ounce of gold at the time of that transaction.”
If this were actually put into effect, expect intense interest from current long-term owners of gold ETFs e.g. GLD. GLD steadily declines relative to spot bullion, as a means of charging to holders expenses of storage, security and management. The Texas proposal would apparently cover such costs entirely with fees on exchange transactions, making long-term holders something like free riders on the system.
[0] https://constitution.congress.gov/browse/essay/artI-S10-C1-2...
the legislators are looking to require the state comptroller to establish a digital currency that is fully backed by gold and fully redeemable in cash or gold.
> Control under Article 12 is designed to be a technology-neutral functional equivalent of “possession.” It generally encompasses circumstances when a party has the “private key” or other mechanism to avail itself of substantially all of the benefits of the record, prevent others from availing themselves of such benefits, and transfer the record and associated benefits.
Having said that, the fact that these bills direct the state to establish the program, fixes in law the redemption of the "currency," and directs the state to hold gold reserves for the currency all suggest that this is Constitutionally questionable, because the bill is trading on "the faith of the state." Consider that, if Texas establishes a gold-backed stablecoin then executes a rug-pull, your legal options as an aggrieved party are limited due to state sovereignty, which is precisely the issue that the Constitution seeks to prevent (though at the time the question of sovereign immunity was somewhat less settled in the absence of the Eleventh Amendment).
Capitalists: "We want to make something more stable than the current system."
Regulators: "Whoa there! Hold those horses! That ain't a move in the playbook! What will these madmen think of next, a full reserve bank? Shut that scheme down now!"
The 3 act play making sure the system is safe unprincipled men since ... I dunno, maybe forever. I doubt this Texan scheme will have a long life either.
It seems like the US would just try to block something like this on principle though. Having your own currency puts you in competition with other countries, doesn't it? And that's not part of the concept of a (US) state.
Not if the redemption process is inscribed in the constitution, in which case, "controlling" it is subject to quite a number of hurdles.
Yeah?
Can you decide to create more gold out of thin air on a Monday morning like Washington has been doing for the past 100 years with the USD?
> On May 2, a Texas House committee passed a bill to create 100% reserve gold and silver-backed transactional currencies ... HB4903 will now move to the Calendars Committee. This committee determines which bills move to the House floor for a vote.
https://www.texasbulliondepository.gov/faqs
Fees are 0.5% of value per year:
https://www.texasbulliondepository.gov/pricing
Apparently there is no per-transaction charge, unlike the proposed digital instrument.
When 1 TexanGoldUnit eventualy devalues to 1000 TGU, does that mean my gold becomes dust too?
This just feels like cryptobros convincing legislators to back their latest pet project.
I mean, I don't care if it is texas, missisipi or claifornia, I am an american and all of it is mine. Whether it is a buch of small skirmishes or a full on civil war again, sececession can only be accomplished by a lot of blood spilled. I can't stand guns and I don't even care enough about politics to vote but if any state tries to secede, I would join whatever military opposing them or just buy a gun and find a secessionist armed soldier to kill and hope that I have a death as honorable as fighting to defend your homeland, sure bests rotting in a bed or in a hospital. Even if I can't get others to join me I can contribute just my tiny drop of blood to the price that needs to be paid to separate a land from its people.
Now, there is exactly one scenario where I'd have no opposition to them seceding: if the constitution is changed to get rid of the electoral college, senatorial representation or if religious rights are infringed upon (even by a SCOTUS decision), and I don't mean protections for miniorities who disagree with a religion but anything that prevents people from sincerely believing (not satanists whose belief according to themselves is fake! For example) in a creator and acting on that belief (including voting). Because before you are a citizen you are a human and before you have legal rights you have natural rights that supersede legal rights(see: declararion of independence) which were the foundation and reasoning used to justify America's secession from Britain.
For Texas secessionists though, all they can acheive is destabilization of the US and as a result the whole world. Russia and China's wet dream but my take on it is that secession is as realistic as a neo-nazi white nationalist state.
There have been peaceful secessions in the past - the split of Czechia and Slovakia back in 1993 was one example. And I believe that both Scotland and Catalonia can achieve a peaceful secession, assuming that their respective central governments decide to actually listen to the will of the people.
[1] "Why would the other states ratify this?" you ask? Lets not quibble over minor details in silly make believe scenarios.
No such agreement exists in the Constitution because having states come and go as they please would be incredibly dumb.
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A...
"Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements."
Wikipedia (at https://en.wikipedia.org/wiki/Withdrawal_from_the_European_U...) notes that a formal method of leaving became a thing in the early 2000s when various Eastern European states were joining, not when the UK joined in the 1970s.
