Amadeo I of Savoy

Son of the Italian king Victor Emmanuel II, Amadeo I was proclaimed King of Spain on the 2nd of January, 1871. Hitherto, the influence exerted by the Spanish government sought to found a constitutional monarchy – hence they selected a foreign king and put in place a system of mandates, namely: the people for the king, through Parliament.
Amadeo I was the first king of Spain to be selected by Parliament. He was not recognised by certain parliamentarians, including; Carlists, Bourbons, the church and by the people; who judged him as being unpleasant and reticent towards learning the Spanish language.
Upon the death of General Prim, the political alliance which had placed Amadeo I on the throne began to dissolve little by little. The pressures brought by the federalist revolts, the loss of support from capitalists and the Carlists war pushed the Italian monarch to renounce the throne on the 11th of February, 1873.
From his 2 years of rule, hallmarks bearing his effigy were designed for the 5 Peseta coins as well as the 25 and 100 Peseta gold coins – some were struck as trials.
In 1868, a new parameter was integrated into the Spanish monetary system. Unique to the world, two dates were to be inscribed on the coins: the approval date of the coin type and when it was struck. Nevertheless, this initiative was not correctly followed between 1871 and 1875, partly covering the rule of Amadeo I. According to information collected in el Catálogo de la Peseta, it appears that the number of coins issued with the year (between the stars) 18-71 are more common than those of 18-73, those of 18-74 appear in only 20% of cases while those of 18-75 appear in only 10% of cases, approximately.
It was only during the 1st republic, i.e. not before the end of the year 1873 that the process of the two dates began to function better, inscribing the correct date between the stars of the coins.
But this accuracy of dating came at a time when the currency did not reflect reality since Amadeo I renounced the throne in February 1873. The republic followed and thereafter, in 1875, came the rule of Alfonso XII, although the currency with Amadeo I’s effigy continued to be struck until mid-1875.

Marks of guarantee of the Amadeo I coins

Five people were charged with assuming the guarantee of these coins. On the obverse side are affixed the first name and surname initials of the engraver – on the reverse, the surname initials of the two Testers and Beam Balancers:

Engraver: L.M.: Luis Marchionni

Testers and Beam Balancers:

SD M: Donato Álvarez Santullano, Eduardo Díaz Pimienta y Ángel Mendoza Ordóñez.

DE M: Eduardo Díaz Pimienta, Julio de Escosura Tablares y Ángel Mendoza Ordoñez.

25 Peseta gold coin

Amadeo I 25 Peseta coin

Characteristics:

Fineness: 900 Thousandths.

Diameter: 24mm.

Weight: 8.0645g.

Workshop: Madrid.

Edge of the first coins: Relief engraving of 27 six-ray stars, using the hoop system open to three points.

Edge of the coins struck later out of reddish gold: JUSTICIA Y LIBERTAD (JUSTICE AND FREEDOM) separated by three groups of two six-ray stars.

Obverse: AMADEO I REY DE ESPAÑA *1871* (AMADEO I KING Of SPAIN *1871*) - portrait of the king facing right.

Reverse: Ley 900 Milésimas (Title 900 thousandths) – 124 piezas in Kilog. (124 coins in Kilog.) SD 25 PESETAS M, around the Spanish armouries carrying the coat of arms of Savoy, surrounded by the coat and fleece.

Number of strikes: 1871 (75) SD M = 25

<The first strikes were made with an alloy containing 10% silver and conferred a bright yellow tone to the gold of these coins, which differentiates them from the other coins struck later, these latter ones displaying a more reddish tone of gold.

These coins, as well as the 100 Peseta coins of the same year were the first gold coins displaying a face value in Pesetas, emanating from the Reform of October 19^th 1868. Struck under the Order of the General Directorate of the Treasury of August 22^nd 1871, “as tests, and it is impossible to specify the quantity of coins manufactured in 71”>

(Information extracted from the Catálogo de la Peseta by J.Aledón & Modern World Gold Coins).

In general, the 25 Peseta coins began to be struck under the Royal Decree of March 15^th 1871. Previously, the reform of the Peseta did not integrate in the values struck out of gold the 25 Peseta coins, omitting the 8 gram model so well-known in Spain, Germany, Holland, etc…

Of these coins, only some were struck as tests. It is under the reign of Alfonso XII that they started to be manufactured in series.

100 Peseta gold coin

Amadeo I 100 Peseta coin

Characteristics:

Fineness: 900 Thousandths

Diameter: 35mm.

Weight: 32.25g.

Workshop: Madrid.

Edge: Relief engraving using the hoop system open to three points with the words JUSTICIA Y LIBERTAD (JUSTICE AND FREEDOM), separated by three groups of two six-ray stars.

Obverse: AMADEO I REY DE ESPAÑA *1871* (AMADEO I KING OF SPAIN *1871*) – portrait of the king facing right.

Reverse: Ley 900 Milésimas (Title 900 thousandths) – 31 piezas in Kilog. (31 coins in kilog.) SD 100 PESETAS M, around the Spanish armouries bearing the coat of arms of Savoy, surrounded by the coat and fleece.

