Silver and Gold as Legal Tender?
The AP is reporting that Utah has passed legislation making gold and silver coins legal currency.
Utah became the first state in the country this month to legalize gold and silver coins as currency. The law also will exempt the sale of the coins from state capital gains taxes.
This will probably be challenged since the constitution (Art. 1, Sec. 8) gives the power to coin money to congress. A number of other states have introduce similar legislation, but Utah is first to pass it.
The other interesting item in the article is a plan for the Utah Gold and Silver Depository. The idea is an account backed by gold that customers can access with something like a debit card.
The idea is simple: Store your gold and silver coins in a vault, and Franco issues a debit-like card to make purchases backed by your holdings.
Details aren't provided, but I can imagine a business setup that wouldn't run in to the constitutional issue of coining money. I'm speculating here since the article doesn't describe Franco's business model and I couldn't find a website for Utah Gold and Silver Depository. Imagine something like an ETF. An account holder deposits dollars (or possibly other currencies), gold or silver and gets a debit card. Purchases could be charged to the card just like any other debit card. When the charge hits the depository, they debit the account for the amount of gold or silver equivalent to the dollars. Very similar to what happens when someone charges a purchase in another country and the bank converts the charge from that currency to the account currency.
The exchange rate mechanism, fee structure, etc. details would need to be ironed out before it could be rolled out, but I'm sure it could be done.
And, since the charge on the debit card at a store is in dollars, the company hasn't created new legal tender. The exchange from dollars to precious metal happens on the back end under some predetermined rate mechanism.
Food for thought.