Utah Accepts Gold As Currency

[Puppycow]

How's that work? At the end of the day your fast food purchases are all tallied up and the appropriate amount is Dremel'd off of your gold brick?

I don't think they would do it that way. Just like when you deposit money in a bank and withdraw it later, it's not the same bills that you deposited.

As long as you get the same weight and purity of gold back, minus what you spent in the meantime, it works.

ETA: of course the question arises of who pays the bankers.
I heard about the debit card thing on a podcast and they didn't explain all the details of the system.

 

[Antiquehunter]

Just trying to analyze / imagine the practicalities of such a system...

- I deposit a 1 oz approved bullion wafer (Johnson & Mathey or whatever) at this 'bank'. They issue me a debit card, which has a spendable value of that day's spot price for 1 oz of Au, minus whatever service charge/markup they would charge for the privilege. For sake of argument, lets say that gives me $1600 in walking around money.

- I go spend $100 on the debit card.

- I'm now entitled to $1500 (less service charges), and I decide to withdaw my gold. In the meantime the spot price has risen to $1700. So I'm entitled to .88235 of an ounce back.

- How the hell is a bank going to return this to me? Fractional gold bullion wafers/coins carry much higher premiums than the standard 1oz sizes. I can't take a one ounce gold coin to a dealer and ask for 10 * 1/10th oz coins back - that would cost additional money. Furthermore, no one makes a .88235 size. They're obviously not going to pay me out in casting grain.

This looks to me to be just a way for some new 'E-gold' sort of website to make some money off the silly.

 

[Tippit]

Precisely, so this bill achieves... nothing expect spending taxpayer's money in executing its passage?

Each taxpayer to send in a few grams of gold to cover the time wasted?

Fail. You might try reading the article, and doing some basic research in order to understand what it really means. Utah has a state income tax, and a capital gains rate of 5%. The Bill offers a capital gains tax credit to offset Utah capital gains taxes on bullion sales, which is ultimately a credit against a form of the inflation tax.

This is small consolation to anyone silly enough to exchange metal for paper directly, since they will still be liable for Federal capital gains taxes at the usurious 28% long-term collectible rate, but it is far from "nothing" with respect to paying income taxes in Utah.

 

[Antiquehunter]

Its a one-time tax break. I certainly didn't read that (when I DID read the article) as being the big 'news'. Assuming people interested in redeeming their gold/silver for a price increase do so in amounts less than $10,000 at a time to avoid financial reporting, I suspect not a lot of voluntary declarations for capital gains are made in any event.

 

[Tippit]

Its a one-time tax break. I certainly didn't read that (when I DID read the article) as being the big 'news'. Assuming people interested in redeeming their gold/silver for a price increase do so in amounts less than $10,000 at a time to avoid financial reporting, I suspect not a lot of voluntary declarations for capital gains are made in any event.

Your assumption is wrong. Thanks to an amendment to the "Patient Protection and Affordable Care Act", sales of gold coins equal to or exceeding $600 are reportable. In 2012 this effectively means that even the sale of a 1oz gold coin is reportable.

 

[Antiquehunter]

By 'reportable' do you mean that one should feel COMPELLED to report this income, much as one should be compelled to report income from sales at Garage Sales, Flea Markets, Ebay auctions etc... Or do you mean that if I sell you a one-ounce gold coin, you are going to provide me with a US Federal tax information slip similar to a W2 documenting the transaction?

I'm not an American, so frankly this is all neither here nor there for me. However a quick browse around of several online dealers of gold bullion doesn't turn up ANY proviso that tax documentation is completed as part of a sell transaction. The only possibility is that if you show up at your bank with a transfer/transaction of more than $10,000 they will ask you to document that transaction, which WILL be reported to the IRS.

 

[Tippit]

By 'reportable' do you mean that one should feel COMPELLED to report this income, much as one should be compelled to report income from sales at Garage Sales, Flea Markets, Ebay auctions etc... Or do you mean that if I sell you a one-ounce gold coin, you are going to provide me with a US Federal tax information slip similar to a W2 documenting the transaction?

If you were an American, you wouldn't "feel" compelled, you would be compelled, by law. Gold sales don't require submitting the seller's SSN, so there is no 1099.

 

[Antiquehunter]

If you were an American, you wouldn't "feel" compelled, you would be compelled, by law. Gold sales don't require submitting the seller's SSN, so there is no 1099.

There is a world of difference between a law saying you SHOULD report, and a mechanism by which one MUST report. Hence my earlier comment about the number of people voluntarily reporting this information and availing themselves of the tax break will be extremely few and far between.

 

[John Albert]

Aside from the logistical problems, who would take advantage of this? I can't imagine the gold bugs do -- they want to KEEP their gold and will happily pay you in "worthless" Federal Reserve Notes instead.

I suspect laws like this are more symbolic than anything. It's a talking point for the "End the Fed" types.

Bingo.

It's a publicity stunt. They've taken a state act and amended it to make it appear they're doing something revolutionary.

Yep. It's a specious and trivial law that really changes nothing in day-to-day activity.

 

[daenku32]

Why would you want to use gold to pay your bills when you are getting paid in dollars? If the value of the dollar is decreasing then you want to spend your dollars as soon as you get them.

