Why Texas wants its gold back from the Federal Reserve
Texas wants its gold back — all $1 billion of it. That's what Gov. Rick Perry told Glenn Beck on his radio show last week, according to the Texas Tribune.
The Federal Reserve holds the gold bars, which are owned by the University of Texas Investment Management Company. Perry wants to bring them all back to Texas to store the gold in what would be called the Texas Bullion Depository.
Former Rep. Ron Paul (R-Texas), a stalwart gold standard proponent, supports Perry's proposal. But Texas state representative Giovanni Capriglione, who wrote legislation to fulfill Perry's wishes, wants to distance the move from that kind of rhetoric, telling the Texas Tribune that the measure is "not about putting Texas on its own gold standard." He says, instead, that it looks to "give the state a reputation as being more financially secure in the event of a national or international financial crisis."
But what's so bad about keeping the gold in the Federal Reserve's vault in New York City? If there were a serious spike in inflation (a big worry of gold standard supporters), there would be nothing to stop Texas from accessing its store of gold in Manhattan. And taking the gold to Texas would likely be more problematic than helpful. As Neil Irwin of the The Washington Post notes, building, staffing, and securing the proposed Texas Bullion Depository would be incredibly expensive.
In fact, it would take a Mad Max-style breakdown to justify bringing all of that booty back to Texas, says Irwin:
For it to make sense to go to all that hassle of storing your own gold, you have to be insuring against some much darker possibilities, like a collapse of the U.S. government and monetary system...
In some episode of hyperinflation and U.S. government collapse, as the nation falls into a Hobbesian state of nature, paper dollars will be no good, but gold would likely be the medium of exchange for buying food and guns and whatever else is needed for Texas to prosper amid the post-apocalyptic hellscape. [Washington Post]
Another reason — other than the one put forth by Capriglione — that a state might want to keep $1 billion of gold handy is if it were planning to secede. Texas, after revolting from Mexico in 1835, existed as an independent republic until it was forced to rejoin the U.S. following the Civil War. And the desire to regain its independence hasn't dwindled much in the ensuing time — more than 100,000 Texans signed an online petition earlier this year asking the White House to allow the state to secede.
Other than support from the Tea Party set, though, many Texas politicians aren't sold on the gold idea. State Rep. Lon Burnam (D) told the Texas Tribune, "We've got plenty of real problems that we're not going to deal with this session. Let's deal with them."
Correction: This story originally stated that Texas attempted to break from the Union twice. Texas revolted against Mexico to become a republic before it was required to rejoin the Union. We regret the error.