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.

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

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!]

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:-)

A Portrait from circa 1895

(Adapted from Cochran, Robert, The Romance of Industry and Invention, W.&R. Chambers, London, no date, but clues in the text imply 1895)

“The railway journey from Capetown to Johannesburg of almost three days is through a seemingly endless sandy country, with range succeeding range of distant mountains, all alike, and strikes a greater sense of vastness and desolation than an expanse of naked ocean itself. Well, we reach Johannesburg, which has not even yet, with all its wealth, a covered-in railway station; whilst by way of contrast, just across the road is a huge club, with tennis, cricket, football, and cycling grounds, gymnasium, military band, halls for dancing, operas, and oratorios, &c., which will bear comparison with any you please. Its members are millionaires and clerks, lodgers and their lodging-house keepers, all equal there; for we have left behind caste, cliques, and cathedral cities, and are cosmopolitan, or, in a word, colonial. An institution like this gives us the state of society there in a nutshell, for, as wages are very high, any one in anything like lucrative employment can belong to it; and the grades in society are determined by money, and money only.

“Johannesburg, the London of South Africa, which was a barren veldt previous to 1886, is now the centre of some one hundred thousand inhabitants, and increasing about as fast as bricks and mortar can be obtained. It is situated directly on top of the gold, and on looking down from the high ground above, it looks to the English eye like a huge, long-drawn-out mass of tin sheds, with its painted iron mine-chimneys running in a straight line all along the quartz gold-reef as far as you can see in either direction. The largest or main reef runs for thirty miles uninterruptedly, gold-bearing and honeycombed with mines throughout. This, even it were alone, could speak for the stability and continued prosperity of the Transvaal gold trade. In a mail-steamer arriving from the Cape there is sometimes as much as between £300,000 and £400,000 worth of gold, and the newspapers show that usually about £100,000 worth is consigned by each mail-boat.

“It was one Sunday evening in 1886 that the great ‘find’ was made which laid the base of the prosperity of the Johannesburg-to-be. A farm-servant of the brothers Struben went over to visit a friend at a neighbouring farm, and as he trekked homeward in the evening, he knocked off a bit of rock, the appearance of which led him to take it home to his employer. It corresponded with what Struben had himself found in another part, and following up both leads, revealed what became famous as the Main Reef, which was traced for miles east and west.

“With this discovery the name and fame of ‘the Rand’ were established, and for years the district became the happy hunting ground of the financiers and company promoters. The Rand, or Witwatersrand, is the topmost plateau of the High Veldt of the Transvaal, and on the summit of the plateau is the gold-city of Johannesburg.

“Soon the principal feature in Johannesburg was the Stock Exchange, and the main occupation of the inhabitants was the buying and selling of shares in mining companies, many of them bogus, at fabulous prices. Today the city is the centre of a great mining industry, and the roar of the ‘stamps’ is heard all round it, night and day. From a haunt of gamblers and ‘wild-catters’, it has grown into a comparatively sedate town of industry, commerce and finance, and the gold-fever which maddened its populace has been transferred (not wholly, perhaps) to London and Paris.

“The Stock Exchange of Johannesburg sprang into existence in 1887, and before the end of that year some sixty-eight mining companies were on its list, with an aggregate nominal capital of £3,000,000.

“In 1887 the Transvaal produced only about 25,000 ounces of gold; in 1894 the output was 2,024,159 ounces; in 1895 it was 2,277,633 ounces.

“As to the future of the South African sources of supply, it is estimated by Messrs Hatch and Chalmers, mining engineers, who have published an exhaustive work on the subject, that before the end of the century the Witwatersrand mines alone will be yielding gold to the value of £20,000,000 annually; that early next century they will turn out £26,000,000 annually; and that the known resources of the district are equal to a total production within the next half century of £700,000,000, of which, probably, £200,000,000 will be clear profit over the cost of mining.”

