Op-ed: Let's hope Utah Legislature is over gold fever
Every legislative session sees its share of bills that leave many Utahns shaking their heads. Although many of those bills often focus on states' rights and unfettered access to firearms, some of the more outlandish bills of recent legislative sessions have revolved around the allure of gold.
Much of the interest in gold was propelled by radio celebrities like Glenn Beck, Rush Limbaugh and Sean Hannity. These gold bugs encouraged their listeners to buy and hoard the precious metal, and would have the state Legislature do the same with public money. Their thesis? Gold is inflation proof and a sure defense against the debasement of the U.S. dollar by the Federal Reserve.
In Utah, gold fever rose to a crescendo in the 2010 legislative session with the Utah Sound Money Act. The act called for the state to transact business in gold. Then-Rep. John Dougall thought the idea had merit. The bill's private author and champion, Larry Hilton, said it was about creating an option.
In 2011, Utah's Legal Tender Act recognized gold and silver as legal tender. At that time, Senate Majority Leader Scott Jenkins said "little by little, our currency is being devalued." By 2011, Hilton was pushing for gold and silver depositories against which individuals could maintain a debit card to make purchases. Hilton argued at the time that "one dollar will be worth one penny in five years."
We're only about halfway through Hilton's five-year forecast, so it's hard to assess his prognostication that a dollar will be worth a penny in 2016. What we do know is that from 2011 to 2013, inflation has run at a cumulative rate of 3.8 percent, so there has been some devaluation of the dollar in inflation terms. But that's a long way from taking a dollar to a penny we have another 95.2 percent to go.
While many investment professionals and economists expect significant inflation in the future, so far, the United States dollar remains "the least worst" place to be. And what kind of inflation hedge, or general investment, has gold been since that crescendo?
In April 2011, shortly after the end of the 2011 legislative session, gold hit its all-time high in dollar terms at $1,923 per ounce. But rather than continue to set new highs, as we enter the 2014 Legislative Session, gold stands at about $1,250 per ounce ÂÂ a drop of more than 35 percent in under three years.
Professional investors call that a bear market. Ordinary people who decided to follow the lead of those such as Beck, Limbaugh, Hannity, Hilton, Palmer and the litany of legislators who encouraged the anti-dollar gold rush, call this a thrashing.
Gold's price just like the value of the dollar is market driven. Despite gold's historical place in the financial system, it has no inherent value unless willing buyers and sellers give it one.
As the legislative session gets underway, hopefully our legislators will listen a little more to the economists and a little less to the shock-jocks.
Josh Kanter is an attorney and founder of the Alliance for a Better UTAH. He and his family live in Sandy.
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