Gold as legal tender?

Investment Analysis Clubs Macro Economic Trends and Risks
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President Franklin D. Roosevelt removed gold as legal tender in the United States through a series of actions starting in 1933. The Gold Reserve Act of 1934 formally took gold out of circulation and established a new fixed price for gold.

Richard Nixon’s decision to delink the dollar from gold was announced without warning in August 1971.

Currently, gold sales are generally subject to capital gains taxes, meaning you’ll pay taxes on any profit made from selling gold. However, the specific tax rate depends on whether the gold is held as a collectible or as a security. Collectibles, like physical gold bars and coins, are taxed at a maximum rate of 28%, which is higher than the standard long-term capital gains rate. If you own gold through stocks, ETFs, or futures, it’s generally taxed as a security, which falls under the standard long-term capital gains tax brackets.

While the price of gold does not correlate with inflation there’s no question that gold has held its value over time better than the USD which has declined continuously due to inflation.

What if we could use gold as legal tender without it being taxed?

https://www.wsj.com/opinion/for-those-who-dont-trust-powell-or-trump-with-our-money-f08e6149?mod=hp_opin_pos_2

For Those Who Don’t Trust Powell or Trump with Our Money

A movement in the states offers a hard-money alternative.

By James Freeman, The Wall Street Journal, July 22, 2025

… [big snip]…
Imagine you’re in the supermarket checkout line. The cashier scans and bags your groceries as usual, then offers you a new way to pay: “Cash, card … or gold?”

The scenario may sound far-fetched. But people in Missouri, Texas and other states will be able to buy household items with gold and silver under a series of new laws that treat precious metals like currency.

Supporters of the measures — among dozens of gold- and silver-related bills considered by states this year — don’t envision people pulling out gold coins and bullion bars at the cash register and don’t require that retailers accept gold as payment. The bipartisan laws are instead designed to make it easier and cheaper for people to spend their gold investments — including by allowing officials to set up electronic payment platforms and by challenging the federal capital gains tax on precious metals.

Missouri enacted a legal tender law last week. Texas, Florida and Arkansas approved similar measures in June, May and April, respectively.... [end quote]

I think this is a long shot. The IRS is on the federal level and they aren’t going to change their taxes in a few states.

I would like to see a return of hard money. Not exclusively but as an option that isn’t penalized by onerous taxes. I’m old enough to remember silver dimes and quarters and the days before inflation took off. I’m old enough to remember the nickel Hershey bar and fifteen cents for a slice of pizza or a soft Carvel ice cream cone.
Wendy

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I think we have a better chance of seeing Bitcoin as legal tender than we do gold. Not many people would want to carry gold around these days to pay their bills. Could you imagine having to weigh it to come up with the correct spot price? But suspenders would come back into style. That and wheel barrows.

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The local gas station mart has a BitCoin ATM sort of machine. That barely has anything to do with the US Treasury but BTC will be another rail with the US Treasury amassing some. So why not, gold can have ATM machines. You get a plastic card with your gold on it. Why not? Does not mean the US Treasury lifted a finger. Make it so.

There are other gambling games available if that does not suit your fancy.

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Hmmm…ever heard of coins? They’ve been around for a while. :wink:

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Wendy

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I think that top coin is worth more than the gold. Maybe we will just use this one. :laughing: Can’t guarantee the gold though.

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There is a little bit of a question. The macrotrends chart is wrong. In January 1980, gold hit $850/ounce. I believe the macrotrends chart shows nominal, not inflation-adjusted as it claims and is likely the monthly average.

Regardless, $850 is worth about $3,300 in today’s dollars. Today’s gold price is $3,430, so gold is up just a tiny bit since January of 1980. And of course you had to go through over four decades of being underwater if you bought near the peak. That’s a long time to be underwater. Like many people’s entire working career.

The mistake I see people make when comparing gold vs. the dollar is they assume the dollars are being stored in a shoebox under the bed. In reality, if you have significant cash, you’ll buy bonds. Perplexity tells me that if you If you invested $10,000 in US Treasury bonds in January 1980 and reinvested the coupons, your investment would have grown to approximately $392,951 by July 2025 .

So, I recommend thinking twice before hopping on the gold FOMO train. It ended badly for those who jumped on at the last peak. I am expecting similar results this peak.

And not just the IRS. Federal law requires wages be paid in legal tender (up to the federal minimum, anyway). These are civil rights laws and unlikely to be over turned.

There is no easy way to handle gold, which is why bank notes were invented. States can pass all the Walter Mitty fantasy laws they want, and there still won’t be an easy way to handle gold.

