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

By Mark Rogers 

The Ancient Greeks had no gold.

So much has come down to us from the Ancient Greeks – philosophy, history, poetry, architecture and sculpture – that it is often forgotten that the Greeks were a relatively poor people for much of their history. What we know of the ancient Greeks was made possible by the defeat of the Persians, firstly by the Athenians at Marathon in 490 B.C., and then again in 480 B.C. when a large Greek army beat the Persians at Salamis. Without these defeats, the Greeks would have been subsumed under the despotic Persian Empire – with incalculable results not only for Greek culture but the whole of European history.

These defeats were the triumph of an agrarian and small city-state civilization, a people who struggled in fierce competition even to subsist on silver, over an Empire which at the time of its defeat had amassed a considerable proportion of the known world’s available gold; the robust determination of the Greeks not to vanish into an oriental despotism secured their victory over such a wealthy power, backed by gold.

Until then, gold had been centred on a territory bounded by Egypt, Asia Minor and the Black Sea; henceforth, gold was to move steadily into Europe, first through the agency of the Greeks and then the Romans.

But the Greeks had no gold of their own; indeed, they knew so little of the sources of gold that they were inclined, out of a sense of awe, to exaggerate the fame and riches of ancient sources such as the River Pactolus: this was the most renowned source of gold in the ancient world. Its identity now uncertain, it then flowed down from Mount Tmolus in the highlands of Anatolia, bearing vast quantities of alluvial gold, which tended to be the natural alloy electrum, “white gold”, composed of random quantities of gold and silver. In spite of Greek exaggeration, these quantities were huge enough, providing a rich source throughout the Persian and later Greek periods. Upon this wealth of gold was created the kingdom of Lydia, the most famous monarch of which was Croesus.

His eponymous (”as rich as Croesus”) wealth had a considerable impact on the Greeks. He was a sophisticated Hellenophile who went to great, indeed munificent, lengths to conciliate Greek feeling by the gold which he offered to the shrine of Apollo at Delphi – that most important of all the religious cities in the ancient Greek world, renowned for its political acumen and internationalism. Herodotus recounts that he  not only gave cups of gold and couches covered in gilt and silver, but also an immense quantity of ingots:

“He melted down a great quantity of gold and fashioned ingots from it, making them six palms [i.e. about 18 inches] in length and three in breadth, and one palm high; and their number was one hundred and seventeen. Four of these were of pure gold, each weighing two and a half talents [i.e. some 550 lbs in all]: the others were of gold alloyed with silver, weighing two talents each. And he also had made a lion of pure gold weighing 10 talents … and two mixing bowls of great size … of which the golden one … weighed over eight and a half talents. … He also sent the golden figure of a woman 3 cubits high … and dedicated his wife’s necklaces and girdles.”

Estimating that the ingots made of the alloy contained at least 50% gold then Croesus’s benefaction must have contained a minimum of 7,500 pounds of the yellow metal.

(Source for this article: C. H. V. Sutherland, “Gold, Its Beauty, Power and Allure”, 3rd revsied and enlarged edition, Thames and Hudson, London, 1969)

By Mark Rogers

In “Tales from a Palm Court”, Ronnie Knox-Mawer’s hilarious account of his years as a Judge in the last British colonies of the South Sea islands, he recalls his meeting with one of the island Resident officers. The living room of his Residence looked like a Victorian parlour, crammed as it was with artefacts, bric-a-brac, ornaments and furniture, including a harmonium.

The Resident, noticing the surprise on the Judge’s face, told him that the habit of keeping things ran deep in his family and recalled that on the demise of an aunt, there was found in her attic a large sack neatly tied with a label that read: “Bits of string too short to be of any use”…

The Victorian middle-class house was a place to keep things. Houses with capacious attics, rooms large enough to hold substantial wardrobes and chests of drawers, often a room given over to a library, and an ingeniously hidden safe – households were synonymous with saving and preserving. It was truly said: “The home should be the treasure chest of living.”

No room, no room!

