Article by: Tarek Saab
The law establishing the Texas Bullion Depository is not about need. It is about value, and the value to the state is realized through revenue, opportunity, and diversification.
First, the depository will cost taxpayers nothing. Zero. The fact that no fiscal note was attached to the bill was the primary reason the bill passed almost unanimously in the House (140-1) and Senate (29-2).
Furthermore, the depository will generate revenue for the state from operations. Since the facility will be funded privately, an additional $20+ million will be invested into the Texas market, along with at least 50 new jobs.
To help illustrate value versus need, consider the fact Texas does not need a state lottery, but the lottery generated $1.2 billion for Texas in 2014, with proceeds channeled primarily to the Foundation School Fund for public education. The state lottery also employs 325 people.
Second, lawmakers recognize that the ever-growing precious metals market is now a $15 billion dollar industry. Seizing opportunities for the state to attract new business and expand into new markets remains a constant endeavor, especially given the state's historic susceptibility to the boom/bust cycle of the oil and gas market. There is a reason Texas is the second fastest-growing state in the nation. Texas has been deliberate about recruiting new business.
Let us, once and for all, dispel the myth that the purpose of this bill is to simply build a place to store gold.
The bill establishes an institution with the mandate to facilitate a "check, draft, or digital electronic instruction" and "to purchase or sell precious metals in the ordinary course of depository operations." The Texas Bullion Depository will be a financial institution, designed to offer flexibility with the security of the world's oldest store of wealth: gold.
As Texans, we are drawn to black gold, but let us not underappreciate the critical role of the real thing as a cornerstone of financial markets.
Third, even though Texas has grown to become the 12th largest economy in the world (if measured as its own country), and has been largely insulated from worldwide economic volatility, who can be naïve about the growing political risk in the world and the vulnerability of global financial markets?
Our national debt is approaching $20 trillion dollars. On "Meet the Press" in 2011, former Fed Chairman Alan Greenspan explained that, "the United States can pay any debt it has because we can always print money to do that." Is there any Texan reassured by that thesis?
We are not far removed from the financial crisis of 2008 that crippled the nation and brought us to within three days of a meltdown of the entire banking system.
It should not be lost on anyone that a bullion reserve, headquartered in Texas, adds a layer of diversification and security to one of the world's largest economies. Every sovereign nation and major central bank stores gold. Few people understand – or even ask the question – why.
As global markets continue to deteriorate, and central banks devolve into a negative interest rate environment, Greenspan – the "maestro" of artificially low interest rates - has become a gold advocate. In a June 28th, 2016 interview with CNBC, he remarked: "We are in the very early days of a crisis which has got a way to go . . . I'm known as a gold bug and everyone laughs at me, but why do central banks own gold now?"
As Greenspan knows, central banks own gold because it has served as the currency par excellence for 5,000 years. It is the money of last resort, and it has no counterparty risk. That Texas lawmakers should seek to better enable gold transactions and storage in a growing market at no cost to taxpayers is an initiative that should be embraced as forward thinking and prudent – especially when it generates risk-free revenue to the state.
The passage of the Texas Depository Bill is an example of inspiring bipartisan stewardship. Let us hope its few remaining opponents can elevate the discussion beyond the trite sound bites of the fringe.
For more information about House Bill 483, visit texasdepository.com.