The topic of gold coins came up in the discussion about Arizona Senate Bill 1439, which identified gold and silver as legal tender. The bill was passed both in the house and the Senate but rejected by Governor Jan Brewer, who was worried that the state would lose profits from taxing rare old coins. Recently, she promoted a major welfare program; hence she is at least stable.
The economics professor of Arizona State University, Dennis Hoffman put a question to the Arizona Republic that whether she can imagine purchasing clothes or a pizza using a lump of gold. On this question, she corrected Hoffman and said that no one has ever been forced to accept gold. Modern laws force us to accept paper but not gold. Nowadays, most of the stores would not accept gold, but just repeating the status quo. This is not a reason to keep legal hazards to the usage of gold.
When you sell silver or gold coins, you should report the profit or loss and pay a tax if there is profit. There should be a record of your purchases. It is not good if you purchase and hold it for long. You may have more dollars but they will be less worthy. Then the US government takes away 28% of that increase in dollars and many states follow that. The outcome is a loss studied in gold, even it seems as profits measured in lessen dollars.
Silver and Gold Coins are for Hoarding Only
Hoarding is one’s personal interest who wants to avoid Cyprus-style losses in case of an insolvent counterparty default. It is the first step in the procedure of gold extracting its bid on the dollar. Naturally, the gold will not be available in exchange for dollars. If it happens, the dollar will collapse.
Gold owners will stop demanding for dollars, but the problem exists among the dollar holders who still want gold. Rates will rise faster and faster. Ultimately, the dollar will have no value. The other hazard to gold circulation is the legal tender law which forces creditors to welcome dollars as full payment. No person would lend gold to a borrower with the option to pay back in dollars.
The debate of why gold coins cannot circulate today gives awareness about the rate of gold measured in dollars. The recent fall in the gold price is a sharp reminder that the cost of gold has something to do with the number of dollars. The dollar is only an irredeemable promise which depends on bad debt that cannot be paid. People measure the rate of gold in dollars and bid up the gold price. Sometimes, this happens if the time is good and sometimes not.
The above reasons conclude why gold is not rated far higher in dollars. Each one of them could suddenly stop to be relevant. Nearly all people are law-abiding and pay their taxes. But they take care of their families over obeying the tax law, are these people be forced to select. We should expect many hasty, if not aggressive, moves along all financial markets not least of which will be gold.