Posted on 04/07/2013 6:45:56 AM PDT by Bon mots
They should buy gold, with tax dollars, and use the gold to pay off existing debt? Why the extra step? Just use the tax dollars to pay off the debt.
Not sure what you mean by "back state debts".
Say the state needs to borrow $10b dollars. If they can back that debt with gold or silver, instead of an interest rate of $1b, it might be just $50m. A much smaller bite on their taxpayers.
If they have $10b in gold, their interest rate drops from 10% to 0.5%?
California, with no gold or silver, has to pay junk bond yields, if there is still anyone foolish enough to loan them money.
True. How does borrowing more to buy gold make their lenders feel better?
This idea really comes into its own if the federals decide to seize private gold again, offering to involuntarily “purchase” it at a ridiculously low price, as they did before.
They seized it last time, because it backed the currency. Seizing it now is pointless. They might as well seize something easier to find, like bank accounts and retirement accounts. They aren't going to break down your door to seize the gold American Eagle you bought.
This makes sense when there is deflation based in a shortage of dollars, which happened at the start of the Great Depression. The saying was “You could buy a pound of hamburger for a nickel, but nobody had any nickels.”
Likewise, it makes sense when there is strong inflation or even hyperinflation of dollars. This is because the state is on something of a “fixed income”, getting the bulk of its tax revenues only once a year.
Gold, on the other hand, is not tied to a volatile dollar, and has its own value independent of federal dollar manipulation, and states, unlike people, are immune to federal confiscation of gold.
As far as slashing interest rates, the gold acts as an extremely fungible collateral, likely approaching or even exceeding 100% of debt. It goes back to the old idea that “The only people who can get credit are those that don’t need it.” If a loan is just a convenience to you, and one backed by 100% collateral, banks are more than happy to give you a loan, because their risk is tiny. Likewise, your interest rate is likely much lower.
Once again, by selecting an ill-managed state with awful credit, California this time, instead of Illinois, when I have already specified a well-managed red state, and one hopefully with a budget surplus to buy the gold, you present a red herring.
California nor Illinois could not possibly make a functional state repository for gold, because they have no gold and no one will sell them any except for cash on the barrel head, which they do not have. Thus they are not an issue.
Texas, right now, on the other hand, has an $8.8 billion budget surplus. And not only that, but they have recalled *their* state gold, which is kept in bank vaults in New York. And something that should concern us all, New York has suddenly become hesitant about returning this gold, which is not just being demanded by Texas, but also by Germany, and possibly other states and nations.
Those foolish New Yorkers might have sold gold that wasn’t their to sell. If that is indeed the case, the SCOTUS may order them to pay up by any means, even selling off state property.
There has been concern about gold for some years now, ever since the Forex gold market did something unexpected: instead of redeeming the same gold that depositors had left with it, when they demanded their gold back, they got a “Duke’s mixture” of generic gold. This sent up red flags all over the place.
In any event, a state repository would be the best thing that could happen to those that own gold, because it would not only help insure that gold is a fungible commodity in that state, but would provide them tangible insurance against federal bad behavior.
Yes, borrowing when you don't need to gives you a lower interest rate. Not as low as not borrowing at all, so I'm still not seeing the benefit.
I have already specified a well-managed red state, and one hopefully with a budget surplus to buy the gold,
Again, not seeing the benefit to buying the gold as opposed to cutting taxes or paying down debt.
Texas, right now, on the other hand, has an $8.8 billion budget surplus. And not only that, but they have recalled *their* state gold, which is kept in bank vaults in New York. And something that should concern us all, New York has suddenly become hesitant about returning this gold
New York, the state, is holding their gold? Are you sure?
ever since the Forex gold market did something unexpected:
There is no "Forex gold market". Forex is used when talking about foreign exchange, trading foreign currencies. You must mean something else.
In any event, a state repository would be the best thing that could happen to those that own gold, because it would not only help insure that gold is a fungible commodity in that state, but would provide them tangible insurance against federal bad behavior.
Gold isn't "fungible" now in Texas?
Are they really worried that Federal Agents are going to take their gold? Really?
If you’re truly this confused about so many things, and really need answers, there is this marvelous thing called the Internet. Specifically Google.com. If you use it, you might actually find the answers to all your questions, and dispel many mistaken beliefs and opinions.
Good luck with that.
Specifically Google.com. If you use it, you might actually find the answers to all your questions, and dispel many mistaken beliefs and opinions.
I don't need Google to dispel many mistaken beliefs and opinions of goldbugs, but thanks for the tip.
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