From Wikipedia:
A bullion coin is a coin struck from precious metal and kept as a store of value or an investment, rather than used in day-to-day commerce. Examples include Krugerrands, British sovereigns, the American Eagle series and the Canadian Maple Leaf series.The American Gold Eagle is a bullion coin first issued in 1986 under the Gold Bullion Coin Act of 1985. Most of the coins are produced from the West Point Mint in West Point, NY, and by law all gold used in the coins must come from "newly mined domestic sources." They carry the mint's mark ("W") beneath the date and are offered in 1/10 oz, 1/4 oz, 1/2 oz, and 1 oz denominations. They are alloyed with silver and copper for better wear-resistance.
As legal tender, these coins have a face value of $5, $10, $25, and $50, respectively. For example, the reverse side of the 1 troy ounce coin is marked with 1 OZ. FINE GOLD - 50 DOLLARS. The other denominations are marked accordingly. The market value of the coins, however, is about equal to the market value of their gold content, not their face value. Today, for instance, the 1 ounce American Gold Eagle would be worth roughly $925.
If you buy bullion coins, Harry recommended taking care of the storage yourself -- don't entrust them to a firm. He does add, though, that a bank safe deposit box is a suitable storage place.
A business owner in Las Vegas, Robert Kahre, paid his workers in gold and silver coins. They had filed income tax returns based on the face value of the coins instead of the much-higher market value. The IRS brought 161 charges against nine people, including Kahre, and failed to get a single conviction.
From the Las Vegas Review-Journal:
. . . the trial lasted four months. It relied heavily on evidence gathered in a controversial armed raid in May 2003 on several of Kahre's local business places. The raid entailed keeping more than 20 workers handcuffed, at gunpoint, in 106-degree heat without shade or water while agents collected records and equipment.Kahre is pursuing civil actions against several parties, including the head prosecutor J. Gregory Damm and the IRS "agents."
In Making Economic Sense, Rothbard made this observation [p. 267]:
. . . there is what can only be considered a grisly joke perpetrated on us by the U.S. Treasury. The one-ounce gold coin is designated, like the pre-1933 coins, as “legal tender,” but only at $50. In other words, if you owe someone $500, you can legally pay your creditor in ten one- ounce coins. But of course you would only do so if you were an idiot, since on the market gold is now worth approximately $420 an ounce. At the designated rate, who would choose to pay their creditors in $4,200 of gold to discharge a $500 debt?
The phony, artificially low gold price, is of course designed by the U.S. Treasury so as to make sure that no one would use these golds coins as money, that is, to make payments and discharge debt. Suppose, for example, that the government designated the one-ounce coin at a bit higher than the market price, say at $500. Then, everyone would rush to exchange their dollars for gold coins, and gold would swiftly replace dollars in circulation.
All this is a pleasant fantasy, of course, but even this superior system would not solve the major problem: what to do about the Federal Reserve and the banking system.
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