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New Hampshire Returning to Gold Standard?
New Hampshire House Bill 1342 (2004) would return the state a monetary gold and silver standard. I must emphasize that this bill is dead already ("inexpedient to legislate") but I'm surprised and pleased that it was introduced at all.
The "foreign controlled power" is the Federal Reserve, which is nominally a private institution. In practice, of course, it isn't.
Their hearts are in the right place, but this legislation wouldn't work. Without returning to a definition of the dollar as a specific quantity of gold, the face value of the coins would not match their gold or silver content except by accident. The coins would trade as gold bullion with a fluctuating exchange rate just as bullion coins do today.
It would be far better to omit any mention of "dollars" on the coins at all, and simply let them trade as bullion. The only assistance government could or should provide would be to make all exchanges involving gold and silver legally equivalent to exchanges in dollars. (i.e., equivalent tax treatment.)
The legislation doesn't state what the face values of the gold and silver coins would be, but it does state that they would be legal tender.
If the face value of the gold coins was $50, they would be equivalent to the Gold Eagle bullion coins produced by the United States Mint. You haven't seen any in circulation, have you? That's because their face value is much lower than their gold value. Because the dollar is no longer defined as a quantity of gold, the price of gold fluctuates, making transactions in gold as much of a hassle as transactions in any foreign currency. (Digital gold banking and payment systems such as e-gold try to reduce this hassle, but so far are less convenient than checkbooks and credit cards.)
If New Hampshire's coins carried a face value lower than their gold value, they wouldn't circulate for the same reasons that gold eagle bullion coins don't circulate. If their face value was greater than their gold value, the creation of these coins would entail significant inflation. A government could make this stick — at significant damage to the economy — due to its legal tender power. Without legal tender status, this inflation problem has been an obstacle for private currencies such as The Liberty Dollar. Why pay a huge premium for a bullion coin, when you can buy bullion coins for near spot?
The digital gold currencies have the right idea. Let gold trade as gold and silver as silver. Have a floating exchange rate rather than a fixed face value. They'd get my money, if only they were more convenient to use.
There's also a serious error in the legislation, §2.III:
It should read "face value" rather than "number". The legislation nowhere fixes the ratio of gold to silver coins that should be minted…