Texas to establish "non-confiscatable" bullion depository & repatriate $1bn gold from the Fed

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Texas to establish "non-confiscatable" bullion depository & repatriate $1bn gold from the Fed

(h/t LRC: https://www.lewrockwell.com/2015/06/tyler-durden/one-step-closer-to-secession-2/)

Tyler Durden @ Zero Hedge: Writing's On The Wall: Texas Pulls $1 Billion In Gold From NY Fed, Makes It "Non-Confiscatable"

Governor Abbott Signs Legislation To Establish State Bullion Depository
http://gov.texas.gov/news/signature/21038
Office of the Governor of Texas (12 June 2015)

Governor Greg Abbott today signed House Bill 483 (Capriglione, R-Southlake; Kolkhorst, R-Brenham) to establish a state gold bullion depository administered by the Office of the Comptroller. The law will repatriate $1 billion of gold bullion from the Federal Reserve in New York to Texas. The bullion depository will serve as the custodian, guardian and administrator of bullion that may be transferred to or otherwise acquired by the State of Texas. Governor Abbott issued the following statement:

“Today I signed HB 483 to provide a secure facility for the State of Texas, state agencies and Texas citizens to store gold bullion and other precious metals. With 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."
 
The gold is not stored with the Federal Reserve but a private bank- HSBC. http://www.ai-cio.com/channel/ASSET...tical_Statement_or_Prescient_Investment_.html The Fed only stores gold for the US Treasury and other countries. This move has no effect on them or their vaults.

(April 20, 2011) – The recent purchase of nearly $1 billion in physical gold bullion by the University of Texas Investment Management Company (UTIMCO) is raising questions among endowment and other asset managers: was it a political statement, or a prescient investment?

"Gold has had a huge run-up – which suggests a bubble,” according to Dean Baker, co-director at the left-leaning Center for Economic and Policy Research in Washington, who has previously warned about institutional investors over-allocating to gold. “I would not consider investing in gold. I assume they expect higher inflation, but I don't understand it. I think it's silly. In this case, I don't see why UTIMCO would do this."

According to multiple reports, UTIMCO executed the purchase of 6,643 gold bars – to be stored at an HSBC vault in New York City – at the behest of Kyle Bass, a UTIMCO investment board member and managing partner of hedge fund Hayman Capital Management. This equates to 5% of the university system’s total assets.
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Storage currently costs them $1 million (per year? or a flat fee?)
If nothing else, the storage of physical gold in this quantity is cheaper than accessing the market via exchange-traded funds, a more common route for investors. According to Bloomberg, at current prices, it will cost UTIMCO approximately $1 million to store the delivered gold – well below the $4 million that the common 0.4% of invested assets going toward an ETF provider such as SPDR Gold Trust. It also avoids any concerns over ETF counterparty risk.
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http://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/26/texas-wants-its-gold-back-wait-what/

Perry and some in the Texas legislature want to bring the roughly $1 billion worth gold held by the state university system’s investment fund onto Texas soil, rather than in its current resting pace in a vault in New York.

“If we own it,” Perry said on Glenn Beck’s radio show last week, according to the Texas Tribune. “I will suggest to you that that’s not someone else’s determination whether we can take possession of it back or not.”

Here’s the thing. Perry’s push to relocate the state’s gold to a newly created “Texas Bullion Depository,” in a strange way makes perfect sense. It lays bare the rationale for investing in the yellow metal to begin with, and is an excellent illustration of the strange role that gold plays in a modern economy and investors’ psyches.

Some basics: People speak of gold as an “investment,” but that’s not quite right. When you buy shares of a company’s stock , you are buying a claim to the future profits of that company. When you buy a Treasury bond, the U.S. government is pledging to pay you a certain amount of money on a certain schedule in the future. But when you buy a 1 ounce ingot of gold, no matter how long you will hold it, you still have exactly one ounce of gold.

In fact, if anything, gold has a negative yield. Because you have to store that gold somewhere; if you keep it in your house, there is a risk of theft. If you keep it in a safe deposit box at the bank, you will have some fee.

If Texas moves its gold back home, it will deal with this in a very real way: Whatever it costs to build, maintain, and guard a facility secure enough to stash $1 billion of gold in will essentially subtract from whatever investment return the holdings offer. (The lawmaker advocating the plan pointed out that only about 20 square feet of space would be needed for the gold as evidence that the cost shouldn’t be high, which kind of misses the point. It’s not the real estate cost that is expensive, it’s the technology and manpower needed to prevent the heist of the millennium).

Texas media outlets have reported that the state's gold is held at the Federal Reserve Bank of New York, though it appears the gold in question is actually at the vault of a private bank, HSBC, in New York (here is a 2011 article about the acquisition; an aide to Texas State Rep. Giovanni Capriglione confirmed that this is the gold in question). Despite what you may have seen in Die Hard 3, in which thieves ransack the New York Fed, the security around major vaults is extremely sophisticated. Texas is considering replicating those security costs and giving up the convenience of being able to sell gold easily at the world's financial capital. But why?

