Earlier this month, the Idaho House of Representatives approved bill 180, which outlines a mechanism for purchasing, selling, and possessing gold and silver in the state. This lays the groundwork for Idaho to attain greater financial autonomy and challenge the Federal Reserve’s exclusive control over currency.
It allows the state to take money sitting idle in its treasury and invest it in physical gold and silver. Holding gold and silver in reserve would also theoretically create a path for the state to maintain financial independence in the case of a collapse of the U.S. dollar.
Rep. Barbara Ehardt introduced the bill on Feb. 21 and it passed its third reading by the House on March 2 by a 40-29 vote. The bill is now being read in the Senate and will referred to the State Affairs committee if it passes the next vote.
“The ability to be able to invest in gold and silver is a great signal, not just to the state of Idaho or the United States, but the world as a whole,” said Brandon Bonifacio, the CEO of NevGold Corp. (TSXV:NAU) (OTCQX:NAUFF) (Frankfurt:5E50) in an interview with Mugglehead.
“It is a signal that buyers most likely have less trust in the Federal Reserve and federal banking system versus owning a physical commodity like gold and silver to hedge against the devaluation of the US dollar effectively.”
NevGold has engaged in a long term drilling campaign at the Nutmeg Mountain property in Idaho. For right now he states there’s no direct impact on his company from the bill’s effects. However, he does recognize the potential for an opportunity if the state of Idaho actually purchased the gold and silver from projects or mines in the state.
Thus far his efforts have extended to opening discussions with various lobbyists, but he admits its early days yet. This is really only the first step with this specific bill.
Bonifacio states that it may be something to consider or even discuss further in the future.
Idaho Bill 180 provides wealth of opportunities
The original U.S. Constitution dictated that states could only use gold and silver as tender in repayment of debts. The Legal Tender Act of 1862 superseded this provision by implementing paper currency as legal tender.
This bill’s passage demonstrates a willingness among politicians to return to the original constitutional position of using gold and silver as the form of debt repayment.
The new subsection also includes the storage requirements for proposed the gold and silver investments. These include that they’re maintained securely in a precious metals depository located somewhere in the state.
Exceptions to the storage requirement involve storing the commodities safely in a neighbouring state if no secure depositories are available.
The treasurer is also tasked with ensuring that the gold and silver held in a qualifying depository under this subsection is insured, independently audited, and physically segregated from other assets.
Additionally, Bonifacio notes that such a return would increase demand for gold.
The increase in demand actually corresponds with what Bonifacio calls a trend towards deglobalization. This is where companies engaged in manufacturing begin to keep their production in-house rather than rely on traditional outsourcing overseas.
“I think countries like the United States and global powers are realizing that they need to be self reliant and self sufficient,” Bonifacio says.
“The fact that there are an abundance of natural resource projects in the United States, I think that will bode well for the companies that are operating there in terms of getting projects permitted, and support from the communities and support for gold ‘Made in America.’”
Central banks buy gold as hedge against waning dollar
House Bill 180 supporters view it as a movement towards restoring the constitutional role of gold and silver. Also, diversifying the state’s investments into gold and silver helps protect the state’s resources against market volatility and inflationary pressures.
Idaho isn’t the only polity on record doing this, either.
Central banks around the world have been buying gold to reduce their dependence on the U.S. dollar. Last year, central banks around the world bought 1,136 tons of gold. This was the highest level of net purchases on record dating back to 1950. Additionally, this is the 13th straight year that central banks have done this.
Banks from Turkey, Egypt, China and Qatar were among those that purchased gold. According to the World Gold Council, however, central banks did not publicly report around two-thirds of the gold they bought last year.
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