Number of strikes in Yellow gold: 1871 (71) = 25

Number of strikes in Red gold: 1871 (71) = 50

> An auction was held in Madrid on March 16^th 1995, selling one of these coins at the starting price of 15 million pesetas (€ 90,151.82)

(Information extracted from Catálogo de la Peseta by J.Aledón & Modern World Gold Coins)

Re-striking of these coins

Unable to gain possession of the original specimens of the said coins, King Alfonso XIII commissioned the re-striking of specific ones in order to honour certain obligations. Thereafter, it was discovered that these coins appeared in 1963 coming from Switzerland.

The Decree of March 21^st 1871, which enacted the creation of the 25 Peseta gold coin, stipulated that it would contain any caption on the edge, and if possible that the smooth part of the corners would contain differences to distinguish these coins from those emanating from other countries.

But the coins re-struck out of reddish gold display on their edge: Justicia y Libertad (Justice and Freedom), separated by three groups of two six-ray stars, similar to the engraving on the edge of the 100 Peseta coins.

Thus, these two coins of reddish gold were a re-striking produced in an unofficial way with the original coins, and to purely profit-driven ends.

As these are very unusual and rare coins, to possess or decide to purchase some is a true luxury – a great treasure!

France’s loss of the triple A rating sharpens the focus on what needs to be done to avoid the Eurozone’s crisis deepening further. What happens in France in the immediate as well as the long term future is therefore of concern to those outside France as well as those within. This week it was made clear that through increased IMF funding, the UK is likely to be contributing to the bail out funds, although the UK remains committed to countries not currencies. Of particular concern to English readers is the likely reaction in France to the required social reforms. And of course the flight into gold helps strengthen the hand of the wise investor.

The loss of the triple A is only one of the superficial symptoms of the trends of 2012. The economic crisis continues to deepen, which may well cause the price of gold to climb more quickly than envisaged, but not initially.

The consequences for the economy…

This is not due to having been warned of the possibility of such a loss. Since October last year, the agency Moody had been holding the sword of Damocles over Gallic heads.
The downgrading of the French credit rating from AAA to AA by the credit rating agency Standard & Poor’s has far graver consequences than would be implied by the speeches of leaders who wish to give reassurances, a mere few months ahead of the elections.

The interest rates at which France borrows and which are already twice as high as those of Germany will increase, to cover the risk of default. The first direct impact on the economy is the flight of investors and thus a fall in the CAC 40 index.
And for individuals
Higher interest rates on mortgages, tax hikes, diminished access to credit… the French will have to curb their spending. All the large companies in which the State has a stake (EDF, GDF, France Telecom, Renault, SNCF…) will see their financing costs increase, which inevitably will impact the expenditure of individuals, not to mention the degradation of public services.

Is the A lost forever?

Of course, France can regain its triple A, but how soon and, especially, at what cost?
The corporate VAT plan is only a tiny initiative when viewed in the light of the catastrophic impact of such a downgrading. According to Norbert Gaillard, consultant at the World Bank, France can only recover its AAA at the expense of important social reforms and “a drastic reduction in public expenditure”. Flexibility of the job market for greater competitiveness, extending the period of contributions to pension funds, elimination of the 35 hour working week… Are the French ready to give up their social gains whilst increasing their daily expenditure? Working more and earning less money?

The consequences for gold

As soon as the credit rating of a country is downgraded, the cautious markets fall, demand for gold increases and hence its price. Initially, the need of banks for liquidity can result in a massive withdrawal following the resale of credit and a fall in the price of gold on the markets, as has been already more or less the case since December. One should therefore take the opportunity to strengthen one’s position on gold and buy now because the secondary effect once the selling off stops will see: gold reach new highs this year breaking the $2000 an ounce barrier and beyond.

Fools or Gold?

Once the dominoes of Debt start to tumble the skies the limit but more importantly, when states fail, currencies collapse or sovereign debt strangles everyday life, where would you rather have your “money”?
In a tangible precious asset with perennial true value?
Or tied up in the worldwide web of debt derivatives, Special Purpose Entities (SPEs) and untraceable off-ledger accounts?

The choice is simple, give your money to the crooks you’ve been conditioned to trust with blind faith and risk losing everything or buy something solid that you own and trust yourself to manage it properly?

It’s what they call a no-brainer!

In the poorest parts of the world, gold is extracted in lawless and unclean ways: an earlier article on this site gives an example in the Peruvian Amazon Forest (The other side of Gold mines in Peru).

Open mine in Madre de Dios

The mines lack proper extraction tools and machinery; far from public gaze and legal regulation, they are hazardous, not only at their hidden locations, but to towns and villages exposed to toxic waste in the water supply. To protect their interests, the miners engage in arms smuggling. Those who work in these conditions are exposing themselves to extreme danger, with no certainty that they will reap the long-term benefits for which they hope.

So why do they do it?

The clue is the word “lawless”. Hernando de Soto’s remarkable book “The Mystery of Capital”, first published in 2000, was the result of him and his researchers from the Institute for Liberty and Democracy in Peru (www.ild.org.pe) asking: why has capitalism worked in the west, but not in the developing and ex-communist world?
The usual answer is that capitalism shouldn’t work in the west and shouldn’t be fostered in the developing world, but after the failure in the twentieth century of all variants of socialism and state direction of economic planning, capitalism is “the only game in town”.

