Libertarian Leanings

Fed Expects No Recession as Inflation Negates Actual Economic Growth

By Mike Gleason, Money Metals Exchange

Rate hike concerns are weighing on precious metals markets this week.

The Federal Reserve lifted its benchmark funds rate by a quarter point as expected on Wednesday. Many investors had been looking for central bankers to signal that would be the final hike of the year. But stronger than expected economic data suggest the Fed may not be done – especially with inflation still running above target.

As NTD News reports, higher borrowing costs will continue to work their way through markets and the economy.

NTD Reporter: One month after a pause, the Federal Reserve is raising interest rates once again to the highest level in more than 20 years.

Jerome Powell: We took another step by raising our policy interest rate a quarter percentage point. We've covered a lot of ground, and the full effects of our tightening have yet to be felt.

NTD Reporter: On Wednesday, Fed Chairman Jerome Powell announcing its 11th rate hike since last spring. For people looking for a home loan, this latest round of interest hikes means they'll pay more for their property. And there's no guarantee relief is coming anytime soon. Economists say more rate hikes could be ahead this year.

Economic Commentator: Inflation is still too high. The Federal Reserve is raising interest rates aggressively to slow the economy and get that inflation back down.

Following the Fed’s rate increase, the preliminary gross domestic product reading for the second quarter came in at a better than expected 2.4%. Thursday’s durable goods orders report also exceeded expectations. Meanwhile, weekly jobless claims came in on the low side.

The bullish economic headlines emboldened monetary hawks and boosted the U.S. dollar on foreign exchange markets. As a consequence, precious metals markets sold off sharply on Thursday.

As of this Friday recording, gold is more or less unchanged now on the week to bring spot prices to $1,970 per ounce. Silver, meanwhile, shows a loss of 1.3% for the week to trade at $24.56 an ounce.

Turning to the platinum group metals, platinum prices are down 2.6% to trade at $953. And finally, palladium is giving up 3.0% this week to come in at $1,298 per ounce.

This week’s price action shows metals markets still mired in the summer doldrums. Bulls will likely have to wait for more clarity from central bankers on interest rates before a sustained rally can commence.

Fed Chairman Jerome Powell said during remarks to the media on Wednesday that Fed economists no longer expect a recession to take hold. But the economy may not be as strong as official GDP and employment reports suggest.

In fact, the leading economic indicators have fallen for 15 months in a row through June. Moreover, the yield curve remains deeply inverted with long-term bonds yielding much less than short-term paper.

If the economy were truly booming, the LEIs would be pointing up and the yield curve would be normalized. Instead, they are both flashing recession warning signs.

Just as the Fed waited too long to raise interest rates while inflation was raging, it may now be hiking too late into the business cycle as higher borrowing costs crimp consumer spending and capital investment. The full effects of the Fed’s latest bump up in the funds rate won’t be known or felt for months. At that point, policymakers could already be in the process of trying to loosen monetary policy all over again.

Of course, nobody can predict when turns will occur in the business cycle or interest rates with any sort of certainty. Fed officials have proven to be dead wrong in the past ahead of major turning points in the economy and financial markets.

And investors who think they can time the market with any degree of success typically end up faring poorly. Successful investors tend to take a disciplined approach of buying and holding assets that represent good value unless and until the fundamentals for those assets change.

Right now, hard assets offer attractive relative value compared to stocks and bonds. Precious metals markets have a compelling supply and demand story, with mining production flat-lining while both industrial and monetary demand are growing.

Gold and silver also tend to fare better during recessions than the stock market. The next recession might not be officially declared this year, but it won’t be put off indefinitely. Unlike recent downturns that began while inflation was relatively mild, the next one could be accompanied by stubbornly high inflation that central bankers as of yet haven’t been able to bring down to target.

Stagflation can be brutal for investors who hold conventional financial assets. Owning physical precious metals can help make it bearable – and potentially even profitable.

