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Legal Tender Act Editor’s note: We apologize for this dated article but believe it to be worth reading on our blog although it is not our purpose to monitor the gold market for investment purposes.

Will oil soon be traded in a currency that is thousands of years old?  What would a “gold for oil” system mean for the petrodollar and the U.S. economy?  Are Russia and China hoarding massive amounts of gold because they plan to kill the petrodollar?  Since the 1970s, the U.S. dollar has been the currency that the international community has used to trade oil around the globe.  This has created an overwhelming demand for U.S. dollars and U.S. debt.

But what happens when the rest of the globe starts rejecting the increasingly unstable U.S. dollar and figures out that gold can be used as a currency in international trade?  The truth is that it doesn’t take a lot of imagination to figure that out.  Demand for the U.S. dollar and U.S. debt would fall off the map and there would be a rush into gold unlike anything we have ever seen before.  So are Russia and China accumulating unprecedented amounts of gold right now because they eventually plan to cut the legs out from under the petrodollar and they want to gobble up huge stockpiles of gold before the cat is out of the bag?  Of course they will never admit this publicly, but there are rumblings out there that this is exactly what is happening.

Not that you can really blame any nation that wants to get into gold right now.  News outlets all over the globe are telling us that we are in the midst of a “currency war” as central banks all over the planet race to devalue their currencies.

So why would anyone want to be in paper in such an environment?

And of course the Federal Reserve is one of the biggest offenders.  The Fed has been printing money like it is going out of style, and nobody at the Fed or in the U.S. government really seems too concerned that all of this money printing could be endangering the petrodollar.

But the truth is that the Fed is endangering the petrodollar.  Just read some foreign news stories about the U.S. dollar.  They mock us for our reckless money printing.

In the end, our recklessness will make it very easy for the rest of the world to ditch the U.S. dollar. At some point, it will happen.  In fact, there are persistent rumors that Russia and China actually intend to make it happen. Many believe that this is the reason both nations have been hoarding so much gold recently.

Just check out how much gold Russia has been accumulating.  The following is from a recent Bloomberg article…When Vladimir Putin says the U.S. is endangering the global economy by abusing its dollar monopoly, he’s not just talking. He’s betting on it.

Not only has Putin made Russia the world’s largest oil producer, he’s also made it the biggest gold buyer. His central bank has added 570 metric tons of the metal in the past decade, a quarter more than runner-up China, according to IMF data compiled by Bloomberg. The added gold is also almost triple the weight of the Statue of Liberty.

“The more gold a country has, the more sovereignty it will have if there’s a cataclysm with the dollar, the euro, the pound or any other reserve currency,” Evgeny Fedorov, a lawmaker for Putin’s United Russia party in the lower house of parliament, said in a telephone interview in Moscow.

And Russia’s gold hoarding appears to have accelerated last year.  According to one recent report, Russia added 3.2 million ounces of gold to their reserves in 2012 alone.

But of even greater concern is China.  Nobody really knows how much gold China has, because they do not tell us, but all indications point to the fact that Chinese gold hoarding has gone into overdrive.  The following is from a Zero Hedge article from a few months ago…

Because while earlier today we were wondering (rhetorically, of course) what China is doing with all that excess trade surplus if it is not recycling it back into Treasuries, now we once again find out that instead of purchasing US paper, Beijing continues to buy non-US gold, in the form of 68 tons in imports from Hong Kong in the month of June. The year to date total (6 months) is 383 tons. In other words, in half a year China, whose official total tally is still a massively underrepresented 1054 tons, has imported more gold than the official gold reserves of Portugal, Venezuela, Saudi Arabia, the UK, and so on, and whose YTD imports alone make it the 14th largest holder of gold in the world. Realistically, by now China, which hasn’t provided an honest gold reserve holdings update to the IMF in years, most certainly has more gold than the IMF, and its 2814 tons, itself. Of course, the moment the PBOC does announce its official updated gold stash, a gold price in the mid-$1000 range will be a long gone memory.