Yet looking at the shocking conditions that prevail in these illegal mines the typical response is an anti-western moralism that regards “capitalism” and “rapacious greed” as synonymous: all one has to do to “understand” poverty is rail against the rich.

This attitude of campaigners of the traditional sort, fair-traders, charities and NGOs, churches and environmentalists is unhelpful: it is misleading to demonise the alleged capitalist forces behind the miners, misleading because the miners are themselves capitalists of a sort, and therefore should presumably also be demonised, unless one sees them as mere helpless puppets – but that is simply another way to dehumanize them.

The problem that de Soto identifies throughout the developing economies is that the overwhelming majority of the world’s poor work completely outside any legal system: the businesses and buildings they create therefore operate without title, which means that the assets they “own” are dead capital. In such an environment, unprotected by clear rules, poor people’s only guarantee of prosperity rests with themselves. Wherever there is potential value and a market for it, with gold just as with any other commodity, they will exploit and protect it without any legal roots to sustain them.
The problems of these unclean gold mines, the use of dangerous chemicals in unsupervised environments, the use of child labour in dangerous places, water tables filled with toxic waste, are the result of there being no clear title to the mines or their products and no legally defined responsibilities. Even the violence is explicable: in the absence of legal title, there is no other way to defend what might anyway turn out to be a temporary interest, rather than a clear and justiciable and therefore legally marketable property right.

In the light of these observations, it should be obvious that what needs to be done is to recognize the “illegal” gold miners as the entrepreneurs they are and co-opt them, bringing them into the legal fold.

In contrast, there is hope regarding the improvement of mining conditions and extraction methods.

The first commercial product exclusively made from “Clean Extraction” gold has been launched.  The Vera Valor is a 1 oz “Bullion” bar-coin, 999.9, Good Delivery and it is made from pure gold from “Clean Extraction”.

The “Clean Extraction” initiative encourages mining companies to behave properly towards their workers, the environment and the lasting aftermath of their activities.

Our friends at Cleanextraction.org have produced the “Clean Extraction” charter which you can consult from their website.

It just shows that “there’s nothing wrong with doing things right” and proves that it is possible for some Gold to have a conscience.

by Mark Rogers

I returned home to Hong Kong after undergoing my last two years of schooling in the UK; I quickly found employment and after work (six days a week) and on Sundays, I began to explore areas of Hong Kong that I had never visited during my childhood and adolescence.

One of the consequences of the several waves of refugees from communist China (the revolution itself, the Great Leap Forward in the 1950s, the Cultural Revolution in the 1960s) was the rapid accumulation of informal dwellings on the mountainsides. These shacks were made out of anything handy: packing crates, corrugated iron, planks. They were incredibly hardy edifices: typhoons capable of lifting a battleship, blowing it out of the harbour and impaling it on a rocky island in the South China Seas, would leave the squatter huts crowded onto an exposed side of the island at the harbour mouth intact!
As a child I had always been fascinated by these places: they embodied escape, freedom, the mastering of adversity; they had an air of romance and adventure. Yet I had never visited one: this was something I remedied as I explored Hong Kong anew during 1975.

What I discovered was remarkable. First of all, these places were orderly and clean, the natural drainage of the mountainsides enabling the latter. The homes were sturdily constructed despite their flimsy materials. What was truly astonishing, however, was the discovery that the expensive cars parked at the foot of the hills belonged to the owners of these huts! This was not all: the informal lifestyle of the hillsides meant that the hut doors tended to be left open: there were always a few children or an ancient grandmother (whom we shall meet again) to keep an eye on things. Through these doors I glimpsed the good life inside: the huts had all the conveniences – fridges, deep freezes, television sets, electric fans, air conditioners, electric lighting: the hills were ablaze with electricity, all legally installed.

This lifestyle reflected a dominant desire among the Hong Kong Cantonese: the ambition, if not for themselves, then for their children to emigrate to one of the Anglosphere countries, far from China, which had caused them such grief. This being so, many prosperous people simply did not want to spend on property. The millionaire who lived on the hillside above us had built himself a house – it was in the style of a mansion, to accord with his status but was really very modest: what was the point of investing in substantial real estate when you might have to abandon it?

Portable Purchasing power?

The personal or family memory of enforced flight also gave rise to the idea that if you were going to have to pick up and go, then property should be portable. The wealthy of Hong Kong are unusual amongst the world’s richest in that they spend more of their money on jewellery and watches than any other type of investment and/or luxury good, mansions and yachts coming right at the bottom of their priorities – only a tiny percentage bother with these things. The desire for wealth in a safe and portable form surely means that the idea of putting their assets into gold coins would appeal to the wealthy, economy-stimulating entrepreneurs of Hong Kong.
Enter Grandma: while I was exploring the shacks and shanties, I saw the most revealing thing of all: the family wealth of these entrepreneurs was stored in gold – in Granny’s teeth: the fillings were so abundant that their mouths gleamed with gold!

by Mark Rogers

The twentieth century saw in both extreme (Nazism/Communism) and mild (the European-style welfare state) forms the strange phenomenon of governments repeatedly taking against their own peoples – in the name of the people. No longer was an independent citizenry to be trusted to look after itself, educate its children, defend its homes and families, and generally stand on its own feet: the munificent state was to do all that, and the end result is bankruptcy. And evasion: the bankrupt states of Europe are not prepared to be honest about where state intervention leads, even though the lessons have been spelled out twice in the twentieth century in draconian form: Nazi Germany and the Soviet Union.

