Will Louisiana Be First with Gold Currency?

For more than 5,000 years, people have seen gold as the most secure way to preserve their wealth and protect it against inflation. Ironically, there has never been a practical way to use gold in everyday transitions.  It is and always has been too valuable to carry around and “spend.”

However, that problem has been solved.  Computers, the internet, and the existence of secure storage vaults now make it possible use gold as money on a day-to-day basis.

Article I, Section 10 of the U.S. Constitution gives each state the right to issue currency backed by gold and silver, which shall be “legal tender” for all debts, public and private.

Five years ago, the State of Texas authorized construction of the Texas Bullion Depository, an $18 million facility in Leander, Texas, near Austin. It is under the control of the State Comptroller of Texas but managed by a private company.

The depository accepts gold, silver, platinum, and palladium from residents of the State of Texas and other states.  It is a Texas version of Fort Knox.

A company named Glint is one of several that allow gold stored in secure facilities to be accessed by the owners with a debit card.  This allows the use of gold as currency. Glint has more than 200,000 customers around the world who are already doing this.

House Bill 714 by Rep. Raymond Crews has been introduced in the Regular Session of the Louisiana Legislature.  It would allow Louisiana State Treasurer John Fleming, M.D., to establish a relationship with a depository such as the Texas Bullion Depository and companies that deal in transactional gold such as Glint.

There would be two advantages to these relationships.  First, because of Article I, Section 10 of the Constitution, the gold on deposit would qualify currency and legal tender, which would provide significant tax advantages to the owners of gold.  Second, the Louisiana State Treasury would create a significant revenue stream to fund its operations.

The Treasurer’s office is already self-sufficient and needs no state general fund dollars. It covers its $14 million budget with fees earned by bond sales and investment commissions.  In addition to its budget, the Treasurer’s office generates $19 million toward the operation of state government. This year its investments will earn more than $400 million for the state.

If Rep. Crews’ legislation passes, the State Treasurer’s office would not be buying or selling gold.  It would be a storehouse for gold belonging to individuals and businesses.  In turn, the state would contract out to storage facilities such as Texas Bullion Depository.  The Treasury would not be lending gold, because the gold is owned by the depositors.  Depositors would have access to their gold at any time because 100 percent of the gold would be on hand at all times. 

The Treasury would earn a fee when people transfer dollars to gold or gold to dollars and when they use their debit cards.

In the 5,000-year history of gold, nothing like this has ever been done.  The advent of the internet and digital services make transactional gold possible. Deposits with the Department of Treasury would be outside the banking system but not outside the legal system.  Tax laws and anti-money laundering laws would apply.

Under the Constitution, only the federal government and state governments can issue currency which is legal tender.

Louisiana would be the first state to utilize the little-known right found in Article I, Section 10.

Louisiana Treasurer John Fleming, M.D., and his staff have been researching Rep. Crews’ bill and so far believe it will provide Louisiana’s citizens a valuable choice on how to store and access their gold.