Recently, we published a news note regarding the potential for a government to issue a gold bond based on an article from Keith Weiner. It appears that the State of Nevada is the government involved in this legislation.
Nevada has a lot of gold and silver mining activity, so it makes sense for that state to look at issuing gold bonds like Keith Weiner talked about. Also of note is that this bill also allows for the issuance of silver bonds. Below is the press release on this news. I added the bolded type for emphasis.
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CARSON CITY, Nev., July 2, 2018 /PRNewswire/
"Assemblyman Jim Marchant announces the Nevada Gold and Silver Enabling Act. This legislation provides the state and its municipalities the framework to issue gold and silver bonds. These bonds will reduce the state's debt, shore up the pension fund, increase mining employment and profitability, and attract capital to Nevada. A paper describing the benefits of issuing gold bonds has been published by Monetary Metals.
"This non-partisan legislation does not force us to use gold and silver," said bill sponsor Jim Marchant, Assembly District 37. He added that, "it simply highlights this option for the state and municipal treasurers, who are empowered to decide for themselves."
"It makes sense to replace dollar-denominated debt with gold bonds, so the obligation is matched to the source of income," said Keith Weiner, an economist and CEO of Monetary Metals.
The bill also allows miners to pay tax in gold or silver. That tax is currently in the hundreds of millions of dollars, or several tons of gold. By paying directly in metal, mining companies can save money.
The Act builds on precedents set over the past several years by related legislation adopted in the states of Utah, Oklahoma, Texas, Arizona, and Wyoming. Under existing federal law, gold and silver coins issued by the US Mint are legal tender. Anyone has the right to tender them in payment of debt or taxes."
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My added comments: At first glance this news may seem a bit anti-climatic since it is a state government involved rather than a national government. However, when you realize that Nevada has a mining industry ranking in the top ten in the world, it could be significant as a next step type of experiment. Keith points out that the State of Nevada gets royalties from gold and silver production which they can use for these bonds. He believes the state can issue the gold and silver bonds at a bit of premium to paper bonds they would exchange them for and benefit in that way. This is because of the 2% inflation targeting done by the Federal Reserve.
If gold and silver bonds are issued successfully in the state of Nevada, it could lead to broader adoption of the concept over time in other states and eventually in other nations. As this news release notes, a number of states in the US are passing legislation favorable to gold and silver so this might be viewed as the next step in an ongoing process. Also, a thank you to Keith Weiner for alerting us to this news. It appears this is a project he has worked on for some time.
Keith has just done this audio interview in which he explains his concept for a gold bond in detail. You can also view it just below.
Keith has just done this audio interview in which he explains his concept for a gold bond in detail. You can also view it just below.
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