Texas House Member Giovanni Capriglione (R), recently introduced a bill that would bring $1 Billion worth of gold bars stored in New York City back home to Texas. The bill also provides for the establishment of the Texas Bullion Depository, which would be the Texas answer to Fort Knox. Private citizens could store their own gold at the depository as well.
According to CNBC, the University of Texas Investment Management Company (UTIMCO) owns 6,643 gold bars. Some media outlets have wrongly reported that the Federal Reserve keeps the gold in an “undisclosed” location somewhere underneath New York City. The bars are actually held in a private vault owned by HSBC bank. This could be one reason why Texas lawmakers want them back. The bill also allows for pension funds like the Teachers Retirement System of Texas to invest in physical gold. As of now, these institutions are limited by law to investing in gold futures only.
“We’re trying to figure out the right amount of gold to have here in Texas. We don’t want just the certificates. We want our gold. And if you’re the state of Texas, you should be able to get your gold.” said Rep. Capriglione. He imagines a scenario where Texas sells the bullion and then immediately repurchases the bars within state lines.
Texas Governor Rick Perry (R) backed the idea behind repatriation in a recent interview with Glenn Beck. “If we own it, I will suggest to you that that’s not someone else’s determination whether we can take possession of it back or not.” said Governor Rick Perry.
10th Amendment Rights
The bill has yet to become law, but it could be a prudent move. Texas is asserting its rights under the 10th Amendment, and some say that this bill is a direct message for the Federal government. “This bill contains a provision that says to the federal government that you, the federal government, purport to confiscate this Texas gold, we, the state of Texas, consider that to be null and void. And under the 10th Amendment of the United States Constitution, they have that power,” says Jim Rickards of Tangent Capital Partners.
Texas is hedging against the possibility that the Federal Government could seize precious metal from private citizens. It’s happened before, the Feds seized gold from private citizens in 1933 after FDR issued Presidential Executive Order 6102. And the recent events in Cypress have shown us that asset seizure can happen when a desperate, bankrupt government runs out of options. It doesn’t make much sense to keep physical gold from a state like Texas, with a strong financial position, and keep it in a “death spiral” state like New York. The gold belongs to Texas, and it should be stored in Texas.
First Step To Secession?
Some may see the gold repatriation as a step towards secession. If Texas were to secede, it could back a new currency with gold bullion. It is highly unlikely that Texas will leave the Union, it would take an act of Congress. But more states could follow Texas’ lead and move to bring gold back home. The move to repatriate gold is not new. As I’ve noted in previous posts, the Bundesbank has recently expressed interest in bring home German bullion stored in New York City vaults. The Netherlands have followed suite.
US government balance sheets should continue to deteriorate, and it seems likely that trust in the Central Bank will erode as well. German and Texas gold repatriation could be the start of a larger trend. Precious metals will always be a store of value. They provide a hedge against depreciating fiat currencies backed by nothing but faith. We could begin to see more states and countries begin to move their gold bullion back home. Repatriation could put upward pressure on prices, providing another reason to add the yellow metal to your portfolio.
Read More: 5 Ways To Invest For Inflation
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