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Posts Tagged ‘gold’

Why Does Money Have Value? Not Because the Government Says It Does. | Mises Wire

Posted by M. C. on October 10, 2021

Contrary to the popular way of thinking, the value of a paper dollar originates in its link to gold—and not government decree or social convention. Following Ludwig von Mises’s regression theorem, money must have originated as a commodity. Furthermore, the fact that an entity has established a purchasing power with respect to various goods and services does not automatically qualify it as money, i.e., as the general medium of exchange. For the entity to become money, it must have wide acceptance.

https://mises.org/wire/why-does-money-have-value-not-because-government-says-it-does

Frank Shostak

Why does the dollar bill in our pockets have value? According to some commentators, money has value because the government in power says so. For other commentators the value of money is on account of social convention. What this implies is that money has value because it is accepted, and why is it accepted? … because it is accepted! Obviously, this is not a good explanation of why money has value.1

The difference between Money and Other Goods

Now, demand for a good arises from its perceived benefit. For instance, people demand food because of the nourishment it offers them once consumed. This is not so with respect to money. According to Murray N. Rothbard,

Money, per se, cannot be consumed and cannot be used directly as a producers’ good in the productive process. Money per se is therefore unproductive; it is dead stock and produces nothing.2

Why, then, is there demand for money? Why do individuals desire to have something which cannot be consumed and produces nothing? To provide an answer to this one must go back in time to establish how money emerged.

In trying to improve their lives and well-being, individuals discovered that by replacing direct exchange, where individuals exchange one good for another good, with indirect exchange they could enhance the marketability of their produce. The introduction of indirect exchange means that the produce of an individual is exchanged for some more marketable good and then this good is exchanged for the produce of another individual.

The key to a good’s emergence as a mediator of indirect exchange is that it must be widely accepted. On this, Ludwig von Mises observed that, over time,

there would be an inevitable tendency for the less marketable of the series of goods used as media of exchange to be one by one rejected until at last only a single commodity remained, which was universally employed as a medium of exchange; in a word, money.3

Similarly, Murray Rothbard wrote that,

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Frank Shostak‘s consulting firm, Applied Austrian School Economics, provides in-depth assessments of financial markets and global economies. Contact: email.

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We Don’t Need a Central Bank to Deal with Changes in the “Demand for Money” | Mises Wire

Posted by M. C. on September 8, 2021

If the market will settle on gold or any other commodity as money the amount of this commodity is going to be in line with people’s requirements.

Given that a commodity that is selected as money is part of the stock of wealth the increase in the supply of such commodity is not going to set in motion the menace of boom-bust cycle. This should be contrasted with the increase in the money supply out of “thin air”.

https://mises.org/wire/we-dont-need-central-bank-deal-changes-demand-money

Frank Shostak

Historically, many different goods have been used as money. On this, Ludwig von Mises observed that, over time,

[T]here would be an inevitable tendency for the less marketable of the series of goods used as media of exchange to be one by one rejected until at last only a single commodity remained, which was universally employed as a medium of exchange; in a word, money.1

Similarly, Murray Rothbard wrote in “What Has Government Done to Our Money,”

Just as in nature, there is a great variety of skills and resources, so there is a variety in the marketability of goods. Some goods are more widely demanded than others, some are more divisible into smaller units without loss of value, some more durable over long periods of time, some more transportable over large distances. All of these advantages make for greater marketability. It is clear that in every society, the most marketable goods will be gradually selected as the media for exchange. As they are more and more selected as media, the demand for them increases because of this use, and so they become even more marketable. The result is a reinforcing spiral: more marketability causes wider use as a medium, which causes more marketability, etc. Eventually, one or two commodities are used as general media-in almost all exchanges-and these are called money.

Through the ongoing process of selection, people settled on gold as their preferred medium of exchange. Some commentators, cast doubt that gold can fulfill the role of money in the modern world. It is held that, relative to the growing demand for money because of growing economies, the supply of gold is not growing fast enough. On this according to Insider from June 15, 2011,

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Author:

Contact Frank Shostak

Frank Shostak‘s consulting firm, Applied Austrian School Economics, provides in-depth assessments of financial markets and global economies. Contact: email.

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Doug Casey on Currency Debasement and Cultural Degradation

Posted by M. C. on August 5, 2021

Doug Casey: There is a relationship. It’s perhaps not directly provable as cause and effect, but there’s a high correlation between junk money and junk culture. And it’s not just a question of arbitrarily changing taste.

https://internationalman.com/articles/doug-casey-on-currency-debasement-and-cultural-degradation/

by Doug Casey

International Man:  How instrumental do you think the debasement of their currency was to the eventual fall of the Roman Empire? How did it affect their culture?

Doug Casey: In ancient pre-industrial societies—just like today—you became wealthy by producing more than you consume and saving the difference.

One of the best things about money is that it allows an individual to set aside capital, the product of his labor, in a form that retains value. A farmer, for instance, can’t save fruit from year to year, nor can a baker save bread. Sound money is critical for lasting gains in wealth and economic progress. Sound money is why wealthy societies become dominant, and a reason other societies are poor and ripe for conquest and domination.

Rome provides a meaningful long-term template. The Roman government, in search of revenue, started debasing the denarius under Nero in the 1st century, taking it from 90% silver to 75%. As late as the reign of Marcus Aurelius, which ended in 180, the denarius was still about 75% silver. By the end of the 3rd century, it was pot metal that was simply plated with silver. The 3rd century was notable for numerous coups, civil wars, assassinations, and secessions. There are plenty of reasons political chaos goes hand in hand with economic chaos; they reinforce each other.

Roman coins weren’t worth saving by the middle of the 3rd century, and the collapse of the currency was a major cause of the collapse of the empire. In some ways, sound money was even more important in ancient times than it is today because they didn’t have sophisticated banking, financial markets, credit, accounting, or ways of measuring the rate of currency depreciation. Physical cash was king.