As the eurocrisis deepens, measures antipathetic to savings are being mooted across the continent, involving amongst other things bans on the purchase of gold over certain amounts and bans on cash transactions. Any attempt by savers to convert increasingly worthless cash into solid investments like gold are to be thwarted, raising fears that a Franklin D. Roosevelt style confiscation of privately owned gold may be on the horizon.

Certainly measures proposed or drafted into law in the last quarter of 2011, in Italy, France and Austria, give cause for concern: in Austria there is a restriction on the purchase of more than 15,000 euros’ worth of gold; in France, all metal sales over 450 euros must be paid for by credit card or bank transfer; in Italy it is proposed to ban all cash transactions over (the figures vary) 300, 1,000 or 5,000 euros. The effect of these measures would be to render all significant purchases of precious metals recorded and therefore traceable to their owners.

It has been claimed that the various reasons for these measures are an attempt to rein in credit, to comply with U.S. requests for assistance in combating money laundering, or to help prevent the theft of ordinary metals: in the case of the latter there have been widespread spates in recent months of the theft of metals from anything ranging from telephone poles to industrial plant. While these may all be true goals (whether the proposed remedies will work is another matter – it always is), there is the significant problem that nowhere are the precious metals excluded from the measures. Hence the fears of confiscation.
Gold is a safe haven competitor against fiat money; this may not cause problems when economies are genuinely booming (i.e. the boom is not fuelled by easy expansions of credit). Yet when the fiat money system is collapsing and inflation is rampant the idea that people may protect their assets and their pensions by converting their cash into gold becomes a serious “problem” for the state: savings are seen as a threat.

We have seen how Keynes thought “wealth accumulation” a vice (Austerity for you – privileges for Politicians, December 16th, 2011). He further mockingly remarked: “The duty of ‘saving’ became nine-tenths of virtue and the growth of the cake the object of true religion.” Reckless governments are hardly likely to admire or condone prudence in their peoples; whatever the ultimate reason for this, such an attitude on the part of the authorities will only widen the gap between the political elite, unable to admit the error of its ways, and nervous private citizens wondering whether they have a future.

Finally, savings based in fiat currencies or related to debt-ridden financial institutions have the possibility to fall to zero in a crisis. Savings based in physical assets that you own help protect to preserve your accumulated wealth as they retain worth through a crisis.

The best physical asset to own during a crisis is gold which has proved its perennial purchasing power for over 6000 years – no fiat currency has ever existed that long to compare it and no other asset can compete with the value retention of gold. After all Gold can never be worth zero – it has intrinsic value, it is relatively rare on the planet and it has always been revered as precious because it is and has chemical and physical properties unmatched by any other metal.

By Mark Rogers

It is taken for granted that to qualify as a banker one must be greedy. The proposition is so silly that it is distressing to note how widespread is its acceptance. Of course there are greedy bankers, just as there are greedy butchers, bakers and train drivers; yet if banking was based on greed, it couldn’t exist. (This is another example of the misunderstanding of self-interest: see  Austerity for you – privileges for Politicians, December 16th, 2011).
The web of trust that is banking could never have come into existence if it was driven by the unqualified greed of all those who tried to participate. Banking arose out of the need of merchants to protect their monetary assets from theft en route as they travelled about Europe trading. They established networks of trust, whereby assets, often gold, could be placed in a secure depository, and redeemed through paper pledges at other trusted depositories, thus ensuring that the merchant carried as little as possible of his wealth about with him. This web of trust is the basic principle which still governs modern banking, and without it the system would collapse.
Isn’t the system already collapsing; doesn’t this prove that governments and people no longer trust the bankers because they are greedy? And the answer to the problem? Legislation: there must be more regulations to fetter the bankers, and to make them pay.
The trouble is they already do. Take bonuses: they are taxed as bonuses, and not as part of income, at a 40-50% rate. The greater a banker’s earnings, the more he already “contributes”. The level of income even without bonuses ensures that the wealthiest people in the country pay a huge percentage of the nation’s taxes, which are largely wasted: the tax-funded welfare state is notoriously inefficient, and a main driver of inflation.

