The following is a Q&A between Mike Gleason and Jp Cortez of the Sound Money Defense League. They discuss the importance of sound money and initiatives currently going on at the state level to encourage its use, stimulate currency competition and ultimately undermine the Federal Reserve’s monopoly on money.
Mike Gleason: It is my privilege, now, to welcome in Jp Cortez, with the Sound Money Defense League, a non-partisan national public policy organization working to restore sound money on the state and federal level.
Jp is a proponent of and has studied in the Austrian School of Economics, and his role at SMDL as policy director has him regularly testifying at legislative hearings and speaking at various events throughout the country.
His articles and analysis have appeared in many national news publications, including The Washington Examiner, Huffington Post, Mises Institute, Foundation for Economic Education, and more, and he’s a frequent guest on various podcasts and national radio shows to talk about the importance of sound money legislation. And it’s a real pleasure to have him on with us today.
Jp, thanks for the time and welcome.
Jp Cortez: Mike, I appreciate you having me on. Thank you so much.
Mike Gleason: Well, Jp, as we start out today, let’s set the stage here and first have you explain why this idea of sound money is important in the first place, and then, as a follow up to that, what kind of policies would help restore and reinforce sound money? Let’s begin with that.
Jp Cortez: Sure. In fact, actually, I’d like to take a step back from there. I think it’s important to define sound money and kind of understand what it is to really understand the implications that it has.
So sound money, just to begin, a cursory definition is money that isn’t really prone to severe appreciation or depreciation in the purses in power of the money over the long term. And this is a function that’s aided by the self-correcting processes that a free market has. It’s a money that has been subject to competition and to market forces, over a long enough timeline that we see, and we collectively understand that it’s a money that holds up.
And so it’s important because historically, now that we know what sound money is, historically we can see it, it’s the linchpin of a prosperous society. Throughout history, if you look back, you can go back to the Roman Empire and see the debasing of money is not something new to the United States. Dollar devaluation has a long and storied history.
And so understandably, Roman soldiers were getting upset when their government was issuing less pure coins to fund the empire that they’d created. And so I think sound money and the importance of sound money can really be boiled down into two value propositions.
The first is that sound money reduces uncertainty. The money that we choose has really, really important impacts on how societies, as a whole function, the ways societies spend, the way they save, the way they invest. The entire process from capital accumulation to capital investment is very dependent, or at least strongly influenced on the money that we use.
So, by moving to a sound money, we find that uncertainty is reduced, and entrepreneurs and consumer and investors can better and more accurately react and really take account of the signals that are being provided by the market.
The second kind of important point of sound money is that it acts as a safeguard against big government. So, on top of, and aside from any sort of economic implications that the money you choose may have, sound money acts as a safeguard against big government. I like to imagine sound money as sort of an “equal opportunity” money. It’s very inclusive in that we all have things about the government we don’t like, whether it’s massive wars, or domestic spying, or immigration, whatever it may be, there are things that the government does that we don’t like.
And without sound money in a monetary system like the one we have today, the government doesn’t need consent from its people to do these things that we don’t like. They can just print the money. But under sound money, a government has to turn to direct taxation to fund wars, to fund ineffective policies on domestic drug use, or illegal domestic spying, or constitutional, or rather unconstitutional wars.
Mike Gleason: Yeah, and obviously there’s taxation a couple of different ways. One is the old fashion way where they raise our taxes, and the other one is that stealth tax, the inflation tax which happens through printing all that money that the Treasury Department’s doing to pay for all this, like you mentioned.
Now I know that the Sound Money Defense League has released a Sound Money Index, which scores each state and assesses how well they’re doing when it comes to the sound money policy. And that index is also available at MoneyMetals.com, as well, by the way.
So, talk about the state of the states, Jp. What was the criteria you used there? And give us a rundown on some of the best and worst states for sound money.
Jp Cortez: Mike, if you don’t mind, I’d like to go back. You asked a question about what policies would help send sound money or help facilitate sound money in the United States.
Real quick, I think mostly the biggest issue here is the taxes – the taxation around money, sales tax and capital gains tax, and all of these things that serve as a disincentive to using sound money every day. In a lot of ways, in 1971 you could say that the American dollar hit an iceberg, with the closing of the Gold Window, with Nixon’s actions, money hit an iceberg. And there are very few lifeboats available to people to get off this sinking ship. And to tax money is to throw shackles on one of the few lifeboats that is available to move away from an asset that we know is moribund, that we know is depreciating, and that, historically, we know eventually will die as all fiat currencies have.
So, back to the Sound Money Index. Yeah, the Sound Money Index is a really cool project that we put together. It’s the first of its kind and we ranked all 50 states. At least, in 2018, we ranked all 50 states using nine specific indicators, nine points of criteria to determine which states offer the most pro-sound money environments in the country.
So, to that end, last year we had Utah, Wyoming, and Texas. Those were our top three. They had recently passed laws. The Wyoming Sound Money Act eliminated all taxation liability on gold and silver in Wyoming. Arizona had recently passed a capital gains exemption, exempting gold and silver from capital gains. Utah, of course, in 2011 had the original Sound Money Act.
And so, this year it’s exciting to see the renaissance, the revolution of sound money continue on the state level. This year in West Virginia, we had two bills that were introduced, and fortunately, I’m happy to say that gold and silver are no longer taxed in West Virginia anymore.
In Nebraska and Washington, tax hungry legislators over there tried to introduce bills to impose taxes where exemptions had already been passed. I’m happy to say that, because of grassroots efforts, and because of in-state dealers and other coming in to really voice their concerns, those efforts were squashed.