Currency inflation creates chaos, whether in a relatively primitive economy like that of the Romans—where there was still a lot of barter. Once the rulers found they couldn’t depreciate the currency anymore, direct taxes went up substantially, but it became hard to collect them simply because the currency had no value. The soldiers didn’t like being paid with worthless tokens. This is why after the reign of Aurelius, the next century was a time of civil wars and general chaos. There was no new construction of roads or public buildings. Those who were able holed up at their country estates, which were internally self-sustaining. It was the beginning of feudalism, a foreshadowing of the coming Dark Ages. By the accession of Diocletian in 295, Rome had lost all touch with its republican roots and had become an oriental-style despotism.

Is Rome a distant mirror to today’s West? It’s entirely possible, even likely.

International Man: What parallels can be made today with the US in terms of monetary debasement and overall degradation?

Doug Casey: The parallels are very direct. We can just look at the pictures on the coins.

During the Roman Republic, the consuls didn’t put their images on the currency. The coins bore images of the gods, heroes, or personifications of various virtues. Julius Caesar was the first ruler who dared put his own image on a coin. It amounted to free advertising.

Caesar signed the death warrant for the Roman republic, followed by Augustus, his adopted son, who was the first actual Roman emperor. From that point until the end, all Roman coins featured the image of the current ruler.

In the US, we didn’t have a picture of a president on a coin until 1909, when Lincoln was deified and put on the penny; before that, pennies featured an Indian. All the other coins had allegorical images, as did Roman coins during its republic. After Roosevelt was elected in 1932, however, things changed. The coins all featured past presidents. Washington replaced a walking Liberty on the quarter in 1932. Jefferson replaced the Indian on the nickel in 1938. Roosevelt himself replaced the image of Mercury on the dime in 1946—that was a big step since he was so recently dead. Benjamin Franklin replaced Liberty on the half dollar in 1947.

Since Lincoln, Washington, and Jefferson were basically mythical-level presidents, I suppose an argument can be made for their images on money—but it was unwise since they were really just politicians. And Lincoln had the nerve to have his picture placed on a $1 bill in 1861.

Kennedy replaced Franklin on the half-dollar in 1964. Replacing allegorical symbols, or long-dead founding fathers, with recently deceased politicians is a sign of degradation. We haven’t yet put a current ruler on the coinage, but we’re getting close.

Of course, gold was the first to go, in 1933, with the accession of Roosevelt. Then in 1964, all silver was removed from coins. Current coins look like silver, but they aren’t. It’s a subtle fraud, symptomatic of the entire US—and world for that matter—monetary system. Technically since, then, the discs you may have in your pocket are tokens, not coins. Coins have value in themselves; tokens have no intrinsic value. Then in 1982, the penny—which had been 95% copper and 5% zinc—was changed to zinc with a copper wash on it.

The trend of money has been negative since the creation of the Federal Reserve in 1913, followed by World War I. Currency debasement and war underlie the ongoing moral and economic bankruptcy of the West.

The next step will be the removal of coins from circulation. Few are still worth enough to bother picking up from the ground. They’re no longer even useful in parking meters or video games. It costs three cents in metal to create a zinc penny and eight cents for a nickel. Both are entirely useless. But all coins are on their way out, to be replaced by digital currency.

This has interesting societal implications because kids won’t be able to collect coins anymore. It’s hard to save money digitally. Digits aren’t tangible, and kids like real stuff if they’re trying to save. Taking the physical reality out of money devalues the concept of money itself.

International Man: Much of the spectacular art, music, and architecture in recent history was created in times when the average person used gold and silver coins as money.

Do you see a relationship between the use of hard money and culture?

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6 Reasons Franklin D. Roosevelt was the WORST

Posted by M. C. on July 22, 2020

Joe left a few out.

Goading the Japanese into declaring war, leaving the Pacific fleet unprepared and refused to fight his “Uncle Joe” for Eastern Europe, particularly Poland.

England entered WWII to save Poland and Churchill and FDR ended up letting Stalin take it. It defeats the point.

https://www.thedailybell.com/all-articles/news-analysis/5-reasons-franklin-d-roosevelt-was-the-worst/

By Joe Jarvis – July 22, 2020

 

Can you believe that there are at least three statues of Franklin D. Roosevelt in Washington DC? There is one in South Dakota too, another in Virginia, and even more in London.

It appears all these places are overrun by racists and fascist sympathizers. How can people celebrate a man who:

1. Literally Rounded Up 120,000 Japanese Americans, and put them in Concentration Camps.

Executive order 9066 authorized the arrest and detention, without charges, or American citizens of Japanese ancestry. Franklin D. Roosevelt signed it into law on February 19, 1942.

Two reports which Roosevelt commissioned in the years prior to their internment found that Japanese Americans posed little to no risk to the government. But FDR ignored the reports’ recommendations.

70,000 of those arrested and detained, sometimes for years, were American citizens. And a simple executive order–no due process– allowed them to be arrested for no reason other than their race and nationality.

How is FDR not widely accepted as the biggest American racist of the last century?

2. FDR Outlawed Private Ownership of Gold.

With Executive Order 6102, signed on April 5, 1933, everyone living in America was given 25 days to turn in their gold. Their property–gold coins and bullion–was confiscated. It became a criminal offense for any American to own or trade gold anywhere in the world– except for some exceptions like jewelry and collector’s coins.

The government paid about $20 per ounce for the gold they forced citizens to sell them. Shortly after, the government set the price of gold to $35 per ounce.

They could do that, because at that point, a dollar was still backed by a set amount of gold. Increasing the dollar value of gold, allowed them to print more money. That is even easier today, unhindered by a gold standard.