Enter the brutalist and minimalist modernists. Surprisingly, the remark just quoted, so redolent of the sort of homes the Georgians and Victorians built, was made by Le Corbusier, more famous for his assertion that: “A house is a machine for living in”.

So which did he really believe? Well, he also said: “I prefer drawing to talking. Drawing is faster, and leaves less room for lies.” So let us look at a typical drawing:

This is the “Plan Voisin” of 1925, a proposal to bulldoze most of central Paris north of the Seine, and replace it with sixty-storey cruciform towers.

Jane Jacobs, in her seminal work, “The Death and Life of Great American Cities”, the book that demolished the inhuman assumptions of the modern movement in architecture, the anti-planner’s bible, notes: “In Le Corbusier’s vertical city the common run of mankind was to be housed at 1,200 inhabitants to the acre, a fantastically high city density indeed, but because of building up so high, 95% of the ground could remain open.” So perhaps the home as conceived by Le Corbusier was more of a machine in which to store human beings: as Jacobs mordantly remarks this was conceiving of the city “as a collection of separate file drawers”.

The vertical city as epitomised by the drawing above does not suggest that there is any room for storing and saving, indeed the design militates against these virtues, not least because in the absence of streets, there is no room in these cities for the arts and amenities of life – no streets, no shops and so no commerce: how were people to actually maintain and provide for themselves and the generations after them? The ordinary requirements of getting and spending, mundane productive labour, all these arts are overlooked by those who plan the shining path to the radiant future.

Indeed, everything that people used to provide for themselves, was to be provided by the authorities: thus is imprudence encouraged by such designs on people’s livelihoods.

What need to save, then, least of all in the safe haven of gold, that bulwark against the authorities’ own imprudence in imagining that people should be deprived of responsiblity for their own welfare.

By Mark Rogers

The Federal Reserve’s holdings of gold are not only non-existent, contrary to what many people understand, they do not even amount to paper gold.

In 1933, the first year of his presidency, President Roosevelt ordered the seizure of private holdings of gold (with some exceptions for jewellery and dentistry); this was followed in 1934 by the confiscation of gold from the banks. This was allegedly in response to the shortage of gold caused by the great depression.

In 1934 the United States fixed the dollar price of gold at $35/troy ounce (devaluing the dollar thereby). This became known as the “statutory” or “legal” price. In spite of all that subsequently happened, the U.S. refused to consider an increase in this price of gold, not the establishment of the Bretton Woods agreement and the International Monetary Fund, nor the devaluation of the pound sterling in 1949 which in effect raised the price of gold in the sterling area without a rise in its price in the dollar area.

In the 1950s the volume and value of the world trade in gold kept on increasing, leading to the idea that a universal rise in the price of gold could be brought about by its dollar revaluation. The growth of the world’s monetary gold reserves as then valued fell far below the increase in the current volume/value; thus, it became clear that the annual yield of new gold (at the same valuation) could not express the increasing volume of goods produced. The U.S. gold reserves had by now fallen to well below the level at which they guaranteed paper money. Nonetheless the U.S. price of gold remained the same.

Decoupling the dollar from gold

In 1972 the “statutory” price was adjusted to $38/ounce and again in 1973 to $42.22/ounce. These movements were followed in 1975 by the revocation of the prohibition on ownership of gold by private parties.

Amongst the banks that had had its gold reserves confiscated was the Federal Reserve – the Treasury was the authority which performed the confiscation. The fact that the Federal Reserve is quasi-independent of the government (somewhat analogously to the Bank of England before it was nationalized in 1946), explains the apparent anomaly of the state confiscating its own reserves.

The Federal Reserve was obliged to sell its gold to the Treasury at $20.67/oz, in return for which it received gold certificates worth around $3.617 billion.

So why does the idea persist that the Federal Reserve has any gold reserves at all? Because the deal done with the Treasury issued in those certificates just mentioned, which is why the Federal Reserve lists them, as the “Gold certificate account”, in its accounts, consistently valued at the final price of 1973.