 

[shemp]

This video gives some excellent advice regarding the greenback dollar:

 

[Muldur]

Why would you want to use gold to pay your bills when you are getting paid in dollars? If the value of the dollar is decreasing then you want to spend your dollars as soon as you get them.

I'm guessing that they're letting the value of the gold on deposit "float". If you deposit 1oz of gold, your account is worth whatever an oz of gold is worth at the time you want to make a transaction..

Example: I deposit an ounce of gold in my account in January at a market price of $1000 (figure chosen for simplicity). My account at that time is $1000. Over the next 4 months, gold appreciates 20%. My account at that time has a balance of $1200. I want to pay my taxes in the amount of $200. I make the transaction and my account balance is again $1000. As long as I don't demand my gold out of my account, it continues to regenerate the account's value as it appreciates in price.

The interesting question is whether or not this "gold bank" is a fractional or full-reserve bank.

 

[John Albert]

I'm guessing that they're letting the value of the gold on deposit "float". If you deposit 1oz of gold, your account is worth whatever an oz of gold is worth at the time you want to make a transaction.

That's a pretty big supposition to make on just a guess.

But it's still irrelevant to the question of using gold as an alternate medium of exchange, because paying a bill is not a "deposit," it's a debit on your account. So the payer effectively relinquishes unto the payee any future value that the gold might acquire after the time of payment. It's not like the state is going to keep a floating ledger on all tax payments, increasing or decreasing each taxpayer's tax burden according to the market value of whatever gold they've already given as a tax payment.

So the question still stands, why would somebody use gold to pay for anything when its value is on the increase? It just makes more sense to hold onto that more valuable resource and pay your bill using plain old dollars.

 

[psionl0]

So the question still stands, why would somebody use gold to pay for anything when its value is on the increase? It just makes more sense to hold onto that more valuable resource and pay your bill using plain old dollars.

Would it make a difference if someone converted some of his gold into currency before paying for something?

 

[dropzone]

First I misread the title as: "Utah accepts God as currency".

But as all good Mormons eventually achieve godhood (well, the men, at least)* that would be distressingly inflationary, worse than in Weimar Germany.

* - No, I really don't know much about the Mormon Church except what I've heard. What gave that away?

 

[Muldur]

That's a pretty big supposition to make on just a guess.

I haven't studied this instance thoroughly, so I freely admit it's a guess.

But it's still irrelevant to the question of using gold as an alternate medium of exchange, because paying a bill is not a "deposit," it's a debit on your account.

I'm perfectly aware of that, and that's not what I said. I said that the smart thing to do in such a case was to spend dollars as soon as you got them to buy gold then deposit said gold in the "gold bank". If the value of the gold is allowed to float, as I suspect it may be, then you draw against the value of that gold (denominated in dollars at the time of the drawing, not the deposit).

So the payer effectively relinquishes unto the payee any future value that the gold might acquire after the time of payment.

No, because he's not actually spending the gold. It's still in the bank. He's drawing against the VALUE of the gold in scrip (dollars).

It almost HAS to work that way. No one is going to plonk down an appreciating asset like gold in a bank if by doing so they "peg" the value of that gold to it's value at the time of deposit. Not only do they lose the appreciation in value, but it makes bookkeeping a nightmare, as each gold bar carried a seperate dollar value based on when deposited.

So the bank's ledgers track the physical amount of gold in the account. If you deposit 4 bars, your account reads as 4 bars. A separate line item in the account ledger lists the current value of the 4 bars, which represents the amount of dollars you have to spend.

It's not like the state is going to keep a floating ledger on all tax payments, increasing or decreasing each taxpayer's tax burden according to the market value of whatever gold they've already given as a tax payment.

You're right, it won't. The tax dept, like any other debt is not paid in actual gold, but in dollars based on the value of the gold, as earlier indicated.

So the question still stands, why would somebody use gold to pay for anything when its value is on the increase? It just makes more sense to hold onto that more valuable resource and pay your bill using plain old dollars.

If I'm right, it's because they're using a floating valuation of the gold, as I indicated, sidestepping that issue.

Ultimately, the whole thing makes no sense as long as we are still under a fiat system, however you explain it.

 

[daenku32]

I'm guessing that they're letting the value of the gold on deposit "float". If you deposit 1oz of gold, your account is worth whatever an oz of gold is worth at the time you want to make a transaction..

Example: I deposit an ounce of gold in my account in January at a market price of $1000 (figure chosen for simplicity). My account at that time is $1000. Over the next 4 months, gold appreciates 20%. My account at that time has a balance of $1200. I want to pay my taxes in the amount of $200. I make the transaction and my account balance is again $1000. As long as I don't demand my gold out of my account, it continues to regenerate the account's value as it appreciates in price.

The interesting question is whether or not this "gold bank" is a fractional or full-reserve bank.

Well that's just living off the returns on your savings. You don't need gold to do that, and quite frankly very few people are actually able to do that. Plus if this is extrapolated to a very large number of workers (like even half of them) you get a glut of savings and the returns drop.

 

[shawmutt]

How much could I get in Utah for a set of gold plates?

 

[Muldur]

Well that's just living off the returns on your savings. You don't need gold to do that, and quite frankly very few people are actually able to do that. Plus if this is extrapolated to a very large number of workers (like even half of them) you get a glut of savings and the returns drop.

You're probably right about that...note I said I didn't think it was viable long-term as it still converts specie to fiat money. That's the only way the "gold bank" CAN work.