The law wasn’t repealed until 1974. Only then was private ownership of gold once again fully legal in the US.

3. FDR was Pen Pals With Mussolini, Whom he Admired.

Benito Mussolini was the fascist Dictator of Italy in league with Adolf Hitler during World War II.

The book, Three New Deals, shows how similar the movements of the 1930’s were in America, Italy, and Germany.

It also recounts how Roosevelt said:

‘I don’t mind telling you in confidence,’ FDR remarked to a White House correspondent, ‘that I am keeping in fairly close touch with that admirable Italian gentleman,’

And Mussolini reviewed FDR’s book Looking Forward.

“Reminiscent of Fascism is the principle that the state no longer leaves the economy to its own devices.… Without question, the mood accompanying this sea change resembles that of Fascism.”

Mussolini and FDR were two peas in a pod.

4. The Roosevelt Administration was Infested with Soviet-Russian Spies.

Diana West describes in her book, American Betrayal, just how well the Soviet Union infiltrated the White House. Top officials close to the President were supportive of the Soviet Regime. Some were almost certainly actual Soviet spies.

In one sketchy encounter, soldiers were told to stand down when they witnessed American secrets being smuggled out of America on a plane bound for Russia, guarded by Soviet soldiers. This may be how the Soviet Union was able to make nuclear weapons.

Many other policies were directly influenced by socialist sympathizers and possibly outright spies in the government appointed by FDR. For instance, Soviet troops were given American supplies during World War II through the “Lend-Lease” program, while American troops went without.

5. FDR Hated the Press and Suppressed Free Speech.

Reason Magazine describes FDR’s War Against the Press:

Roosevelt warned in 1938 that “our newspapers cannot be edited in the interests of the general public, from the counting room. And I wish we could have a national symposium on that question, particularly in relation to the freedom of the press. How many bogies are conjured up by invoking that greatly overworked phrase?”

He’s basically saying he wishes he could shut down “fake news”.

Roosevelt also started the FCC (Federal Communications Commission) and limited licenses for radio broadcasting to six months. That way the government could revoke a license, and silence critics of FDR.

It did not take long for broadcasters to get the message. NBC, for example, announced that it was limiting broadcasts “contrary to the policies of the United States government.” CBS Vice President Henry A. Bellows said that “no broadcast would be permitted over the Columbia Broadcasting System that in any way was critical of any policy of the Administration.” He elaborated “that the Columbia system was at the disposal of President Roosevelt and his administration and they would permit no broadcast that did not have his approval.” Local station owners and network executives alike took it for granted, as Editor and Publisher observed, that each station had “to dance to Government tunes because it is under Government license.”

FDR’s government illegally intercepted telegraphs and used the ill-begotten information to subpoena journalists, chilling any dissent, and drying up the flow of information to reporters. A law was even proposed to give prison sentences to anyone who knowingly published fake news.

6. The Roosevelt administration seized and destroyed crops while Americans starved

The Agricultural Adjustment Act of 1933, reauthorized in 1938, was allegedly to help struggling farmers. The point was to raise the prices of crops, to keep farmers from going broke and abandoning their farms.

Of course if farmers were abandoning their farms because prices were too low to make a living, that would have naturally decreased supply…

Instead, power-hungry leaders like FDR just had to intervene. And the consequences were disastrous.

Remember this was during the Great Depression, which meant already struggling families had to pay more for food.

Then when not enough crops were grown in the US, America had to import crops, making the country more dependent and less self sufficient.

There are plenty more reasons to despise Franklin D. Roosevelt. But if we are putting in requests to destroy racist, fascist statues, FDR should top the list.

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China’s Stealth Plan to Use Gold for World Domination

Posted by M. C. on February 27, 2020

Russia bought $100 billion worth of euros, yuan, and yen in 2018… the Keyser Söze of gold won’t make that mistake again.

And over eleven trillion U.S. dollars’ worth of global investment opportunities have a negative yield. So Russia would end up paying money to hold them.

Gold, on the other hand, has paid off handsomely for Putin.

The real plan-Some feel this is why the US is trying to topple countries that are looking to alternative currencies.

In short, China and Russia want a world where the U.S. dollar is no longer the reserve currency.

To do that, both Russia and China (specifically China) have a lot of gold buying to do before they can realistically back up their currency.

It won’t be a return to the gold standard, certainly. It will be more of a “gold support.”

https://internationalman.com/articles/red-gold-china-stealth-plan-to-use-gold-for-world-domination/

by Marin Katusa

Gold used to be important.

During and after World War II, every major developed country amassed as much physical gold as they could. It stabilized currencies and signaled independence.

But with the end of the gold standard in 1971, most countries began to sell off their reserves.

So much so that in 1999, an agreement was formed to limit the amount of gold that central banks could sell. Fast forward to today, and Canada’s central bank owns ZERO gold.

Despite the agreement, most countries continued to shed their gold reserves as fast as possible.

Central bank gold reserves

That is until a few years ago, when a handful of countries reversed course. Central Banks started buying gold with fury, and they haven’t let up since.

In the final quarter of 2018, central banks purchased more gold than in any other quarter on record.

By the end of the year, central banks collectively held around 1.064 billion ounces of gold (equivalent to 33,200 tons).

That’s about one-fifth of all the gold ever mined.

In the first half of 2019, central banks purchased 11.97 million ounces of gold (374 tons). Once again, that was far more than ever before. And it’s equivalent to one-sixth of total gold demand in that period.

And total central bank gold purchases for 2019 were the second highest they’ve been in the last 50 years (2018 being the first).

The Unusual Suspects in Central Bank Gold Purchases

And the Keyser Söze of gold is Vladimir Putin.

I’ve been very quiet about Russia and Putin the last few years as I’ve been swamped with media requests following the success of my NY Times Bestseller The Colder War.

