The Utah legislature moved a step closer to
complete insanity fiscal independence this month by declaring gold and silver coins legal tender in the state. Sort of: no laws have been passed requiring merchants or banks to accept an ounce of 24-karat gold with Rush Limbaugh stamped on the front, but as of a week ago, it’s still totally money. It’s just that legally, parties to a contract cannot be required to accept it as tender for debts public or private. This raises the question of exactly how those pieces of precious metal constitute currency, but that’s not important. What’s important now is that, thanks to Republican state representative Brad Galvez, Utah doesn’t use federal bills. Don’t worry, by the way—he isn’t crazy. “We’re too far down the road to go back to the gold standard,” Galvez acknowledged to the Associated Press. “This will move us toward an alternative currency.”
That remark suggests what the discerning reader may have suspected all along, which is that this particular piece of legislation is kind of symbolic. Galvez says he sponsored the bill largely as a protest against the monetary policy of the Federal Reserve, which has angered hard-right conservatives by continuing to A) back the loose-money policies Alan Greenspan implemented during the Bush years to absolutely no conservative outcry and B) exist. They did not have a Federal Reserve in 1789. They had tri-cornered hats and irregularly-shaped gold and silver coins issued by states, banks and the occasional joint stock company, and everything was awesome, as a certain type of white person will tell you at the post office.
We are speaking, of course, of the Tea Party. The Fed has become a Soros-style bugbear for that organization since the recession and, like a teenager drinking an entire bottle of creme de menthe on the Fourth of July, they are striking at it in the way that they heard would totally work. The gold standard appeals to the Tea Party enormously, probably because it is understandable in precisely the way that floating currency pegged to various international markets in order to allow Keynesian interventions is not. Plus, it’s old-timey. Symbolically if not actually, it is of a piece with that colonial atavism which the Tea Party poses as the universal solution to the country’s problems, just as the dog has considered any given issue carefully and proposes barking.
Well, almost like that—the analogy would be more apt if barking somehow made the dog money. In addition to making gold and silver coins a sufficient-but-not-necessary currency, Utah’s law also exempts the sale of such coins from state capital gains tax. That explains the massive discrepancy in the face value of the coins—$50 for a one-ounce gold piece—and the market value of gold, which is currently around $1,500 per ounce.* It’s also incredibly good news for anyone in the state with large gold holdings.
For example: Craig Franco, who owns the Utah Gold and Silver Depository. His customers can store their gold and silver coins in his vault, and he will issue them a debit card that they can use to make purchases at Utah businesses. His exact business model is not explained in the AP article, but I imagine it works something like this:
1) I give Craig Franco ten $50 gold pieces, in exchange for which he gives me a $500 pre-paid Mastercard.
2) Craig Franco sells my ten $50 gold pieces for $15,000 and gives Mastercard $500.
3) He pays no capital gains taxes, thus preventing the building of Utah public schools that might help people realize what the fuck he is getting away with.
If this law wasn’t a perfect Tea Party symbol before, that last part clinches it. Part of the reason the US adhered to the gold standard, besides its simplicity, is that it’s enormously advantageous for people who have large amounts of precious, precious gold already. Gold currency is inflation-resistant, hard to get as a loan, and subject to weird scarcities. It’s the perfect money for people who have a bunch of money already, in that it keeps getting more valuable and makes it more difficult for poor people to pay off their debts. Gold coins get rich people richer and keep them that way.
Their popularity with the Tea Party reminds us how often greedy goes about as stupid’s false friend. Unlike the floating currency in custody of the Federal Reserve, the gold standard is easy to understand. That it makes it more difficult for the economy to recover from downturns and tends to widen the gap between rich and poor is just an added bonus. The important thing is that you can explain it to anybody in about ten minutes, and you can keep making money off it for a lifetime.