The curious aspect of the demand for regulation is that it is MPs who are to be the overseers of this legislative campaign against greed. There is a strange dichotomy in the democratic mind: nobody much trusts politicians (though like bankers there are eminently worthy men and women to be found amongst them); nevertheless we entrust our health, our education, and all manner of things the state really has no business being involved in, to just these unloved politicians.
The question arises as to whether playing to the masses, which is what democratic politics now largely consists of, is likely to produce viable policies to prevent another crisis. In an editorial in the London Evening Standard, 19 December 2011, concerning the likelihood that parliamentary and public pressure will force the Chancellor to accept the Vickers recommendation on banking reform that banks must separate their investment and retail banking operations, it was pointed out that “[s]ome of the banks most exposed to the sub-prime crash – notably Northern Rock – did not conduct investment bank-style ‘proprietary trading’. Conversely, Lehman Brothers conducted only such activity, having no retail arm. Then again, Barclays Capital, Barclays’ investment banking arm, survived the crisis.”
In other words a key recommendation is based on prejudice and not the facts. So much for financial probity!

By Mark Rogers

Watch the Ads they didn’t want you to see here – read on

There are many theories surrounding the manipulation of the Gold Market and the Gold Spot price but few doubt that it takes place, orchestrated by some greater beings that seek to control the money supply.

In a recent cynical twist, gold has been effectively censored off the air of a host of major US TV Networks working in collusion with the Obama administration and the Fed.
An established gold investment company recently made two TV ads to be aired across the networks. The ads feature caricatures of Obama, Bernanke and Pat Boone who narrates the story. The latter works for the company Swiss America and has long been an advocate of the virtues of gold versus dollars.
The first of the ads takes a humorous jibe at Bernanke’s Wall Street reputation for being “helicopter Ben” , ready to dump money on a crisis.

“made-up” reasons for ban?

The reasons given for rejecting the ads vary from ;
• Comcast who explained that it “doesn’t meet our standards on public symbol. The Comcast Public Symbol Policy apparently specifies that the “use of the name or likeness of the President of the United States and/or the Presidential Seal for endorsing commercial purposes must be authorized by the White House.”
• Fox News said the “representation of public figures is something we try to avoid.”
• CNN/HLN told Swiss America the commercials were “not appropriate for the current political landscape.”

Swiss America CEO Craig Smith said “The networks’ reaction shocked me,” Smith said. “It’s a threat to First Amendment rights when a commercial message is rejected not because it is inaccurate or misleading, but because it makes what is perceived to be a political statement the networks want to avoid.”

Smith told WND he was concerned that the networks were protecting Obama and Bernanke.
“All we are saying in these two commercials is what dozens of responsible professional economists are saying every day,” Smith said;

“Gold investment as a responsible diversification strategy when governments printing of fiat currencies with abandon risk unleashing inflationary principles.”

Inflationary pressures are building globally and no-one has an answer to them rising and the consequent economic impact.
It is a common known fact that storing gold through a crisis and inflation is the BEST way to protect your wealth value and its purchasing power. This has been the case for 6000 years.

Gold can never be worth zero – it has intrinsic value.
Fiat currency can become worthless – its only value is that of a piece of paper

The Ban backfires

However, the censorship has backfired as Google TV accepted the ads which will eventually be shown throughout the networks via Google TV!
These humorous videos tell a very straight and simple story and the only possible reason for banning them is because of how close to the TRUTH they really are – and that hurts the Politocrats who believe they are all supreme and mighty to judge over us, control us and bankrupt us.

They are so desperate to cling on to power they will do anything – except we are not the fools they take us for – are we?

Is the Europen Union real?

The crisis of the Euro is demonstrating a fundamental lack of credibility in the institutions of the European Union. Throughout, the European Commission has consistently taken a back seat, as if it really had no idea what was going on, let alone what to do about it.

All parties to the state of the single currency share this lack of credibility and not least because the euro was never credible anyway. Its launch was deferred for a year because the poorer member nations were nowhere near the narrow margin either side of parity with the Deutsche Mark which was the fundamental condition for entry into the new currency.

That fact alone shows what a queer creature the Euro is. The Maastricht Treaty created the European Union to give Europe a single market, a single currency – to become a single State. That there are rules as to who was in the single currency already beggars the question as to what forms a cohesive state.

The rules were for a time adhered to; a year on from the original date of the launch, though nothing had changed, political ambition got the upper hand and the Euro was born: the claim was made that delaying any longer would only call the project’s credibility into doubt.

What was done, however, was incredible: this attempt to unite anyway widely disparate economies by breaking the first rule of admission generated an educated scepticism on the part of several British economists, who outlined the demise of the Euro, down to the detail that Greece would collapse first.

A week after the summit which agreed new fiscal rules (the problem with the old ones, apart from the whole air of unreality investing the project, was that they were never adhered to, a fault it is hard to see the new ones mending), a leader in The Times of London (16 December 2011) pointed out that “Mr Sarkozy secured his goal of framing the new fiscal rules as an inter-governmental agreement rather than a treaty backed by the European Union’s institutions.”

Eurozone Union?

This is even more incredible: in order to commit to more binding state-like ties, in order to chase that ever-elusive credibility, the Euro currency nations are going their own way outside the boundaries of the European Union’s institutions – yet still blithely calling it “The European Union”. What, in this light, is one to make of the European Central Bank’s position? What is the status of the Commission? What does the old cry “further and deeper union” mean now?

The other side of this coin is that there can now be no question that what is driving all this is the national interests of the two most powerful states, which are determined to pull the poorer nations, whether or not it is in their interests, after them, and in doing so divide the Union.