As I wrote about the other day, nobody produces more gold than China does, and nobody imports more gold than China does. Everyone agrees that China seems to have an insatiable appetite for gold, but nobody can agree on exactly how much gold they actually have.  One recent estimate put China’s gold reserves at more than 7,000 tons of gold, but it could even be much higher than that.  Nobody really knows.

So what are Russia and China up to?

Well, for a long time both nations have expressed displeasure with the fact that the U.S. dollar is the de facto currency of the world.  Leaders from both nations have suggested the possibility of adopting a new global reserve currency, but up to this point no real contenders have emerged to dethrone the U.S. dollar.

So for now, the U.S. dollar reigns supreme in international trade.  Sadly, even though most Americans greatly benefit from the petrodollar, most of them do not even know what it is.  For those that do not fully understand the petrodollar, the following is a good explanation of the petrodollar from a recent article by Christopher Doran

In a nutshell, any country that wants to purchase oil from an oil producing country has to do so in U.S. dollars. This is a long standing agreement within all oil exporting nations, aka OPEC, the Organization of Petroleum Exporting Countries. The UK for example, cannot simply buy oil from Saudi Arabia by exchanging British pounds. Instead, the UK must exchange its pounds for U.S. dollars. The major exception at present is, of course, Iran.

This means that every country in the world that imports oil—which is the vast majority of the world’s nations—has to have immense quantities of dollars in reserve. These dollars of course are not hidden under the proverbial national mattress. They are invested. And because they are U.S. dollars, they are invested in U.S. Treasury bills and other interest bearing securities that can be easily converted to purchase dollar-priced commodities like oil. This is what has allowed the U.S. to run up trillions of dollars of debt: the rest of the world simply buys up that debt in the form of U.S. interest bearing securities.

And all of this has worked out very nicely for the United States.  It has created a massive demand for U.S. dollars and U.S. debt.

But what would happen if the rest of the world rejected the petrodollar system and adopted a “petrogold” system instead?

A recent article by Jim Willie discussed how a petrogold system might work…

The crux of the non-US$ trade vehicle devised as a US Dollar alternative will be the Gold Trade Note. It will enable peer-to-peer payments to be completed from direct account transfers independent of currency, and most importantly, not done through the narrow pipes and channels controlled by the bankers with their omnipresent SWIFT code system among the world of banks. The Gold Trade Note will act much like a Letter of Credit, serve as a short-term bill, and maybe even push aside the near 0% short-term US Treasury Bills that litter the banking landscape. Any bond or bill earning almost no interest is veritable clutter. The zero bound US Treasuries open the door in a big way for replacement by a better vehicle. The new trade notes will involve posted gold as collateral, whose entire system for trade usage will bear a massive gold core that also will include silver and platinum, maybe other precious metals. The idea is to avoid the FOREX systems, to avoid the US Dollar, and to avoid the banks as much as possible in a peer-to-peer system that can be executed between parties holding Blackberry devices or simple PC to complete the payments on transactions. If Gold is ignored by the corrupt bankers, then Gold will be the center of the new trade system and the solution in providing a globally accepted US Dollar alternative. And Russia and China would greatly benefit from a petrogold system.

Today, Russia is the number one oil exporter on the planet.

China is the number two consumer of oil in the world, and at this point they are actually importing more oil from Saudi Arabia than is the United States. Does it make sense that they should remain locked into a system that forces them to use U.S. dollars for all of their oil transactions?

And now Russia even has the number one oil company in the world.  The following is from a recent article by Marin Katusa

Exxon Mobil is no longer the world’s number-one oil producer. As of yesterday, that title belongs to Putin Oil Corp – oh, whoops, I mean the title belongs to Rosneft, Russia’s state-controlled oil company.

