Many Texas Republicans, and this includes the present governor, Greg Abbott, seem to have a variety of problems with President Barak Obama and the United States Government. They believe that they are constantly being plotted against by either or both of these entities.
Currently there are two major fears in their minds. One has to do with the Jade Helm 15 military training exercise. According to the U.S. Army website this is a training exercise that will take place from July 15 to September 15 utilizing members of the U.S. Army Special Command and service members from the military’s four branches. The training will take place over seven states. Primarily the exercise will occur in Texas because the Special Operation Command requires large areas of underdeveloped land as well as access to towns.
The far right wing of the Republican Party in Texas have organized Operation Counter Jade Helm. The state is rife with conspiracy theories. The newly elected governor, Greg Abbott, has called out the state guard, at taxpayer expense, to keep an eye on the U.S. Military as it carries out its training. Abbott stated that “It is important that Texans know their safety, constitutional rights, private rights, and civil liberties will not be infringed upon.”
The Republican candidates for the presidency are unwilling or don’t want to denounce right wing extremism. Marco Rubio, Scott Walker, and Jeb Bush have been silent on this issue. Rick Perry, Rand Paul, and Ted Cruz all stated something to the effect of that they would look into the matter.
In Texas and some of the other southern states, where the exercise is currently occurring, there have been public protests. Republican leaders continue to embrace these conspiracy theories. One is that President Obama plans to declare martial law in Texas and deprive the population of their guns. Another, which is even crazier is that President Obama is getting ready to make himself Dictator of the United States for life and cancel the 2016 Election. And to these people, if none of this happens that will be proof that it was planned and their objections stopped it from happening. We go from the ridiculous to the totally insane!
On the last Friday in June of 2015, shortly before the June 30th end of their session, the Supreme Court decided by a 5 to 4 decision that same sex marriage was constitutional. In Texas both Houses of the State Legislature went ballistic. They considered making that decision null and void within the state. They threatened to pass a law making same sex marriage illegal in Texas. So far they have not acted upon this threat. And then apparently took their case to the ultra-conservative Fifth Circuit Court which had overturned the Texas voting ID decision from a lower Court that had declared that law as being the same as a modern day poll tax. The Fifth Circuit Court, which is lower than the Supreme Court but higher than the first court, declared the same sex marriage decision as the law of the land. The Texas legislature is very unhappy with this current situation and some are still threatening to pass a law making it unconstitutional in the State of Texas.
The only way this could work was if Texas went back to being the Lone Star State. She would first have to secede from the Union. The last time that was tried was in the 1860s and she was forcibly brought back into the United States at the end of the Civil War.
Currently Texas does not trust the United States monetary policy, apparently she feels that the value of the dollar may crash at any time, and she wants to be ready in case that happens. Texas would like to have a gold backed currency ready if this were to happen. She will develop in Huston a state owned Fort Knox. Obviously neither Governor Abbott nor the members of the Texas Legislature have recently read the Constitution, particularly the first paragraph of Section 10, Article I, wherein it states that “No state shall, without the consent of Congress . . . coin Money, make any Thing but gold and silver Coin a Tender of Payment of Debts;”
On June 12, 2015 the Texas legislature passed a law setting up a “Texas Bullion Depository.” The newly elected Governor Greg Abbott’s office stated that the facility would increase “the security and stability of our gold reserves.” The bill’s sponsor, state Representative Giovanni Capriglione, a Republican Tea Party member, said that the depository will give Texas a hedge if there are problems with the U.S. economy. The law was passed in the Texas House by a vote of 140 to 4.
This law will repatriate over one billion dollars, worth of gold bullion from the vault of the HSBC Bank in Manhattan to Huston where the depository is to be built underground. There are two big pension funds in Texas that together own more than one billion dollars’ worth of gold. One is the Teacher’s Retirement System and the other is the University of Texas. The Teacher’s Retirement Fund made headlines in 2011 when its board made the decision to take delivery of its money reserves in gold bars. The other gold holdings belong to the University of Texas Investment Management Company which was created in 1996 to oversee investments for the University of Texas and Texas A&M University systems.
The Texas Management Company (UTIMCO) pays about $600,000 a year to store the gold. Its officials are amenable to moving any gold that is part of their portfolio, but under conditions which would limit the cost to no more than they are currently paying, if the depository does come into being, and the depository is a ”robust member” of the Chicago Mercantile Exchange. The Teachers’ Retirement System also stores its gold bars at the same place and, I assume, pays additional funds for the privilege.
The question then arises as to who will own and control the gold? Is it to be the Board of the Teachers’ Retirement System and the University of Texas Investment Management Company or the State of Texas? Clearly it is owned by the University Management Company and the Teachers’ Retirement System and not by the State of Texas. Can they legally usurp possession of the gold? Apparently from statements that have been issued by the legislature and the governor’s office they seem to believe that they control the gold bullion.
If the gold was purchased prior to 2005 the cost was about $400.00 per ounce. If some of it was purchased at a later date then the price gradually rose to about $1,800.00 per ounce by 2011. It then descended to $1,155.21 an ounce where it closed on Monday, July 13, 2015. I would imagine that the Texas Investment Management Company has done quite well on its investment, even with the heavy fees paid to the N.Y. bank for storage but the Teachers’ Retirement System has taken a financial bath on its investment. Still the question remains as to who actually owns the gold, the University or the State of Texas?