Don’t underestimate what the Russians are doing, as others are starting to follow…

While the world focuses on China, Russia has positioned itself at the center of the global political chessboard.

Here’s what’s interesting about the recent central bank gold purchases: the vast majority of that unprecedented purchasing came from just four countries.

These are places you’d never expect.

  • One of those countries is Kazakhstan, whose GDP is smaller than Kansas’s. Kazakhstan grew their reserves from 2.4 million ounces (75 tons) in 2011 to 12 million ounces (375 tons) in 2020 — A 400% increase.
  • Turkey moved far faster. In 2017, they had 3.71 million ounces (116 tons). Now, they have 12.32 million ounces (385 tons) of gold. That’s a 232% increase in just the last two years.
  • In 2018 alone, Russia bought 8.78 million ounces (274.3 tons). That’s the most it’s ever purchased in one year, and its fourth year above 6.4 million (200 tons) ounces of gold. For reference, that’s $15.7 billion worth of gold.

Putin is undertaking what’s called a “de-dollarization.” Aware of sanctions from the United States, Russia is positioning itself to not be dependent on U.S. Dollar holdings.

So, the central bank in Russia has sold nearly all of their U.S. Treasury notes. And it’s used the proceeds to buy gold.

Like I said, the Keyser Söze of gold is Vladimir Putin.

Pay attention to the world’s master strategist. This is very bullish for gold.

Russian gold purchases

You might be wondering why Russia doesn’t buy a yielding investment with the cash.

The problem is that other reserve currencies, like the euro or the yen, are extraordinarily weak against the dollar and Putin knows this will continue.

Russia bought $100 billion worth of euros, yuan, and yen in 2018… the Keyser Söze of gold won’t make that mistake again.

And over eleven trillion U.S. dollars’ worth of global investment opportunities have a negative yield. So Russia would end up paying money to hold them.

Gold, on the other hand, has paid off handsomely for Putin.

In 2019, the value of Russian-held gold has increased from $86 billion to more than $112 billion. The rising gold price has generated a windfall for the Russians of nearly $20 billion that the Russians can leverage.

That’s providing plenty of incentive to keep Russia buying in the long run, stoking further demand.

The problem is that Russia’s buying is fairly well-known. Unless it continues to step up gold purchases, its effect on gold prices has mostly already been taken into account.

China’s New Golden Rule

With WuFlu (the Coronavirus) now having infected more people than SARS did in 2003, will China continue their gold purchases?

China stockpiled huge amounts of gold every single month last year.

You’re probably wondering why…

Well, you’ve probably heard the saying, “He who has the gold, makes the rules.” Xi Jinping, President of China, agrees with Putin’s strategy.

WuFlu no doubt has sidetracked China here in the near term, but it’s been proven that the gold insurance strategy is a very wise one.

The Chinese elite are aware of their aging demographics and high debt loads.

The gold will be valuable to potentially backstop any shortfalls without being overly dependent on their foreign exchange reserves.

China is diversifying its foreign exchange reserves away from the USD and towards gold. This will take many years, but it’s a sound strategy.

The major Western countries hold upwards of 60 percent of their foreign exchange reserves in gold.

China is currently at just 2.9%. Russia is currently at 20%.

China knows it has to pick up its gold to reserves ratio and WuFlu will accelerate this belief.

The chart below shows where Russia and China will want to be at—with the western superpowers. They will get there. And the price of gold will be positively impacted as a result.

gold percentage

Of course, China has much larger foreign exchange reserves than most other countries. So its gold holdings represent a lower percentage of its total reserves.

But even when looking at actual gold holdings, you can see that China and Russia have long lagged behind the west. Only now are they catching up.

gold reserves

If – and it’s a big if – China were to shoot for the same gold-to-forex reserve ratio as the United States, that would take 1.98 billion ounces of gold (62,000 tons) of gold off the market—or fourteen years’ worth of 100% of the world’s gold demand.

The subsequent rise in the price of gold would be unlike anything the world has ever seen. But it seems impossible… right?

Here’s the thing: Russia’s own gold-to-forex reserve ratio fell below 2.5 percent in 2007. Now it’s at 20 percent—and climbing.

Not only that, but China has a much longer-term vision in mind with their gold purchases.

According to one of my favorite people to debate on stage at conferences, Euro Pacific Capital CEO Peter Schiff, Russia and China are “preparing for the world where the dollar is no longer the reserve currency.”

China can’t do this, and they know it. Peter knows it too, until China’s reserves grow 10-fold.

In short, China and Russia want a world where the U.S. dollar is no longer the reserve currency.

To do that, both Russia and China (specifically China) have a lot of gold buying to do before they can realistically back up their currency.

It won’t be a return to the gold standard, certainly. It will be more of a “gold support.”

The Angry Dragon

So here are the trillion-dollar questions: exactly how much gold is China planning to buy?

And what will it do to the price of gold?

The problem with China is that it doesn’t update its gold reserve numbers very often. When the numbers are updated, their accuracy is impossible to verify.

Few believe the official WuFlu numbers, never mind gold numbers.

China lacks global trust.

Real gold reserves are one step towards building that trust.

China buys its gold extremely quietly via back channels to avoid running up the price via its purchases. (Remember Kazakhstan’s huge gold buys? Guess who they share a border with…)

From 2009 to 2015, the Chinese government didn’t provide any updates about its gold holdings. Then it suddenly announced a massive 57 percent jump in its reserves.

What we do know is that China purchased nearly 3.2 million ounces (100 tons) of gold in the past year. But, they need to buy 1.9 billion ounces to be on par with America. 3.2 million ounces is a lot of gold, but relative to where they need to be—it’s not.

Moving forward, that’s set to rise—dramatically.

