From an original article published at L’Or et L’Argent.

There are several institutions throughout the world which are part of the historical numismatic memory  –  without which we could not enjoy the collections nor any interest in investing in those precious coins which safeguard our heritage in the way that gold coins do. Today therefore we will touch upon the history of Colombia’s Mint Museum.

For those passionate about numismatics travelling to Colombia and in particular to Bogota, there is one place not to be missed: the Mint Museum, located in the working-class district of La Candelaria.

Latin American countries have always had a very strong link to the history of gold – therefore we shall dedicate some space to them, sharing their history and an analysis of their coins, those which are most representative and much valued and appreciated by their inhabitants.

King Felipe III of Spain ordered the foundation of this emblematic Mint Museum in Santa Fé de Bogota and entrusted the works to the engineer Alonso Turrillo de Yebra.

The striking of coins began in 1621 in one of the very first buildings constructed in Bogota. The history of this Mint Museum is very important since it is the place where the first gold coins of the Americas were manufactured, the “macuquinas”, which were named ‘doubloons or mintings’.

Some were struck in Cartagena and others in Santa Fé de Bogota. It was only a decade or so later that the striking of gold coins was authorized in the Mint Museums of Mexico and Peru.

Its infrastructure improved gradually, going from a small, simple blacksmith’s workshop located on only one level at the current Museum, endowed with a beautiful Andalusian-style architecture with a touch of provincial colonial period features.

Santa Fé de Bogota was the capital of the Spanish Vice-royalty of New-Grenada, home to the viceroys, the judges of the Royal Court, the Clergy, the Captains of the Tercios of Spain and of course to Gonzalo Jiménez de Quesada, its founder.

The amount of work becoming increasingly important in terms of volume, the directors of the museum found themselves under increasing pressure over time to reform it in order to meet requirements. Half a century after its inauguration, it was Felipe VI himself who ordered its expansion – in the beginning, the striking was highly traditional, but following the implementation of various changes, machines started to be used.

Their treasures were much coveted during the riots which took place in the Colombian capital, but they fortunately survived all attacks – including natural ones, notably during earthquakes.

Nowadays, we can enjoy the same museum as that of several centuries ago, which was re-inaugurated by Viceroy Solis in 1756.

Bogata’s Mint Museum is recognized as a National Monument, a title which was granted in 1975 following the decree of 1584, currently dependent upon the Bank of the Republic of Colombia.

Within, one can follow all the most important events of the country’s history, the history of the museum and all the coins and notes manufactured throughout these centuries.

Some thoughts on the return of gold as a means of exchange from L’Or et L’Argent (the original article may be read here).

Payment for Iranian oil in gold

More than a trend, there is a strong signal being sent: gold is returning to the markets as a currency of exchange. Thus, China, the largest importer of Iranian oil, follows in the footsteps of India and avoids the embargo imposed on Iran by choosing to pay for crude oil in gold. Because it decided to continue with its nuclear program, Iran saw sanctions imposed by the United States in late 2011. The oil embargo, which will take effect in June, prohibits payment for Iranian crude oil in international exchange currencies (Dollars, Yen, Euros…). Soon after, the European Union announced that it was also going to apply the embargo which will take effect in July.

Gold returns in trading

Although Iran does not represent a large percentage of oil imports to the US and to the EU, the same cannot be said for India and China which between them account for 40% of imports. India, which has a large demand for oil, has chosen to maintain its commercial trade with Iran by paying its bills in gold.

Recently, Forbes magazine reported that China was also intending to avoid the financial sanctions imposed on Iran by buying its oil with gold. China, the largest producer but also the largest consumer of gold, already imports huge amounts of the yellow metal (its imports tripled in 2011, to 428 tons). Such a decision will only amplify the economic effects on the price of gold.

Gold: exchange currency and political weapon

Gold, which is increasingly returning to the mechanisms of means of payment will also take a more political dimension and become a real weapon of war. These events confirm the most bullish gold market for years. In the same way that investors made wise choices by betting on gold since 2007, this also goes for today’s investors, when they will see the ounce crossing the $2,000 mark in the next few months.

 Gold has recently been undergoing a consolidation period – its price is below the value that in reality it should have. It is therefore the right time to strengthen one’s positions on gold, before the summer. Moreover, because of the presidential elections in the US next November, uncertainty over the economic future of the country will undoubtedly cause a new rush on gold… which will not stay at the current level of $1,640.

By Mark Rogers

Welfarism undermines democracy: this is one of the manifest lessons of the eurozone crisis, and is seen in many ways, the most recent being the Greek elections in the fissipiration of the political system, with the running being made by minority parties with unrealistic and self-aggrandizing agendas. Instead of there being any attempt at shrinking the state, more, and more aggressive, groupuscules want more of the same: “Syriza’s idealistic economic programme calls for providing students with free meals and doling out pensions equal to final salaries. Mr Tsipras says the state should hire 100,000 more workers to help reduce unemployment.” (The Economist, May 12th 2012). Is this “idealism” or ignorance (though the latter is, of course, the handmaid of the former)? After all one of the things that brought the Greeks to their knees was the number of people entitled to government largesse.

When the Greeks received the first bailout from the Germans, Papandreou publicly thanked the German government and people for their largesse and acknowledged that as a result the Greeks would have to do some serious cleaning up, starting with an attempt to find out how many people worked for the government. They didn’t know! This is welfarism with an insouciance.

Democracy and accountability

The idea that democracy is a device to hold government to account implies a responsible, independent citizenry and limited government. One of the things that the government is to be held accountable for is limitations on its growth. The welfare state, instead, thrives on factional interests which seek to carve out niches for themselves at the expense of others, with the state as overlord and facilitator – and therefore at the mercy of being captured by the bolder interest groups.

The Founding Fathers of the American Constitution wanted to strike the right balances between majorities and minorities, while recognizing both that majorities could become tyrannous and that minorities could descend into factionalism. The balances that the Founding Fathers sought were to prevent majorities from dealing with minorities in the old-fashioned European way – i.e. simply eliminating them, whether through exile or execution. This meant allowing minorities a functioning place within the body politic accommodating their ways where they were beneficial without creating vested interests which might put the public order at risk.

While it is self-evident that the Constitution of the U.S.A. has not prevented the growth of big government or the gradual assimilation of the American people to welfarism, it is also clear that modern government’s most serious derogation from constitutional principle is the emergence of the centralized state as a faction in itself. Large civil services become an end in themselves; the purveyors of welfare form a huge vested interest group, averse to change that may damage their own position however it may benefit the taxpayers who fund them.

