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The lack of faith in central bank trustworthiness is spreading. First Germany, then Holland, and Austria, and now – as we noted was possible previously<\/em><\/a> – Texas has enacted a Bill to repatriate $1 billion of gold from The NY Fed’s vaults to a newly established state gold bullion depository<\/strong>…”People have this image of Texas as big and powerful \u2026 so for a lot of people, this is exactly where they would want to go with their gold,” and the Bill includes a section to prevent forced seizure from the Federal Government<\/strong>.<\/p>\n From 2011:<\/p>\n “The University of Texas Investment Management Co., the second-largest U.S. academic endowment, took delivery of almost $1 billion in gold bullion and is storing the bars in a New York vault,<\/strong> according to the fund\u2019s board.”<\/p>\n <\/p>\n The decision to turn the fund\u2019s investment into gold bars was influenced by Kyle Bass, a Dallas hedge fund manager and member of the endowment\u2019s board, <\/strong>Zimmerman said at its annual meeting on April 14. Bass made $500 million on the U.S. subprime-mortgage collapse.<\/p>\n <\/p>\n \u201cCentral banks are printing more money than they ever have, so what\u2019s the value of money in terms of purchases of goods and services,\u201d Bass said yesterday in a telephone interview. \u201cI look at gold as just another currency that they can\u2019t print any more of.\u201d<\/strong><\/p><\/blockquote>\n And now, after we noted the possibility previously,<\/a> as The Epoch Times reports,<\/em><\/a> Texas Governor Greg Abbott signed a bill into law on Friday, June 12, that will allow Texas to build a gold and silver bullion depository. In addition, Texas will repatriate $1 billion worth of bullion from the Federal Reserve in New York to the new facility once completed.<\/p>\n On the surface the bill looks rather innocent, but its implications are far reaching. HB 483, \u201crelating to the establishment and administration of a state bullion depository\u201d to store gold and silver coins, was introduced by state Rep. Giovanni Capriglione.<\/p>\n <\/p>\n Capriglione told the Star-Telegram:<\/p>\n <\/p>\n \u201cWe are not talking Fort Knox. But when I first announced this, I got so many emails and phone calls from people literally all over the world who said they want to store their gold \u2026 in a Texas depository. People have this image of Texas as big and powerful \u2026 so for a lot of people, this is exactly where they would want to go with their gold.\u201d<\/strong><\/p>\n <\/p>\n But isn\u2019t New York, where most of the world\u2019s gold is stored, also big and powerful? Why does the state of Texas want to go through the trouble of building its own storage facility?<\/p><\/blockquote>\n There are precisely two important reasons. One involves distrust in the current storage system. The second threatens the paper money system as a whole.<\/strong><\/em><\/p>\n \u201cIn a lot of cases with gold you may not have clear title to the metal. <\/strong>You may have a counterparty relationship that makes you a creditor. If the counterparty has a problem unrelated to gold, they can default and then you become an unsecured creditor in bankruptcy,\u201d said Keith Weiner, president of the Gold Standard Institute.<\/p>\n <\/p>\n This means you get whatever is left after liquidation, often just a fraction of the initial value of your holdings.<\/p>\n <\/p>\n \u201cThis exact scenario happened with futures broker MF Global. I knew people who had warehouse receipts to gold bars with a specific serial number. But that gold had an encumbered title and they became unsecured creditors in bankruptcy,\u201d <\/strong>said Weiner.<\/p>\n <\/p>\n In Texas, two big public pension funds from the University of Texas (UoT) and the Teacher Retirement System (TRS) own gold worth more than $1 billion.<\/p>\n <\/p>\n Being uncomfortable with holding purely financial gold in the form of futures and Exchange-traded Funds, University of Texas actually took delivery of the gold bars in 2011 and warehoused it with HSBC Bank in New York.<\/p>\n <\/p>\n At the time pension fund board member and hedge fund manager Kyle Bass explained: \u201cAs a fiduciary, which I am in that position to the extent you own gold and you are going for a long time, and it\u2019s not a trade. \u2026 We looked at the COMEX at the time and they had about $80 billion of open interest between futures and futures options. And in the warehouse they had $2.7 billion of deliverables. We are going to own it a long time. You are on the board, you are a fiduciary, so that\u2019s an easy one, you go get it.\u201d<\/strong><\/em><\/p>\n <\/p>\n Bass is implying that there is much more financial gold out there than physical, and that it is prudent to actually hold the physical.<\/p>\n <\/p>\n Taking the gold to Texas would then also solve the counterparty risk. <\/strong>\u201cIn this case it\u2019s going to be a depository, the gold is going to be there, they are not going to be able to lend it out and it won\u2019t serve as collateral for other transactions of the bank.\u201d said Victor Sperandeo of trading firm EAM Partners. \u201cBecause if the bank closes, you are screwed.\u201d<\/p>\n <\/p>\n \u201cI think that somebody was looking at that, we better have this under our complete control,\u201d said constitutional lawyer and gold expert Edwin Vieira, of the Texas bill. \u201cThey don\u2019t want to have the gold in some bank somewhere and in two to five years it turns out not to be there.\u201d<\/strong><\/p><\/blockquote>\n So far most of the attention has focused on the part of the depository and the big institutions. However, the bill also includes a provision to prevent seizure, which is important for private parties who want to avoid another 1933 style confiscation of their bullion by Federal authorities.<\/strong><\/p>\n Section A2116.023 of the bill states: \u201cA purported confiscation, requisition, seizure, or other attempt to control the ownership \u2026 is void ab initio and of no force or effect.\u201d<\/strong> Effectively, the state of Texas will protect any gold stored in the depository from the federal government.<\/p>\n <\/p>\n And free from the threat of confiscation, private citizens can use gold and silver as money, completely bypassing the paper money system.<\/strong><\/p>\n <\/p>\n \u201cPeople can legally do that with gold contracts. The difficulty is the implementation. Now Texas has set up a mechanism with the depository. We have accounts in that institution and can easily transfer back and forth certain amounts. So we can run our money system a gold or silver basis if we were so inclined,\u201d<\/strong> said Vieira.<\/p>\n <\/p>\n This would not be possible if the gold is stored in a bank because of the risks of bank holidays and bankruptcies. It would also not be possible if the federal government could confiscate gold.<\/strong><\/p>\n <\/p>\n According to Vieira, this anti-seizure provision rests on Article 1, section 10 of the Constitution of the United States, which obliges the States to not make anything tender in payment of debts apart from gold and silver coin.<\/p>\n <\/p>\n \u201cIf someone from the Department of Justice comes along you are going to see legal and political fireworks<\/strong>. The state is going to say \u2018we need to have a mechanism to make gold and silver money. This is pursuant to the constitutional provision we have. You can\u2019t touch this. Our state power on the constitutional level is more powerful than any statute you may pass,’\u201d said Vieira.<\/p>\n <\/p>\n Because one of the litigant parties is a state, the case would go directly to the Supreme Court.<\/p>\n <\/p>\n \u201cWe are talking about something completely new in terms of the legal playing field. This is no longer a fringe concept,\u201d<\/strong> he adds, but cautions about a possible fight with the federal government: \u201cWe will have to see how committed the governor and the attorney general are.\u201d<\/p><\/blockquote>\n\n
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