The Fed’s “paper gold” not even paper gold

Dr Ron Paul, member of the House of Representatives, is the champion of getting the Federal Reserve to be audited by the Government Accountability Office: that task has always been undertaken by the Federal Reserve itself (surprising as that may seem). Hitherto his efforts at getting this into law have met huge resistance and evasion by the Federal Reserve (which is not surprising at all).

On the first of June, 2011, testimony by Scott G. Alvarez, General Counsel, and Thomas C. Baxter Jr., General Counsel, Federal Reserve (formal testimony here) before the Subcommittee on Domestic Monetary Policy and Technology, Committee on Financial Services, U.S. House of Representatives, Washington, D.C., of which Dr Paul was the Chairman, on Federal Reserve Lending Disclosures, exposed the nature of the “gold certificate account” in exchanges between Dr Paul and Mr Alvarez.

Crucially, it transpires that these certificates are not even claims to the actual gold that the Treasury confiscated. Said Mr Alvarez: “No we have no interest in the gold that is owned by the Treasury. We have simply an accounting document that is called gold certificates that represents the value at a statutory rate that we gave to the Treasury in 1934.″

In a fascinating analysis of this extraordinary statement, GoldNews.Com discusses what this means in terms of the relationship between the Treasury and the Federal Reserve: “The Treasury, however, in a desire to realize the value of the gold without selling it, used their gold as collateral against gold certificate issuance to the Fed in exchange for fresh cash for the Treasury to spend. The Treasury is able to print as many gold certificates as they choose, under one restriction from the Gold Reserve Act: the amount of gold certificates outstanding shall at no time exceed the value of gold held by the Treasury, priced at the statutory rate. This meant any increase in the value of the Treasury’s gold could be matched by printing gold certificates and those certificates could be used to acquire new Federal Reserve Notes (dollars) from the Fed.”

This is Quantitative Easing with a vengeance! In order to have more money to spend, the Fed is asked to print more notes, in return for which, and in order, presumably, not to disturb the “statutory” price recorded on the Fed’s accounts, the Treasury then prints more gold certificates.

An upshot of this is that the dollar is worth a good deal less than is assumed. And a corollary of this is that the manner in which the Treasury acquired the gold and its subsequent valuation as “gold certificates” would explain why, as noted above, the U.S. insisted on maintaining the dollar price at $35 for so long: it was an accountancy exercise and no more, and continues as such to this day.

Does this, at least in theory, mean that should there ever be a deal whereby the Fed buys its gold back from the Treasury, it would do so at that “price” on its books?

The analysis of this extremely complicated state of affairs by GoldNews.Com can be found here (Part One) and here (Part Two, from which the substantial quotation above has been taken).

Credit no measure of true value

Here, in the light of the above discussion, is a sobering observation made by C.H.V. Sutherland, then Keeper of Coins at the Ashmolean Museum, Oxford, in “Gold: Its Beauty, Power and Allure” (published by Thames and Hudson, 1969): “Collapse of the gold standard was followed by the era of credit currency. We accept a bank-note for the payment of £1, but in accepting it we receive in fact only the bank’s promise to pay £1. We accept a cheque, similarly; but a cheque again is no more than its drawer’s promise that his bank will pay us another bank’s promises. The growth of ‘money’ in this sense – and of course it is not money at all, in any true sense, but an extension of credit – is one of the most remarkable features of economic life since 1914 [emphasis added].”

There is considerable historical irony in the fact that President Roosevelt ended Prohibition in 1933, only to enact another prohibition on the private ownership of gold, with consequences which are still unravelling in the “current” financial crisis: I say “current” because the problems of paper money have been unravelling ever since the decisions about gold related above were taken – just as the same President’s New Deal, with its state-backed savings and loans funds, is a fundamental cause of the subprime crisis.