While it is usual to equate freedom with democracy and welfarism with fairness, in fact there is no logical or historically necessary connection between freedom and democracy, nor is welfarism necessarily fair. In fact, the larger the state’s involvement in wealth distribution, whether it is by cash transfers, or manipulations of the educational and health systems, the more that the least admirable moral qualities are promoted in the welfare state: envy and greed.

Entitlement

The welfare state encourages the vice of entitlement, actively encouraged by the administrators of the welfare state – through education, through multiculturalism and through the benefits system. If bankers are thought to be too quick to justify their salaries, it is only done in the language of the welfare state which all are encouraged to use. (An aside on bankers: while, as has been maintained here, here and here,their remuneration is an utterly inadequate basis for the crisis, bankers at least operate in a world of more immediate accountability: recently shareholders have risen to the task of curbing pay in relation to poor performance.)

Envy in the East?

I grew up in Hong Kong (my political and economic gold standard). That there were exceptionally wealthy people was well-known, but they tended not to live celebrity lives and had risen to their riches, in many cases from extreme poverty, through hard work and good judgment. That everyone had a chance to better themselves to the extent that they were prepared to work for it because the tax system was simple and equitable, meant that envy was at a discount in Hong Kong – people tended rather to admire the rich because they were hard working and philanthropic, and because each and all had the opportunities open to them to advance to similar riches. A breeding ground for hard work, thrift and imaginative enterprise rather than envy, greed and carping.

By Mark Rogers

One day.

The “sarkozy” in question? Bashing the City of London. So nothing has changed on the despising of the Anglo-Saxon economic model front, then. What else has changed as a result of the French and Greek elections?

While the Times has reported that there is a capital flight out of Greece (The Times, 8 May 2012) – which is hardly surprising – the answer to the above question is: nothing, politically.

The fireworks will be different colours after the French and Greek elections, but the unwillingness to recognise and to deal with the political death of Europe will continue: there is still no political will to recognise the failure of the euro and all the difficulties that that entails for the “union”. Not that there is much show of unity; there is little love lost on the continent for each other, but there is a determination to keep the bone of contention alive – not even the faux-radicals who have been elected to the Greek Parliament, while perfectly content to call their Northern neighbours barbarians, want to pull out of the euro! (Bloomberg here.)

“Voters shy from hard choices.” Thus Lexington in the Economist, April 28th 2012, page 42. “…voters everywhere … want many impossible things before breakfast, including low taxes and all the things that high taxes pay for.” He is, after a fashion, taking issue with Grover Norquist of Americans for Tax Reform, who concedes that the argument for small state-low tax politics is yet to be won: “Too many voters continue to like some of the things their taxes buy, such as entitlements and government jobs. If those things can be shrunk, [Mr Norquist] believes, so can their fondness for the state. Good luck with that, Mr Norquist.”

Well, Mr Norquist is perfectly entitled to point to Europe, where fondness for the state was invented and has become inbred, and in particular to Greece.

Greek voters wanted low taxes, so they simply didn’t bother to pay their taxes at all – and the tax collectors went on strike in sympathy – and they still wanted the things that high taxes pay for. A price system this is not.

The idea, fantastic as it seems, that tax collectors would go on strike against changes to their salaries would beggar belief were it not yet another strong reminder that those who advocate that the state simply pays it way out of trouble (which is what got us into the trouble in the first place) forget that the state has no money.

Even the editor of the Economist has advocated that the state in the UK should build more infrastructure (which, he says, “incidentally” provides more jobs) as a way of spending its way to recovery. This is the same Economist which considered the Socialist candidate, now victor, in the French presidential elections, M. Hollande, “rather dangerous” (April 28th) – even though he promises just such spending…

The tax collectors of Greece went on strike because they do not want their salaries cut, but in striking, i.e. refusing to do their job which is to collect the taxes out of which their salaries are paid, they are in effect cutting their incomes to zero.

The state has no money of its own: all that it spends is ultimately derived from the taxpayer: either directly, or by borrowing, which is then paid back by further despoliations of the taxpayer.

Ah! but what about Quantitative Easing? Apart from sounding like what Gargantua did after arriving in Paris, it has pretty much the same effect on the average saver: deluging the economy with printed money simply attacks the taxpayer from another angle – those who have saved see their savings and pensions eroded. Without savings, where is investment, and therefore growth, to come from?

Too much liquidity, and fake at that: QE seems to me to be essentially the government forging its own currency…

By Mark Rogers

While there is much speculation that there are moves afoot in some countries to rein in the private ownership of gold (see here and here), it is encouraging to read the following story (originally posted at L’Or et L’Argent) about how Singapore is opening up its markets to gold. This is yet another move in the free Asian economies to strengthen their positions, a welcome strength in view of the economic turmoil in the developed world and in China, whose economic future seems very uncertain.

Given that the following article points out the strong position of gold in Hong Kong, readers might like to read this fascinating account of gold dealing there; amongst other interesting points is the note that the Chinese Gold and Silver Exchange Society is the world’s oldest gold dealing exchange. Gold and stability could have no sounder exemplification than the growth of Hong Kong as one of the world’s strongest economies throughout the twentieth century and still leading the way in the new millennium!

Singapore’s move comes in tandem with growing speculation amongst gold observers that there is a slow but sure momentum building up to a return to the gold standard. The financial turmoil in Europe and the erosion of the US economy is fundamentally a crisis of paper money and cannot continue without a major shift towards the kind of stability that a properly backed currency provides. This shift will come either when the relevant governments realise that such a resolution of their problems needs to be carefully managed – or it will be forced upon them if they continue to do nothing other than roll the printing presses, which will in the end precipitate a catastrophe of an order such that even they will not be able to deny the obvious.

I shall in the very near future be posting reviews of Detlev Schlichter’s Paper Money Collapse and James Rickards’s Currency Wars, which contain detailed analyses of how our present woes are the inevitable result of fiat money, and, in Rickards’s book, an outline of how a return to the gold standard should be managed.

Meanwhile:

Singapore bows before Gold

The world’s fourth largest financial centre is seeking to open itself to the gold market. Thus, it has decided that tax cuts will apply to precious metals including gold.