Zhang Bingnan, vice president of the China Gold Association, forecasted the optimal gold reserve capacity for China for the next two decades…

He found that in 2020, China’s optimal gold reserves should be between 185.6 million ounces and 217.6 million ounces (5,800 and 6,800 tons) of gold.

Remember, China’s gold reserves currently sit around 58.94 million ounces (1,842 tons).

That means it would need to buy 128 million ounces (4,000 tons) at a minimum, this year, to meet Zhang Bingnan’s optimal rate.

But even that would be short by 1.77 billion ounces to meet the ratio that U.S. reserves are at.

Another way to look at it is, even if China doubles their gold reserves, they’re still short of meeting the same ratio as the United States by 93%.

A Dragon’s Appetite for Gold

According to a precious metals analyst at Standard Chartered Bank…

Just to achieve the diversification it’s looking for, China would need to buy two years of global gold production.

In short, when China really starts buying, it’s not going to be able to disguise it any longer. And that could cause a run on gold like the world has never seen before.

Central reserve banks are already snatching gold up at record levels… when prices are at record levels. These central banks themselves anticipate prices going much, much higher.

When central reserve banks begin to see gold both as diversification, insurance and leverage there will never be enough of it to go around.

I wouldn’t want to bet against them. I’d never bet against the Keyser Söze of gold, Vladimir Putin.

Because gold still matters—a lot.

And with any shakiness in the global economy, it’s going to matter a lot more.

Editor’s Note: In this shaky economic environment, big buyers like China and Russia, are accumulating as much gold as possible.

It’s no question that negative interest rates and the devaluation of currencies will only put fuel on the fire.

In a newly released video, legendary speculator Doug Casey and resource expert Marin Katusa breakdown exactly what is coming, and exactly how you can profit from the rally in gold. Click here to watch it now.

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Fiat Money - The main driver behind boom & Bust Cycles ...

 

 

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IRS Warns Against Keeping IRA Funds In Gold At Home | Zero Hedge

Posted by M. C. on February 26, 2020

What the heck is a windfall profit anyway?

As far as I can tell, it’s whatever politicians decide it is. It’s completely arbitrary. There are no objective measures to define it.

In short, a windfall profit is simply a profit politicians don’t like. The whole concept is a scam—a word trick to camouflage and sanitize legalized theft.

Gold-harder to steal than a digital bank account. Gold-It screams independence. The government like neither.

Never use a safety deposit box. If legal troubles find you the box gets a lock for which you are not allowed a key. If the bank gets in trouble-same.

If you bank is like Wells Fargo the contents of your box are up for grabs.

https://www.zerohedge.com/news/2016-09-07/irs-warns-against-keeping-ira-funds-gold-home

 

The Internal Revenue Service isn’t too keen on the recent advertisements suggesting retirement savers store their tax-free individual retirement account funds in gold at their house or in safety-deposit boxes, the Wall Street Journal writes.

Storing Gold at Home: Legal, But with Caveats

The statement from the IRS comes in response to a number of ads online and on the radio, such as one from Hartford Gold Group, suggesting investors can avoid stock market turbulence by investing IRA accounts in gold coins and bullion they can store where they like, including their home, according to the Journal.

 

But the law on such practices is cloudy, the publication writes.

 

For example, IRA assets can’t be stored in collectibles such as antiques, gems, artworks or wine, according to the Journal. On the other hand, it’s legal to keep IRA investments in coins and bullion-quality bars in metals such as gold, silver and platinum, the publication writes.

 

But few IRA investment providers offer the option — Vanguard and Charles Schwab don’t allows their clients to invest IRAs in physical metals, according to the Journal.

 

The IRS may be taking issue with just how difficult and expensive investing in physical gold could end up for the investor. Fidelity, which allows IRA investing in some coins and bullion, charges up to 2.9% to buy and 2% to sell the assets, and a further 0.125% quarterly storage fee, the publication writes.

 

And keeping the gold at home is not an option: out of tax compliance considerations, Fidelity requires physical metals to be stored at a qualified facility and doesn’t let IRA investors take the gold out or even view it without notification from the IRA custodian, the Journal writes.

 

Proponents of store-at-home gold say that IRA owners can legally keep their gold in a safe-deposit box or at home if they are the owners and managers of a limited-liability company that uses the funds from the IRA to obtain the gold, according to the publication.

 

Some attorney says this structure would allow investors to store coins owned by the LLC at home — but for bullion, they would still have to store it in an LLC-owned safety-deposit box, the Journal writes.

 

Home storage can get pricy, too: one professional whose company provides paperwork for at-home storage of IRA gold charges $400 to $1,200 to set up such an LLC, according to the publication.

 

And because the issue of LLC ownership by IRA has no legal precedent, companies advertising home storage of IRA gold are careful to note that they don’t provide legal advice, the Journal writes.

*  *  *

Amid the increasingly mainstream “war on cash” and ‘hoarding’ across the globe, the timing of the IRS’ warning about keeping gold in your IRA seems highly coincidental at best and more than worrisome at least as the “different this time” confiscation methods shift attitudes from concerns to actions…

The government blatantly stole wealth from the American people before.

Many worry the U.S. government might confiscate gold again if it becomes desperate enough. I don’t think those fears are unfounded. The U.S. government’s abysmal financial situation is only getting worse.

But would it really do a 1933-style grab again?

I don’t think it will. However, there is another growing threat to your gold.

More Likely Than Outright Confiscation

Today, only a tiny fraction of the U.S. population owns gold. Heck, I’d bet most Americans have never even seen a gold coin, much less appreciate its value.

This wasn’t the case in 1933, when the U.S. was still on a variation of the gold standard. That’s why the government probably won’t repeat the 1933 rip-off. It’s simply not worth the effort.

If the government wants to confiscate wealth, it’s far more likely to go for the easy option… steadily debasing the currency by printing money. It’s a stealthy way to confiscate from savers.