In other news, Oregon Gov. Tina Kotek this week signed a sound money bill ending the state’s punitive Corporate Activity Tax on precious metals dealers and, ultimately, the state’s gold and silver investors.

Lending a hand to efforts by in-state small business owners, the Sound Money Defense League and Money Metals Exchange mobilized grassroots support and worked in other ways to secure the passage of House Bill 2073, a package of corporate activity tax (CAT) reforms and cleanups which included the exemption of precious metals sales from Oregon's CAT tax.

Legitimate gold and silver businesses operate on extremely small margins—margins that are similar in scale to brokerages, which are already exempt from the CAT. A CAT tax imposed on topline precious metals revenue is therefore extremely burdensome when compared to the taxes paid by other current CAT payers.

Furthermore, these increased costs on precious metals businesses ultimately are passed through to Oregon savers and investors.

Oregon is among the 43 states that do not directly impose sales taxes on precious metals, but Oregon's Corporate Activity Tax (CAT) had been doing this in a back-door manner. Ohio is another state that still has this draconian tax.

It's bad public policy to penalize small-time savers and investors—as well as the businesses that support them. Fortunately, the trend across the nation is to reduce the costs and obstacles in the way of preserving wealth in the form of gold and silver.

For example, Mississippi, Alabama, Tennessee, and Virginia passed legislation within the last two years to exempt precious metals-related purchases from taxation in their states. Oregon is the latest state to promote sound money by removing the CAT from precious metals dealers and their customers.

Money Metals continues to target the elimination of discriminatory tax policies that discourage precious metals ownership and thereby reduce the likelihood that citizens are able to take steps to insulate themselves from the inflation and financial turmoil that flows from the Federal Reserve System.

This is important work, and we are pleased to say that progress is being made, at least when it comes to the state level.

   

Mike Gleason is a Director with Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.

Oregon Governor Signs Bill Ending Unjust Corporate Activity Tax on Precious Metals Dealers and Investors

Sound Money Defense League

(Salem, Oregon, USA – July 28, 2023) – With the stroke of her pen, Oregon Gov. Tina Kotek put an end to the state's punitive Corporate Activity Tax as applied to precious metals dealers and, ultimately, to gold and silver investors, effective in 2024.

Supporting the efforts of in-state small business owners, the Sound Money Defense League and Money Metals Exchange mobilized grassroots support and worked in other ways to secure the passage of House Bill 2073, a package of corporate activity tax (CAT) reforms and cleanups which included the exemption of precious metals sales from Oregon's CAT.

Gold and silver businesses operate on extremely small margins—margins that are similar in scale to brokerages, which are already exempt from the CAT. A CAT imposed on topline precious metals sales revenue is therefore extremely burdensome when compared to the taxes paid by other current CAT payers.

Furthermore, these increased costs on precious metals businesses ultimately are passed through to Oregon savers and investors.

Oregon is among the 43 states that do not directly impose sales taxes on precious metals, but Oregon's Corporate Activity Tax (CAT) had been doing this in a back-door manner.

"It's bad public policy to penalize small-time savers and investors—as well as the businesses that support them," said Stefan Gleason, president of Idaho-based Money Metals Exchange. "The trend across the nation is to reduce the costs and obstacles in the way of preserving wealth in the form of gold and silver."

Mississippi, Alabama, Tennessee, and Virginia passed legislation within the last two years to exempt precious metals-related purchases from taxation in their states. Oregon is the latest state to promote sound money by removing the CAT from precious metals dealers and their customers.

Sound money advocates have targeted the elimination of discriminatory tax policies that discourage precious metals ownership reducing the likelihood that citizens will take steps to insulate themselves from the inflation and financial turmoil that flows from the Federal Reserve System.