Rosneft is buying TNK-BP, which is a vertically integrated oil company co-owned by British oil firm BP and a group of Russian billionaires known as AAR. One of the top-ten privately owned oil producers in the world, in 2010 TNK-BP churned out 1.74 million barrels of oil equivalent per day from its assets in Russia and Ukraine and processed almost half that amount through its refineries.

With TNK-BP in its hands, Rosneft will be in charge of more than 4 million barrels of oil production a day. And who is in charge of Rosneft? None other than Vladimir Putin, Russia’s resource-full president.

And Russian gas giant Gazprom supplies a huge percentage of the natural gas that Europe uses…

Gazprom, the Russian state gas company, already has Europe wrapped around its little finger. Russia supplies 34% of Europe’s gas needs, and when the under-construction South Stream pipeline starts operating, that percentage will increase. As if those developments weren’t enough, yesterday Gazprom offered the highest bid to obtain a stake in the massive Leviathan gas field off Israel’s coast.

Gazprom in control of Europe’s gas, Rosneft in control of its oil. A red hand stretching out from Russia to strangle the supremacy of the West and pave the way for a new world order– one with Russia at the helm.

Russia and China have a tremendous amount of leverage when it comes to energy.  What if they got together with a bunch of oil producing nations in the Middle East and decided to set up a system where oil is traded for gold?  Would not much of the rest of the world go along with such a system?

Of course if that happened the U.S. financial system would crash.  We would no longer be able to export our inflation to the rest of the globe and prices would rise dramatically.  Demand for U.S. government debt would go through the floor and interest rates on that debt and on everything else in our economy would skyrocket.  Economic activity would grind to a standstill and the financial markets would collapse.

And that would just be for starters.

Most Americans simply don’t understand that Russia and China have the power to collapse the U.S. economy by going to a gold for oil system.  All they have to do is pull the trigger.

The other day I wrote an article entitled “Show This To Anyone That Believes That ‘Things Are Getting Better’ In America” which discussed all of the reasons why the U.S. economy is already collapsing.  But as bad as things are now, this is nothing compared to what things will be like when the petrodollar dies.

So pay keen attention to anything in the news about Russia or China suggesting that oil should be traded for gold.  When Russia and China pull the trigger, things will get messy very quickly.

For more, see The Economic Collapse Blog.

Thursday, February 14, 2013 9:47 AM        http://www.afa.net/Blogs/BlogPost.aspx?id=2147532400

 

Although previously agreeing to hear the Arizona Legal Tender Act bill last year, Kate Brophy McGee refused this year to place the bill on the calendar. Her refusal was in large part her belief that Arizona did not need the bill, even though it is mandated in U.S. Constitution Article 1 S. 8. It died in her Banking and Finance Committee.

It is not surprising that Kate Brophy McGee is on the blacklist of RINO Republicans who collaborated with Gov. Jan Brewer to join with the Democrat legislators in voting for Medicaid expansion. This was to accommodate the implementation of ‘Obamacare’ instead of enacting a state healthcare exchange, among other unconstitutional actions led by the governor. It was the same Gov. Jan Brewer who vetoed the Arizona Legal Tender Act last year for nebulous reasons her office could not defend.

Unfortunately, the bills sponsor, Senator Chester J. Crandell was suddenly killed in an accident while riding on his ranch.

According to the Arizona Daily Sun, “Crandell was known largely for espousing conservative causes, getting attention for a 2013 measure seeking to declare that privately minted gold and silver coins are legal tender in Arizona. He said it set the stage for a time when people will want to use these coins rather than the paper currency being issued by the Federal Reserve, money that some people believe could become worthless due to hyperinflation.”

Senator Crandell was able to easily recruit 12 sponsors for the bill and the Arizona Legislature passed the bill, in large part because of his dedication and dogged determination to the task, a characteristic of all of his work whether in the legislature or on the ranch.

Continue to follow the progress of this topic in Arizona as other states also make progress on constitutional legal tender.

