The premium over spot price for a Silver Eagle is up to $4, according to an informal survey we made of dealers today – a signal the Mint can’t keep up with demand.
“Why can’t they keep the supply of coins up?” asks Rep. Ron Paul, chairman of the House Subcommittee on Domestic Monetary Policy. That’s in part a rhetorical question: The Mint doesn’t make its own blanks. “There is a contract with a foreign company, which makes no sense at all.”
Dr. Paul will bring the Mint’s operations under the microscope at his subcommittee’s hearing next Thursday. The Eagle program is near and dear to him. In fact, the program likely wouldn’t exist were it not for Paul’s involvement in the US Gold Commission appointed by President Reagan in 1981.
US Gold and Silver Eagles are now legal tender in Utah.
Actually, they’re legal tender in every state – a 1-ounce Gold Eagle has a face value of $50 – but “the intent would be to see where a gold or silver coin is valued at its market value instead of its face value,” says State Rep. Brad Galvez, who introduced the bill.
“This allows the people of Utah to protect their assets against what we’re seeing in inflation and the devaluation of the dollar.”
Gov. Gary Herbert signed the bill into law last week.
An aide who wished to remain anonymous told CNN, “If somebody is stupid enough that they want to buy a Snickers bar at 7-Eleven with a gold coin worth thousands of dollars, they will be able to do that.”
There is one practical effect to the bill: Sales of Gold and Silver Eagles will not be subject to state capital gains taxes; sales of foreign precious metals coins still will.
“So alarming has been the collapse of the dollar,” says writer Seth Lipsky in The Wall Street Journal, “that the legislatures in as many as a dozen American states are considering using their authority – under Article 1, Section 10 of the Constitution – to make legal tender out of gold and silver coins…
“However, the von NotHaus verdict will stand as a warning.”
You may recall von NotHaus was convicted last month of violating a law that makes it illegal, in the words of the FBI press release, “to create private coin or currency systems to compete with official coinage and currency of the United States.”
But as Lipsky points out, that’s not entirely true.
In another wrinkle to an incredibly tangled case, the judge threw out the part of the indictment that claimed “it is a violation of law for private coin systems to compete with the official coinage of the United States.”
You can’t make this stuff up.
“It is not clear that there is a constitutional basis or a logic,” Lipsky concluded in his piece, “for prohibiting individuals from making and selling pieces of gold and silver and using them, on a voluntary basis, as money – i.e., to ‘compete with’ the official coinage of the US.”
To be continued…
“What was left to convict the man on, we don’t know,” added our own Bill Bonner to the von NotHaus saga in Friday’s “Protecting Yourself from the Inexorable Decline of the US Dollar”. “But the court did so. And now he must appeal…or face penalties, possibly time in jail…and possibly a long time.
“But what about the rest of us? Are we sentenced too? Will we be forced to pay the price for the feds’ goofy monetary policies?
“Compare Mr. von NotHaus’s money to the money issued by the US Treasury Department. The Treasury’s dollars have no precious metal content – none. At best, their content comes from trees and cotton plants, with a scrap value that is probably negative. Meaning, if it loses its value as money, you’ll have to pay someone to haul it away.
“So who do the authorities haul to the hoosegow? The guy who mints honest money in tiny quantities…or the guy who puts out $2.2 trillion in ‘paper’ money that is sure to lose its value quickly?
“Go ahead…take a guess.”
Gold and Silver Coins Continue to Make Headlines originally appeared in the Daily Reckoning. Daily Reckoning founder Bill Bonner recently wrote articles on stagflation and introduced his new book Dice Have No Memory: Big Bets & Bad Economics From Paris to the Pampas.