Dr Eamonn Butler, of The Adam Smith Institute, in one of his more recent books “The Rotten State of Britain” (Gibson Square, London, 2009), gives a succinct account of the regulatory burden on Britain:

“Each year, the state requires us to fill out more than a billion forms. And each year, the government passes twenty or more major laws. It also approves around 3,500 regulations, amounting to around 75,000 pages of rules, with another 25,000 pages of explanation.” He goes on to point out that “[i]n 2009 the British Chamber of Commerce reported that the cost of regulation on businesses rose by more than  £10 billion over the year before, to a staggering £76.8 billion. That’s more than six times the 2001 figure.”

The picture painted would be only too familiar to anyone attempting to do business in the developing world – even more so. There are places where, for example, it takes nineteen years to fill out the government paper work before one can start a business, or others where the forms to be filled in, laid end to end, lengthen out to 11 miles (for more details read Hernando de Soto’s classic “The Mystery of Capital”, probably one of the most important books on economics published since Adam Smith wrote “The Wealth of Nations”, and for the same reason: he describes in clear prose exactly how a developing economy works).

The effect of all this is of course in both the developed and the developing world deeply discouraging to enterprise. People simply don’t bother – or, in the developing world, go into the extra-legal economy. But the combination of the unnecessarily complex regulatory regimes in the developed world with the economic meltdown of the financial crisis, raises an interesting question which is the corollary of the matters I discussed in the recent post What is Money?

Are we in effect in the western economies entering a phase which we could call “de-development”? As Dr Butler rightly points out with reference to the regulatory burden: “Nobody can possibly keep up with this torrent of red tape.” And that inability has profound effects on the way business is conducted: people become increasingly careless of the law – such regulatory burdens always have the consequence of bringing lawmaking and legal processes into contempt – to our cost.

For if we live in a “knowledge economy”, then the foundation of that economy is the law. Indeed, in “The Mystery of Capital” referred to above, de Soto demonstrates that all successful economies are based on knowledge – economic facts enshrined in legal documents the ultimate purpose of which is to anchor title to property, making it justiciable and thereby tradeable and negotiable. It is the legal fact that comes first: that title is ultimately justiciable means that it can be safely traded, in the knowledge that any disputes that may arise have an objective forum in which they may be peaceably settled.

It is this that government regulatory systems destroy (in the case of the west) or prevent (in the case of the developing world).

In a thoughtful and alarming analysis, de Soto’s immensely fruitful work in the developing world enables him to see with great clarity just what are the roots and mechanisms of the financial crisis: “The Destruction of Economic Facts“.

By Howard R. Gray, Guest Contributor

When Debt’s Called Credit (1), (2) and (3) looked at the follies of the modern mortgage. In the following piece, Howard R. Gray, Chartered Surveyor and Barrister at Law of Lincoln’s Inn and the Middle Temple, discusses the alternatives to foreclosure.

Why should mortgages be hostages to fortune?

The concept of a loan secured upon real estate has been a standard feature of our society: Common law systems have used real estate as a fundamental element of wealth. The engine of society must be production, distribution and sale of goods and services, and these need to be financed. Loans come in two main varieties, secured and unsecured; as would reasonably be expected, security is preferred and thus the mortgage provided the very best security for commercial transactions.

So what exactly is the mortgage? The dead pledge is that the real estate is held in a shell form by the home purchaser until the loan is paid, while ownership in real estate terms is recognized to be in the hands of the owner of the property. However, the truth is the mortgagee has the power in theory to reclaim his money should the mortgage payments fail to arrive on time. We’re used to the situation, though there have been very serious problems with the way mortgagees choose to bundle mortgages, treating them as negotiable securities. This has become such a problem in the U.S. that situations have arisen where mortgages are so muddled administratively that it is frequently impossible to know who has title to the income stream as mortgagee.

Foreclosure and Perpetual Institutions

Let me tell you what happened during one of my property cases many years ago. My client owned two properties in London, one in Camden Town and one further north towards Alexandra Palace. He was behind in his payments on the Camden property and found himself in court in foreclosure proceedings:  the usual method was to repossess the property, sell it cheap and recoup the difference, if possible, from the mortgagor.

