Gold is Returning as a Medium of Exchange
The gold is one of the most important products for investment in the world is known to be time well. After all, it is the safe haven par excellence, which serves precisely when you need to invest or diversify your portfolio and want to do so by opting for a safe asset, which will never be devalued. But there is more: there is a country in the world that is beginning to consider gold just like a currency.
After a century, since the last time it happened, a state has recognized the possibility of using gold as a currency, therefore to pay off debts and to collect credits. But who are we talking about? The United States of America! That's right: the US is accepting some laws - as we know there are more than 50 states - that recognize a value as gold as legal money, without even the need to meet tax charges.
Why is the possibility of being used as a bargaining chip being returned to the USA? It must be considered that the United States, as we have mentioned, is not a "single" country, but is a federal nation made up of fifty autonomous states.
The constitution is unique, but each state has some special supplementary laws, a GDP, commercial interests that differ significantly from one country to another. These federal countries have their own specific needs and requirements and have always carved out certain freedom to self-determine them from an economic and legislative point of view, adopting laws that reflect the will of the population and their specific needs.
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To be precise, though, the US Constitution itself gives a special and unique role to gold and silver as instruments of exchange instead of money.
The American Constitution, France, and Gold
Article 1, section 10 of the US Constitution is clear. “No state can [...] mint money; issue credit notes; to declare other things except gold and silver coins legal tender [valid] for the repayment of the debts “reads it. An article, this, never amended in all these years of history and, therefore, still valid, today as today.
But where does it have its roots? Why does the US Constitution take care to speak of gold and silver as legal tender money, and not of other instruments such as - for example - credit notes? The reason why the American Constitution expresses itself in this way, with an undoubted favor towards gold and silver, has its roots in the French crisis which then - along with other reasons - led to the bloody revolution of 1789.
The Kingdom of France, after the death of Louis XIV, is in total chaos. The sovereign's mad expenses have left a country in total default, with dissatisfaction growing. Just in those years, a certain John Law landed in France, a gambler who wandered around Europe after a death sentence for killing a man in a duel and who had written a book where he claimed that the amount of money in circulation it determined the fate of the trade, and that to increase the circulation of money it is necessary to issue the so-called credit notes.
John Law is heard by the regent of France, Philip of Orléans, and the former promises the latter that he will be able to free the country from monetary changes. He was given permission to found a bank: in 1716 the Banque Générale was born, which began to issue paper money. The French compete to grab the securities that increase in value. The regent orders more and more banknotes to be printed. However, the bubble widens and is about to burst: commodity prices go up, the value of the shares goes down.
People, sensing the problem, ask to convert the banknotes into metallic currency: needless to say, however, that the banknotes are many more than the coins and the latter are not enough for everyone. People start to get angry; Law sniffs the problem and flees to Venice in December 1720, where he settles down to play the Ridotto, a gambling house. He dies in poverty and is buried in Venice.
Today we still wonder if Law had been a genius or a scammer, it is certain that his idea of developing payment systems other than coins caused a big problem and was perhaps one of the causes of the revolution. The American Constitution, mindful of the situation, therefore took care to insert this article where it specifies that only gold and silver are considered valid money in the economic activity of the federation.
So, reading this article, we realize that not even credit notes (which would be banknotes) would be allowed to pay, today as today, given that this article is still valid in the USA.
It is no coincidence that in the USA banknotes were initially printed only in very special circumstances (after the War of Independence, for example) and only in 1913, when the central bank FED was built, were pressures put on the reintroduction of banknotes.
The Time of Gold is Back
We understand quite well why the constituent fathers of the USA did not want banknotes. The risks of paper currency, which had erupted before everyone in France in the 1700s, were those of inflation and devaluation. Indeed, there was a tendency to consider inflation as a sort of hidden tax, because if the bank prints the currency, it thus decreases the value of the existing and circulating currency, and in this way - over time - it does nothing but decrease the purchasing power of savers and to donate it to the state and banks instead.
Today the reassessment of article 1 section 10 of the American Constitution (which, remember, binds all fifty states) may seem out of place. Instead, several states have decided to reevaluate it, relying on that rule that still considers the banknote unconstitutional.
Some states have decided to say enough about the central bank's arrogance and the devaluation of the purchasing power of citizenship, and popular discontent has made itself felt to the point of pushing some US countries to make decisions on the matter.
Thus, in recent years, several states have given legal tender status to gold: Utah in 2011, Oklahoma in 2014, Kansas in 2017, Idaho in 2017, Arizona in 2017 and Wyoming in 2018. While in other states such as North Carolina, Virginia, Minnesota, Louisiana, work is underway on the gold status law. It seems that the fever of the return to gold and its centrality is really involving the United States of America.
Trump and the Gold Standard Today
What will the future be like for the USA? We understood that Trump has a great affinity for gold, he said that "going back" (to the Gold Standard) would be fantastic because the US, in this way, would return to having a standard on which to base the issuance of the currency. And without too many words, President Donald Trump said: "We used to have a very, very solid country because it was based on a gold standard". So he expressed a clear preference for the Gold Standard.
Even Alan Greenspan, the historic Governor of the Federal Reserve, declared that gold was the primary global currency for him.
A change, of course, is affecting the US, and it is about an interesting change, of course, to keep an eye on.
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