That doesn’t mean gold owners are in the clear.

I think the government will try a new scam: taxing windfall profits on gold. This would make it much easier for the government to accomplish something similar to its 1933 heist.

There’s precedence for it, too. In 1980, Congress passed the Crude Oil Windfall Profit Tax Act, which taxed up to 70% of “windfall profits” of domestic oil producers.

What the heck is a windfall profit anyway?

As far as I can tell, it’s whatever politicians decide it is. It’s completely arbitrary. There are no objective measures to define it.

In short, a windfall profit is simply a profit politicians don’t like. The whole concept is a scam—a word trick to camouflage and sanitize legalized theft.

If the price of gold explodes, I wouldn’t be surprised if Congress passes a Fair Share Gold Windfall Profit Tax Act levying a tax of 80%, 90%, or more on gold profits.

Be seeing you

Bernie

 

 

 

 

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An Empire Self-Destructs | Zero Hedge

Posted by M. C. on January 12, 2020

They tend to end through the gradual elimination of the free-market system, the metamorphosis to a welfare state, and, finally, through the destruction of wealth through costly warfare.

https://www.zerohedge.com/geopolitical/empire-self-destructs

Empires are built through the creation or acquisition of wealth.

The Roman Empire came about through the productivity of its people and its subsequent acquisition of wealth from those that it invaded.

The Spanish Empire began with productivity and expanded through the use of its large armada of ships, looting the New World of its gold.

The British Empire began through localized productivity and grew through its creation of colonies worldwide – colonies that it exploited, bringing the wealth back to England to make it the wealthiest country in the world.

In the Victorian Age, we Brits were proud to say, “There will always be an England,” and “The sun never sets on the British Empire.”

So, where did we go wrong? Why are we no longer the world’s foremost empire? Why have we lost not only the majority of our colonies, but also the majority of our wealth?

Well, first, let’s take a peek back at the other aforementioned empires and see how they fared. Rome was arguably the greatest empire the world has ever seen. Industrious Romans organized large armies that went to other parts of the world, subjugating them and seizing the wealth that they had built up over generations. And as long as there were further conquerable lands just over the next hill, this approach was very effective. However, once Rome faced diminishing returns on new lands to conquer, it became evident that those lands it had conquered had to be maintained and defended, even though there was little further wealth that could be confiscated.

The conquered lands needed costly militaries and bureaucracies in place to keep them subjugated but were no longer paying for themselves. The “colonies” were running at a loss. Meanwhile, Rome itself had become very spoiled. Its politicians kept promising more in the way of “bread and circuses” to the voters, in order to maintain their political office. So, the coffers were being drained by both the colonies and at home. Finally, in a bid to keep from losing their power, Roman leaders entered into highly expensive wars. This was the final economic crippler and the empire self-destructed.

Spain was a highly productive nation that attacked its neighbours successfully and built up its wealth, then became far wealthier when it sailed west, raiding the Americas of the silver and gold that they had spent hundreds of years accumulating. The sudden addition of this wealth allowed the Spanish kings to be lavish to the people and, as in Rome, the Spanish became very spoiled indeed. But once the gold and silver that was coming out of the New World was down to a trickle, the funding for maintaining the empire began to dry up. Worse, old enemies from Europe were knocking at the door, hoping to even old scores. In a bid to retain the empire, the king entered into extensive warfare in Europe, rapidly draining the royal purse and, like Rome, the Spanish Empire self-destructed.

In the Victorian era, the British Empire was unmatched in the world. It entered the industrial revolution and was highly productive. In addition, it was pulling wealth from its colonies in the form of mining, farming and industry. But, like other countries in Europe, it dove into World War I quickly and, since warfare always diminishes productivity at home whilst it demands major expense abroad, the British Empire was knocked down to one knee by the end of the war.

Then, in 1939, the game was afoot again and Britain was drawn into a second world war. By the end of the war, it could still be said that there would always be an England, but its wealth had been drained off and, one by one, its colonies jumped ship. The days of empire were gone.

Into the breach stepped the US. At the beginning of World War I, the US took no part in the fighting, but, as it had experienced its own industrial revolution, it supplied goods, food, and armaments to Britain and her allies. Because the pound and other European currencies could not be trusted not to inflate, payment was made in gold and silver. So the US was expanding its productivity into a guaranteed market, selling at top dollar, using the profits to create larger, more efficient factories, and getting paid in gold.

Then, in 1939, it all happened again. Although the US eventually joined both wars, they did so much later than Britain and her allies. At the end of World War II, the US had a lively young workforce, as they had lost fewer men to the war. They also had modern factories, which had been paid for by other nations, that could now be used to produce peacetime goods for themselves and the rest of the world more efficiently than anyone else.

And (and this is a very big “and”) by 1945 they owned or controlled three quarters of the world’s gold, as they’d drained it away from the warring nations in the early days of the war. This allowed the US to invite the post-war leaders to Bretton Woods to explain that, as the holders of the world’s wealth, they’d dictate what the world’s default currency would be: the dollar.

But this was all threatened by the fact that, when the now-poorer nations of the world sold their goods to the US, they, too, beginning with the French, wished to be paid in gold.

And so, in the subsequent years, the gold in Fort Knox was beginning to travel back to the east, from whence it had come in previous years. In 1971, this flow was shut off, as the US, still the foremost empire, had the power to simply remove all intrinsic value from the dollar and turn it into a fiat currency. Payment in gold ended.

Fast-forward to the post-millennium era and we see that America, like the previous empires, ended its acquisition of gold after World War II, yet its people became spoiled by political leaders who promised ever-increasing bread and circuses. The productivity that led to its initial strength was dying off, and it was spending more than it was bringing in. Finally, it sought to maintain its hegemony through warfare, thereby creating a dramatic drain to its wealth.