The most common reason to buy gold is as something of an insurance policy against some very bad events, like a bout of significant inflation. In the more plausible scenarios, like a return of 1970s-style period of 10 percent or so annual price increases, gold would indeed likely prove to be quite a good investment. But in that scenario, the state of Texas would have no problem getting access to its gold stored in New York. There would be no need to go to the trouble and expense of setting up a miniature Fort Knox in Austin.

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, and/or Texas making a (second) bid to secede from the United States.
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I can't find costs for building or operating their new vault but did confirm that it does cost $1 million a year to store the $1 billion in gold and is not held at the Federal Reserve in New York. These costs reduce the value of their investment and cost the taxpayers money.

http://www.star-telegram.com/news/politics-government/article22707600.html

The goal is to create a secure facility that would allow the state to bring home more than $1 billion in gold bars that are owned by the University of Texas Investment Management Co. and are now housed at the Hong Kong and Shanghai Bank in New York.

“The depository would be an agency of the state located in the Office of the Comptroller, directed by an administrator appointed by the Comptroller with the advice and consent of the Governor, Lieutenant Governor and Senate,” according to a fiscal analysis of the bill.

The depository could also hold deposits of gold and other precious metals from financial institutions, cities, school districts, businesses, individuals and countries.

“This will allow for bullion to be deposited here, as well as any other investments that … any state agencies, businesses or individuals have,” Capriglione said.

Storage fees will be charged, perhaps generating revenue for the state. For instance, Texas pays about $1 million a year to store its gold in New York, Capriglione said.

A fiscal note attached to the bill states that the depository will have “an indeterminate fiscal impact” on the state, depending on the number of transactions and fees, but says it’s too early to determine the extent.
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Just a note- they purchased the gold in March, 2013 when it was about $1600 an ounce. As of today it is $1180- a fall of 26%. That $1 billion would be $740 million today. (minus $2 million in storage fees in that time). Minus nobody knows yet how many million to build and operate the new facility. And actually the gold belongs to the University of Texas fund- not the state of Texas- the the University of Texas Investment Management Company.

http://www.texastribune.org/2013/03/21/perry-some-lawmakers-want-states-gold-back-texas/

Physically transporting gold that various state entities own from New York City or other banks to Texas would be impractical from a security and logistics standpoint, Capriglione said. He believes it makes more sense to sell the gold Texas has elsewhere and repurchase it within state lines.
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Capriglione is one of the big backers of the recently signed bill.

State Rep. Lon Burnam, D-Fort Worth, said he was familiar with Capriglione's bill but was skeptical that it addresses a legitimate problem facing the state.

“We’ve got plenty of real problems that we’re not going to deal with this session," Burnam said. "Let’s deal with them.”

Capriglione said he was at a Tea Party event in Tarrant County earlier this year where Perry spoke about the state’s gold investments as an economic development tool. Since then, he has been working with Perry’s office on the bill.
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Taxpayer money being spent on building and keeping a bank.
 
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Texas should store other States, Countries', etc. gold and make a profit.
 
Danke said:
Texas should store other States, Countries', etc. gold and make a profit.
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Maybe that is the plan. Seems like a good idea. Besides zippy they are creating Texas jobs and spending the money locally not in some NY banksters pocket...IE the fed.
 
Gold price at moment of writing $/oz
1 185,96
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1 billion $ is about 850.000oz

or just a little over 50.000lbs.

Not a whole lot of volume...

//I'd say it's just over a cubic meter of solid gold but I guess that doesn't mean much to most of you.
 
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Dr.3D said:
Well, it will be interesting to see how much of that turns out to be tungsten.
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Well in case it's a lot, should I leave my shipping address ? Tungsten is pretty nice in the making of flies for flyfishing. It's actually pretty expensive to buy so if they got some worthless metal they can send it to me. :D
 
luctor-et-emergo said:
Gold price at moment of writing $/oz


1 billion $ is about 850.000oz

or just a little over 50.000lbs.

Not a whole lot of volume...

//I'd say it's just over a cubic meter of solid gold but I guess that doesn't mean much to most of you.
Click to expand...

What is estimated size of the block for all the gold ever mined?

Fits in an Olympic sized swimming pool, I believe I've read.
 
I love Gov. Abbott so far. I hope he closely watches his rear view mirror though :(( .
 
“Today I signed HB 483 to provide a secure facility for the State of Texas, state agencies and Texas citizens to store gold bullion and other precious metals. With 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,” said Governor Abbott, according to a press release.
..
Tenth Amendment Center founder and executive director Michael Boldin wrote that the bill “creates a means for transactions to occur” in gold. “In short, a person will be able to deposit gold or silver – and pay other people through electronic means or checks – in sound money. Doing so has the potential to open the market to sound money in day-to-day transactions,” said Boldin.
..
Last Friday, Texas Republican Governor Greg Abbott signed House Bill 483 into law, which will create a new state-level bullion depository. According to KVUE-TV, representatives from Governor Abbott’s office said that, under the new law, Texas will repatriate $1 billion in gold from the New York branch of the Federal Reserve to its new state gold depository, which has been unofficially nicknamed Texas’ “Fort Knox.”
 
Good on Texas... Now watch as the NY Fed says, "Sure you can have your gold! You will get one ounce per month over the next 50 years.... have a nice day!"
 
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