I thought I would start a hypothetical discussion and get some points of view on an idea. What if Australia had some forward thinking leaders that understood gold enough to understand the need for Australia to hold larger gold reserves instead of foreign paper. While "nationalization" isn't probably the right word for it, I thought it may be for some interesting discussion. Australia exports somewhere between 300-450tonnes of gold every year. It is our third largest export in $ terms behind coal and steel. We take it for granted that the gold is "ours" and give the rights to mine it to private organizations. We gave that a tweak, so that the gold remained "ours" and the miners were paid a simple fee for its extraction. What if we decided that for a decade, Australia would stop exporting gold, refine it and build a 3000-4500 ton reserve to cushion ourselves from world economic events. An agreement could be made with all of the Australian gold miners to sell their gold to the RBA in return for Aussie dollars printed by the RBA. Let's say a set price of $1500 an ounce was set and agreed upon by the miners giving them a "floor price" on their asset and a guaranteed profit (I picked $1500 because it is the closest round figure to the current price). In a similar contract to say a coal or gas producer signing a contract to a power supplier under the market rate in order to secure a guaranteed long term funding for the mine. They could be given an incentive to take up the offer with a reduced tax rate and those that chose to stick with the market rate on gold remain on royalty+corporate tax. What are the implications and unintended consequences of such an action? Discuss away.
Good idea and would happilyy vote for a Polly holding silver balls to voice the idea Failing that, they will just pass a super profits tax on PM
The first one I can see is the "extra" currency hitting the economy causing inflation. However if this coincided with restrictions on the banking industry to compensate according to the amount of gold bought each year, it could be neutralized. With 8-10% board money Growth occurring now anyway with no "compensation" to the general public, the RBA would simply be substituting the banks with gold miners (who will stick their money in a bank anyway) as the tool for the new money entering the economy.
If we simply recognised gold as money (funny how XAU is already gold's currency code under the ISO 4217 standard), we could let the miners pay their taxes in gold. If their cash costs for digging it out of the ground are, say, $900/oz and we valued it for tax purposes at spot (currently ~$1600/oz), the miners would get an effective discount on their taxes, giving them an incentive to pay their taxes in gold rather than in cash. Of course that means we'd be giving up cash that can be spent now rather than gold that would be saved, so government revenue would tax a hit. A solution to that would be to simply include gold in the Minerals Resource Rent Tax (like the Greens wanted) so that large gold miners theoretically pay more tax overall, but with the effective discount it wouldn't actually be that much more. The figures in the above example would provide the miners with a 56% discount, so for every $100 worth of extra tax they'd be paying, it would only cost them $46 to actually pay it.
Stupid fabian talking sense again For some context - 1 metric tonne is 32,150.7466 troy ounces - at $1620 AUD an ounce, that's $52 million AUD a tonne. 300 tonnes is $15.6 billion. Australia's GDP is $923.61 billion (source: CIA Factbook, converted to AUD). So 300 tonnes of gold is 1.69% of GDP. That's a lot.
How dare you sir! If I wasn't running late for Socialist Alliance meeting, I'd really write a very strongly worded post!
Ha! You libertarians and your damn cookies. What, grow the wheat yourself did you? Or did you just oppress some poor farmers' collective in Guatemala to get the choc chips? My meeting has been cancelled to due wet weather anyway. The other guy's umbrella broke yesterday.
The "acquisition on just terms" part? S51 (xii) already provides for payments to be made in gold and silver, so presumably that would include payment of taxes. Legally there wouldn't be a problem, and the "just terms" bit would only really apply if the miners were intending on keeping the gold they dig up, but in reality they're selling their output at market rates so the "terms" are about as "just" as they're ever going to get.
Does Australia hold reserves in US dollars? If so it would surely be better to use those reserves to buy Silver from Mexico or Gold from other countries. They get the American fiat, for however long it is good for, we get their precious metals and we still have our own metals sitting in the ground. Several countries were talking about trading in gold rather than US dollars, granted they have been invaded by the US, but eventually the idea may catch on in which case we will no longer need a store of US dollars to trade with anyone. Until then we might be sitting on a big pile of gold and forced to trade with "Rogue" Nations for gold as everyone else is still using US dollars. You have to store gold and the security costs will not be cheap etc. the tax payer would end up forking out a fortune because as soon as the government gets involved any thoughts of competitive rates etc. go out the window. However, you can bet that a big old store of gold would make a tempting target for thieves, terrorists and politicians. None of them would be able to keep their hands off the stuff.
...And I saw this documentry once when a domestic terrorist tried to irradiate all the Gold in Fort Knox. This would have completely wiped out the value of the Government's gold stocks and increased the value of the terrorist's gold stack. Fortunately the plot was foiled by a British Agent. God save the Queen!
Yes the belief that America has lots of gold helps a heap. Does America have a hoard of gold? If it was found that america's hoard was in fact flogged out the back door years ago would this have an impact on their economy?
You must have a very different constitution to me, since mine only says "(xii) currency, coinage, and legal tender;"
The US supposedly has 8000+ tons of Gold, 73% of the Gold reserves of the world. However, note sure that is in fact true, they don't exactly let anyone go and have a look, not since Goldfinger anyway.
Sorry, S115 via S51. S115 is the "A state shall not coin money nor make anything but gold and silver legal tender" etc. part. If any clarity was needed, S51 allows the Commonwealth to make a new law that says "Gold is legal tender in Australia at a rate of exchange to the Australian Dollar as determined by [blah, blah, something about the market and the spot price]".
If gold = money as far as Australian law is concerned then gold miners could pay their taxes in gold. If the goal is to increase our national gold reserves, that's about as simple as solutions get. So yeah, not relevant at all...
All this means is that states can't print their own money - so you can't have Victorian dollars or South Australian pounds. But they can make gold and silver coins, which is why the Perth Mint is able to exist and make gold and silver coins that are legal tender. Constitutional power s51(xii) gives the Commonwealth power over "currency, coinage, and legal tender" So they can legally make fiat. So there is no conspiracy that the Australian Constitution only recognises gold and silver as legal tender. People who believe that end up like that moron in Queensland that got his butt handed to him when he tried to challenge his parking fine.