Sound Money Defense League policy director Jp Cortez testified in support of House Bill 2073, making the following public policy arguments:

• Taxing gold and silver harms in-state businesses. It's a competitive marketplace, so buyers will take their business to neighboring states (which have all eliminated or reduced taxes on precious metals), thereby undermining Oregon businesses and jobs.
• Gold and silver are the only money mentioned in the U.S. Constitution. Article 1, Section 10 states that "no state shall make any Thing but Gold and Silver a tender in payment of debts." Therefore, the exchange of one form of U.S. money for another should not be taxed.
• Taxing precious metals businesses is harmful to small-time savers. Purchasers of precious metals aren't usually fat-cat investors. Most who buy precious metals do so in small increments as a way of saving money, seeking to preserve their wealth against the damages of inflation.

"Oregon should not be increasing the costs of saving in a proven inflation hedge—especially considering the economic danger that currently faces the nation. Inflation harms the poorest among us, including pensioners, Oregonians on fixed incomes, wage earners, savers, and more," said Cortez.

"We congratulate Oregon on enacting House Bill 2073, and we encourage other states to follow their lead in promoting sound money principles and reducing obstacles to wealth preservation," Cortez concluded.

Jp Cortez is the Policy Director for the Sound Money Defense League, a non-partisan, national public policy group working to restore sound money at the state and federal level and publisher of the Sound Money Index.

Will the FedNow Payment System Pave the Way for Digital Social Engineering?

By Stefan Gleason, Money Metals Exchange

Last week, the Federal Reserve launched a new payment processing system dubbed "FedNow."

Officials say FedNow will allow individuals and businesses to initiate instant funds transfers between banks. Critics warn that FedNow could be a prelude to central bank digital currency (CBDC) that threatens financial privacy and freedom.

Fund transfers between banks made through FedNow will settle directly in accounts at the central bank. Once Fed accounts become widely adopted and used for payments, critics fear it's only one additional step to convert the "dollars" used in transactions into "FedCoin" – a proposed digital token to be issued directly by the central bank.

To be sure, similar arguments could be used to justify a CBDC as have been made with FedNow, e.g. it will improve the speed, efficiency, and reliability of payments.

However, the FedNow system is really just a major upgrade to the highly deficient ACH payment system that has limped along for decades, with its very slow clearing time, lack of fraud prevention, and other problems.

Concerns about FedNow appear to be overblown, and FedNow should not be conflated with totalitarian CBDC schemes. Here is what Emile Phaneuf of the American Institute for Economic Research writes on the risks of CBDCs:

Risks CBDCs present include the loss of settlement finality that comes with physical cash (as abandoning cash accompanies the push for CBDCs), loss of financial privacy, easy seizure of assets, loss of the ability to resolve problems at a local level with a commercial bank (as it would be doubtful that a central bank would come to be known for its customer service)…

…outright prohibition on spending or purchase limits with certain merchants or on certain products, and (perhaps most importantly) the paradigm shift from money as an exercise of economic freedom to one of social engineering by central banks and their respective governments.

The latter could manifest itself in various ways, including (to name just a few) negative interest rates (essentially a confiscation of one's savings), the expiry of one's money (with a date determined by the issuing central bank or its government) — or even discouraging the consumption of products like gasoline, plane tickets or red meat in order to enforce a climate agenda.

The weaponization of the monetary system for social engineering purposes has been in the works for decades. The abandonment of hard currency backed by physical gold and silver gave politicians and central bankers the power to manipulate the supply and value of the currency for their own ends.

Under a fiat currency regime, central planners arbitrarily try to determine how much inflation (i.e., currency depreciation) to inflict on the economy.

Under the Federal Reserve's dual mandate, central bankers are supposed to ensure "price stability." Instead, they openly flout that mandate, redefining "stable prices" as annual price inflation of 2%. Of course, the Fed is failing even to deliver on that objective by allowing inflation to run much hotter than 2%!

Those who wish to preserve their purchasing power over time while protecting their financial privacy should beware of central bankers' new campaign to promote digital Fed accounts.