The Finance Minister Tharman Shanmugaratnam confirmed a month ago that an exemption would be made to the 7% tax rate, hitherto applied to gold and all other precious metals, in order to encourage growth in trade negotiations and in particular as an incentive for producers to participate in the market.

Singapore will thus be able to compete on an equal footing with other neighbouring markets open to the gold trade, the most important being Hong Kong where producers prefer to sell their bullion – free of tax. It is evident that having to pay a 7% tax in Singapore discourages investors. This measure is completely logical and fair since no kind of taxes should be applied to a safe haven investment – the latter being basically currency.

This reduction will be initiated as of next October – which prompted certain declarations to be made at the time this measure was made public, for example, `that an important producer has expressed a particular interest in opening a factory in Singapore in the light of the announced tax change’ and furthermore that there will be more gold trading companies present in the country.

Gold has risen sharply and this is why there is so much competition between countries which are putting in place strategies to meet current requirements. If Singapore wishes to compete with its Asian neighbours who have a significant advantage, it will be extremely advantageous for it to adopt this fully justified initiative which will enable the gold market to benefit from a fall in tax or an exemption. By maintaining high taxes, Singapore has risked putting off all potential investors – the latter being welcomed with open-arms in Hong Kong and Japan.

Following on from our reflections (here and here) on the problems at the South African mint, another consideration has arisen: are the dud krugerrands that have come to light dud forgeries? That is, have some stamps been stolen from the mint (it should be remembered that the design of the krugerrand was supposed to make it very difficult to forge)? The forgers would be attempting to put onto the market coins that in all respects were identical (weight, specification) to the genuine article, just made from some cheaply acquired black market gold. We hope to find out more this month with the promised revelations in Forbes Africa.

Meanwhile, our friends at L’Or et L’Argent (for the original article: here) have come up with these findings about market abuses and forgeries:

Gold agencies are checked by customs!

There is currently an intensification in the auditing of the gold market. Faced with abuses the French authorities are (finally) ringing the alarm bells: customs officers have taken up   energetic measures. But what are their priority targets? Agencies dealing in the sale/purchase of gold!

In an article on April 18th, 2012, the newspaper Sud Ouest announced numerous “raids” organized by the regional customs offices of Bordeaux on the shops of gold buyers. The objective behind these unannounced visits is to check the compliance of the corporate name and observance of the strict regulation monitoring the trade. Customs officers are particularly vigilant when it comes to compliance with the law of July 29th, 2011 which prohibits paying for the purchase of gold in cash (although see here for an alternative concern).

Gold, a corollary of trafficking

It is clear that with the explosion in the price of gold over these last few years we are not short of people setting a bad example in this market.

The traceability of the noble metal remains a significant problem which gives rise to all types of abuse. It is extremely difficult to authenticate the source of gold which can be re-melted at will. These agencies take part only too often, with or without their knowledge, in the illegal trading in gold arising from burglaries in particular. They then, perforce, act as real platforms in the trafficking of the metal…

If we take just one example: the daily newspaper Sud Ouest mentions shops for the buying/selling of gold which had opened wholly illegally: without a declaration and certificate from the trade registry. In charge of one of them? An “ex-burglar” – as simple as that: a wonderful switch of employment!

We should not be quick to stigmatise them, but we must remain very cautious with regard to these agencies which are not very particular about the source of the gold and which appear to condone the abuses of the market…

The trafficking of gold is thus not a myth and the arrest of a gang of forgers in Libya last March clearly illustrates the extent of the phenomenon!

Translated from an original article by Charles Sannat, Director of Economic Studies, AuCOFFRE.com, Paris

The Fourth Summit of the BRIC nations, a major political event.

This is a huge story and yet has gone largely unreported by the major western media. On the 29th of March in New Delhi, the Fourth Summit of the BRIC nations took place (Brazil, Russia, India, China).

“The BRIC nations (Brazil, Russia, India, China and South Africa) should no longer use the US Dollar in their bilateral exchanges. That is what was decided on Thursday the 29th March, 2012, during the Fourth Summit of leaders of these five nations in the Indian capital”.

Source: algeriedz.info and rian.ru

The following was decided during this meeting: an essential step was taken towards a “multipolar” global monetary system. March 29th 2012 will undoubtedly not be the date remembered in history as marking the end of the era of the Dollar. Nonetheless, the change is major.

Towards an overhaul of the IMS

We are entering a phase of disintegration of the International Monetary System as we know it. Our monetary system dates back to the Bretton Woods agreement of 1944 which was brought to an end by the Jamaican agreement of 1976 (this ended the gold standard).

So what will happen now? Stock markets are starting to fall because the issuing of European bond funds is doing badly or is disappointing (depending on your degree of optimism about the outcome of this policy), which is the case for Spain and now Italy.

What one must understand is that according to the current economic system it is the surpluses of some which finance the deficits of others, thus creating a balance. In other words, western countries are in a chronic deficit which has been, and I stress has been, financed by the major Asian exporting nations on the one hand (China and India) and the oil-producing nations on the other.

For the last few years, nobody was lending to western states (by this we mean the US and Europe) which now find themselves in an irreversibly compromised situation.

It is this lack of external funds which is pushing the central banks, the FED and the ECB to massively intervene in the markets. The only option that remains for us is indeed the use of the printing press and the creation of money with all the negative consequences that follow.

Though this Fourth Summit of the BRIC nations is a founding step towards the overhaul of the IMS this is certainly not the ultimate goal.

Ground-breaking events in international relations

Discussing the topic of the monetary system without mentioning the political dimensions would be a mistake. The future International Monetary System will be shaped by the international balance of power and alliances between the major players in the context of the fight for access to energy and agricultural resources and in the broader sense to raw materials. A strong axis is taking shape amongst the BRIC countries, and Iranian diplomacy is also far from insignificant.

The trans-Atlantic relationship remains strong despite the strains and divergences. Lastly, one should not imagine that the United States of America will let their status as world leaders slip away without a colossal “fight”. American policy has always been based on a simple concept: “America First”.

We are thus entering a new phase in the current crisis:

In 2007, the subprime crisis led to a financial and stock market crisis.

The financial crisis led to an economic recession.

The economic recession lead to massive state intervention in the form of stimulus packages which resulted in massive debts for these states.

The debt crisis can only lead to a major monetary crisis.

The monetary crisis (which is on its way) will lead to the restructuring of the International Monetary System.