I thought this innately unfair and frankly inequitable. I therefore broached the perpetual nature of banks: the mortgagee (a recently converted building society) took great umbrage at this idea. The question was simply: if a bank is a perpetual institution why is it selling property on the cheap when it could quite as easily hold onto it until the market turned as it always does, recoup the loan plus any ancillary expenses and, of course, hand back the difference to the mortgagor. Does this not appear to be a thoroughly equitable solution to a very unpleasant financial situation? The response was most alarming: defending counsel was spat upon by the solicitor for the bank!

Moral of the story

Banks generally are perpetual so long as they are properly managed. The truth is that banks being in the real estate business should be better equipped to be in that market during a recession or depression. Writing off loans, attacking mortgagors’ equities, often negative or thoroughly underwater during a recession, results in spectacular losses. Most mortgagees (the banks) ignore the benighted borrowers unless so large they threaten the bank’s viability: so why not immunize against such threats?

If Freddie Mac and Fannie Mae had been disenfranchised from foreclosure in the first instance and had been made to stand back and look into the future and consider the possibility of managing underwater real estate, loans would have been factored to take that possibility into account. Given that recessions come and go and that banks are perpetual entities, by smoothing out repossessions over time very large elements of risk in real estate finance would disappear.

Since banks in any event hold onto properties in excess of 20 to 30 years why should they be shy of holding onto a property for three or four years to await a return to normality during a recession? While it is true that such a procedure might tie up funds, nevertheless a smoothing process which prevents a precipitous collapse in value through inimical short-term behaviour can only improve investment strategies for lender and borrower let alone the nation.

It would behoove the banking system to come up with this sort of arrangement rather than ask the government to do it for them. Now that gold and silver are becoming increasingly valuable it is high time to back up this process by ensuring some more rational security is built into the real estate market. By way of example, multigenerational mortgages exist in France, meaning that longer time horizons do not have to be a problem even for the shorter terms we are used to: this suggests that there are means of ensuring that foreclosure procedures could be smoothed out, as well as ensuring that the market waves are taken into account ab initio when the mortgage is granted.  

Money out of nothing – or gold?

Governments which overspend do not have a clue how to operate other than by creating money out of nothing or raising taxes. By having a mortgage market that can ride out economic waves there would be potential for underwriting the real economy as opposed to the fantasy economy of economically predatory governments. It won’t prevent government from fiscal irresponsibility but it might slow down the crash a while.

Introducing some form of gold valuation as an ancillary method of making real estate credible and tradable, should the currency collapse completely, ought to be carefully considered: this is a question of innovative contract design. Revaluing English real estate in the rental sector with regular rent reviews has, for example, been largely successful in dealing with inflation. If value is going to diminish significantly over time because of recession, why not make allowances for it and use some form of valuation based upon gold, coupled with foreclosure extension. This could be a short term method for the duration of a currency collapse.

Linking the value of real estate to gold through an underwriting formula is not an unreasonable proposition. Whatever the dollar or pound price of a good such as a Saville Row suit, pricing it in gold does not change much in the simple weight of gold. Real estate would work in the same manner: while for the most part the price of the real estate may go up or down, nevertheless, there would remain a component of the price that wouldn’t change much in real value over time, although it may change by significant amounts when measured in fiat currency terms.

Sustaining value

The simple conclusion is that banks are perpetual entities: they will be around after all the mortgagors have passed out of this world. It is not unreasonable to suggest that foreclosure should not entail the complete destruction of a loan contract. Given that recessions, depressions and booms are the norm in real estate as they are in the rest of the economy, nor should it be unreasonable to take account of this nature of the market by using a smoothing process to deal with a failure of the mortgagor to make his payments in full and on time. Since so many mortgagors have considerable equity in buildings this situation should have some form of protection in the loan recovery process. The market will develop ways to handle a creative process to allow a mortgagor to at least recover his investment just by allowing the market to turn back to an upward move in value.

By sustaining the value of buildings and preventing mortgagors from defaulting while awaiting a market turn coupled with creative processes to handle this there will be far fewer buildings coming onto the market in a distressed condition thus destroying overall building values during the pit of a depression.