Arizona’s Legal Tender Act SB1096 is assigned to one more committee before the House floor vote, the C.O.W. and on to the governor!

Please contact the AZ House Financial Institutions Committee to hear and pass this honest money bill:

Financial Institutions

Members

Position

Email

Phone

Kate Brophy McGee

Chairman

kbrophymcgee@azleg.gov (602) 926-4486
Demion Clinco

Member

dclinco@azleg.gov (602) 926-4089
Jeff Dial

Member

jdial@azleg.gov (602) 926-5550
Rosanna Gabaldón

Member

rgabaldon@azleg.gov (602) 926-3424
Lydia Hernández

Member

lhernandez@azleg.gov (602) 926-3376
David Livingston

Vice-Chairman

dlivingston@azleg.gov (602) 926-4178
Darin Mitchell

Member

dmitchell@azleg.gov (602) 926-5894
Steve Smith

Member

stsmith@azleg.gov (602) 926-5685

Here are some points to share with Arizona’s Financial Institutions Committee from the Sound Money Campaign:

One of the primary reasons our paper money is not tied to a gold standard is that the government can fund whatever project it needs to fund simply by instructing the Fed to print more money. Before we unchained the dollar from gold, the government could not spend more money than it held in gold. That kept the lid on wild spending, and our eyes on what the United States budget was really doing.

The result of printing money with nothing to back it is a huge national debt. Sure it is easy to say that we need all of these government programs, but how we are going to pay for them. We cannot continue to spend money that we do not have. How long can you do this before you face a huge economic crisis? Well the U. S. Government is facing a huge economic crisis. That crisis is going to affect everyone.

The opponents of sound money (money that is backed by a gold standard) are the very ones who are making the laws, and driving up debt. They are skimming the top and getting rich while waiting for the entire heap to collapse in on itself. Who is going to pay for this? It will be the American middle and lower class and their children!

Paper money is not working for the country. It undermines the power of supply and demand. It turns citizens into addicts of consumerism. Sure we need people to buy products but at what cost do we allow people who cannot afford products to keep buying them? The housing market crash of 2008 should have been a sound warning. It was not. The people have allowed the Fed to make the situation worse by decreasing the value of the American Dollar to such a degree that it is practically worthless.

Paper money is like a mirage. Money that is not redeemable in gold or silver does not show a true vision of industry. How do we measure success and failure if the very components of either are propped up with fake cash? When currency is backed by an asset, it has a limit on how much it can be worth and how little it can be worth. The extreme of printed money is not expressed by upward growth; it is in terms of deflation.

How can the value of currency increase if the amount of the currency floating within the market continually dilutes its value? The answer is that printed money cannot gain in value unless it is retracted from the market. In the current situation, that would cause interest rates to go sky high, and the economy would face huge inflationary problems. Printed money needs to go. It is past time to return to a gold standard. It is past the time that we allow the markets to regulate the value of currency so a Dollar really is worth a Dollar.

Last year’s Arizona Legal Tender Act was in demand again this year by a number of legislators and its sponsor was swift in resubmitting it to the ‘hopper’ in 2014 as Senate Bill SB1096!

This time the bill is beefed up to address minor concerns with implementation. the Senate Engrossed text of the bill can be read HERE. It was quickly passed through the Arizona Senate and is in the House Federalism and Fiscal Responsibility Committee TODAY.

Please contact the members of this committee to encourage them to recognize honest money as legal tender in Arizona, paving the way to another great tool for prosperity and sound economic practice in compliance with Article I, Section 8 of the Constitution.

Should this committee amend and recommend the bill to the floor for consideration by the Committee of the Whole, or send it directly to the floor for Third Read, contact all members of the House and encourage them to pass SB1096 as it stands.

FOR TALKING POINTS to promote this bill, see the Arizona Legal Tender Act Fact Sheet tab above and browse the articles. Facts on honest money don’t change–the use of gold and silver coin as legal tender is almost as old as dirt itself (pardon the pun!).

