Texas wants to repatriate its gold held in the Federal Reserve vault in New York. Other states may feel the same way. It remains to be seen if President Obama’s heavy-handed Justice Department will try to intervene to stop it.
On Friday, Texas Governor Greg Abbott (R) signed legislation that will create a state-run gold depository in the Lone Star State – one that will attempt to rival those operated by the US government inside Fort Knox and the Federal Reserve Bank of New York. The “Texas Bullion Depository” will be the first state-run precious metals depository in the country.
Governor Abbott stated, “The Texas Bullion Depository will become the first state-level facility of its kind in the nation, increasing the security and stability of our gold reserves, and keeping taxpayer funds from leaving Texas to pay fees to store gold in facilities outside our state.”
Shortly after the signing ceremony, Abbott’s office said that Texas “will repatriate $1 billion of gold bullion from the Federal Reserve in New York to Texas.” It is not clear how they arrived at the $1 billion figure. Most assume that number includes the estimated $500 million in physical gold owned by the University of Texas’ huge endowment fund, another $200 million or so thought to be owned by the Texas Teacher Retirement System – both of which are stored in the vault at the Federal Reserve Bank of New York – and gold owned by other sources in Texas.
The new depository will not just be a well-guarded warehouse for that bullion. The law Abbott signed calls for the creation of an electronic payments system that will allow gold, silver, platinum, palladium, and rhodium depositors to write checks against their accounts, making the new depository into a bank.
Investors who have any of the physical precious metals listed above – that meet certain requirements – will be able to store them (for a fee) in the new depository. This has the potential to become popular among Americans who distrust the government and/or the Fed. While the State of Texas is still a government, early indications are that the new depository will be very popular.
Fed critics heralded the depository bill as a long-awaited and much-needed assault on the government’s printing press. The libertarian Mises Institute commented that “While the Texas depository is a government-owned enterprise, it nevertheless is an improvement since it is a case of decentralization… that will present alternatives to the federally-controlled monetary and banking systems.”
Time will tell if the new depository – whenever and wherever it will be built (not disclosed yet) – will become as popular as its supporters suggest. Some critics suggest that it is unwise of Texas to take on the risk of guarding potentially billions of dollars’ worth of physical precious metals. They argue that the NY Federal Reserve bank is a more secure site that has at its disposal more robust resources to guard and defend itself.
Perhaps the most interesting part of the legislation is that it purports to allow people to use gold as a form of money, as the US Constitution permits. Assuming it catches on, it will allow accounts to easily transfer certain amounts back and forth so that parties can make legal contracts in terms of gold.
This legislation, especially coming from a big state like Texas, has to scare the federal government and the central bankers at the Fed. The federal government and the Fed depend on the fiat monetary system to spend money, run up debt, bail out banks, and quietly tax people by way of debasing their money.
And legislation such as this sends a strong message that they better not think about trying to confiscate gold, as has been done in the past. The new law explicitly declares that no “government or quasi-government authority other than an authority of Texas” will be able to confiscate or freeze an account inside the depository.
It will also be interesting to see if other states decide to follow suit on this type of legislation. In 2011, the State of Utah passed legislation affirming the acceptance of gold and silver as legal tender, so this Texas legislation did not come out of nowhere.
Finally, some anti-gold liberals, such as the Los Angeles Times and others, tried to make the case that the Texas Bullion Depository is the State’s first step toward seceding from the Union. PULEEEASE!!! Nothing could be further from the truth.
Happy Father’s Day to all you Dads out there!
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