As with all advanced democracies, and this is something the euro crisis has exposed mercilessly, there is a further division within the nations between the political class and the ordinary public: the politicians persist in their unreal aspirations, risking jobs and investments.

The People decide while Politics prevaricates?

A little item of Christmas realism? Vendors at a Christmas market in at least one German town are advertising their willingness to accept – Deutsche Marks! (Exchange rate €1 = 2 DM)

by Mark Rogers

Austerity = Rising x (Inflation + Taxation + Unemployment)
=Misey + Poverty + Social unrest

“In the long run we are all dead”

There is about Keynes’s famous maxim just a smack of the superior viewpoint (I will not call it wisdom) of the Bloomsbury Group, but this is because it was he who said it. It is indeed a singularly commonplace remark, and surely had no place in the thoughts of an economist. After all, the economist’s stock in trade is getting and spending, the provisioning, manufacturing, storing, and distributing of the very stuff of Life!

While a truism, taken as the premise of moral counsel the remark is pernicious. There is also a sense in which it isn’t even true. You and I may be soon for the grave, but that isn’t yet true of our children, or of those generations unborn. No human being is conceived in isolation: we are born into webs of family connections, which expand into webs of friendship, business and social ties. Behind all those webs, lies the vast concourse of mankind…. There is much to be said for Burke’s idea of an unbroken chain of inheritance and responsibility, encompassing all life, past, present and to come: it reminds us that in the long run the end of life is – living.

Good things are still possible in the future, as long as you have tangible, physical assets that are still worth something – your survival depends on their value when the economic crisis deepens and money as we know it reverts to its true value – bits of printed paper.

Euro RIP

By Mark Rogers

Here we continue our conversation from the previous article “When Debt’s called Credit”.

So, you mortgaged your salary and have been fortunate enough with your earnings to stay the course of a twenty-five year mortgage repayment plan. However, the asset which you now possess has cost you something like three times its original price. You are inclined to think that this, plus the profit on any potential sale, is what your house is now “worth”. However, your house will only be worth its inflated price (a price entirely created by debt) relative to a booming economy which puts a premium on home ownership. That is, it is worth this potential only if there is sufficient activity in the economy to fuel someone else’s borrowing to purchase your house to further inflate the value of that property.

One point to clarify, at the risk of stating the obvious (though there is little that is obvious about the modern mortgage): where does the borrowing come in – you have paid for your house out of your earnings on a monthly payment plan. The bank/building society has lent you the money by buying the house, and the repayment plan reflects the cost of, and length of time that, the money is out on loan in the form of bricks and mortar.

Thus house prices become grossly inflated. If the cycle continues, the house at the end of each twenty-five year period will keep tripling its nominal value – but this is unsustainable in the long run, and, despite Keynes’s dictum that “the long run is a misleading guide to current affairs”, that is exactly the view that should be taken: in the long run, the mortgage inflates the value of the asset, and it is entirely foreseeable that it should do so. In fact, that it does so renders the word “asset” in this context potentially meaningless. What happens if you cannot sell the house, and no-one wishes to rent it at a price that reflects anything like your “investment” in it?

Of course, there are many who buy their houses as homes and a long-run inheritance for their children. But the trouble with the modern mortgage is that it is sold largely on the basis that the asset is a tradable good. This is not a natural assumption for most people to make, especially families, and was not something that our forefathers generally assumed – unless they were builders, property developers and speculators.

There is a serious and somewhat sneaky consequence of the inflation of house prices: the government under New Labour changed an important measures of inflation, the Retail Price Index which included mortgage interest repayments, that is house prices, (and was used, amongst other things, to adjust selected benefits, including state pensions) by switching to the Consumer Price Index, which does not (interestingly, the latter also omits Council Tax, which is a concern for pensioners, who may well own their homes, but are not free of this major property cost). The measure of inflation used by those who make public policy does not include a major source of inflation.

Has the desire to own one’s own home become a mania of the Tulip or the Railway kind?

It is also worth remembering that inflation rates currently higher than interest rates, thus all monies stored/saved in this type of way are effectively losing value daily and their purchasing power rapidly eroded.

There are few “inflation-proof” savings or savings plans on offer but one to consider is the purchase (and ownership) of the only safe haven tangible asset – Gold in physical form. Historically gold has always protected wealth against periods of inflation and crisis. One important aspect is to ensure that you own your gold as this gives you complete control over its eventual resale which is the most important moment for your investment.
We strongly advise against the purchase of “paper” gold such as ETFs as these are so oversold that only 5% could be redeemed against physical stocks. These types of investments are extremely vulnerable in an economic crisis and the risk of significant losses is increased.

True value is an asset that maintains its worth at all times – during prosperity and austerity.

Choose yours wisely!

By Mark Rogers

Numismatic Gold coins

The profession of numismatists has changed in the past 30 years. Lovers of beautiful and rare gold coins have been gradually replaced by amateur investors.

Pierre-Yves Lathoumetie in “Avers et revers de la numismatique (1973)” makes a distinction between the humanist collector and the speculator.
The former may make some honest investments guided by his passion for rare or unusual Gold, silver or bronze coins. The latter, instead, will fail unless he is able to appreciate the true historical value of the coins.