(As for the US, I did say actually passing a constitutional amendment to allow succession would be unlikely, but I don't think it's legally impossible?)
Why would you need a constitutional amendment for more seasons of a popular TV show?
Even if the producers don't want to make any more episodes, all it would take is the money to acquire the rights to the show and pay for production costs. No Constitutional Amendment (or even a law) required.
They even have their own separate power grid, just in case.
https://texasgop.org/wp-content/uploads/2022/06/6-Permanent-... https://www.thebulwark.com/texas-republicans-deadly-serious-...
I maintain that I have the right to leave my employer and wife. I don't have plans or want to do either at the current moment
My suspicion is that it's talking out of both sides of their mouth. It means they can go to any kooks and say "We want to secede", while saying to everybody else "oh, it's just a referendum to re-assert what we already claim to be true, just for funsies".
It means enacting legislation for a secession referendum, and holding the referendum. It doesn’t mean secession is going to win the referendum.
If Texas held a secession referendum tomorrow, I doubt “Yes” would get anywhere near a majority-and I’m sure they know that. It would be an exercise in moving the Overton window, not in actually seceding. Which I think is their whole point-actual secession would be enormously risky for unclear benefit, making it a topic of live political debate could have great reward for some.
Whether that strategy works as well in the very different political context of the US remains to be seen, but it isn’t impossible that it might
These are chucklehead GOP politicians who only have a seat through gerrymandering. I suspect if this was to go to referendum it wouldn't get far. The most citizens of their largest cities have no interest in secession.
Just a few minutes' reflection should convince you that's a very bad idea for any free market, capitalist economy.
Oil is perishable.
1) Wealthy + Paranoid + Stupid. They'd rather keep their money in sovereigns under their mattress, than put it into any sort of productive economic activity. On a long term, especially in the US, you could pretty much throw darts and build a portfolio that competes with, or beats, inflation.
2) Conspirational: "fiat currency is a grand scheme to undermine our savings for (insert nefarious bugaboo of the day)"
3) Arguably a subset of 2) but Apocalypse Enthusiast. "When civilization crumbles, the obvious trade unit won't be something like grain, alcohol, or bullets, but my bags full of low-grade silver dimes! I'll be King of the Wasteland!"
I mean, I'm fucked. I've effectively lost between 10-20% of my purchasing power out of what ultimately equates to a relatively small sum in the first place because my time horizon was pretty small, I put a trust fund together for myself. Whole I was doing this bond yields were negative, and had been for a long while, and I'd posit they still are (last I looked the $1 pound loaves at Walmart were $1.50). I just did not and do not have the buffer money for investing, not to mention a need for liquidity and possible penalties. It would be nice to have something more stable. Of course, Au and Ag haven't yet reared their imaginary powers yet in any case, though many portend they will.
Ideally though, an ounce of gold is an ounce. But a dollar can be anything. The question is one of making gold, silver, or some other fixed-quantity, portable, arbitrarily valuable substance into legal tender, right?
How exactly is it not? Inflation = stealing value from people, that they have already created, time-limiting their spending power so that there's no way to actually save money in the long-term.
Money printing is theft, indirect taxation without consent.
The idea is that you'd save by investing into productive enterprises (and or government bonds) obviously that doesn't necessarily function as well as one would hope for but it's an better solution than hoarding cash/gold/bitcoin/etc.
Besides equities? Besides TIPS?
* https://www.investopedia.com/terms/t/tips.asp
Do you literally keep bills under your mattress or buried in your backyard? There's your problem.
No, there's not my problem. The problem is that the government keeps printing money, so my bills under my mattress or buried in my backyard keep dropping in value. The fact that there are securities that are literally called "Inflation-Protected" as an antidote to that only serves as a proof of the original problem.
> But you can save money!
No, you can invest money. But investing should not be mandatory just to keep your wealth from rotting.
Except that it doesn't. Money is created by private banks through credit (loan, mortgage) creation:
* https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...
* https://www.bankofengland.co.uk/explainers/how-is-money-crea...
> […] so my bills under my mattress or buried in my backyard keep dropping in value.
Yes, this is a feature: the discouragement of the non-productive uses of capital and hoarding à la Scrooge McDuck.
> No, you can invest money.
Most people actually save and do not invest:
* https://www.pragcap.com/saving-is-not-the-key-to-financial-s...
