The Silver Club Concept

by Gil Guillory

The government has wrested from the public control of the money supply. How do we take it back? Some might claim that we can vote in a specie standard. Others think it would be immoral or impossible to do so. Here is an idea for promoting a specie standard without political action: truly striking the root. Establish a Silver Club.

The Silver Club (abbreviated SC) is a silver warehouse with rules of operation:

1. Anyone may become a member of the SC by establishing an account with the SC. All accounts with the SC are in US dollars.

1. 2. The SC accepts deposits in only one denomination: walking liberty silver dollars, minted by the US Treasury department but available at other dealers for considerably less. The deposits are held in a 100% reserve account for a yearly fee ($1/year). Withdrawals are paid in only one denomination: walking liberty silver dollars.

3. 3. Funds can be transferred to another person by check or electronic transfer to another SC account, and can be made for fractional dollar amounts. However, withdrawals cannot be made in fractional dollar amounts (see #2).

Members are encouraged to settle monetary debts with fellow members by means of checks drawn on the SC.

If a member is selling wares in an open market, and the buyer is a member tendering payment by check drawn on the SC, then the seller is encouraged to give a discount to that buyer of 80% or another mutually agreed-to discount.

Membership Has Its Advantages

The chief goal of being a member of a SC is to promote the use of silver as a medium of exchange. The more people use silver, the more its value will rise and the value of Federal Reserve Notes will drop.

Depending on what discounts sellers and buyers agree to, participation could also reduce one’s tax liabilities. By getting a deep discount from members, applicable income, corporate, and sales taxes could potentially be reduced. But a member merchant does not sacrifice his profitability, since the discount is offset by the artificially low legal tender value of the coins.

To be clear, in the market, people trade about $7 in Federal Reserve Notes for a single walking liberty dollar. If you are a SC member and are selling something in your store for $7 to the general public, and you offer an 85.7% discount to fellow SC members, then they pay the discounted price of $1.00 in walking liberty dollars, which, if you need to, you can redeem in an open market for about $7 in Federal Reserve Notes.  

It is my contention that the proposal for a SC is a completely legal one, although I am not an attorney, nor have I had it reviewed by one. It is similar to a barter club, except that the barter units are actually legal tender US dollars, so it is not clear how US tax law applies. Statements from the SC will be in US dollars, and all transactions will be reported in US dollars.

How individuals handle their tax matters is their own business, of course; but, to the extent that tax liabilities are reduced by joining a SC, there is at least one important non-ideological reason for prospective members to join.

There are other important benefits. As explained above, if you are a silver investor (bullion, futures, mining companies, or other coins), a SC will raise the demand for silver, making your other investments worth more. If you believe that silver is currently undervalued due to excessive leasing and non-hedge speculation in the presence of an annual deficit of production, a SC could be a way to help the “anti-bubble” burst. If you like the idea of trying to get one over on Uncle Sam using one of his own dirty tricks, legal tender laws, then this might also suit your purposes. Lastly, using a SC as a bank would not subject you to the disclosure requirements that deposits at a FDIC-insured and US government-regulated bank does.

Objections

Here I address some objections that might be raised:

You are engaged in a conspiracy to evade taxes! No, the SC is a club for silver enthusiasts with potential tax advantages. I don’t even think that it qualifies as a tax shelter or a tax protest scheme. This is the most important question to be answered definitively. If it turns out to be legal, you can be sure that I will promote the idea further. Perhaps the IRS won’t allow for any amount of reduction in tax liability, but a state government might. Then, it would be useful for reducing sales tax liability even though it could not be used to reduce income or corporate tax liabilities. But, in any case, the central concern of the Silver Club is not to reduce tax liability: that is a happy coincidence that individuals may wish to explore. The Silver Club would not seek any tax advantages.  

You are trading marketable commodities (bartering) that must be reported to the IRS in accordance with their fair market value. Since we are trading legal US tender, it is not clear that a transaction involving a $1 walking liberty dollar should be reported as $7, just as pre-1964 quarters are traded all the time at face value with no implication of impropriety. Go here and search on the term “legal tender.” And, see this publication from the IRS. Again, this would be up to the individual SC member to decide.  

The SC is a bank and subject to banking regulation. No, it is a warehouse. I don’t think it would be subject to banking regulation. Even if it were, this would be a hurdle, not a show-stopper.

The reduction in taxes might work for a while, but they’ll eventually outlaw it. That may be the case, and if so it might only reduce taxes for a year or two. But how would they outlaw the Silver Club? The coins are in circulation and are legal US tender, good for all debts, public and private. It is unlikely that they will remove them from circulation, or restrict the ownership of silver. If they do either, the market value of your deposit will grow. In any case, if a Silver Club exists for any amount of time, it can only help the true purpose of the Silver Club: trying to re-establish a specie-based medium of exchange.

They’ll seize all of the coins. There is nothing about this scheme that requires centralization. There could be thousands of SC’s across the country with clearinghouses or clearinghouse-like agreements. But, to protect against seizure, the wares in the warehouse could be insured against losses.

If this were a workable concept, it would already have been tried. This is the efficient markets fallacy. The fact of entrepreneurial discovery is that someone has to discover a new way of doing things first. Maybe this is a new idea.