Why consult a numismatist?

Both need to consult an expert: the numismatist, who will be able to advice them on price and history of a Gold, silver or bronze coin. Consultation with a numismatist and trust in him does not prevent the collector or speculator from comparing prices or obtaining information from other sources.

Roughly speaking, this is basically what awaits those who want to get involved in the numismatic world. Experts and novices run the risk of finding themselves lost in a market that has changed considerably in 30 years and which is subject to fluctuations and uncertainties.

A market without rules

It is important to know that there are no rules governing the rare coin market. The price on a piece may differ greatly within the same category, from one country to another, depending on demand. There is no fixed price. Two identical coins may have two different prices with the same exhibitor. What this tells us is that the market of extremely rare pieces has no uniformity, in contrast to the market of gold bars or investment coins which is structured and organized. These changes, obviously, have an impact on the profession of numismatist.

Numismatic influences of the Art market

After 30 years, we are witnessing a type of negotiation between vendors and purchasers where any price is possible, within the higher band. We are also witnessing an extremely sensitive market where the most insignificant event may shoot up the price of some particular coin: public sale, archaeological discovery.

From collector, the numismatist has become speculator, ignoring in most cases the past of the coins, the art and archaeology.

Varied consequences

-Perfect coins are being sought after due to their premium, and because those that are damaged or deteriorated lose their charm. There have been cases when extremely rare pieces have been sold for very little money and others less unusual have been sold at gold price because they are intact.

-Investors grab Gold coins which are easily recognizable (newer pieces from the 19th and 20th centuries) the prices of which increase rapidly, in detriment of rarer pieces which are not so popular among the public.

- The price of a coin may differ from one country to another as the demand is not the same (usually national pieces are more valued in their own country).

To summarize, the rare coins market has nothing in common with the common coins market reserved for investment. But as is the case with works of art and fine wines, the truly rare coins are the ones that in the long term are a good investment, because a rare piece has a “long life” and never depreciates. Its value is based on its rarity and not the gold price.

Edmund Burke, the 18th Century Irish Member of Parliament, friend and champion of Adam Smith, champion of American Liberty, scourge of the French Revolutionaries, warned against paid MPs. Expenses were a recurring scandal since medieval times: whenever a Parliament was summoned, MPs travelled to London to attend; there were frequent attempts to claim more for journeys and hostelry bills than propriety countenanced. Schemes and machinations abounded. Familiar? Yet at least these MPs were not salaried: they had their own incomes – expenses, being extra, were considered (except by the King) as fair game. Burke’s concern was that salaries for MPs would turn the members of the House of Commons into a professional caste.

The scandals over inflated expenses could, perhaps, have once been regarded as a small price to pay to avoid professional salaries; besides, of course, in those days Parliament only convened when there was business to conduct. The MPs expenses scandal of recent years shows how right Burke was: here were professional MPs, on fairly generous salaries, with expense accounts that allowed them to employ family members as staff – and capable of being stretched to cover all sorts of things not related to their duties.

This corruption must be seen as just one element of the moral corruption of the contemporary political class, as well as a wider corruption of the parliamentary system. For the question needs to be asked: what are professional politicians? Are they persons, scholarly of mind, who are learned in the history of the Common Law Constitution? Far from it; so far indeed that they are not even versed in the legislation that they pass: for example, when Gordon Brown as Chancellor introduced his unnecessarily complex Income Tax return forms, it was found that a sizeable number of MPs did not understand them. They were not, however, thrown back at the government on the grounds that if MPs couldn’t understand them, it was fair to assume that many of their constituents wouldn’t either.

One particularly corrupting influence is the habit of delegated legislation, now so widespread that it could be said that all legislation has become delegated legislation. Delegated legislation entails framing the intentions of an Act of Parliament in obscurely wide-ranging terms and concluding that for all practical outworkings and impositions of the Act, the relevant Minister is empowered, without further consultation with Parliament, to act as he sees fit.
That is, MPs pass the supervisory function over the executive that they are supposed to exercise, straight back to the executive. Presumably so that they can spend more time with their moats, ducks, first class railway tickets and McVitie’s biscuits, while lying to their mortgage providers….

This is not only moral corruption but dereliction of duty, indeed outright subversion of the very functions of a representative parliament. Burke’s prophecy has come to pass: a salariat professing political virtue and competence has become a self-interested cabal whose interests are diametrically opposed to those who elected them. Are these the people to be entrusted with overseeing the wealth of nations?

by Mark Rogers

Not long ago, the Halifax Building Society advertised its services under the banner “the U.K.’s largest mortgage provider”. Which being interpreted means: the British financial institution most exposed to the next collapse of the housing market.
Traditionally, a mortgage is the securing of a loan (which might be less than the value of the asset) against realty: a property with secure title was offered as collateral for debt.

With most people unable to purchase a property outright, a “mortgage loan” is arranged, which is actually the opposite of a mortgage: you choose the house you would like to rent from your bank/building society, which purchases it and rents it to you for a fixed term (typically 25 years in the U.K.). If you maintain the “rental” payments, after the term has elapsed you get to keep the house.