Hard money (gold and silver) held outside the banking system remains the soundest alternative to fiat currency in all its manifestations.

   

Stefan Gleason is President of Money Metals Exchange, the company recently named "Best Overall Online Precious Metals Dealer" by Investopedia. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC and in hundreds of publications such as the Wall Street Journal, TheStreet, and Seeking Alpha.

Money Metals' Weekly Market Wrap

By Mike Gleason, Money Metals Exchange

As the U.S. dollar continues to lose purchasing power at home and prestige around the world, a major presidential candidate is calling for a return to sound money.

More on that in moment. But first, let's review this week's market action in precious metals.

Gold and silver sold off on Thursday, but the yellow metal was still clinging to a small weekly advance through yesterday's close. As of this Friday recording, the gold market is up a slight 0.3% for the week to come in at $1,971 an ounce. Silver, meanwhile, is registering a weekly loss of 1.3% to trade at $24.83 per ounce.

Turning to the PGMs, platinum is off 1.2% to trade at $977. And finally, palladium is putting in a weekly gain of 0.6% to command $1,330 per ounce.

Despite some constructive price action this month, it's still too early to conclude the summer doldrums are over. But there is a good chance that the seasonal lows for gold and silver have already been seen. If that's the case, then any pullbacks that do come in the weeks ahead could be shallow and short-lived.

As investors anticipate the Federal Reserve to soon declare an end to its rate hiking campaign, they will be looking to position themselves for an eventual pivot back toward monetary easing.

Although recent economic data has prompted many establishment economists and Wall Street cheerleaders to downplay the odds of a recession this year, it's only a matter of time until the next one comes. The warning signs from the interest rate market couldn't be clearer – an inverted yield curve, unaffordable mortgages driving real estate sales volumes way down, and a tightening of credit available to consumers and small businesses.

We've seen this setup before. It almost always leads to a financial crisis of some sort. And that inevitably causes central bankers to try to come to the rescue with emergency liquidity – also known as money printing.

These Fed-induced booms, busts, and bailouts are the consequence of a fiat monetary system that is no longer restrained by gold or any other sound backing.

Ever since President Richard Nixon severed the last official link between the U.S. dollar and gold in 1971, both Republican and Democrat administrations that followed have financed their favored domestic and foreign policy priorities by running up debt to unpayable levels.

The Biden administration is undeterred from continuing to borrow by the trillions because officials know they can count on central bankers at the Fed to buy government bonds in unlimited quantities.

Some say the last President who tried to push back against central bank power and toward sound monetary policy was John F. Kennedy. His nephew, Robert F. Kennedy Jr., is currently running for President.

He recently delivered remarks warning that Washington's abuse of fiat currency will lead to the destruction of the U.S. dollar's global reserve status.

Robert Kennedy Jr: My uncle, President Kennedy, when he was in office, understood the importance of hard currency and the dangers of having pure fiat currency with no other option. He created silver certificates. He created gold certificates. After his death, those were discontinued, but he understood the relationship between fiat currency and war, fiat currency and large-scale, very, very destructive environmental projects, and also these giant aggregations of wealth, and the unbalance, the disparities in wealth that are the ultimate yield of every fiat currency, and then also the threat to America from the inflation, and ultimately, the destruction of the dollar as the global currency.

Kennedy testified before Congress this week about the weaponization of government in directing social media companies to censor content. RFK was specifically targeted for censorship after he raised doubts about the effectiveness and safety of experimental COVID vaccines.

House Democrats responded to his testimony by accusing him of "hate speech." They pushed a motion to ban him from appearing ever again before the Committee. Kennedy, in turn, blasted them for "trying to censor a censorship hearing."

The attacks on free speech, the collusion with big corporations, the reckless borrowing and spending, and the deliberate debasement of the dollar represent a dramatic shift in the party line from John F. Kennedy's time. Of course, he wouldn't have been able to fathom much of what has now been enshrined as Woke ideology.