By Mark Rogers

This street 观前街 Guan Qian Jie, in Suzhou, near Shanghai, is full of Gold shops

During the seven days of the Chinese New Year’s holidays, people have bought 3.62 billion yuan’s worth (0.5761 billion dollars) of gold in Beijing, 15.5% more than last year. It was also reported that just two shops in Beijing during this same period managed to shift 1.5 tonnes (GoldCoin.org Chinese source). At GoldCoin.org we have previously reported on the expansive buying of gold in China in our article “Chinese queue at malls to beat Bernanke’s inflation with gold“.

John Stepek, editor of Money Week, recently pointed out that “Chinese citizens don’t have many options as far as saving their money goes – you can’t get an above-inflation return from your bank account, and the local stock market is a casino.”

What is happening? And why is it happening?

As with the eurozone, the flight – on this scale – into gold indicates extreme economic uncertainty and a desire to shore up one’s savings in the only real safe haven. Yet isn’t China supposed to be an economic powerhouse? Isn’t Beijing planning to float the renminbi (yuan), in an attempt to replace the dollar? Isn’t the Chancellor of the Exchequer actively working with the authorities in Hong Kong to make “sure that London is the western trading centre for the Chinese currency”, turning “the City into an offshore trading centre for the renminbi” (The Financial Times, 16 January, 2012)? The renminbi is about to become fully convertible this year – isn’t it?

Well, perhaps not: “capital account liberalization looks off the table … At the moment, the transfers out of China are manageable, but then again the economy has only begun to falter. No officials, even ones less obsessed about control than Beijing’s, would open up a capital account in a quickly deteriorating economic environment. Therefore, events are working against Zhou Xiaochuan [Governor of the People’s Bank of China], and so is Chen Deming, the boss of the Ministry of Commerce. Chen has tenaciously defended the interests of exporters by blocking currency liberalization, and with the country’s trade surplus set to decline—to about $150 billion last year from $183.1 billion in 2010 and $196.1 billion in 2009—it is unlikely that Chen will now let central bank reformers get their way. … If Beijing opens the currency wall and the markets are not ready, flows of investment cash could—and probably will—lead to a catastrophe. At this time, it will take years to get China’s banks and markets in shape for unregulated flows of currency. So don’t expect capital account convertibility this year or even next.” This is the analysis of Gordon Chang (author of The Coming Collapse of China, and Forbes contributor, here: “China says Yuan will be fully convertible soon”).

Declining demand for Chinese exports

Certainly the Chinese economy gives plenty of reasons for this degree of pessimism. One of the most important indicators of China’s burgeoning woes is the troubled eurozone: Europe was China’s biggest export market, but Europe has practically ceased importing. The immediate consequence of this is that recession is perceptibly looming in China, indeed there are, for example, reports that China’s steel industry is seriously struggling with the potential closure of many mills (The Economist, Jan. 23-Feb. 3, 2012). Add to this the optimism expressed at the recent Davos summit by American business leaders that the coming on stream of shale gas in the United States is going to dramatically reduce manufacturing energy costs there, thus enabling American manufacturers to repatriate production.

So does this explain the Chinese flight into gold?

Inside a typical gold retailer in Suzhou, China

See a previous article on Goldcoin.org called “1 Billion to buy gold as Chinese gold rush grows” for some facts and figures.

The figures are certainly impressive – not to say astonishing. But is it certain that these figures represent only concerned citizens anxious to preserve their wealth? The active encouragement of the People’s Bank of China, referred to in the cited article, that “1 Billion Chinese citizens buy gold as a way of preserving and protecting their wealth against inflation, economic crisis and the falling values of major currencies” could bear another interpretation: namely that the Chinese authorities are contemplating at some future tipping point to announce a patriotic handing over of individual gold holdings to the state – i.e. confiscation.

Moreover, let us look again at the declared intention of that same People’s Bank of China to make the renminbi fully convertible this year. The massive purchases of gold may have yet another interpretation: as a means of supporting the value of the renminbi when it floats in spite of the problems that both Mr Chang and Mr Stepek discuss in their articles cited above. And that raises another enigma.