If you do not maintain them, the house is “repossessed” – another odd term, given that you do not possess it, your bank/building society does – and all that money paid over by you has done no more than what an ordinary rent would have achieved, somewhere to live pro tem, rather than an investment and/or a property you can pass on to your children.

At the end of the boom of the mid- to late-1980s, a wave of “repossessions” swept South-east England: young upwardly-mobile traders had bought substantial properties in the Home Counties on mortgages paid out of the commissions they were earning on City of London trading floors.

This was not all: they invested in furnishings and adornments appropriate to their new and their properties’ traditional status. All was lost! Bailiffs repossessed the properties and took possession of antiques, period furniture and antiquarian books and first editions.

A colleague of mine owned a small bookshop in the heart of a traditionally affluent part of west Surrey, a natural place for these traders to gravitate to. Bailiffs knew the value of the furniture they were appropriating: that went into auction. My colleague benefited from their lack of interest in books, and for months at the end of 1989 and well into 1990, estate cars would stop at his shop, packed with books at a tenner a box. Each box contained several valuable books.

A home is not just a house: it is how you decorate it and what you put in it, the sum creating a value you would, presumably, wish to preserve and cash in when the assets have appreciated, and/or pass through your family unto the last generation… So why would one try to do so on a modern mortgage? Especially as if anything is being “mortgaged”, it is your earnings. If your earnings are in an already precarious sector – such as the trading floors, with their complete lack of job security (one reason commissions are so high: compensation for potential instant dismissal) – this only increases the risks of property ownership. The matter is just as serious for the average earner on a wage: there is no guaranteed future in any job.

Of course there is value in realty, but the modern mortgage gets it exactly the wrong way round: your earnings dry up, you lose everything.

So why mortgage your salary?

By Mark Rogers

Open mine in Madre de Dios

Mother Nature has been extremely generous with Peru, and has presented it with a valuable treasure such as its exuberant Amazon Forest and in the depths of its earth, the presence of the coveted golden mineral, which has given rise to the existence of numerous mines and gold washing places in the country.

Over the years, many national and international companies have heard of the treasures which may be extracted in Peru and have settled in its provinces. In this process methods have evolved and they have the Escuela de Minas, whose object is to train competent professionals, capable of offering a better organisation in order to guarantee the optimum achievement of the mining companies’ aims.

But there is another side to the story, beside the great mining companies and their expensive equipment and potential, sits the illegal extraction of this mineral in far away areas of the Amazon Forest, where control by the Government environmental and financial agencies has proven difficult. There are different reasons why this illicit activity has arisen such as shortage of employment in rural areas, increase in the gold price and tax avoidance which in turn results in an increase in profits. But all this is being done without control and the heads of these illegal extraction operations do not take into consideration environmental conservation issues provoking in turn further erosion (than that caused by any mineral extractions, even when using appropriate means) and an increase in the contamination of rivers as mercury and cyanide are being poured inappropriately into water sources.

In this scenario, problems are not only environmental but also social. According to studies undertaken by Peruvian authorities, the business of illegal extraction creates problems such as child prostitution (in the area known as Madre de Dios, it is thought that over 300 children work in prostitution in bars near the illegal mines) and that others are subject to child labour, having to work from a very early age without being paid for it. Other consequences of illegal extractions are smuggling and illegal trafficking of arms.

It is not just a matter of gold. In these crossroads, the wish of the few to quickly enrich themselves provokes serious problems, which may be more difficult to eradicate than illegal mining itself.

Article by : Lizette Paternina

The stock Market is not the only worry for the BNP Paribas.

The french bank BNP Paribas is taking radical steps to adapt to the economic and regulatory situation.

Interviewed recently, its Managing Director Baudoin Prot announced a write-down of 60% on Greek securities held (however he did say that Greece was not a problem in the past).
More surprising, BNP has implemented a programme for the massive transfer of government bonds held namely in countries such as Italy, Spain or Portugal, as a result generating a loss of 362 million Euros.

This raises two questions.
The first being who is going to buy these bonds that BNP no longer wants? The second question is why BNP in particular, but banks in general, continue to encourage their customers to invest massively in life insurance contracts in Euros even though the great majority are made up of more and more risky government bonds.

The bank reduces its own exposure to sovereign debt but not doesn’t reduce the exposure of private individuals.

Lastly, the follow-up of the strategy for reducing the size of the balance sheet (clearly BNP voluntarily reduces its volume of activity and commitments) includes a massive redundancy plan in the BFI (financing and investments banks) and this will certainly be the first of many which will affect French banks and others around the world in the next few months.

All of these actions have generated a quarterly fall in net profits of 71% . But as the same Baudoin Prot said a few weeks ago: “the only problem for BNP Paribas is its market price”.

Finally, you still need to bare in mind that the important essentials are not affected as the Managing Director declared that “nothing seems to indicate following a path cancelling shareholders’ dividends”.

Phew! I’m greatly reassured. Aren’t you?

Article by Charles Sannat
Director of Economic studies
AuCOFFRE.com