Robert F. Kennedy Jr. faces an uphill battle in trying to defeat Joe Biden and the Democrat party machine that backs him. Many of his ideas are proving to be more popular among independents, Libertarians, and Republicans than among fellow Democrats of the current year.

One of his boldest policy proposals is to move the United States back toward hard currency.

Robert Kennedy Jr: The Kennedy administration will begin to back the U.S. dollar with real finite assets such as gold, silver, platinum, and Bitcoin. My plan would be to start very, very small; perhaps 1% of issued T-bills would be backed by hard currency, by gold, silver, platinum, or Bitcoin, and then, depending on the outcome, we would increase that annually.

Kennedy also said he would exempt Bitcoin from taxes when converted to or from U.S. dollars. He didn't specifically say whether precious metals would enjoy that same tax-free status. But if he wants dollars to represent gold and silver, then gold and silver should be declared legal tender that is freely convertible into dollars without triggering capital gains liabilities.

RFK's candidacy could potentially bring sound money issues into the national spotlight in a way that hasn't been done since Ron Paul's presidential runs in 2008 and 2012. Dr. Paul had gained a big platform via the Republican primary debates to present his critiques of the Federal Reserve system.

Unfortunately for RFK supporters, there doesn't appear to be any chance that Democrat party bosses will put Biden through any primary debates. And they certainly won't allow Kennedy to speak at the DNC convention.

On the Republican side, the playing field for candidates is more open. Former President Donald Trump is the front-runner at the moment. But he is potentially vulnerable to attacks from challengers on his record of adding to the national debt and installing Jerome Powell to pursue loose monetary policy at the Fed.

Whether a viable sound money candidate emerges on the Republican side remains to be seen. But there are Republican sound money advocates in Congress such as West Virginia Representative Alex Mooney.

He will be gaining a bigger platform for his ideas as he embarks on a campaign for the U.S. Senate. Interestingly, Mooney does have the endorsement of Donald Trump. Trump himself has spoken favorably of gold-backed money in the past. Perhaps he will again in the future.

Moving to a related topic, Money Metals' efforts to promote sound money policies have been building momentum and chalking up wins this year.

Our Sound Money Defense League project has emerged as a formidable national advocate – spearheading state and federal legislative projects, testifying in committee hearings across the country, and garnering grassroots support.

In 2023 alone, we've actively engaged with policymakers and worked on 50 pieces of legislation across 25 states, including Oregon, Maine, and New Jersey, just to name a few.

Now, following our big win in Mississippi this year, New Jersey is aiming to become the 44th state in the United States to end sales tax on purchases of gold and silver. A bill sponsored by Reps. Louis Greenwald and Lisa Swain sailed through the New Jersey Assembly by a vote of 74-0 last month.

Before being voted on by the full Assembly, the Appropriations committee unanimously greenlighted the bill – right after our own Jp Cortez testified at the hearing.

Jp Cortez: Chairwoman Swain and the rest of the members of the committee, thank you for the opportunity to testify before you today. My name is Jp Cortez, and I'm the policy director for the Sound Money Defense League. We stand in strong support of A5294.

Under current law, New Jersey citizens are penalized and discouraged via tax policy from protecting the value of their savings from inflation by holding gold and silver, and that's a large part of why we support A5294. Removing the sales tax on the purchase of gold and silver coins, bars, and rounds would benefit small-time investors and savers, who, unlike the wealthy, have far fewer options of ways to protect their wealth.

Th[is] assembly bill would help level the playing field and provide another option for New Jersey savers. Because inflation diminishes the purchasing power of the currency, it robs the people and the savers of their purchasing power, retirees, people on fixed income. Holding savings in gold and silver is one way to protect the value of one's savings. With housing and other real assets increasingly becoming out of reach for New Jersey citizens, passing this bill would provide another option, another accessible form of tangible assets for people to save in.

