Last Monday Arizona lawmakers passed a bill that makes precious metals legal tender. Arizona is the second state after Utah to allow gold coins created by the Fed and private mints to be used as currency. More than a dozen states have legislature underway to pass similar measures.
The bill comes hot off the heels of one of the largest drops in the price of gold. The metal fell 9% yesterday -- its biggest one-day drop in 30 years. Gold’s volatility may make it hard to go to a grocery store and pay for milk and eggs with bullion coins.
“Yeah, I know gold is down right now,” Arizona State Senator Chester Crandell and sponsor of Senate bill 1439, tells The Daily Ticker. “People are still buying gold and using it as a commodity and I think they want to use it as actual legal tender instead of the dollar."
Senator Crandell says that the differences between gold as a commodity and gold as legal tender are pronounced.
“I think there’s a different comparison when you trade it as a commodity or when you use it as actual monetary value," he says. A return to the gold standard, he believes, will relieve volatility in the gold market.
The bill will also eliminate a capital gains tax liability associated with an increase in the value of gold. Making gold a legal tender eliminates the commodities tax at a state level.
The bill doesn’t force any constituent to use or accept gold as currency and because of problems with the local revenue department, residents of Arizona won’t be able to pay their taxes in bullion. In fact, the bill seems more symbolic than anything-- an exercise of a constitutional right.
In an interview with the Arizona Daily Star, Crandell expressed his distrust in the U.S. Dollar, stating that as the Fed continues to print money hyperinflation becomes more likely. This bill will prove to be a safe haven for the state of Arizona when hyperinflation sets in, he says.
Arizona Democrats largely opposed the bill arguing that there was no need for this legislation and no way for it to be properly implemented.
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