Idaho Legislators Aim to Protect State Funds with Gold And Silver
The comments below are an edited and abridged synopsis of an article by JP Cortez
The explosion of money printing and debt-funded spending by the US in response to Covid-19 has sparked renewed interest in the role gold and silver play in hedging against systemic risks, and a group of Idaho legislators is working to secure a role for the monetary metals in hedging government reserves.
House Bill 7 would permit the State Treasurer to hold a portion of state funds in physical gold and silver to help secure state assets against the risks of inflation and financial turmoil and/or to achieve capital gains as measured in US dollars.
The Idaho Treasurer is currently handcuffed when it comes to investment choices. State statutes provide limited options for holding, managing and investing Idaho’s ‘idle moneys’ (that amount to several billion dollars).
As a result, Idaho’s reserves are invested almost exclusively in low-yielding debt paper (corporate bonds, tax-anticipation notes, municipal bonds, repurchase agreements, CDs, treasuries, money market funds).
These debt holdings appear to have low volatility, but they carry other risks, one of which is pernicious inflation and the steady erosion in real value of principal, coupled with interest rates that are negative in real terms.
An allocation to gold and silver provides a hedge against inflation, debt default risks, stock market declines, and volatility, and it increases overall returns. Gold and silver do not have the default or loss of purchasing power risks that bonds or other debt instruments carry.
H7 adds the authority to hold physical gold and silver in a manner that does not assume the counterparty and default risks involved with other state holdings. It does not grant authority to buy stocks, futures contracts, or other gold/silver derivatives. The authority is confined to physical gold and silver, owned by the state and stored in secure bailment.
A few other forward-thinking states (Texas, South Carolina, Wyoming) are examining ways to implement an allocation of state funds to gold and silver.
Gold and silver provide a meaningful way of hedging taxpayer funds against debt default risks, stock market declines, and dollar devaluation. A gold allocation has historically boosted overall investment returns while also reducing volatility.
An allocation to physical gold and silver fits squarely within the objective of protecting state funds against financial risks and would logically be included on any list of safe investment holdings. The Sound Money Defense League will work with Idaho legislators to ensure the State has the authority to invest state funds in sound money.