The current new law will build an underground depository. It’s not quite clear who will pay for this construction. Many critics accuse Governor Greg Abbott of playing to the secessionist right. Apparently a large percentage of Texas Republicans support the move, seeing the depository as the first step in a declaration of state independence. It can be a step in the establishment of a currency system and bring about independence from Washington, D.C. The independence sentiment surfaced after the governor signed House Bill 483 into law in June of 2015 and issued a statement declaring that the Texas Bullion Depository was to become “the first state level facility of its kind in the nation.”
This move has massive support among advocates of a return to the gold standard. Many of these people believe that the Federal Government and the Federal Reserve have mismanaged the dollar and are afraid for the security of their holdings. They see this as a hedge against their fear of the collapse of the dollar.
The initial Depository Bill was first introduced in 2013. It failed because of the expense involved. It was estimated then that moving the gold would cost $23 million. In 2015 the bill was rewritten by State House Representative Giovanni Capriglione, a Tea Party Republican, allowing private companies to move the gold and manage the depository with no cost to the state of Texas. The bill provides for the Depository but does not spend any money to bring it about.
The concept of going back to gold backed currency is both interesting and crazy. In the second half of 1969, then President Richard M. Nixon removed the last vestiges of gold that was presumably held behind all paper money. Currency from that point became only backed by the word of the issuing country, in this case the United States. Today there is no precious metal behind any currency issued throughout the world. The basic reason we went off the gold standard in 1933, the lowest point of the Great Depression, was that there was not nor had been enough gold in existence to supply the currency needed for all the possible business transactions necessary for the economy to function properly. In point of fact, essentially the industrial world went off the gold standard in the 1930s and created the fiction thereafter that all the paper money was backed by buried hordes of gold bullion. There was never enough gold bullion to really back the amount of money in circulation. This was particularly true after World War II because during the war all the American Allies had shipped their gold to the United States for safekeeping and had spent it there during the war.
In late 1969 the U.S. Federal Government began selling gold for $36.00 an ounce, which at that time was the legal price of gold in the country. The price rose rapidly as buyers rushed to invest their money and the value of gold gradually rose to $800 an ounce, then it dropped slowly to about $200 an ounce. By 2005 it was at $400 an ounce, then by the seventh or eighth month of 2011 it had risen to over $1,800 an ounce. From there, with gyrations it gradually dropped to 1,131.90 an ounce by Friday, July 17, 2015. By the end of July 2015 gold had decreased to a little over one thousand dollars an ounce.
Unfortunately the Teachers’ Retirement System bought their gold in 2011. They have lost over $700 an ounce on their retirement fund, not to mention the cost of storing it in the New York bank vault. The good-old-boys on the Teacher’s Retirement Board had probably dealt with a bunch of good-old-boys who sold gold on a commission basis. The size of the Teacher’s Retirement Fund has dropped over thirty-three percent. That doesn’t do much for teacher retirement in Texas. This is doubly true if the state usurps the gold bricks for its new money system, which the state will have to do if it puts out its own money. Remember, according to the Constitution states can’t print money; they can only mint it. The state would have to melt down the bricks and turn them into coins. Currently a one ounce coin would be worth about $1,100, a half ounce coin would be worth $550. It would be difficult to get most stores to make change on these coins for shopping. In addition gold seems to be still in the process of decreasing in value.
The Republican Party of Texas has shown a distrust for the Federal Reserve and the Treasury of the United States. They want a return to the so-called gold standard of the 1930s and beyond when the American dollar was backed by buried bricks of gold and silver and they would like an end of the Federal Reserve. Many of these people are arguing that Texas can eventually set up a system of currency exchange that could eventually supplant that of the U.S. Government. Obviously they haven’t read or intend to change the U.S. Constitution. Interestingly the U.S. dollar internationally has not only maintained its value but has also increase in worth against other currencies.
The State Comptroller of Texas, without any separate funding, is currently in charge of the gold transfer and depository project. The law doesn’t state where the Depository will be or how it should be built or secured. According to the law there is a provision allowing ordinary people to deposit their individually owned gold or silver into the facility.
Currently the Comptroller’s office has a four man task force working out all the details of building the Texas Billion Depository without any special funding. Presumably securing and moving the gold from New York City to a Texas’ city, not yet designated, is estimated to run into millions of dollars and building the Depository will cost additional millions of dollars. All this will be done by private enterprise and then run by private enterprise charging the State of Texas and the assorted individuals using the gold fees for storing their gold and other precious metals and making a profit. Somehow it all sounds like fancy day-dreaming. The fees that would have to be charged by the private company would be prohibitive for it to recover its gold moving, maintenance, and protection costs if it were to make a profit. And this would be true even if Texas were to be able to secede from the Union and become a lone star state again. The probability is that nothing can come from this move. It is just Texas Republican paranoia, or to use a trite phrase, Pie in the sky by ultra conservative Texans.
(Footnote: I will be away on vacation for the next two weeks. The next blog will appear after the middle of August.)