Taxing gold and silver has also become an outmoded process or an outmoded practice. 43 states in the US have exempted gold and silver from sales tax. Just in the last two years, Alabama, Arkansas, Mississippi, Ohio, Tennessee, and Virginia have all passed legislation to either enact or extend sales tax exemptions that already existed. This is a bill and effort that would benefit small-time savers. Like I mentioned, the people buying gold and silver typically aren't your wealthy fat cats. These are people that are buying small amounts that of time to try to protect their wealth. And many times, this includes the people on fixed incomes, people on pensions, savers, wage earners, hourly workers. It's also the case that precious metals are held for resale, so a sales tax on this asset is inappropriate."

Meanwhile, we've been aiding an effort to remove the Commercial Activity Tax from precious metals sales in the State of Oregon. Here's Jp Cortez again, this time making his case during a hearing before the state's Senate Finance and Revenue committee:

Jp Cortez: Gold and silver businesses operate on extremely small margins, margins that are similar in scale to brokerage commissions that are already exempt from the CAT. And so this CAT imposed on precious metal sales revenue is extremely burdensome when compared to the taxes paid by other current CAT taxpayers.

Furthermore, these increased costs on precious metals businesses ultimately penalize Oregon savers and investors. Oregon is among the 43 states that does not impose a sales tax on precious metals, but Oregon's CAT does this essentially in a backdoor manner.

The trend across the nation is to remove or to the reduce the cost and obstacles in the way of preserving wealth in the form of gold and silver. Mississippi, Alabama, Tennessee, and Virginia just passed legislation in the last few years to exempt precious metals-related purchases from taxation in their states. This is a competitive marketplace with extremely small margins, so buyers will take their business to neighboring states, harming ultimately Oregon businesses and Oregon investors."

The CAT tax repeal passed unanimously out of the Oregon House and then passed the State Senate. The final stop is the Oregon governor's mansion, where Gov. Tina Kotek is expected to sign this bill into law within the next few days.

Moving to the State of Maine, Senator Eric Brakey introduced a bill to exempt gold and silver from that state's sales tax system. Here he is speaking recently before the Joint Taxation Committee:

Eric Brakey: So for thousands of years, we're going way back now, for thousands of years, civilizations across the world have chosen gold and silver as preferred forms of money for the convergence of qualities they possess. The visibility, portability, high value per unit of weight, durability, and uniform quality, establishing them as uniquely effective stores of value and mediums of exchange. Throughout this time, their value has remained remarkably stable. It is often said that in the Roman Empire, an ounce of gold could buy you a well-tailored toga. Today in America, an ounce of gold can buy you a well-tailored suit, the temptation for central authorities, however, to de base the currency is ever present. As I'm sure this committee is aware, raising taxes on the people can be very unpopular, but when you control the currency, funds can be raised from the people without them even knowing it through monetary sleight of hand."

As Sen. Brakey puts it, from time immemorial, civilizations have consistently chosen gold and silver as their preferred forms of money.... money with an array of exceptional qualities, such as visibility, portability, high value per unit of weight, durability, and uniform quality... making them unparalleled as stores of value, and media of exchange.

Nevertheless, the temptation for central authorities to manipulate and devalue the currency persists. Even worse, inflation is a pernicious, yet often unnoticed, tax. And it breeds discontent and frustration.

Speaking at a Joint Taxation Committee hearing in Maine, Sen. Libby answered a fellow legislator's question about what makes gold and silver different than other assets, such as Corvettes.

Sen. Libby expertly responded, "I just would bring up the point that Corvettes aren't listed in the constitution as money." Here's more of what he had to say.

Sen. Libby: That would be one important distinction... I'm not sure why we would depart from that on this issue when clearly there's a substantial move across the country to bring other states into [compliance]. Why would all of the other 43 states exempt gold and silver and Maine not join this? It may make sense to allow Mainers to have the same benefit that so many other states do. And with so many states passing this legislation, our citizens are just going to go through the back door and find loopholes, order online, get it delivered to the holding stations. So I'd rather see that money stay here in our state rather than go elsewhere. And I think it makes sense to move this [sales tax exemption] forward at this time."

