The Legislature is working on HB 317, a bill to put Utah on the gold standard and do away with all danger of inflation, or so the sponsors say.
You can read the story here (click) but the premise of the bill — that gold is more stable and inflation-proof than paper money — is simply wrong.
Gold is a commodity. All money is a commodity. The value of gold relative to other commodities — potatoes, bread, BMWs — is determined by the amount of gold floating around relative to the amount of potatoes, bread and BMWs floating around. The bill asks Utah to let people pay taxes in gold coin, which would put Utah in the sticky position of trying to figure out how much gold to take.
Will we all have to start carrying around pokes of gold dust? Reminds me of the movie “North To Alaska.”
Alaska is a good example of how gold does cause inflation, and its value is far from stable. Miners with pokes of gold had to pay $1 a dozen for eggs back on the Klondike. It was supply and demand, and store-keepers (who made the real money during the Gold Rush) knew how to work it.
Spain went through a period of inflation after 1492 when it started importing all that gold from the New World without increasing the manufacturing base in Spain. More gold chasing the same amount of commodities (probably not BMWs) meant the price of those things went up. Good for you if you had the gold, not so good if you didn’t.
Money is a way to trade my potatoes for your BMW without having to haul around sacks of potatoes. Paper money is, it is true, not gold, but neither is the check you write when you buy a BMW.
The government can print all the money wants, just as you can write all the checks you want, but you are both foolish to write or print more than the value of goods and produce your checks, or the government’s money, is supposed to represent.
People worry about too much paper money, but what if someone discovers a huge amount of gold somewhere? Suddenly gold would be as common as peanuts. Not for nothing does DeBeers keep tons of diamonds locked up solid: If that hoard ever got loose, diamonds would be as valuable as paper dollars. As it is, I’m amazed they’re still valuable — after all, darn near every bride has one.
Judging by the amount of inflation we’re seeing right now — less than 1 percent except for gasoline — I’d say the goverment is doing a better job than some people I know handle their checking accounts.
The only real effect I see of this silly bill is that it will cost the state of Utah several hundred thousand dollars because it exempts gold coins from capital gains tax.
Makes me wonder if the real goal of the bill is to help people who have gold coins make a killing in the currently highly inflated gold market without having to pay taxes on their profits.
That’s the age-old conundrum: What do you sell gold for? When they sell their gold, they’ll most likely be paid in paper.
I bet they take it, too.