I sincerely doubt that "disouragement of the non-productive uses of capital" is the main reason for inflation. Linear tax on having money would do much better. Besides, except for a pathological example where scarcity of money causes deflation, why would it matter if someone is hoarding money?
If they're saving for something that costs e.g. 10 years wage, "hoarding" money is the only way they'd ever save that much. But with constant inflation, it's basically impossible - the only way to "save" money for something that expensive is to take a loan... Which again seems to lead back into banks' pockets. Who actually hoard money.
The game seems rigged, and all "explanations" for inflation just sound like bad lies given by Wall Street brokers high on coke.
I think this characterization is incorrect.
imagine writing this as ironic mockery during an ongoing inflation crisis.
It's never a "they're targeting a number that they believe in good faith will maximize economic activity on a national level", it's always "devaluing my existing holdings gives $boogeyman_ethnic_or_political_group an advantage" like you're somehow prohibited from investing.
Yes, direct trade may definitely be grains, alcohol or bullets - but as soon as economies more complex than a self sufficient farm village crop up, eventually some form of token will be required.
For that, historically gold and silver have been the established tokens of choice for millennia, and even today's currencies are backed by insane amounts of gold in central bank vaults - it's not a bad assumption per se to think that gold and silver will outlast even our modern civilization. Come to think of it, most of the world's currencies sans the Swiss Franc and the US dollars are barely decades old.
We're already seeing a switch from the US dollar as the universally accepted international reserve and trading currency - only 60% of reserves and 40% of trades are valued in dollars, mostly towards the Euro and, in smaller amounts, yen, yuan and a bit of Francs. Think forward a few decades... what humans create can vanish in a very short time.
And I don't understand your second point either. Your savings have most definitely been undermined. Your nominal wages might be up, but your purchasing power is way down since after the stimmys. To calculate the difference, compare how many hours you'd have to have worked in the past to how many hours you'd have to work now to achieve the same standard of living.
Maybe cut out the pretentiousness and dismissiveness and listen to what people who are generally concerned about you and your purchasing power are saying.
See also the amount of deflation that has occurred over the decades:
It forces you to invest it productive assets. What social value is there in locking away wealth in non-productive forms?
Buffett in 2011:
> Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A.
> Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?
> Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices.
> A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.
* https://www.berkshirehathaway.com/letters/2011ltr.pdf
What social good does encouraging hoarding attain?
After seeing endless debates between various schools of economics for decades, in the end I've come to the conclusion that nobody really knows what they're talking about.
A big problem is that history is an experiment with no replications, no controls, and no good way to tie complex causes to complex effects. "What would the past 100 years have looked like had we kept the dollar pegged to gold?" We don't know and we'll never know. All you can do is tell just-so stories. Did having an inflationary currency help us achieve the remarkable growth of the past hundred years? We can't know that either. For all we know all that growth was due to demographics and technology and would have happened regardless of the monetary system.
I wonder if maybe it doesn't matter that much, and so in that sense both sides are wrong. Maybe the real basis of the economy is the real economy (people, capital, resources, technology) and what you use to price it is secondary. So as long as your monetary system avoids extreme failure modes like hyperinflation or extreme deflationary collapse, the system will just adapt to whatever monetary base it's given and price signals will do their job.
Anyone who doesn't understand this should try eating gold. Or an ETF. Or a dollar bill.
Of course gold does have some use value, but so do plenty of other metals. The only special thing about it is that it has a history of being valuable - already a social agreement - and it gives a very clear agreed social signal when used in jewellery.
You can compare the permanent boom and bust cycle the global economy was in prior to the Great Depression to the relatively stable inflationary environment of the last several decades.
Just look at:
https://www.officialdata.org/us/inflation/1800?amount=1#:~:t....
Specie based money (with not meaningful monetary policy) is not stable, in fact it's less stable than Fiat money it's just that periods of high inflation are followed by periods of very high deflation. And unpredictability is clearly an obvious downside...
(to be fair I almost thoroughly disagree with your reasoning).
* https://www.theatlantic.com/business/archive/2012/08/why-the...
https://tylervigen.com/spurious-correlations
We can't run an experiment to determine causation.
A lot of things happened since WWII. The whole way our government works shifted more toward centralization as a result of the war. Better information and communication technology could have allowed markets to operate more efficiently. Loads of European and Asian productivity was smashed in the war, distorting global trade toward America. A generation received a collective military experience. Women entered the workforce in large numbers. On and on and on...
Just like with most/almost all complex systems. I don't see this as a good reason to handwave all the arguments or reasoning somebody happens to disagree with.