And… the manoeuvres have already begun. The global repercussions will be deeply felt, as the International Monetary System is to the global economy what tectonic plates are to geology. We are touching upon the essential part. The tremors will truly be felt.

Will you be ready?

By Mark Rogers

Needless to say, there is a great deal of concern about this story, first addressed on this site on Monday. Conspiracy theorists are in little doubt this is a government swindle, though leveller heads are pointing out that this is unlikely. Nevertheless, it has to be said that the Mint’s Media Statement is very cagey in what it says about the origin of the dud coins: the suspension of senior staff last December was because of “technical issues”, and the longer statement quoted in my last article doesn’t exactly link those “technical issues” to the dud proofs.

Nor does it link the criminal gang which stole R5 circulation coins to the minting scandal. While it is entirely understandable that the Mint does not want to debase the trust that any such institution must maintain and therefore does not want to say too much in case panic ensues, why, then, has it said anything at all?

The curator of modern money at the British Museum, Thomas Hockenhull, is quoted in The Washington Post, April 24, as saying that it is unusual for mints to go public on problems of this kind, while Tom Hallenbeck, the American Numismatic Association’s President is also quoted to the effect that glitches in manufacturing are to be expected given the volume of coins produced.

Exposed

An obvious reason for saying anything at all is damage limitation. Whatever is going on at the SA Mint was already under investigation by CNBC and Forbes, and with television exposure and Forbes publishing its findings next month, perhaps the Mint thought that its hand was being forced.

Undoubtedly, it has fallen between two stools as a result. The clarification that it had (somehow) produced under specification coins and not as TimesLive reported underweight ones, led at least one commentator to conclude that this was evidence of a deliberate skimming exercise by the Mint itself:  “A national mint producing investment grade gold coins for several months with debased gold is not accidental. Period.”

That, of course, still does not rule out infiltration by a criminal gang, but that having been said, that such a gang could get away with it apparently for so long says volumes about accountability and transparency in a major public institution.

Effect?

A claim is made here that dealers are buying Krugerrand bullion coins at a lower premium than usual, while raising the possibility that there will be a “flight” from the coin. Did it escape the mind of the author of the Mint’s statement that this might happen, and that if the proof Krugers fell under suspicion, the contagion might spread to the bullion coins?

Even the mere speculation by a writer with an “anonymous source” on an internet site might be enough, especially in the light of the generally gloomy picture of politics in South Africa.

All over the world, political elites are coming under fire: high taxation, monetary incompetence, the keeping of a self-serving distance from their electorates – general nannying while the ship of state flounders.

Even if the problems of the SA Mint were occasioned by such political incompetence, rather than a deliberate crime sanctioned at the highest level, the suspicion that is falling on governments everywhere is reason enough to seek safe havens elsewhere – indeed, they are vital as havens from the financial incontinence of the state.

Alternative

Whatever else is revealed, and happens in consequence, there is an alternative, again as mentioned on Monday: the Vera Valor. Not only is this coin of the highest standard of purity; not only is it audited to a high standard, and its source and manufacture of a high standard of purity; it also has another quality – it is a purely commercial venture, with no connections to malfunctioning government institutions and suspicious officials.

By Mark Rogers

On 8 December 2011, the Board of the South African Mint Company suspended the Managing Director of the Company and its General Manager Numismatic Coins, having become “aware of certain technical issues within the operations of the SA Mint Company.” The media statement went on to say that:  “Investigations into the matter have been instituted and are on-going.”

Nothing at this time was said publicly about what these “technical issues” were. However, dealers were alerted in confidential meetings to the need to assay their stocks of proof Krugerrands. A further statement, going into much more detail, was publicly issued on 13 April 2012.

This stated that “investigations into the matter have revealed that some of the proof Krugerrand coins cast between April 2011 and May 2011may not meet all the required quality specifications. Based on information that there had been fluctuations in assay results in the production process starting from April 2010, a conservative approach was adopted to analyse results from 01 April 2010 until 31 October 2011, the latter date being one on which  new quality control measures were introduced.  The extended period was adopted merely as a precaution.”

Proof and Bullion Kruggerands and Investment

The SA Mint only strikes the proof Krugers, bullion Krugers being the preserve of the Rand Refinery. Proof coins are issued in smaller quantities for the collectors’ market and are struck in a way that provides a mirror-like finish with a contrast of matt. They are important to collectors who are interested in “a perfect uncirculated” coin, a distinction that mattered when the Krugerrand was first struck given that the bullion coins were intended to circulate as currency.

This means that Krugers are minted from a copper-gold alloy, as the copper gives the coin greater durability. Apart from the mirror finish, the other difference between the proof and the bullion coins is the number of serrations (or reeds) around the edges, being 180 on the bullion and 220 on the proofs.

While the minting process is different between the SA Mint and Rand Refinery in order to achieve the required finish, the gold content and ultimately the investment are the same: bullion coins are still as valuable for their gold content and premium and are the most prevalent, but there is no difference to an investor if the Kruger is proof or just bullion.

The proof can be found to be more expensive but usually in collectors’ circles as they insist on this type of coin. However, in effect all of the Krugers are bullion coins and they can be found at the same purchase price. The importance of all this comes into play when demand is high: investors buy them all for the same reason. Even “proof” Krugers are important as they are part of the available investment quality bullion coins and there is no real need to differentiate their importance as an investment. Most Krugers are held for their investment potential and not by collectors – they are very “liquid assets” that contain a sure value (1 oz of gold).

Scandal Story Breaks – Misleadingly

Within a couple of days of the latest Media Statement issued by the SA Mint, TimesLive published a story that some of the proof coins were underweight. This was a very careless reading of the Mint’s statement which is quite clear on this point: the coins were under-specification, containing less gold than required by law. The South African gold collector who first alerted the Mint to the problem makes the crucial point on PM Bug (Precious Metals Forum):

“The coins are NOT underweight in any way, shape or form, they are under-spec. They weigh exactly the same as any of the Krugers available. This is just bad reportage from TimesLive. Now people will just weigh their coins, see the weight is right, and forget about it.” (Readers should view the short excerpt from CNBC Africa report that is posted on this forum after the statement just quoted – and look out for the moment when a gold coin being assayed registers at 94% silver! GoldCoin.org is attempting to discover more…)

Apparently TimesLive was aware that CNBC Africa and Forbes Africa were onto this story and wanted to scoop them – hence the sloppy reporting. Forbes Africa is due to publish the fruit of its investigations in its May issue.