China remains, politically, a Communist state, and remains fundamentally unfriendly to the Western powers – witness its recent active unwillingness to censure the Syrian butchers. That it has liberalised its economy since the reforms of Deng Xiaoping, and that this has opened trade barriers and brought prosperity to millions of Chinese is not to be doubted; but this has all taken place in terms of a closed political system that holds the whip hand over the economy, “state capitalism” interpreted in the interests of the Chinese Communist Party, that is, a fascist-corporatist economic model.

This raises intriguing possibilities in terms of those thousands of purchasers of gold. For while there are corporations that clearly function under the rubric of the Chinese State there are many more enterprises that appear to be private corporations but are in fact shells for the State (the Chinese corporate structure emulates in many ways the systems of incorporation that for a long time successfully hid the fact that ultimately it was the shameless and cruel King Leopold II of Belgium who owned the Congo Free State). And just as this operates at the corporate level, so may it operate at the individual level: there is simply no way of knowing how many of those individual or smaller-scale enterprises who are buying up gold may in fact be agents of the state.

A Chinese Gold Standard?

Remember that according to the World Gold Council and GFMS reports, China is the World’s largest producer of gold and is second only to India for gold consumption (but catching up fast). No coincidence here either!

So to answer the questions raised at the beginning of this article: What is happening? We don’t actually know. And why is it happening? One shudders to think….
…. But then imagine if one day the Chinese government “requires” private investors to place their gold in the People’s Bank for the good of the Nation – the national gold stock would swell considerably – maybe enough to back the Yuan with a Gold Standard and thus achieve its ambition to be the World’s Reserve currency?

A young investor contemplates the potential of gold

Shaw was the most consistent socialist of the Twentieth Century in being the advocate of Lenin, Mussolini, Stalin and Hitler. He saw quite clearly that they pursued socialist policies, and equally admired their penchant for violence and destruction: this counted for a lot with Shaw, who was willing to see museums, cathedrals, galleries and libraries blown up as symbols of the past which obstructed the creation of a new mankind (he not infrequently proclaimed his own superiority over Aeschylus and Shakespeare).

He enjoyed rubbing his audiences’ faces in what he saw as the absurdities of the capitalist system; one technique was to claim that his own understanding of how it worked was greater than the average person’s. He was a very astute capitalist when it came to promoting his own plays: he insisted on charging very low royalties, particularly for amateur drama societies. This made him rich, because it ensured that his plays were performed more frequently than those of his contemporaries – and he lived a very long life!

Not for the first time did a socialist, while swallowing his own inconsistencies, claim to penetrate to the heart of the system’s inconsistencies. He was, in short, a rhetorical poseur, who was nevertheless occasionally astute about what he despised; here are his observations on gold:

“The most important thing about money is to maintain its stability, so that a pound will buy as much a year hence or ten years hence or fifty years hence as today, and no more. With paper money this stability has to be maintained by the Government. With a gold currency it tends to maintain itself even when the natural supply of gold is increased by discoveries of new deposits, because of the curious fact that the demand for gold in the world is practically infinite. You have to choose (as a voter) between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government. And with due respect to these gentlemen, I advise you, as long as the Capitalist system lasts, to vote for gold.”

Another inconsistency, of course, is that under the dictatorships he admired there was never any contest as to the trustworthiness of the Government. Everything, and not just the money system, was ruled by fiat.

Now that the tribulations of the Twentieth Century have demonstrated the superiority of capitalism and markets to the horrors of the tyrants that Shaw endorsed, a vote for gold is therefore a vote for capitalism, especially as a haven from its present woes. In fact, of course, the developed nations are passing through the consequences of the protectionist-corporatist approach to the risks and benefits of markets, which has been most widely expressed over the late Twentieth Century in the consensus that confidence can and should be voted in “the honesty and intelligence of the members of the Government”, with the result that though everyone likes, inconsistently, to blame the government, everyone also seems to have no trouble in believing its paper promises.

The hope must be that the current crisis may concentrate people’s minds on what makes for true value and how it can be recovered and maintained. A tall order, but a start must be made, and where better than voting for a little gold of one’s own…

You know how it is: it’s January and already the film critics are exhorting one and all to see “this year’s best movie”. With another 11 months to go, how do they know?

