Colorado may legalize gold currency
Imagine paying for groceries with gold instead of paper money -- if the store owner agreed to accept it, that is.
This post comes from Kelli B. Grant at partner site SmartMoney.
Colorado state senators are considering a bill that would legalize gold and silver as currency, a practice President Franklin Roosevelt banned to prevent hoarding. Currently, precious metals are considered property, with capital gains taxes levied on the profits from their sale.
Last year, Utah passed a similar measure, and a dozen additional states are considering it.
"It's a message from the grassroots level that there needs to be a change in monetary policy," says Rich Danker, economics director for American Principles Project, a conservative think tank. Investors often turn to gold as a way to preserve wealth in tough economic times, and supporters of such state laws have cited concerns about the country's growing deficit and the strength of the U.S. dollar. A return to the gold standard, they say, would result in a stronger currency. (Post continues below.)
Going gold has its drawbacks. "Gold and silver prices fluctuate dramatically throughout the day," says Jack Plunkett, the chief executive of Plunkett Research. "It would be difficult to figure out what your coin was worth at the moment you paid your bill with it."
Finding merchants willing to accept gold as payment isn't likely to be easy, either. (Utah's law, for example, doesn't require merchants to accept gold or silver as payment.) They would need to determine the precious metal content of items such as coins in order to root out counterfeits, which could cost them money on the transaction, Plunkett says.
But supporters say such concerns are overblown. For one, they say the new state measures would allow consumers who have invested in gold or silver to spend it directly, rather than selling the metal first and incurring capital gains taxes, says Danker.
That's especially useful for older U.S. coins, which may have a higher value in metal content than their marked face value. But paying with gold may not necessitate walking around with a bag of precious coins, either. The Utah Gold and Silver Depository is working on a debit card system that draws against the value of a customer’s deposited gold.
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