So what was happening at the Mint?

“Concurrent with the investigation into proof Krugerrand coins, the SA Mint investigated the evidential theft of R5 circulation coins. This crime was ostensibly committed by a number of employees who appeared to have acted in collusion with what appears to be a syndicate-style operation that included external parties. Appropriate steps have been taken and all evidence gathered has been handed over to the Police’s Directorate for Priority Crime Investigation.”

How did a criminal gang come to be operating at the South African Mint, a wholly-owned subsidiary of the South African Reserve Bank? How far up the scale of management did it penetrate? Were the two officials suspended because this happened on their watch or is there evidence that they were somehow complicit and/or bought off? Is this yet another instance of the corruption and malfeasance that have embroiled South Africa after the early promise of the post-apartheid years? The ANC is after all no more than a tribal ascendancy and there is widespread disillusion with the ruling elite in South Africa.

True Value

This is an astonishing story and one that may have considerable implications for the Krugerrand, a popular investment because widely regarded as a strong one. Perhaps investors should start taking a very serious look at the Vera Valor, recently highlighted in the luxury magazine Meze.

The Vera Valor is a serious contender for replacing the Krugerrand as the gold coin of investor choice.

We here at Goldcoin.org have had the pleasure to interview Señora Lizette Paternina, the editor of LingORO.info, a blog dedicated to gold investment, gold coins and the unstable economics of our time. Her story has an interesting evolution based on the response she had to her blog articles. The popularity of her blog has paved the way for the launch of a commercial website, LingORO.com, which enables the Spanish speaking market to have access to a proven, reliable method of gold investment.

Editor: When did you first launch the blog LingORO.info?

Lizette: In March 2011 I posted my first article on line having spent some months previous immersed in the research of blog content. The first article is always special and I remember the feeling of excitement when I saw the visits to my blog and knew that people were reading my article. I was encouraged to continue producing and evolving content that was obviously attracting a growing audience.

Editor: What do you look for in an article?

Lizette: A story that tells a truth, with substance, meaning, logic and often on a subject ignored by the mainstream media. My articles present information to readers regarding the current economic climate and its impact on all of us. Many things are left unsaid that need expressing and this can be particularly true in the gold industry. I am originally from Colombia and so issues regarding “ORO VERDE” that could be so important for the survival of whole communities & their livelihoods need highlighting. Similarly I fully support the Clean Extraction initiative for 100% traceable gold that respects people and the planet. It is also important to have an historic perspective on the economy and gold investment as well as for the evolution of everyday changes in the economy. To this end I like to combine numismatic and historical facts about gold coins as well as the story of certain important coins that have a particular place in Spanish or Latin American history.

Editor: Why have you launched LingORO.com now?

Lizette: This is the ideal moment to launch an alternative method of Gold Investment to the Spanish and Latin American markets because there is no similar offer currently available. The current market is based more on jewelry and physical possession of gold bars and coins. However, our experience suggests that this is not the best way to invest in gold as it is difficult to realise a good value at resale when you inevitably have to sell it back to a dealer. Our business model allows Members to freely trade between themselves, therefore maximizing the opportunity to realise the full potential of their gold coins. It’s easy, practical, logical and has a proven track record in the French and the English speaking worlds as demonstrated by our sister sites AuCOFFRE.com & LinGOLD.com.

The advantages of LingORO are that investors can buy and sell on-line 24/7 from anywhere they want and also that we offer vault storage – this model allows ease of resale.

Editor: What type of products are available and why? Where do they come from?

Lizette: Only professionally sourced investment quality gold coins are available – these are all verified and sealed in cases. We also have a focus on certain Spanish and South American gold coins which are of great interest including the 25 Pesetas, The 50 Pesos and the Soles and Libra from Peru.

Editor: Why should we invest in gold?

Lizette: Gold is an excellent way to save, it is an alternative to the traditional bank products which have proved to be unreliable (particularly during the current crisis) and of course it is a diversification of a portfolio. Perhaps most importantly Gold is the safe haven currency when all other currencies are failing and losing value.
It is worth noting that most investments have a risk attached – that is to say a risk to the counterpart offered in the investment. If these are shares, certificates, funds etc there is a possibility that the counterpart to your investment ie. the shares or assets supposedly backing funds could fall to zero in a crisis due to company failure, the debt cycle or unscrupulous traders who have oversold their funds such as is the case with ETFs (less than 20% physical gold to back the certificates sold).
Gold can never fall to zero as it has consistently had value for 6000 years which is better than any modern day currency or fund.
Finally, we should think of gold as an insurance against economic crisis. It will protect your wealth against inflation and it will always maintain purchasing power whatever happens during the crisis. No other product can offer this. If you have a house you usually have fire insurance in case one day the unthinkable happens. At least you have the peace of mind that you can rebuil it.
If the crisis deepens as is largely expected our whole way of life could be challenged – therefore it is prudent and wise to take out an insurance against the effects of crisis.
As in the case of fire insurance it is wiser to buy insurance before the catastrophic event!

Editor: Do you have a message to the people?

Lizette: Choose a good option that helps you save not only in a moment of crisis but which will also work for them during normal situation.
Gold protects money and the people can have a real savings to leave for the family or indeed help them with the costs of life, houses, holidays, cars, university fees etc.
We have a beautiful collection of professionally certified coins that are designated as investment quality which is not always the case elsewhere. We offer quality of service as well as trust and confidence with our Members.
My message to investors is to look at what we have to offer and then compare this to other methods that they have traditionally used and evaluate which is the better option for you – that way I know I will be welcoming lots of them real soon.

Editor: Many thanks for your time and best of luck with LingORO.com

Lizette: You’re very welcome and thank you. I am a regular reader and fan of Goldcoin.org because there are so many interesting facts and articles that are pertinent to the economic situation and the gold market. I often post links to your articles and sometimes translate quotes made by economists and commentators about the gold market. I wish you continued success with your blog and hope to see you in Spain soon.

By Mark Rogers

Is there a necessary connection between gold coins and politics? The short answer is: yes. Undoubtedly over the course of the last century, and beginning fairly early on, gold became, and still remains, a highly controversial political subject. The most influential economist of the century, John Maynard Keynes disparaged not just the gold standard but the metal itself: he thought wealth creation a sort of secular sin, and considered those who saved to be selfish. In 1933, President Roosevelt banned the private ownership of gold, and passed measures to confiscate privately held gold – something that may be about to occur in places as widely diverse as the European Union, Turkey and Vietnam, with a suspicion that the same is afoot in China.

