There were a few readers talking about this story in the open threads yesterday and it’s a curious enough issue that I thought it deserved a look. The Lone Star State recently voted to retrieve all of its holdings in gold from repositories in New York. Given New York’s general reputation, that’s probably not a terrible idea in theory, but Texas is running into a few complications in terms of how to actually accomplish the feat.
The new law does not specify where a potential depository should be constructed or secured. It also did not provide funding for building costs or leasing purposes.
Also at issue is a provision allowing Texas citizens to check their own gold or silver bullion into the proposed facility.
“We are honestly at the phase where the questions we are answering are creating more questions that we have to answer,” said Chris Bryan, a comptroller’s office spokesman.
The comptroller’s office has a four-person task force plotting the logistics of the gold stockpile’s move and storage, AP said.
As Business Insider points out, the complications involve questions of who will pay for and manage the proposed facility.
The law calls for the construction of the Texas Bullion Depository to hold all 5,600 gold bars, but, unfortunately, it doesn’t specify where it will go and how it will be built…
The biggest problem is funding. In the bill, which was authored by Republican state Rep. Giovanni Capriglione and introduced in 2013, it was estimated the repository would cost $23 million.
By comparison, Fort Knox cost approximately $9.2 million in today’s money to build, the AP said.
To solve the funding problem, Capriglione said he thinks a private company could build the repository and then charge for storage and other service fees. Under the law, civilians will also be allowed to store their gold holdings in the new repository.
These are questions which the state will have to answer to be sure, but states build and staff things all the time. The numbers we’re talking about here aren’t really staggering for an economy the size of Texas’ so it sounds like that could be worked out. I suppose the big question for me which isn’t answered in the coverage is… why? What is the pressing need to physically house $650M in gold in a building in Texas? I see a few comments about how it could serve as a bulwark against recession, but that doesn’t really make a lot of sense at first glance because Texas (like the rest of the states) doesn’t issue their own currency… something which is forbidden by the Constitution anyway. Other phrases which have popped up include assurances of “stability” in the event of a fiscal crisis, but that would need to be one seriously big crisis before states had to start covering their debts with gold bullion.
One other possibility is at least implied in the comments of the original sponsor of the bill which started this move.
“There will always be the exact same amount of gold in there as the amount that was put in,” said state Rep. Giovanni Capriglione, according to AP.
Not for nothing, but that sounds a little bit like the suspicions which have periodically popped up about whether or not there’s actually any gold left in Fort Knox. (For the record, I’m pretty sure there is. And since we’re not on the gold standard any more it’s not as much of an issue aside from questions of the government meddling in currency manipulation deals.)
So there’s nothing wrong with Texas wanting to do this… it’s their gold and it’s up to the citizens how they want to manage it. But aside from making a political statement, I’m not sure how much value Texas will be getting for their investment with this move. Of course, when the zombies rise up and attack I’m going to look rather foolish for questioning them.