Sadly, Maine's partisan Democrat bosses twisted arms in the final moments and flipped some votes – ultimately killing the proposed sales tax exemption by a two-vote margin during the final roll call vote.

But do take heart... momentum is indeed our side. And this year has already been witness to five sound money victories at the state level.

These successes are largely thanks to the grassroots involvement of Money Metals customers across the nation – patriots who taken the time to call and email their legislators at key moments in these battles. So, we want to say again that we deeply appreciate everything you do to advance this important cause.

   

Mike Gleason is a Director with Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.

BRICS Countries Planning New Gold-Backed Currency

By Stefan Gleason, Money Metals Exchange

As tensions with Russia and China escalate, the so-called BRICS countries (Brazil, Russia, India, China, and South Africa) are preparing to strike a blow against U.S. dollar hegemony.

Last week, the Russian Embassy in Kenya declared, "The BRICS countries are planning to introduce a new trading currency, which will be backed by gold.”

Although any claims coming from Russian sources invite skepticism, independent analysts expect BRICS to continue to pursue de-dollarization and for gold to play a role in that process.

A more specific framework for a gold-backed BRICS currency could be announced during the BRICS summit being held next month in South Africa.

Investors shouldn’t expect China or other major powers to declare an immediate abandonment of the Federal Reserve note “dollar” in international trade. For now, there exists no single, universally preferred alternative.

Leslie Maasdorp, Vice President of the BIRCS New Development Bank said, “It’s going to take a very long time for currency movements to take shape so any discussion of alternate currencies is indeed a much more medium and longer-term aspiration.”

That said, the trend of de-dollarization isn’t some far-off future fantasy. It is happening now. Federal Reserve notes as proportion of foreign reserves have been steadily declining over the past few years.

Russia has had no choice but to pursue alternatives to the dollar in response to it being blacklisted from the SWIFT international payments regime.

Other nations have taken note of this retaliatory blacklisting – something the U.S. hadn’t even done during the Cold War – and have been increasingly repatriating their gold holdings to insure against future attacks or sanctions.

Now China is looking to strike back at the U.S. as well.

President Joe Biden called China’s Xi Jinping a “dictator.” Biden administration officials attempted to downplay the characterization. But offense was clearly taken by the Chinese Communist Party.

China moved to enact export controls on critical commodities, including rare earth metals. The United States is nearly 100% dependent on China to supply certain of these rare earths which are needed in high-tech and energy applications.

Treasury Secretary Janet Yellen went to Beijing to try to assuage the Chinese, insisting she wants the two powers to remain trading partners rather than adversaries.

Implicit in her appeal to China is that any move on the part of the Chinese to ditch the U.S. dollar and conduct trade in an alternative gold-backed currency would be viewed as an escalation of hostilities.

Of course, there is nothing the Biden administration can do to prevent China, its trading partners, or other countries around the world from continuing to accumulate gold as monetary reserves.

The mere fact that gold is being considered by BRICS countries as a basis for international trade should incentivize central banks – and individual investors – to accumulate precious metals. If gold’s role as a global alternative currency is to increase, then so, likely, will its price.

   

 

Stefan Gleason is President of Money Metals Exchange, the company recently named "Best Overall Online Precious Metals Dealer" by Investopedia. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC and in hundreds of publications such as the Wall Street Journal, TheStreet, and Seeking Alpha.

More States Consider Sales Tax Exemptions for Precious Metals as Mississippi Law Takes Effect

By Stefan Gleason, Money Metals News Service

Assessing a state sales tax on the purchase of gold and silver is becoming an outmoded, indeed outrageous, practice – but a small number of U.S. states still engage in it.

Several of the remaining seven states that tax all precious metals purchases are presently considering enacting their own exemptions, and just this week Mississippi bureaucrats formally stopped slapping these taxes on citizens.