Not surprisingly, these animosities towards gold have gone in tandem with the creation and expansion of the Welfare State, the political entity that is utterly bankrupt and is the prime cause of the financial crisis.

So, yes indeed gold, whether in the form of collectable coins or other types of investment, is very political indeed, but not just because it is seen as a store of selfish wealth, or, as its enemies derisorily call it, “hoarding”.

Ray Vicker in The Realms of Gold (published by Robert Hale, London, 1975) makes this very important point:

“The deeper one gets into monetary matters, the more one realizes that the whole argument about gold’s monetary role, or its inability to perform it, involves fundamental emotional attitudes toward man and his environment.

“Not only technical monetary systems are at odds when the chrysophilites and the chrysophobes argue money. This is cash versus credit. Sound versus easy money. A balanced federal budget versus deficit spending. Rugged free enterprise versus government economic management. A black-and-gray world versus utopia. The belief in sinful man meeting the conviction that man is essentially good. The idea that progress only comes through individual gain clashing with the contention that communal efforts spell forward movement.”

Gold, therefore, is not only a measure of prudence, it is also the summation of the political arguments of the last century – and even a repository of some of the profoundest truths of human existence.

Those who invest in gold are, in the long run, realists, as the following account by Vicker of what happened in the 1960s and 70s makes clear:

“When sense and nonsense are being evaluated the chrysophobes must explain how come they erred so much in the 1960s when they were denigrating gold and claiming that it was on the way out. It was in the 1960s and early 1970s that the great monetary battles involving gold were fought, with few people in the United States realizing what was happening even after the dollar experienced two devaluations. Briefly, the dollar, which had been ‘as good as gold’ for so long, no longer was as good as a thirty-fifth of an ounce of gold. And many people were discovering this fact.

“These people were termed ‘speculators’ through the monetary cyclones which erupted. Actually, they were ordinary businessmen, bankers and others who had sense enough to protect their assets. In politics, whenever anyone disrupts a pet project of the party in power, it is customary to tack some derogatory term onto the disrupters. The word ‘speculator’ has enough of an unsavoury connotation that it appealed to those in government who saw themselves as ‘defenders of the dollar’, though they couldn’t see the easiest method of preserving the whole system – a doubling of the monetary price of gold.”

Therefore, however unlikely it may seem on the surface that a numismatic website should feature regular political commentary, the central role that gold plays in human affairs means that its political and economic aspects need constant analysis.

By Mark Rogers

Taxation in the modern state is an attack on wealth and its creation.

Which is illogical, because without wealth creation there can be no tax base.

The Welfare State was founded, and is foundering, on conundrums such as these. So perhaps it is not surprising to see a Tory Chancellor of the Exchequer engaging in what amounts to left-wing style class warfare.

George Osborne has just announced that he is “going after the wealthy tax dodgers”. As reported in The Daily Telegraph, Tuesday 10th April, he has been examining “anonymised” tax returns furnished by HM Revenue and Customs which show the completely legal measures that some very rich people have been using to reduce their tax bills, through what the Chancellor and the Revenue are pleased to call “loopholes”.

If the measures are legal, how can those who use them be called “dodgers”? (And see here for another example of the Revenue being rude.)

Osborne has cleverly turned the issue into a moral one and in doing so has introduced a novel legal concept on the hoof. These schemes of tax avoidance have been dubbed “aggressive” avoidance, as if by hurling an adjective about what is legal is suddenly rendered “un”-legal.

Now one of these legal “loopholes” is offsetting tax liabilities by making donations to charity, which in the nature of things would be large ones for the offset to work. Closing this “loophole” is therefore going to deprive flourishing charitable organisations of substantial and necessary sums.

Now one of these legal “loopholes” is offsetting tax liabilities by making donations to charity, which in the nature of things would be large ones for the offset to work. Closing this “loophole” is therefore going to deprive flourishing charitable organisations of substantial and necessary sums.

And it is to be observed that such charities find more efficient and targeted ways of spending the money they receive through such donations. Can the government be expected, can the government even promise, to spend the money that it thus intends to steal as efficiently? Of course not.

One obvious practical problem that also looms is that many of these allegedly “aggressive avoiders” are foreigners, who settled here because of the way the tax rules had already been drawn up: they run businesses, they spend – in other words, they are already “contributors” in various ways to the economic life of the country. If the rules that encouraged them to settle here are changed, then they will simply leave, or if they stay, the taxes imposed on them will dry up certain expenditures, which will amount to much the same as if they had departed.

So the plans to deal with people who have done nothing illegal will have the opposite effect: less wealth creation, less voluntary “distribution” through getting and spending of that created wealth through the rest of the economy and more government waste – of human resources as well as cash…

Once upon a time, these things were done so differently: here is the opening paragraph of A. J. P. Taylor’s volume in the Oxford History of England, “English History 1914-1915”:

Until August 1914 a sensible, law-abiding Englishman could pass through life and hardly notice the existence of the state, beyond the post office and the policeman. He could live where he liked and as he liked. He had no official number or identity card. He could travel abroad or leave his country for ever without a passport or any sort of official permission. He could exchange his money for any other currency without any restriction or limit. He could buy goods from any country in the world on the same terms as he bought goods at home. For that matter, a foreigner could spend his life in this country without permit and without informing the police. Unlike the countries of the European continent, the state did not require its citizens to perform military service. An Englishman could enlist, if he chose, in the regular army, the navy, or the territorials. He could also ignore, if he chose, the demands of national defence. Substantial householders were occasionally called on for jury service. Otherwise, only those helped the state who wished to do so. The Englishman paid taxes on a modest scale: nearly £200 million in 1913-1914, or rather less than 8 per cent. of national income.

An occasional series of curiosities of Gold, its history and ideas about it.

By Mark Rogers

For all practical purposes, it has looked for a very long time as if the gold standard has become a curiosity; reviled by Keynesians, found impractical by politicians (I wonder why?!), alleged to be unworkable as a medium for regulating international trade – these are just some of the reasons that anybody who advocates a possible return to it is regarded as a crank. (This does not stop governments from wanting to get their hands on gold or control it, as witness the buying of gold in China, and the curtailing of paying for gold in cash in Europe.)

