Earlier this year, the Utah state legislature passed a law making gold and silver coins legal tender. Now, a Salt Lake City-area numismatist hopes to set up a system that will allow Utahans to use those precious metals to pay for anything they want.
Craig Franco, CEO and president of Pacific Rarities, specializes in the evaluation, purchase and resale of rare U.S. coins and collectibles, and plans to open the Utah Gold and Silver Depository on June 1. His business model, according to the Associated Press
: "Store your gold and silver coins in a vault, and Franco issues a debit-like card to make purchases backed by your holdings."
"With the state of Utah monetizing gold and silver," Franco told DailyFinance
, "the question then became, how do we provide a common vehicle for commerce to transact?"
Franco says he has encountered "a profound amount of interest" in his new service, "coming nationally, not just locally. We have received, in the last 48 hours since the AP article broke, inquiries from the East Coast to the West Coast, from private investors to asset managers."
Some details remain to be decided, including the exact fee schedule the depository will charge. Franco says clients will have 30 days to clear their accounts following transactions. When debiting, he'll use the spot price of the metal in question on the day a transaction is settled. "But the value of the account fluctuates on an hourly basis," Franco explained, "based upon the global market."
Less a Useful Law, More a Libertarian Protest
When it was passed in March, the Utah law was derided
as an example of right-wing fringe thinking run amok. Political columnist Dana Milbank denounced
it as one of several "curious formulas" mixed by "tea party chemists," akin to a Montana bill celebrating global warming, or an attempt to mandate gun ownership for all adults in South Dakota. Even its backers seemed to admit that its significance was largely symbolic: Rich Danker, a think tank project director who supported the bill, told the AP that it would send "a strong signal to Congress and the Federal Reserve that their monetary policy is failing" -- assuming that Ben Bernanke and the rest of the Fed's Board of Governors care what the Utah state legislature thinks.
And yet a dozen other states, from Virginia to Idaho, are said to be considering similar legislation, though the practical effects are limited: The Utah law, for instance, exempts the sale of gold and silver coins from state taxes, thereby removing one barrier to their increased circulation. But it can't compel businesses or individuals to accept precious metals in lieu of paper money -- or, as its detractors are likely to call it (with contempt), fiat currency.
As a form of libertarian protest, however, such laws make sense: One Florida op-ed writer
, urging his fellow Floridians to support a "legal tender reform law" of their own, listed the reasons: "Out-of-control federal budget deficits, costly new entitlement programs (such as health care reform), printing trillions of dollars to prop up the central banking system, and three overseas wars -- all causing mounting inflation."