A culmination of a four-year campaign by Money Metals Exchange and the Sound Money Defense League, Mississippi Governor Tate Reeves signed Senate Bill 2862 in April and, as of July 1, all purchases of gold, silver, platinum, and palladium coins, bars, and rounds are fully exempt from sales tax in the Magnolia State.

Mississippi follows Virginia (2022), Tennessee (2022), Ohio (2021), and Arkansas (2021). Meanwhile, New Jersey and Wisconsin could be the next two states to remove sales taxes from the monetary metals.

In fact, members of the New Jersey assembly unanimously voted last week to pass A5294, sending the bill to the state senate for concurrence. And Wisconsin is expected to hold hearings on an exemption bill in September.

Hawaii, Kentucky, New Mexico, Vermont, Maine, New Jersey, and Wisconsin are the only remaining full sales tax states – and none of them border each other. That means these states are surrounded by tax-exempt states, further increasing the pressure to act.

That's certainly one of the reasons Mississippi passed its sales tax exemption this year. It's embarrassing to the politicians when they see that citizens are taking their business to other states.

Among the other strong arguments to end this tax:

1. Gold and silver are money, per the U.S. Constitution. It makes no sense to tax money.
2. Stocks, bonds, and ETFs don't have sales taxes, so why should those who purchase gold and silver to save money or hedge against inflation be treated differently?
3. Gold and silver are not consumed. Instead, they are held for resale or exchange – and sales taxes are generally targeting the final consumer of goods, exempting resellers.
4. Coin conventions avoid – and coin shops struggle to succeed in – the sales tax states, forcing economic activity, and businesses themselves, out of state.

Although this year's Wisconsin and New Jersey bills are still moving forward, big government politicians in Maine, Kentucky, and Vermont have defeated such bills (for 2023, at least).

Meanwhile, tax-hungry bureaucrats in California – a “threshold state” – bumped up the required gold or silver purchase size for a sales tax exemption from $1,500 to $2,000, exploiting an inflation adjustment mechanism in state regulations.

This threshold scheme – where the smaller purchasers get taxed, while those who make larger buys do not – is particularly unjust.

Aside from California, New York, Connecticut, Maryland, Massachusetts, and Florida penalize small-time savers who make precious metals purchases below each state's arbitrarily chosen threshold.

As they've traversed the country, Money Metals and Sound Money Defense League staff have uncovered only limited opposition to sales tax exemption bills. There is no major constituency that engages in these battles on the other side.

Not surprisingly, though, some of these bills can get caught up in partisan squabbles or other political gamesmanship.

In a galling display of petty politics, for example, Democrat leaders in the Maine House of Representatives and Senate called for a revote last month after each chamber initially passed the sales tax exemption bill.

After some 11th hour arm twisting, two key "yes" votes flipped to "no,” killing the measure for this year's legislative session.

This sound money bill in Maine was perceived as a Republican proposal. And Democrats, who hold the majority in both chambers, wanted to prove they still had control of the state legislature in a year when the GOP had essentially been shut out of any policy victories. Public be damned.

It's downright crazy for politicians to block access to gold and silver lifeboats in the throes of a dangerous financial storm.

Yet, notwithstanding these challenges, we are fortunate to be making real progress for sound money, particularly at the state level – and particularly when it comes to eliminating sales taxes on gold and silver.

There are also other sound money victories to report involving other types of bills introduced this year, which we will summarize in a later article.

For now, though, we want to give a special thanks to the thousands of Money Metals customers who, at our prompting, have contacted their legislators in literally dozens of states. Grassroots contact works, and the momentum is building.

   

Stefan Gleason is President of Money Metals Exchange, the company recently named "Best Overall Online Precious Metals Dealer" by Investopedia. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC and in hundreds of publications such as the Wall Street Journal, TheStreet, and Seeking Alpha.