The state government of Texas recently passed legislation to bring back the state’s gold. It will set up a vault in Texas – perhaps something similar to Fort Knox on a smaller scale – that will keep the gold for safe-keeping.
The Texas Bullion Depository is going to store the gold bars owned by the University of Texas Investment Management Company, estimated to be worth $25.4 billion. About 2.5% of that belongs to the state.
While many gold bugs are happy about this bill and the stand that Texas is taking against the Federal Reserve and the federal government, there is a problem: trying to execute the legislation.
The original author of the bill estimated the storage facility would cost $23 million. A task force of four people that was formed to enact the legislation is wondering if this is doable. They are also wondering where this facility is going to be located.
It was easy for lawmakers to write this legislation and vote for it, but there are a lot of logistics that will need to be worked out.
The original author of the bill, Representative Giovanni Capriglione, believes that a private company can build the facility. But perhaps this should have been discussed prior to passing the legislation, or maybe even included in the legislation.
The first lesson to take away from all of this is that even seemingly pro gold legislation will run into problems with enforcement and budget overruns. We should not be surprised if we see the other elements of political law show up, such as cronyism and misinterpretation of the law.
Free Market Solutions
While I appreciate the stand that the people of Texas are taking, and I appreciate the distrust of the feds in guarding their gold, I am not so sure that another law was the answer here.
Given that the state actually owns some gold, it probably is a good idea to take it out of New York and keep it away from the bankers and politicians in the northeast. Still, did they have to enact a law to build a massive storage facility?
Why couldn’t the state just find a third party in Texas to store the gold? I can understand not wanting to store it at a large commercial bank. But if they are talking about a private company building and maintaining the facility now anyway, why pay all of the expenses for this upfront? Why can’t the state of Texas just rent a really large safety deposit box?
The new law will also allow regular people to deposit their gold holdings into the repository. Maybe this means a little competition for the U.S. dollar.
Again though, why do they need to make these laws? How about repealing laws instead of adding new ones? Allow for gold to be used as a form of money. If Texas really wants to be bold, tell the federal government that the federal legal tender laws will not be recognized in Texas.
Most people who are pro gold also tend to be pro free market. And in this sense, this legislation is somewhat contradictory. It is pro gold and it takes opposition to the central bank and federal government. At the same time, this legislation is not allowing the free market to work.
For people who want to hold gold, they have many options already available for storing it. Private storage facilities, aside from big banks, already exist. If there is a demand for this service, we should let the free market fulfill this demand.
It is hard to praise a bill that is going to cost taxpayers $23 million or more. And it is not as if the gold being transferred from New York is actually owned by the citizens. It isn’t “owned” any more than the average American citizen owns a baseball stadium, or a public park, or the Jefferson Memorial.
Just because your tax money went to build a national monument, it doesn’t mean you own it. If so, try taking possession of your share, or see if you can cash in your ownership share.
The Texas legislature is on the right track in not trusting the federal government, but it still may have missed the mark with this bill.
You can advocate states’ rights without advocating more action by state governments. We need fewer laws, at all levels of government. We need free market solutions. We need to find alternative forms of money, including gold, but not necessarily at the direction of the Texas legislature.