With all the (completely justified) angst surrounding central bank digital currencies (CBDCs), it’s easy to forget that the concept of digital money isn’t the problem. It’s just a tool like any other and can be used for good or evil, depending on who’s wielding it.
Obviously, if a CBDC is managed by some combination of the Federal Reserve, the military-industrial complex, the intelligence community, and Big Pharma, that currency will be a mechanism of state control and should be avoided at all costs. But if it’s backed by gold or silver and run transparently by people who respect their citizens’ privacy and agency, then it’s potentially part of a brighter monetary future.
This brings us to Texas Senate Bill 2334, which calls for the introduction of a state-run digital currency, backed by gold and/or silver, accepted as legal tender within the state and available to people living anywhere in the world.
Texas is a logical first mover since in the 2010s it opened a state gold depository where citizens could safely store their bullion. Think of it as Texas’ Fort Knox. This depository gives the state a physical starting point for establishing a gold-backed currency.
From the Epoch Times:
Texas Lawmakers Consider Creating Gold-Based Digital Currency for Use by Anyone Anywhere
Texas could become the first state in the nation to issue its own digital currency based on gold and silver.
If the Texas digital currency proposal becomes law, money could be spent with a debit card by people anywhere in the world, not just within Texas.
Under the proposed law, the Texas comptroller would create a digital currency based on gold or silver and would be given the authority to mint pure gold or silver coins based on weight.
The coins and the digital currency would be considered legal tender to pay debts and would be “readily transferable … to another person,” according to the bill.
Under the plan, the digital money debit card could be used anywhere debit cards are accepted. People outside of Texas could create accounts and use the system wherever they live in the world as long as it’s legal.
The state comptroller, or a trustee hired to oversee the program, would purchase and hold enough gold or silver to cover the units of digital currency set aside for each account holder.
To make sure we’re all on the same conceptual page, a gold standard is a monetary system in which the circulating currency is backed by gold stored in a government vault. Gold and currency are convertible into each other at the discretion of their owners, which prevents the government from creating too much currency. And that’s it. No half-wit Ivy League economists rewarding their future hedge fund employers with artificially-low interest rates. No reporters asking repetitive softball questions of the aforementioned economists, and no money managers building careers on predicting what irrational thing the Fed will do next.
The central bank becomes not much more than a bank teller window, exchanging gold for cash and cash for gold. Money becomes part of the environment, a stable thing that no one worries about, rather than a tool the authorities use to manipulate markets. The rich lose the ability to game the system by buying politicians and Fed governors, so economic inequality is less of an issue. In short, the good effects of a gold standard far outweigh the bad.
Some other possible effects of Texas starting its own gold-backed currency:
The Texas Gold Depository might become a gold/silver storage alternative to vaults in Singapore or Switzerland. For the average American, Texas would seem a lot less exotic and intimidating as a place to store physical precious metals.
The resulting capital inflows would, other things being equal, benefit the Texas economy.
It would serve as a proof-of-concept experiment demonstrating how a state-sponsored gold-backed digital currency would work, possibly inspiring competitors around the world.
It would increase demand for gold and silver, giving people another way to vote with their bank accounts for a return to a gold/silver standard. The result might be a positive feedback loop in which rising demand for gold-backed currencies pushes up the price of gold, making the currencies even more attractive, and so on, until gold and silver approach their intrinsic values of $10,000 and $500 an ounce, respectively.
It’s way too early for predictions, but the best-case scenarios for state-based gold-backed digital currencies are exciting. In any event, it’s nice to be able to report some positive monetary news for a change.