That is not the only reason why I am, at least for the purposes of this article, putting the gold standard in the category of a curiosity. Although Britain came off the gold standard in 1931, at least as late as 1934 candidates sitting the Final Examination of the Institute of Chartered Accountants were still being asked questions on the gold standard.

I discovered this in a small crib published in 1934 for such candidates: “109 Examination Questions on General Financial Knowledge together with Answers Thereto” by R. Byrne (A.C.A, A.S.A.A., F.C.I.S), published by The Coaching Association Ltd, London E.C.2.

Here they are, giving as good and succinct a definition as one could wish for, written with essentially practical business in mind:

Q.77 Explain concisely what is meant by the gold standard, and mention the various forms of the gold standard.

By “the gold standard” is meant a system of monetary management whereby the currency of the country has a definite gold value, even though the circulating medium is a paper currency or a metal other than gold.

Any country which is on the gold standard undertakes that its standard coin shall contain a fixed and unalterable amount of pure gold. It also undertakes that such standard gold coins shall be legal tender to an unlimited amount, and that its central agent (the Bank of England in this country) shall buy and sell gold at certain fixed prices.

Under the gold specie or circulation standard – which is the most perfect form of gold standard – gold coins are actually in circulation and the central bank undertakes to redeem any of its bank notes in gold coin. Gold coin, therefore, is readily available for the settlement of debt. This is the system which was in operation in this country prior to 1914. The gold bullion standard, which was in operation in this country from 1925 until 1931, is a more restricted form of gold standard. Under this system the central bank is bound to buy and sell gold bullion at fixed prices. In England, the Bank of England was compelled to buy gold of standard fineness at the rate of £3 17s. 9d. per oz., and to sell it – in bars of not less than 400 ozs. – at £3 17s. 10½d. Consequently, gold was always available for shipment in payment of debts, and the £ always had a value fixed in relation to these prices. The gold exchange standard is that adopted by silver-using countries. Thus, a country such as India would maintain the gold standard by purchasing the exchange or securities of a country which was on the gold standard, e.g. England. These securities could be sold, and with the proceeds gold obtained from the Bank of England. This gold could then be transferred to India’s creditors so that the rupee, although silver, could be definitely linked to gold.

Q.78 Explain how the gold standard operates to adjust the balance of international trade.

The gold standard maintains stability of the exchanges, for when the currency of a gold standard country is convertible into gold at a fixed price, the value of that currency in terms of the currencies of other gold standard countries will only vary within small limits known as specie points. Therefore, international trade may proceed without any fear on the part of the trader of loss owing to exchange fluctuations.

In order that the gold standard shall operate freely, it is necessary that no restrictions shall be placed upon the free movement of gold from centre to centre, and that there should be some relationship between the internal and external purchasing power of a currency.

When a country has an adverse balance, payment will be made in the form of gold. The loss of gold will result in a contraction in the volume of money, and prices will tend to fall. In consequence, the country exporting gold is able to produce more cheaply, and its exports tend to increase. Its imports, however, tend to decrease because of the higher costs of production prevailing abroad. In the countries receiving the gold the opposite results will be noticed, i.e. more imports and fewer exports, so that in due course the country which had the unfavourable balance will tend towards equality with the others, and will ultimately have a favourable balance, resulting in the receipt of gold.

The gold standard therefore operates as a corrective, whereby the course of international trade is facilitated by the transfer of gold.

If the gold standard is not permitted to operate freely, i.e. by an inflationary policy on the part of the gold-losing country, or by excessive tariffs on the part of others, gold will tend to move one way only, resulting in the exhaustion of gold supplies of at least one country, and the eventual abandonment of the gold standard by that country.

For good measure, Q.79 is What are the disadvantages of a paper standard of currency? the last sentence of the answer reading emphatically: It may be remarked that inflation has always occurred in cases where a paper standard has been adopted.

[The author is, amongst other things, a dealer in secondhand books and is always picking up little gems such as this crib on his rambles!]

By Simone Wapler (translated from an article originally published in France)

In the middle of a difficult economic situation, investors rush for gilt-edged securities, among them: gold. But watch-out for the swindlers… do not confuse actual stocks with virtual stocks.

Everyone is talking about gold at the moment, especially as it is falling. Those who believe in a gold bubble are licking their lips. These bears are primarily to be found in the world of the big money men, the people who explain to you that your money must be made to “work”… in their own interest, clearly, just like Goldman Sachs. A recent survey carried out in France by the IFOP for the company AuCoffre.com produced surprising results. This particular French company is on the way to becoming the leading French company selling gold coins online. According to this survey, 68% of French people believe that gold is an investment with a future, but 60% find that it is incomprehensible and reserved to a privileged audience.

Some people who recently tried to buy gold through their banks found that it was not easy. Banks prefer to put forward their own certificates, or trackers, that are supposed to respond to the price of gold, rather than sell physical gold.  At first sight, if people want gold it is because they think that it will go up. Which is completely untrue. It is not gold that rises but currencies that drop. Here is the rise in the price of gold in the main currencies over the last 10 years:

• Peso 694%
• Rupee 487%
• US$ 474%
• Rouble 443%
• Pound Sterling 421%
• Real 339%
• Euro 287%
• Yen 262%
• Rand 262%
• $CAD 258%
• Francs 219%
• AU 186%

It is obvious that with the help of the crisis and the restarting of dubious monetary transactions, currencies continue to lose ground to gold and therefore its rise (since it is the commonly used term) continues. It is because currencies fall, with the dollar in the lead, that the central banks of the emerging country buy gold to diversify their reserves.

Who are the people holding gold for investment?

Out of the 166,000 tons of gold extracted from the ground, the central banks have 28,000 and private sector investment 30,000. Gold for investment is therefore to be found in the safe deposit boxes of the central banks, therefore the official sector, but also (and especially) in the private sector and in this case in two forms: in a shared form with the ETC (Exchange Traded Commodities) and in a private form for individuals. The ETCs are continuously listed certificates, in theory guaranteed by a physical gold reserve. Private individuals may also choose to obtain gold through their bank, and store it in their bank. In this case gold appears simply as one line on the bank account statement (1 ingot with a value of €40,000) and the bank stores it. Benefits: reduced management fees (since they are shared with others) and the safety of the large deposit-box of your bank.

But the real question is “does everyone actually have the gold that they claim to have”?

Why does the Fed refuse to have its reserves audited?