Nothwithstanding such follies of prediction, I am going to announce the Barmiest Political Story of the Year. And no, it is not the euro-shenanigans…

It was reported in The Sunday Telegraph, 5 January 2012, that last year the Indian Government tried to reject Great Britain’s development aid largesse. The U.K. Department for International Development has spent in excess of £1 billion over the last five years in “aid” to India, with a further £600 million earmarked up to 2015, corresponding to about £280 million per year.

This in spite of the fact that “the then Foreign Minister, Nirupama Rao, proposed ‘not to avail [of] any further DFID assistance with effect from April 1, 2011’.” In tune with the April folly, the British government declined the saving offered by India, officially now ranked as a middle-income country.

And what was the reason?

To save politicians’ faces. “They said”, continues The Sunday Telegraph correspondent Andrew Gilligan, quoting an anonymous source, “British Ministers had spent political capital justifying the aid to their electorate. … They said it would be highly embarrassing if the Government of India then pulled the plug.” Highly embarrassing? Wasting taxpayers’ money, when the recipient has declined it? Which is stupider: looking foolish because the DFID has ignored the tremendous growth in Indian prosperity? (And at an annual growth rate of 10%, that’s growing! Within the decade, the Indian growth rate is projected to be greater than Britain’s.) Or looking foolish because it is determined to persist in an unnecessary and demeaning expenditure, especially in these would-be austere times?

The Indian Government regards the aid as belittling, as if India was still being regarded as an impoverished country. Said the Finance Minister, Pranab Mukherjee: “We do not require the aid. It is a peanut in our total development exercises.”

This is a land where even the peasants invest in gold: “The IMF estimates in fact that Indian homes alone represent 15,000 tons of gold,” notes Jean-François Faure in “Gold: an investment and an insurance that reassures” (transalation). And here at GoldCoin.org we reported on January 14, 2011 that “India is responsible for one quarter of the global imports of gold.”
Gold is immensely important in India, even for the poorest families because it represents some sort of status; this is because gold jewellery plays an essential role in Indian marriage customs and ceremonies. It is a measure of both prudence and munificence. The U.K., the government of which has long since forgotten the first of these, and then makes a pretence of the latter, has no business being spendthrift with money it really hasn’t got.

Savings, anyone?

by Mark Rogers

“The physical gold market is actually being drained by euro gold buyers. People are converting their euros to gold and there is only a finite amount of physical gold available.” The “London Trader” made this assertion to King World News on January 17, 2012.

He also expressed concern over the amount of “paper gold” being created: “Yes, you will still see games being played and yes you can create paper gold out of thin air. But there comes a point where each time you do that the physical buyers are taking it and it has a lagging effect that will catch up, and eventually it gets reflected in the price.”

What is “paper gold”?

As might be inferred, it amounts to a trick.

“The IMF actually invented what became referred to as “Paper Gold” in 1971 – months before the U.S. severed the tie between the Dollar and Gold.

The IMF knew this step was coming, and so it invented the “SDR” (Special Drawing Right).

It was touted as a Reserve “Currency” that would replace both the U.S. Dollar and Gold in the basements of the world’s Central Banks.” source: The Privateer

This is astonishing: the yellow metal, something solid, something of genuine value was going to be replaced by – paper! It gets worse: in discussing StreetTracks Gold Shares (ticker symbol: GLD), the NYSE-listed exchange-traded fund sponsored by The World Gold Council, James Turk (Founder, Gold Money) explained on March 5, 2007 just how this paper gold “functions”:

“Investments in gold can be nearly anything gold related. For example, they can be gold certificates and other promises to pay gold. Importantly, they do not have to be physical gold. Therefore, all GLD has to do to satisfy its auditor is to show them the bank statement (i.e., a piece of paper) that says gold is stored in any Subcustodian appointed by the Custodian. The auditors do not have to go to the vault of the Subcustodian to prove that the gold actually exists, is not encumbered in any way, is securely placed in allocated storage, and accurately records the ownership of the fund.