Like other empires before it, the US is now on the verge of relinquishing the crown of empire. If there’s any difference this time around, it’s that its collapse will very likely be far more spectacular than that of previous empires. However, just as in previous collapses, those who least understand that the collapse is around the corner are those who are closest to its centre. Clearly, the majority of Americans are worried about their future yet cannot conceive of their country as a second-rate power. And those who hold the reins of that power tend to be the most deluded, delving ever-deeper into debt at an ever-faster rate, whilst expanding welfare and warfare without any concept of how it might all be paid for.

It’s understandable, therefore, that those of us who are on the outside looking in find it easier to observe objectively from afar and see the coming self-destruction of yet another empire.

As stated in the first line of this essay, “empires are built through the creation or acquisition of wealth.” They tend to end through the gradual elimination of the free-market system, the metamorphosis to a welfare state, and, finally, through the destruction of wealth through costly warfare.

Does this indicate the “end of the world”? Not at all. The world did not end with the fall of Rome, Spain, England, or any one of the many other empires. The productive people simply moved to a different geographical location—one that encourages free-market opportunity. The wealth moved with them, then grew, as the free market allowed productive people to make it grow.

Freedom and opportunity still exist and indeed flourish. All that’s changing is the locations where they are to be found.

Be seeing you

 

 

 

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Syria Is Lost. Lebanon’s Gold Is Next – LewRockwell

Posted by M. C. on November 6, 2019

https://www.lewrockwell.com/2019/11/no_author/syria-is-lost-lebanons-gold-is-next/

By Steve Brown

The largest reserve gold traders on the planet are the six bullion banks. A bullion bank is a large multi-national bank authorized to serve as a conduit through which Central Banks – and the Fed primary dealers – loan their gold out into the market. All central banks lease gold, to maintain their balance sheet and to provide sovereign collateral when a currency swap or paper trade won’t work. It’s called the gold carry trade.

There are currently six clearing banks on the LBMA handling gold lease transactions: Barclays, Scotia, Deutsche Bank, HSBC, JPM, and UBS all of which are primary Fed Dealer Banks, too. Central Banks need real money as collateral – physical gold holdings – to back paper (debt instruments) and as guarantor of foreign exchange sovereign liquidity, or when dealing with failed or semi-failed states.

The Bullion Banks not only guarantee and lease their own gold reserves, but require adjustments to physical gold holdings based on Geopolitical events particularly during times of war. For example, Libya, Afghanistan, Iraq, Syria, Egypt and the Ukraine have all turned over their physical gold holdings to the IMF – which acts by proxy for the Fed and G7 Central Banks – for favorable lending terms or settlement of debt to the West, or their gold is seized by force of arms.

Nixon officially closed the US international sovereign gold trading window in 1971, alleged to be temporary, now ostensibly never to re-open. Officially Nixon’s gold closure still applies to US gold trading, but the “official” world is not the real world. Thus, the US engages in covert gold trading shrouded in secrecy, generally by proxy to the IMF and via gold carry trade gold swaps.  (Also see: IMF voting rights and reform and the Exchange Stabilization Fund)

The international gold window is not about a “gold standard” but about international trade in gold. That trade is to support currency swaps to manipulate currency markets; to enhance interest returns by leveraging other debt products providing a higher return; or to build or deplete foreign exchange reserves held by a sovereign or Central Bank. Thus, the international gold window still exists in the form of the gold carry trade.

But the international gold window is much more than a trade and collateral window, the international gold window is still an essential factor in Geo-politics. Conflicts and alliances require the gold carry trade to operate by covert, by proxy, or by overt means. The gold carry trade market also operates by acquiring the gold reserves of failed states such as Iraq, Libya, Syria, Afghanistan, or Ukraine, at prices subsidized by the US taxpayer.

Or the cost of their lost treasure is borne by the unknowing, unaware local population partaking in a “colour revolution” or the “Arab Spring” for example, on behalf of Washington.

The banking crisis in Lebanon is one recent example, where geopolitics and finance – especially relating to gold – intersect. Lebanon has relatively high physical gold reserves relative to its economy and relative to other Middle Eastern states, and Lebanon has been a player in the carry trade for many years.

However, according to one confidential source and many reports, Lebanon has dialed-back its carry trade activities since 2015. By scaling back its carry trade activity, Lebanon has provoked the ire of western Central Banks, and made it more difficult for Lebanon to protect its currency.

The reason for Lebanon’s de-leveraging in the gold carry trade is unknown, but one can only speculate that along with US sanctions versus Lebanon, the international currency cartel has its eye on Lebanon’s gold reserves. By extension, The Neocon-Neoliberal ‘Blob’ believes that by harming Lebanon, the Blob can likewise curtail Hezbollah’s influence.

Israel too, currently subject to its own self-induced purgatory in leadership, desperately needs a visible geopolitical victory, and no doubt US and Israeli central bankers see Lebanon’s finance as low-hanging fruit, since Hezbollah cannot be militarily defeated. How do we know? …well, David Ignatius tells us so…

Germany

Germany demanded return of its gold reserves from New York (called repatriation).  In reality repatriation ends the lease conditions by which the Federal Reserve holds German gold. That Germany leased approximately 300 tonnes of gold to the US Exchange Stabilization Fund during the US financial collapse is well known, and the ESF undoubtedly disposed of that German gold by carry trade means, to support the US dollar and stock market. Effectively the US government may sell or lease any “commodity” as it sees fit, in its possession, whether strategic oil reserves or gold – even if that gold “belongs” to a foreign power…

Ukraine

Long a hotbed of corruption, shady dealings, and political intrigue, the Ukraine has leveraged its gold reserves via the carry trade and leasing system for many years now.  Falling prey to the IMF predatory system of capital is another Ukraine specialty, since Ukraine’s gold is its only real strategic asset, besides it location adjacent to Eastern Europe…

Argentina

Likewise, the IMF was the worst possible option for Argentina. Argentina was forced to sell 1/3rd of its physical gold reserves from 2009-2013, to prevent a replay of 2001 by placating US bond holders. Argentina’s gold reserves played a major role in keeping the country somewhat liquid, but now western powers want the rest of that gold – represented by bondholder lawsuits – since Argentina just defaulted again.