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It’s still in its trading range

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Indeed. I was reading a travel book by Robert Byron, The Road to Oxiania, about travels around Persia and Afghanistan in the 1930s. At one point they needed more money and it was heavy…

The Imperial Bank of Persia in Meshed gave me rupee drafts on its branch in Bombay to use in Afghanistan. This morning I went to change one with the Shirkat Asharmi, the newly established State Trading Company. No one in the office could read the draft or even its figures. But they took my word for its being worth 100 rupees, and after discovering, apparently by telepathy, the current rate of exchange in Kandahar, counted out 672 silver coins each the size of a shilling. These I took away in two sacks, plodding through the bazaar crowds like a millionaire in a cartoon.

DB2

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Just for fun, I suggest people look at the trouble lab-grown diamonds have cause in the diamond market.

**AI Overview**

Yes, lab-grown diamonds have significantly disrupted the De Beers market, leading to a dramatic shift in the diamond industry. While De Beers once controlled a near-monopoly, the rise of lab-grown options, coupled with declining prices and changing consumer preferences, has forced De Beers to adapt its strategy

How is “lab grown diamonds relevant?”

, a Silicon Valley startup now asserts that, with the use of nuclear fusion technology, it has finally solved the age-old alchemical enigma.

Read more at:

Yeah, I know people have been chasing the “making gold from base metals” thing for millenia. I wonder if someday they succeed, and what the resultant chaos in the world economy would be.

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Nuclear fusion…that seems to be a problem. But wouldn’t it be interesting, and disrupting, if suddenly gold could be manufactured?

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Not necessarily much as the price of gold is already dislocated from the value of gold - and it can be “manufactured” (just not in an unlimited amount). Reminds me a lot of Bitcoin for the same reason.

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Who needs fusion?
We’ve got SpaceX and NASA.

{. The Psyche spacecraft launched Oct. 13, 2023, at 10:19 a.m. EDT from Kennedy Space Center. Psyche lifted off from Launch Pad 39A aboard a SpaceX Falcon Heavy rocket. Psyche was the first in a series of NASA science missions to be the primary payloads launched on a SpaceX Falcon Heavy rocket. }

{. asteroid 16 Psyche, the target of NASA’s upcoming Psyche mission, is worth $100,000 quadrillion.
…snip…
If the metals on Psyche were on Earth, they would be worth more than the entire world economy, according to an estimate by the Psyche mission’s lead scientist, Lindy Elkins-Tanton. }

Heh!
:eyes:
ralph

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The value of gold, diamonds and bitcoin, is only it’s scarcity. If it becomes an ordinary rock, it loses its value. Just like people do not believe in Bitcoin, I do not believe in Diamonds or gold, I always just look on them as an ordinary rock that some people thought were “pretty”.

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Wouldn’t such abundance devalue those commodities? And mining an asteroid? Dream on.

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Not entirely true.

Gold has uses in jewelry for example. Especially since it does not cause allergic reactions, nor does it oxidize and look bad. Gold has uses in industry for example. Excellent conductor of electricity, does not corrode, malleable, etc.

Diamonds also have use in jewelry and industry. For example, diamond tipped drill bits and saw blades.

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Which while all true, if there was an abundance of it then the price would crater. I worked with high voltage and I never wore any jewelry because of my job. Even now I do not like any type of jewelry, so gold to me is worthless. I have no need or want for it. If you gave it to me I would take it down and sell it for the money.

Also true, but now they make fake diamonds and that is taking away from the price of the real diamonds. I read a story years ago that Debeers was artificially keeping the price of diamonds up by buying them all up to created scarcity. Again, I couldn’t care less about diamonds and luckily my wife does not like jewelry either. Although if she did I probably would be out buying her “stuff”.

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The Space com article mentions the economic impacts.
IIRC, back a couple years ago when “the mission” was announced, the ramifications were beaten enough to make bog butter.

Which will come first?
Asteroid mining or nuclear fusion?

:troll:
ralph

OT: bog butter.
https://www.smithsonianmag.com/smart-news/a-brief-history-of-bog-butter-180959384/

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Yesterday I found a copper € penny. My mom used to say that found money brings luck so don’t spend it.

I’d love to find AU pennies.

The Captain

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I offer:

And this YT, start at 10.30 minutes.

Tony says the Chinese machine costs $280,000.

Both videos touch on the macroeconomics of diamonds.

:gem_stone::diamond_suit::spade_suit:
ralph

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Wow, that’s amazing. My jaw dropped when I saw the spotless production floor covered with rows of machines.

They are using chemical vapor deposition, a very precise process which is used for semiconductor manufacturing. This means they can get purity down to the nanometer scale. The diamonds would be free of flaws such as inclusions, breaks in the crystal structure, etc.

The DeBeers cartel will desperately try to persuade customers that “natural” diamonds are superior. But the mass market doesn’t care about status. The average consumer will see a cheaper, better quality stone as the right choice.

Wendy

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