“If GLD declared its asset to be “Gold”, the fund’s auditor would have to substantiate that the gold really exists, which GLD of course cannot do because of the inability to audit or even inspect gold stored in subcustodians and sub-subcustodians, which is a risk noted in the prospectus. This reality just re-confirms what I and others have concluded all along – GLD is just a paper scheme. It should not be considered as an alternative to physical gold ownership because it is not.” source: The Paper Game

This happens because what is being traded is called “Investments in Gold” rather than “Gold” as such. So in effect this is trading on a promise, and a loose one at that. One must wonder why the World Gold Council endorses what looks suspiciously like a fraud: read more of Mr Turk’s article to discover how trades in these “assets” can result in two people owning the same piece of gold!

Friedrich Hayek pointed out that merely putting the word “social” in front of a legitimate concept (e.g. “social justice”) automatically deprived that concept of meaning; the word “paper” clearly fulfils the same function in high finance….!

by Mark Rogers

Earlier this month on Goldcoin.org, we looked at hazardous gold mining operations in South America (Unclean Gold). The context was the Peruvian economist, Hernando de Soto’s findings that the vast majority of the world’s poor operate in economies that give them no access to title and other capital-realizing legal arrangements. There will be a great deal more to say about these insights, but here I want to address an important distinction that needs to be made about eco-crisis and the environment. This is to clear up some of the misapprehensions voiced by critics of capitalism and free trade, such as “Occupy” and many of the rancidly left-wing organizations financed by Soros.

The anti-globalization movement has global ambitions far in excess of those entertained by the merchants and manufacturers who drive globalization. The latter want to acquire or produce their goods at the best possible costs and sell them for the best possible prices. Not only are these relatively modest ambitions, but they are also perfectly normal: merchants and manufacturers down the centuries have always traded on these assumptions.

A main platform of anti-globalizers against the despoliation allegedly caused by capitalist enterprise is environmentalism, and this vision is entirely holistic – i.e. global! They also embrace goals far in excess of what any economy can bear, especially a developing one: the grandest is the demand that carbon emissions are reduced by an improbable amount in an unachievable time…

The reason: “global warming”. However, this is an ideology and can have no bearing on what real people struggling in real economies must do to survive and prosper. Hence the refusal of India and China to sign up to carbon quotas; hence the puzzlement of Africans and South Americans that they should be sacrificed, denied the possibility to improve their lot because of the perceived “fate of the earth”.

Global warming is now a legislative fact, and it is so because the wrong science is used: the study of the “greenhouse effect” is based on the composition of gases, i.e. chemistry. However, what drives the climate is convection, i.e. physics. The Earth is 70% water, and the land mass that makes up the rest contains high mountain ranges: the effect is the creation of a planetary climate which helps regulate temperatures over time.

“Environmentalism” is merely another attempt by those who despise wealth creation, and all the benefits that flow from it, to reduce western economies and suppress emerging ones.

Yet are there not serious ecological problems such as the unclean and illegal gold mines discussed earlier? Of course there are, but refusing to be blinded by environmentalism means approaching such eco-crises more circumspectly. That is, each crisis must be seen on a case-by-case basis, and not dove-tailed into a wider and misleading perspective. Why should what needs to be done – and more to the point that can be done – to alleviate a local problem, be deferred until globalization and the environment are “fixed”? The attempt to co-opt the unclean gold mines into a productive framework, would demonstrate that such problems can be solved on their own terms – and give true value not only to the gold extracted but to the lives and work of the extractors.

By Mark Rogers

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!

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

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?

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

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 G20 in Cannes is in crisis as its host President Sarkozy remains distracted by the Greek referendum announcement and the implications for his cunning Franco-German solution, hatched with best chum Chancellor Merkel to the European debt crisis.
The G20 group accounts for 80% of global wealth but also brings together huge differences in perception of where the world is at.

