![\"Gold\"](\"https:\/\/hcsblogdotorg.files.wordpress.com\/2016\/05\/gold.jpg\")
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Last year, we covered a story coming out of Texas<\/a> in which the state government was planning to institute a state-controlled \u201cgold depository\u201d that would allow individuals to store their gold in a presumably safe place outside the United States banking system.<\/p>\n This proposition was met with emotionally-charged denunciations\u00a0<\/a>from Americans in far away northeastern American states where it was\u00a0claimed this measure was contrary to the \u201csupremacy clause\u201d and just a terrible idea in general because it undermined faith in the US\u2019s central government and the Federal Reserve System.<\/p>\n Well, in spite of the disapproval of New Yorkers, the Texas legislature passed the bill, and the governor signed it into law last June<\/a>.<\/p>\n \u201cWith the passage of this bill, the Texas Bullion Depository will become the first state-level facility of its kind in the nation, increasing the security and stability of our gold reserves and keeping taxpayer funds from leaving Texas to pay for fees to store gold in facilities outside our state,\u201d Abbott said when he signed the bill.<\/p>\n The depository won\u2019t just store\u00a0state\u00a0gold and other precious metals. The law requires\u00a0that\u00a0individual customers, and even school districts,\u00a0be allowed\u00a0to open accounts. Capriglione has described it as a bank that doesn\u2019t do any lending.<\/p><\/blockquote>\n Originally, the bill appears to have envisioned Texas tax dollars being used to create the facility, but the bill only passed when it was modified to create what is seemingly a state-chartered gold depository that will be privately owned and paid for via fees for gold storage.<\/p>\n Thus, not surprisingly, several private firms are now trying to become the creators of one of these depositories. The Ft. Worth Star-Telegram<\/em> yesterday reported<\/a>:<\/p>\n Saab\u2019s company, one of many interested in being involved with the state\u2019s plan to create a depository, proposes building a potentially $20 million facility \u2014 with no Texas tax dollars \u2014 on 40 acres of land it has in Shiner, about 250 miles south of Fort Worth.<\/p><\/blockquote>\n The original sponsor of the bill, State Representative\u00a0Giovanni Capriglione\u00a0appears pleased with the progress being made:<\/p>\n \u201cI am optimistic that the depository will be up and running at the end of this year or the beginning of next year,\u201d Capriglione said. \u201cThe most important factor is making sure that the process is completed with considerable thought and care.\u201d<\/p>\n At the depository, Texans will be able to open accounts similar to checking or savings accounts at traditional banks \u2014 and monitor them online.<\/p><\/blockquote>\n The physical construction of the facility is very humdrum compared to the implications of the creation of a depository of this sort.<\/p>\n Laying the Ground Work for Electronic Gold-Based \u201cMoney\u201d\u00a0<\/strong><\/p>\n For one, many state politicians hope that the State of Texas will be able to relocate its own gold holdings to Texas from New York where it currently sits. The state spends a million dollars per year on its storage.<\/p>\n Moreover, the existence of the depository opens up the possibilities for users creating a new type of currency in which purchases are made electronically with the backing of the gold in the depository. In other words, one could potentially use the depository\u2019s infrastructure to make purchases using gold, and to have gold either directly deposited into another\u2019s account, or converted to US dollars\u00a0and deposited in a conventional bank. Arguably, this is just an\u00a0electronic version of gold-backed money.<\/p>\n Ironically, Zero Interest Rate Policy Has Made Gold Depositories\u00a0More Practical\u00a0<\/strong><\/p>\n And now more than ever, the idea of paying fees on gold deposits has become relatively economical thanks to near-zero interest rates on ordinary bank accounts. In ages past when banks actually paid meaningful interest on deposits, one might wonder why anyone would pay a fee to store gold when one could collect interest on cash at a bank.<\/p>\n Thanks to the central banks\u2019\u00a0commitment to near-zero or even negative interest rates<\/a>, though, holding cash in a bank no longer brings any benefit in terms of investment earnings. That is, the opportunity cost of storing gold in a depository is getting lower and lower thanks to central bank policy.<\/p>\n Note:<\/strong>\u00a0The views expressed on Mises.org<\/a> are not necessarily those of the\u00a0Mises\u00a0Institute.<\/p>\n