There are two issues (and there is plenty of empirical evidence for them, since we've actually observed this):
- Ensuring price/currency stability in a globalized market is almost impossible without very strict capital controls. You get long-term price stability at a cost of very high short term volatility that's a core feature of the gold standard in basically any non stagnant economy. High short term volatility leads to financial instability due to higher uncertainty etc. which again puts the economy in a permanent boom and bust cycle.
- The ability of central banks to respond to economic crises is severely limited. Can't really use monetary policy to to stabilize the economy, stimulate growth or decrease unemployment are severely limited. Between the 1830s and 1930s there were three events which were called the 'Great depression' (well that is unless the next one when the previous one was renamed to something like the 'long' depression for instance...). How many 'economic depression' were there in the last 90 years?
Well leaving the gold standard certainly helped countries start recovering from the Great Depression:
> In the end, recovery from the Great Depression does not begin until countries give up on the combination of the Bagehot Rule and of commitment to sound gold-standard finance. Those countries that have central banks willing to print up enough money so that people are willing to spend it--it is when you adopt such policies that your economy begins to recover. If you don’t, you become France, which sticks to the gold standard all the way up to 1937, and never gets a recovery. When World War II begins, Nazi Germany’s production--equal to France's in 1933--had doubled between 1933 and 1939. French production had fallen by 15%.
* https://delong.typepad.com/sdj/2013/10/the-great-depression-...
Ideally having neither too much nor too little money circulating is best, but it's impossible to do that, so it's better to have a little too much, as having too little hampers your economy:
From the perspective of CPI (consumer price index), gold would be "deflationary", because prices would get cheaper. However, this is not a property of gold; it's the property of a capitalist economy, where companies compete to offer better products at cheaper prices.
There's no good reason for diluting the currency to keep prices increasing, other than corruption and greed of those who control the money supply. Inflationary currency means that someone is profiting by creating money, and that profit is paid in the increasing price of products.
Like every single electronics product in the last 50 years has been deflating in price (either literally or increasing in core value).
Does that stop people buying them? No!
But perhaps someone here who’s anti deflationist could explain to me why I’m wrong.
The problem with deflating currency is that it encourages you to sit on it. Economists don't want you sitting on a hoard like a dragon. In the extreme case, GDP goes to zero today because everybody is expecting prices to be cheaper tomorrow. Then all the workers get fired because there's nothing to produce. Now they have no money, and buy nothing, so it gets even worse.
Obviously the extreme case doesn't happen, but the thought experiment illustrates the problem. A tiny bit of inflation encourages purchasing and investment, which keeps money moving. You may want to stop working as an individual once you've acquired enough money, but the nation as a whole never retires, and relies on consumption to give everybody work.
Prices of goods coming down is OK, because goods are consumed. You have to buy new goods tomorrow. Durable goods wear out; real estate is maintained; intellectual goods get boring. The economy rolls along, and people continue to make investments to get a bigger share of it for themselves.
So economists aim for low but steady inflation. It benefits the economy as a whole, at a cost to those who want to accumulate cash and not spend or invest it.
tl,dr: Sitting on cash removes it from the economy, and deflation encourages people to spend money tomorrow rather than today.
Since most people are in debt, this really says: encourage people to borrow to buy what they cannot afford today and then hope for inflation to make that borrowing less onerous.
Economists like debt. It gets the economy moving. A debt-less economy is very slow. Most non-trivial projects require debt: starting a business, buying a house, getting an education. If you had to pay for those in cash, you'd do so much later if ever.
It's the reason most corporations have debt. They use it to fund expansion. As long as that expansion brings in more money than the interest payments, they literally never have to pay that debt back.
Human beings, unlike corporations, retire. Inflation certainly puts a crimp in that, but there are many other problems with retirement with larger effects. Ultimately, those problems come down to an economy that continues to expand even after they've left the workforce, such that they can outpace inflation by either their own investments, or the government's.
Which, as I started with, is all about somebody taking out debts so that the economy expands. A vastly slower economy without debts is more straightforward to understand, but it's also a much more primitive and less productive one, and so everyone is worse off.
In reality, people spend their money when they want or need something.
Today it's possible to hoard wealth in real estate/gold/stocks. The value of the pile is guaranteed to go up because of guaranteed inflation. Yet for some reason the economy doesn't grind to halt. By your explanation, everyone would just sit on that pile like a dragon and never buy anything.
People spend whenever they need or want something, which is the fundamental force that keeps the economy running, regardless of what type of money or wealth they possess.
I believe the person who has to spend - likely more than - a few minutes reflection isn't who you think.
IOW, burden of proof is on you.