The Chinese have 3 Trillion dollars to help out the troubled western economies if it chooses. But then the Chinese are a nation of savers, hard earned cash they earn from long days of toil, often in self-enterprise ventures, is regularly put aside as investment for their future. On average the Chinese put aside 25% of monthly income for a rainy day. However their view of our crisis is somewhat different as one guy likened it to “ a bankrupt wealthy old man asking a poor man for money”. Some Chinese also remember the past experiences of decadent Western capitalism and imperialism. As Holly Williams from Sky News said “They don’t see why they should invest their hard-earned savings to help out economies and people to continue to have much more than they ever have had or ever will.

It is worth remembering that the average Chinese citizen lives below the poverty line and the new found wealth and middle class does not benefit the majority of China’s population – just like every other country you may care to analyse. The distribution of wealth always remains top heavy to keep our governing powers in the manner they’re accustomed and the bankers with enough profits to pay for it as well as their own hefty bonuses.

If you want to know to whom all the “money” has been paid that has resulted in this planet-sized debt then look no further than Goldman Sachs, their lawyers, all ex-heads of state and the personal fortunes of other prominent world politicians over the last 40 years, the Federal Reserve, the history of the Rothschild fortune and the IMF.

Will this debt ever be properly accounted for or ever paid back? No and No.

That’s why China does not want to lose value of its accrued wealth to the whims of US or European debt. Both lack a credible and coherent plan. Obama and Sarkozy have both got one eye firmly on domestic matters as they prepare for re-election next year.

Greek Tragedy?

The joke is they were all so smug thinking they’d sorted out a plan to buy time with Greece and then Papendréou goes and drops a bombshell with his referendum offer as a democratic gesture to the Greek people – oh yeah!
Trouble is he doesn’t actually care because he has nothing to lose and he knows what is coming as we wrote in “Greeks prepare a coup d’état ?”

He has taken this opportunity, his last on the European and G20 stage, covered by the world’s media, to play centre stage and enjoy his moment. He was called before the Headmaster and Headmistress of the Franco-German alliance, to explain his unilateral approach to life and to discuss the question that will be put on the referendum.
He indicated that sovereignty of Greek affairs remained the jurisdiction of the Greek parliament and its decisions are binding before all others and not open to outside interference. So not your average pro-European stance!! As I’ve said he’s got nothing to lose and knows what is coming.

US upgrades priority on plans for Iran airstrike

I also heard that the US and therefore by default the UK as well are bringing forward their plans to conduct air strikes on Iran. Seems they’re centrifuges are back in business as is the possibility of producing weapons grade nuclear material. Looks like they’ll hit their not-so-secret secret mountain production facilities. Intelligence reports backed up by International Atomic Energy Agency gives this story more than usual credibility. The word on the street is that Obama is nervous.
Israel says report proves “we told you so” for years that Iran posed a significant threat to its existence.

UK General strike will paralyse a nation

In the UK a massive general strike looks set to take place at the end of the month over public sector pension reform plans. The nation could be brought to a standstill with a 3 Million walkout planned. Negotiations between the Government and Trade Union leaders are not making any progress even if there is an improved offer on the table. The taste of austerity is always bitter.

Silvio doesn’t want to spoil a party

Finally Italy rushed out a message on the eve of the G20 to announce a package of austerity measures no doubt to comply with some previous handshake and just to make sure drinks with the others went well in Cannes! We’ll believe them when they’re implemented, successful and have brought about the desired effect.

Ever wondered why the announcements of “new improved measures and offerings to us all” from politicians always get great airtime but we rarely see a “results show” – then again fixing figures is a way of life for some so don’t settle for less than “seeing is believing” proof.

Crisis, what crisis?

So the world, its economies, all nations and globalization are working fine and there’s nothing to worry about – fine – and remember in this case do nothing, just enjoy every moment of a beautiful daily life.

If you thought for one minute this may be in jeopardy would you insure against it? Just like you would a car against an accident so you can afford to replace it if necessary, or against a fire so you could rebuild your home?

How do you insure yourself against a crisis?