Even before the invention of Goldbacks in 2019, I was concerned about the unstable and fraudulent nature of our “monetary” system, which since August 15, 1971 no longer uses money, but instead only transacts in irredeemable paper or digital currency units which are, as former Federal Reserve Governor John Exter pointed out, “IOU nothings”. As I explain in my essay “Systemic Bankruptcy”, our “monetary” system, which uses no real money, has no way of retiring systemic debt, except through bankruptcy. “Dollars” (and all other national fiat currency units) are irredeemable bits of taxpayer debt. When you pay someone “dollars” you are giving that person debt.
After moving to Las Vegas in early 2014, I began hosting informal meetings at my home for others interested in the subjects of money and banking. Amongst members of our group were several who had been thinking for several years of these problems and searching for a solution to the problem of the collapse of the global fiat currency system. Particular members were economist Keith Weiner, CEO of Monetary Metals in Scottsdale, Arizona, political strategist Nikki Fuller, and state assemblyman Jim Marchant. In a series of meetings in Las Vegas and Carson City, our small group authored a bill to formally declare that the state of Nevada could issue bonds denominated in gold instead of dollars. This bill was introduced in 2017. Though the bill currently lies dormant, never brought to a vote, the opportunity it represents for the state of Nevada and for the nation as a whole still exists, and indeed is more urgent than ever before. With the right leadereship at both the state and federal levels by dedicated individuals like Nikki Fuller and Jim Marchant, we can move back from the brink of catastrophic banking and currency collapse.
Our team discussed the problems inherent in the design and operation of the US banking system, and realized the need to — somehow — reintroduce actual money (gold and silver) into the US “monetary” system, so as to allow systemic debt to be gradually eliminated by settlement instead of default. Gold coins are monetary assets that are not themselves debt, so if I pay a debt I owe you by giving you a gold coin, I have eliminated my debt to you without giving you someone else’s (the taxpayers’) debt. By paying you in gold, I have eliminated a bit of debt that contributes to the total national (actually global) systemic debt. If you then pay a debt you owe by transferring that same gold coin to someone else, another chunk of global debt is eliminated, further reducing systemic debt. And so on. That one gold coin, repeatedly passing from hand to hand, eliminates debt with each transfer, reducing overall debt. Hundreds of millions of people using millions of gold coins daily to pay their bills, would allow a gradual reduction in systemic debt, and possibly avoid the catastrophe of national (or even global) systemic bankruptcy.
But, how to get gold coins circulating again? In the US, gold was withdrawn from circulation in 1933 by Franklin D. Roosevelt, and imprisoned in Fort Knox, where it cannot perform its vital economic role of eliminating debt through circulation throughout the economy. Then in 1971, Richard Nixon by fiat (that word again!) removed gold from the entire global financial system, eliminating the ability of nations to settle debts between themselves and between parties across borders. The world no longer uses money, and as a result, half a century later, is facing global systemic bankruptcy.
To prevent catastrophic default, gold must be released from prison and again begin to circulate amongst the people. The gold must flow. But, how?
Our monetary policy group realized that Nevada was uniquely equipped to take the first step in releasing gold from prison and allowing it to again circulate. This is because the US is a major gold-producing country, and in the US, Nevada dominates gold production. According to the World Gold Council ( https://www.gold.org/goldhub/data/gold-production-by-country ) the leading gold producers in 2021 were: China (332 tons), Russia (331 tons), Australia (315 tons), Canada (193 tons), and the US (187 tons). Out of that 187 tons, Nevada produced about 75%, or 140 tons. And crucially, gold production in Nevada is subject to a state royalty “ad valoram” property tax, effectively giving the state of Nevada and many of its political subdivisions, incomes in gold. And, if you have income in gold, you can issue bonds that pay interest and principal in gold.
If the state of Nevada issued bonds that were denominated, not in dollars, but in ounces of gold, because of its income in gold, it could service this debt without incurring risk of a sudden increase in the dollar price of gold. To pay interest in gold, the state would not have to buy gold with dollars, it could merely dedicate a portion of its gold royalty income to the bond coupon payments. This would start to get gold again circulating as money, because the state would be borrowing, and paying interest and principal, in gold, not in paper dollars. (See Keith Weiner’s work in this area.) Once the state bonds had been issued, other entities, starting with gold mining companies themselves (which obviously have incomes in gold) and later other commodity producing companies (e.g. copper miners and oil producers) could start issuing gold bonds, creating a whole new financial ecosystem wherein the circulating money was gold instead of debt paper.
We have no time to waste.