Proposal To Facilitate Gold, Silver As Alternate Money

It's one that can even be described as a compromise of sorts. Those who like the fiat-money system as it is believe that gold has no place at all in it, as money or quasi-money. Many goldbugs want gold to be officially enshrined as money again. The compromise position, one that's not that far from today's reality, is governments continuing to stick with fiat money but tolerating the use of gold and silver as alternate monies.

Where we're at now isn't that far away from the compromise. There's no law preventing any citizen of a developed economy from owning, buying or selling gold. There's no law preventing anyone from bartering with it. There is, however, one barrier that hobbles the precious metals from being used as alternate monies: capital-gain taxes on them.

Hence, Thomas J. Gordon's proposal. In order to place gold and silver on an equal footing, capital gains on gold and silver - more realistically, specific kinds of gold and silver designated as alternate monies - should be eliminated. Doing so would enable ordinary citizens to use gold and silver as wealth protectors should they see the need to. [Gordon doesn't mention it explicitly, but it would also facilitate bartering with them. It's not just the tax bite; it's also the record-keeping hassle that limits gold and silver's use as barter items.]


He's come up with a nice proposal, but it doesn't get over an objection that's fairly obvious to those hep to political economy: enacting it would slice a lot of tax revenue from the government's coffers. The income made by the mints by selling additional gold and silver coins wouldn't cover the difference. There's not even a hope that said elimination would lead to other sources of tax revenue expanding; no reasonable supply-sider could make that case. Thus, there's no incentive (and an obvious disincentive) for the government to eliminate the capital-gains tax on barter gold and barter silver. There's no way that proposal would be enacted without the public leaning on elected officials to do so.