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 fees to store gold in facilities outside our state.”
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 beenrepatriating 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.”
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 anational 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.
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