Our eyes are immediately focussed on the Fed, its colossal balance sheet of bad debts and its gold reserves. The Republican Senator Ron Paul has been asking for years for an audit on the gold reserves. In vain. [And see here for an analysis of this problem.] Just to stir up more problems, false ingots lined with tungsten have been discovered. They would appear to be of American origin.

Why do the central banks loan out their gold?

During the double decade (1980-2000) and the flat-period in the gold market, central banks engaged in the regrettable practice of giving gold out on loan in order to get some income from this dormant stock-pile. They can loan it out to commercial banks which use it to satisfy demand from an institutional client, for example. The last report on these strange practices goes back to 2006 and emanates from a private player, the specialized trader Blanchard. One then has to ask the question: do the ETFs (Exchange Traded Funds) ETCs actually possess their gold?

There exist various legal arrangements according to country. The following question is often repeated: wouldn’t these reserves not just be gold out on loan?

When banks give gold in exchange is it their own or your own?

In February 2011, The Wall Street Journal informed us that gold is accepted in the swaps transactions of commercial banks.  At this date, the inter-banking market is completely seized up. Banks are terrified and refuse to lend between themselves. Where does this gold, that suddenly appears, come from? Is this gold out on loan by central banks or is this the famous gold in the pipeline of the customer? Deafening silence.

Comex sets the price of gold… paper gold. The largest futures market in the world remains Comex. A futures contract is a bit of paper which bears an expiry date, a commodity, a quantity and a price. At the expiry date, the owner of the bit of paper has a choice: to take delivery at the agreed price of the commodity or “roll-over his position”, i.e. take the following contract. The majority of speculators choose the latter. In the warehouses of Comex, there is therefore much less gold than that which is covered by the futures contracts which circulate. So much less that the Canadians (who are large gold producers) got annoyed: Comex sets its prices, disconnected from reality, on paper. Short sellers are financed by the lobby of the large US banks and everything is distorted, they claimed.

A revolt was organized in 2008 Vaporize Comex (Let’s smash Comex). Principle: that the holders of futures contracts ask for delivery, in unison, all on the same date to show to the face of the world that the warehouses of the Commodities Exchange were almost empty. The Canadian rebels had agreed on a contract at the end of December. Shortly after, rumours circulated according to which certain contract holders had agreed not to take delivery in exchange for substantial compensation in dollars…

 And that’s why the premium goes up!

 Simone Wapler is Chief Editor for Agora Publications (financial analysis and consultancy).

Source: Reuters

A lucid analysis from France on the logic of gold investment

Translated from an original article by Charles Sannat, Director of Economic Studies, AuCOFFRE.com, Paris

With regard to the economy, we have just gone through a “settlement” period with the Greek crisis. But in reality nothing has been settled. As far as Greece is concerned, we have gained a few months’ respite in so far as that country remains indebted to the tune of more than 120% of its GDP and nothing indicates that a recovery in the public finances can succeed. Having said that, we shall see within 12 to 24 months.

More worrying of course is the economic situation of Spain and Portugal, with here too monumental social damage in progress and popular demonstrations which are starting to become extremely significant in the fight against austerity plans. Beware. Spain is not Greece. Spain is a great country, with a great history and Franco’s nationalism only dates back to 1975, i.e. yesterday. As any expert on Spain will tell you, that country will never accept a Greek-style humiliation. The Prime Minister has in fact called a stop to certain reforms. And he is right-wing. Spain will not be able to find a way out of the economic, financial and property crisis with a strong euro which does not correspond to the intrinsic characteristics of its economy. The same applies to Portugal.

We should not forget our own country, France. If we recall, in 2010, there were 1.42 working people for every retired person. Retirements will end up by no longer being paid for because there is quite simply no more money. The problem is not in 20 years’ time. It is now.

France is also in bankruptcy. The Court of Auditors in France, chaired by the Socialist Migot, has stated that it is necessary to dispense with indexing pensions to inflation. With real inflation of 5% per annum, in 10 years’ time a pensioner will lose the equivalent of 60% of his purchasing power. That is the reality.

Lastly, let us remember the end is nigh atmosphere at the end of 2011 (that was three months ago). One really wondered whether the euro would have survived by Christmas. What has changed since then?  One simple but basic fact. Over-indebted countries (France and Germany) became even more indebted, to temporarily save a country like Greece from immediate bankruptcy. But it is the entirety of our economic system which is in an irremediably compromised position. Nobody is able to say so. Even less the “people” behind the system. That is self-evident.

The only truth is the following: infinite growth related to mass consumption thanks to abundant and cheap energy in a finite world is a system likely to fail.

• A gold purchaser does not buy gold to speculate.
• A gold purchaser does not buy gold to get rich.
• A gold purchaser does not have a view on the financial results of the next quarter.
• A gold purchaser buys gold because he or she has a fundamental analysis of the current dead end in which the global economy finds itself.
• He or she buys gold because each serious crisis ends up by finding a “monetary” resolution that is usually painful.
• He or she buys gold because gold has been the Vera Valor (true value) for more than 6,000 years whilst the euro barely celebrates its 10th anniversary.
• He or she buys gold because before 1914 the currency was gold; because in the inter-war years those who had given up gold got to know a period of hyperinflation which led to Nazism coming to power with the disastrous consequences that we all know.
• He or she buys gold because in 1971, the dollar was no longer convertible and only the banknote plate continued to function unsupervised.
• Above all, he or she buys gold because he or she knows, and it is a historical certainty, that nothing is immaterial. During the last century we saw five different international currency systems or one every 20 years on average.
• He or she buys gold because the current system will change. Regardless whether it is in six months or six years.
• Gold buyers buy gold because they know that whatever the outcome of change, they will have simply kept the value of their assets. And it is that which will make all the difference.

Everyone else is half-witted, rendered moronic through TV and lobotomized by the eternal Welfare State. They will suffer. But this last sentence should of course not be quoted. It is OFF the record as they say. And I will not even give a small coin (out of gold) to a tramp when he goes around begging with his small sign: “May I call upon your kindness, Ladies and Gentlemen, in helping a former paper salesman by giving a bit of change to eat and help me to remain clean.” These people are ruining French people, just as with the Russian loans, or the assignats, and with each devaluation… In short it is necessary to know history and fully understand that they do not support us. The people act as compensation for the rich (banks and the system).

That’s why gold is bought.

Gold is rising I am happy. Gold is falling I am equally happy because I can buy more.
A gold buyer is always happy:-)