Netherlands

In 2014 the Dutch Central bank announced that 122 metric tonnes of gold had been repatriated from the United States. The DCB’s loss of confidence in the US likely relates to the collapse of the US financial system from 2008-2009.  It’s likely too that the Netherlands loaned some sovereign gold reserves to the Fed/ESF during that crisis, and has not seen its gold returned.

Venezuela

Half of Venezuela’s reserves are in gold. The structural and fundamental problem is that Venezuela cannot lease gold via the bullion banks because the physical gold was repatriated, and the gold still present in US /London vaults is sanctioned…

Summary

Trouble is, most of the third world and Non-Aligned Movement – with the exception of Iran, Lebanon, and Venezuela – have already turned over their gold to the West. So, there is little physical gold for Washington to cajole, appropriate, or steal from destabilized sovereign entities or failed states Washington creates…

Be seeing you

What if US had raised interest rates? | A Wild Duck

 

 

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The Real Reason the Deep State Hates Russia… What it Means for Gold

Posted by M. C. on June 27, 2019

What do all the countries Washington wants to go to war with have in common? Not terrorism, oil.

What Washington doesn’t like is that these countries are developing alternatives to paying for oil in dollars. Gold backed alternatives.

Once the world bails on the dollar the dollar sinks like a rock.

The US position is a familiar one. Let US win your hearts and minds or we will burn your village down. The US can never seem to make that strategy work.

https://internationalman.com/articles/the-real-reason-the-deep-state-hates-russia-and-what-it-means-for-gold/

by International Man

For years, the Deep State in the US—the permanently entrenched bureaucracy that runs the show no matter which party is in power—has labelled Russia “public enemy number one.”

To help us better understand the situation we’re turning to Doug Casey’s friend, Mark Gould.

Mark is an executive for a company in the oil industry, also working on several media projects. He also has 30 years of experience in Russian telecommunications as co-founder of CTC Media (previously NASDAQ:CTCM); and afterwards pioneering digital compression for TV (the core technology for video streaming) on the Soviet Satellite system, Moscow Global. Mark currently lives in Moscow.

International Man: Naturally, Americans have a lot of misconceptions about Russia. And that’s what we want to help clear up today. The importance of Russia to world affairs is simply too important to ignore or to not understand properly.

Also, this perception gap about Russia could be key to finding interesting investment opportunities—particularly in the natural resources space—that are off the radar of the mainstream financial media.

John McCain used to call Russia a gas station masquerading as a country. This is a childish and overly simplistic characterization. Others in the US media and government have made similar comments. What does the mainstream image of Russia get wrong?

Mark Gould: The US perspective is stuck in the 1960s and even earlier, going back to the 19th century.

Russia is a unique society. It’s a normal place, operating under its own rules and customs. Viewing it through the prism of the Soviet past is not concurrent with present realities. Russia is an independent state that has its own concerns, people, leaders, and problems just like America does. And the people are patriotic and so is the president.

Russia is charting its own path. It doesn’t want to be under the thumb of the IMF or the World Bank…

If you go back in history a little bit, you can get the Russian perspective on gold.

The Russian ruble has always been backed by gold. It’s not a new idea. And Russia has more reserves in gold that backs the currency than almost any other country.

Russia is also the world’s largest producer of oil; it’s the second largest producer of natural gas; it’s number two in sunflower oil.

Kicking Russia out of SWIFT or doing anything like that would be basically cutting off your nose to spite your own face. The US government would be complete idiots to do that.

Money is an idea backed by confidence, and gold has held that for many years for many people and for many countries.

Russia is hedging its bets. It’s building its own trade alliances. For example, recently Russia signed a deal with Huawei, the Chinese company that’s been banned from American markets.

International Man: Russia has been building alternatives to Western-dominated systems. This includes measures to protect itself from sanctions involving the US financial system, an alternative to the SWIFT system, alternative trade deals with other BRICS countries, the Eurasian Economic Union, and integration with China’s New Silk Road program. Where do you see this trend going?

Mark Gould: Well I think it’s going to continue.

Russia is building alliances; who doesn’t? To expect Russia not to look after its own economic self-interest is absurd. It’s the same thing the US or the UK or France or Indonesia do…

Be seeing you

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Doug Casey on Why Gold Is Money – Casey Research

Posted by M. C. on November 24, 2018

https://www.caseyresearch.com/casey-daily-dispatch/doug-casey-on-why-gold-is-money

By Doug Casey, founder, Casey Research

It’s an unfortunate historical anomaly that people think about the paper in their wallets as money. The dollar is, technically, a currency. A currency is a government substitute for money. But gold is money.

Now, why do I say that?

Historically, many things have been used as money. Cattle have been used as money in many societies, including Roman society. That’s where we get the word “pecuniary” from: the Latin word for a single head of cattle is pecus. Salt has been used as money, also in ancient Rome, and that’s where the word “salary” comes from; the Latin for salt is sal (or salis). The North American Indians used seashells. Cigarettes were used during WWII. So, money is simply a medium of exchange and a store of value.

By that definition, almost anything could be used as money, but obviously, some things work better than others; it’s hard to exchange things people don’t want, and some things don’t store value well. Over thousands of years, the precious metals have emerged as the best form of money. Gold and silver both, though primarily gold… Read the rest of this entry »

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