It is time we kept our hard-earned wealth intact. “A wise man leaves an inheritance to his children and grandchildren.”

 

Texas Votes to Abolish Taxation of Gold

May 23, 2013

Texas to Abolish Gold Taxation as APP Launches Related Website on States and Sound Money The Texas Senate on Wednesday night passed H.B. 78, a bill that eliminates the sales tax on precious metal coins and bullion. It now goes to Governor Rick Perry’s desk for his signature into law. Existing Texas statute applies the […]

Read more

By Shane Vander Hart on May 22, 2013 | Economics

SB 248 is being discussed in the Louisiana Senate Committee on Revenue and Fiscal Affairs.  It simply provides for a sales and use tax exemption on purchases of gold and silver bullion coins.  This bill is sponsored by State Senator A.G. Crowe (R-Slidell).  This is the bill we have been involved in.  There may be a vote on this before the end of the day, we’ll keep you updated.

There is a similar House bill – HB 682 sponsored by State Representative Paul Hollis (R-Covington) that is being considered by the Louisiana House Ways and Means Committee.  This bill broadens the sales and use tax exclusion for gold, silver, or numismatic coins (collectables), or platinum, gold or silver bullion.

If both bills pass the differences will need to be worked out in conference committee.

Update: the House bill just passed out of committee unanimously.

Saturday, 04 May 2013 Written by  Alex Newman
http://www.thenewamerican.com/economy/economics/item/15298-outcry-after-gop-arizona-gov-brewer-vetoes-gold-and-silver-bill

Despite overwhelming support among lawmakers and activists, Republican Gov. Jan Brewer vetoed legislation that would have made Arizona the second state to officially define gold and silver as legal tender. The GOP governor acknowledged that concerns over the increasingly unstable U.S. dollar were justified. However, citing a miniscule projected drop in tax revenue and other trivial excuses, Brewer refused to support the popular bill. Activists are now hoping lawmakers will try to override the governor.

In an open letter about the veto of SB 1439 to Arizona Senate President Andy Biggs, the governor claimed that alleged “administrative and fiscal burdens” for taxpayers and the state revenue department “remain vague.” In addition, Brewer cited an example of her supposed confusion, claiming it was “unclear” whether the measure would have required Arizona to exempt income tax related to a transaction with collectible coins or currency originally authorized by Congress and used as legal tender.

“This would result in lost revenue to the state, while giving businesses that buy and sell collectable coins or currency originally authorized by Congress an unfair tax advantage,” Brewer wrote in explaining her controversial decision, which sparked an outcry among conservatives and sound-money advocates. Despite the supposed worry over “lost revenue,” however, experts said the legislation was unlikely to have any significant impact on the state budget — especially not if, as critics of the bill alleged, few people were interested in using sound money anyway.

Still, Brewer did suggest that she understood growing nationwide fears surrounding the Federal Reserve System, inflation, and wild federal spending. “While I believe the concern over a devalued dollar as a result of an unsustainable federal deficit is justified, I am unable to support this legislation,” she wrote. “I believe the provisions in this legislation need to be more carefully examined and there should be prior coordination with those government agencies tasked with oversight of these transactions.”

It was not immediately clear whether the governor would be willing to reconsider supporting the bill if the provisions were “more carefully examined.” As The New American reported last month, in an effort to soften opposition from the Brewer administration’s revenue bureaucrats, the Arizona House of Representatives added an amendment specifically stating that authorities would not be forced to accept gold or silver. Apparently that was not enough.

Under the legislation, which received widespread support from economists, lawmakers, and grassroots activists, precious metals would have been treated like debt-based fiat currency for taxation and regulation purposes. Unlike the privately owned Federal Reserve’s currency, however, nobody would have been forced to accept gold or silver against their will.

Outcry After GOP Arizona Gov. Brewer Vetoes Gold and Silver Bill

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