Unfortunately, in Ohio, we suffered a defeat. It’s kind of a strange dynamic that’s playing out there. Not too long ago, there’s still a cloud hanging over Ohio of a swindler, a rare coin “Investor” who swindled Ohio taxpayers out of 50 million dollars in taxpayer money. And so, Ohio had a bad taste in its mouth, it was an environment that was sort of against sound money to begin with, and it was an uphill battle. But we look forward to bringing, hopefully, new legislation next year and helping to convince and really show the Ohio legislature that they made a big mistake. And the people most harmed by their mistakes, unfortunately, are the poorest… the savers, those on fixed incomes, retirees, the people who can’t afford to hedge the loss of their purchasing power.
Mike Gleason: You mentioned Utah and Wyoming and Texas as your top ones there on the Sound Money Index. How about some of those bottom states?
Jp Cortez: Ah well, at the bottom, the 2019 Sound Money Index hasn’t come out yet, but the 2018 Sound Money Index has six states with a zero score. That is Arkansas, Maine, Kentucky, New Jersey, West Virginia, and Vermont.
And so part of the reason I’m so fired up about sound money, and part of the reason that the path looks clearer than it ever has before to restoring sound money, is that just these here, just in these bottom three states, three of these states this past session introduced legislation to remove taxes on sound money. Arkansas, Maine, and West Virginia, all three introduced legislation.
Unfortunately, not all of them passed, but West Virginia is making big strides, and state policy is more of an incremental game and it’s laying the foundation to continue to build on this in future sessions.
Mike Gleason: Yeah, certainly a lot going on at the legislative level over the last couple of years, which is one of the big reasons why we wanted to have you on to kind of update us on all this.
Now what about federally, Jp? We’ve all heard Trump make some pro sound money comments, although he did a little more of that as Candidate Trump than he has as President Trump. What’s with the situation at the federal level, what kind of legislation or executive action can be pursued there?
Jp Cortez: Yeah, it was really exciting to hear Trump, and Pence, talk so favorably about a gold standard while they were on a campaign trail. Unfortunately, that’s simmered down a little bit, but with the recent news about Trump’s plan to nominate Judy Shelton to the Fed, we’re seeing sound money kind of make an uptick again here, at least in mainstream media.
So, it’s exciting, and there’s a lot going on here aside from the potential nomination. Just generally, the IRS a while ago, unilaterally decided that gold and silver are collectibles, that is to say, there’s no difference from gold and silver to a Beanie Baby, or a baseball card, or something like that. So, at the top level, one of the easiest things that could happen at the federal level is for the IRS to just decide either, A, we are not going to tax gold and silver at a discriminatorily high 28%. Another option is just to stop taxing at all, this classification is wrong.
That’s probably all that could happen without legislation, but fortunately, there are a few sound money allies in Congress that have been fighting this fight. Just this year, Alex Mooney, Representative Alex Mooney from West Virginia has introduced two pieces of legislation. One, to very broadly remove taxation on gold and silver coins, rounds, and ingots, foreign and domestic, which would be a very broad and great step forward for sound money. Representative Mooney also introduced an Audit the Gold bill. The bill that calls for a full assay, inventory, and audit of all the U.S.’s gold holdings and any encumbrances on that gold that might exist. And then it calls for subsequent audits ever five years too.
So, our last audit was mostly for show, and it was in the 1950s, and we haven’t really seen or heard much about America’s gold since then. So, it’s great to have Representative Mooney on the front lines, calling for an audit on this stuff.
Mike Gleason: Yeah hopefully he can get some more allies there in congress. These are certainly uphill battles, and we would love to see him get some others to join him in those efforts.
Well, as we begin to wrap up here, Jp, any other comments or anything else you want to share with our audience, or maybe something else that we haven’t touched on yet?
Jp Cortez: Yeah, great. I’d just like to talk about the Sound Money Scholarship really quick, Mike. As you know, the Sound Money Defense League in conjunction with Money Metals Exchange offers and awards the Sound Money Scholarship every year. We’ve been doing this since 2016, we offer money for deserving students, high school seniors, undergrads and graduate students who have shown a very acute understanding of the problems in economics that we’re faced with today.
So, every year we award five scholarships. Two to undergrad and high school students, and then two to graduate students. And then we also have People’s Choice Award where we get on social media and try to spread the word as much as we can about the essays that these incredible students are writing.
These are questions, essay prompts, that are on the Federal Reserve, and money and (the) gold standard. We have a Blue Ribbon Panel of judges – Austrian economists, professors, pundits – who’ll come in and they’ll grade the essays, they’ll judge the essays and determine the winner.
So, I encourage anyone, any students, if you know any students, please let them know about the scholarship, it’s an awesome opportunity, it’s a great way to get published. And the deadline this year is September 30th and you can look on Money Metals website or Sound Money’s website for more information.
Mike Gleason: Yeah, the only scholarship of its kind, a gold-backed scholarship out there, it’s a great thing, and we’re happy to partner with the Sound Money Defense League, and we certainly urge anyone to take advantage of that and let’s see if we can give away some more scholarships this year to some very deserving people.
Well, keep up the great work, Jp, it’s a vitally important cause and we appreciate the time very much, and I look forward to having you on again in the future to update us on a lot of what’s going on these legislative fronts, because I know you’re following it and are involved like nobody else when it comes to the sound money-related bills. We wish you continued success in those efforts and, thanks again for the time, take care.
Jp Cortez: Thanks a lot, Mike. I look forward to coming back with some good news.
Mike Gleason: Absolutely. Well, that will do it for this week, thanks again to Jp Cortez, policy director at the Sound Money Defense League. For more information or to follow these ongoing sound money efforts, or to even make a donation to help support the mission of sound money advancement, please visit SoundMoneyDefense.org. And in terms of the previously mentioned Gold-Backed Scholarship, you can find that on the Sound Money site, or you can also check out details on that at MoneyMetals.com/scholarship.