By Mark Rogers

At the end of the post on the U.S. Federal Reserve’s non-existent gold I quoted C.H.V. Sutherland on paper money, which he points out  ”is not money at all, in any true sense, but an extension of credit”, hence “credit currency”. The latter term now of course encompasses electronic money, the device which makes quantitative easing so much easier.

The idea that paper or electronic money is really nothing more than an extenstion of credit, a promise to pay, raises an interesting point: to borrow money is in effect to take out a mortgage on the paper credit you hold and earn, that is, to extend credit on the basis of credit currency earnings is to extend credit on credit.

This raises the issue of trust that lies behind such a system to the level of the most important practical as well as moral feature of that system, and potentially compromises any sense of value that the monetary system embodies.

This post is by way of reflecting on some basic ideas about value and how it arises and what systems best embody it and allow it to function. These are introductory ideas merely, and the examination of this problem will continue in later posts, embracing history and anthropology as well as economics.

Hernando de Soto (whose work has already been referred to here and here) makes the interesting claim that we are only beginning to understand the nature of money, what brings it into existence and what supports it. His work in the extra-legal economies of the developing world has thrown up this question in sharp relief. His discovery that the poor, some 87% of whom live and work outside any formal legal structure, are camping on assets worth trillions (the value of which cannot be realised because of the absence of workable legal systems that realise title to those assets), raised the question of how assets are dissociated from their potential value.

There would appear to be a formula that runs from assets to value to capital to money, and that the jump from the first to the second of these, which in turn gives rise to the latter two, is a jump over a very large gap. That jump is taken very much for granted in the developed world because we do it all the time without necessarily realising it, so secure are our legal arrangements; but the gap effectively immobilises the poor in developing economies. They have assets in the form of unrealisable savings, which renders them, therefore, essentially worthless.

There is an interesting anthropological speculation arising from the idea that without property there can be no money system: that is if the formula suggested above turns out to be a true and fruitful one, then the common understanding that things such as cowrie shells and cattle were a form of pre-currency is a misunderstanding of the functions of money. That is, they may have been no more than a more highly stylised form of bartering and possibly, again against previous understandings, a less efficient one, not a rationalisation that led in time to formal money currencies.

If money only arises against a property system, and that in turn is the result of the development of formal legal systems, there can be very little connection between any system of bartering and formal money. The idea that money is a realisation of value inherent in property means currency is the result of a property holding system which, to be realisable, must have clear title. Then, on the basis of that title, the value of the asset can be ascertained and then realised as capital which then has a representational form as currency. That is, money as a representation of value, as a means of realising that value and being a store of that value is the result of a legal system that can render property fungible – that is, that the asset can be more than one thing.

This, of course, means that property is a form of savings, and that savings are therefore at the root of money. As we have seen in earlier posts, savings have been under attack throughout the twentieth century, with Keynes as a cheerleader of that attack, an attack which has been redoubled recently with quantitative easing and with measures against the purchase of gold being enacted in Europe. Even George Bernard Shaw saw through the paper money promise and recommended the purchase of gold! 

The failure to realise the necessity of savings and their wider functions in a workable economy is at the root of the financial crisis.

Those wise Cantonese grandmothers in Hong Kong understood the vital nature of savings – and, moreover, the best way to store them as gold.

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.

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…

We will now deal with one of the highest sold investment coins in the world, manufactured on Mexican territory. It is called the Ounce or Libertad.
Its origin dates back to 1981, and coming to enrich the gold investment market where hitherto only the Krugerrand had existed since 1960 with the Maple Leaf in 1979. At the beginning, this Mexican gold coin was called `Once’ but a few years later, its name was changed to that of `Libertad’.
It is a coin used as legal tender in Mexico (the silver coin is not considered legal tender, only that made out of gold), classified Type I and as opposed to other gold coins, this one does not have any face value. Thus, its value has to be measured in weight. If we want to calculate its face value, we can obtain it by converting its weight according to the current rate of exchange for gold’.

Origins

In the Seventies, while we were going through a serious oil crisis, it was necessary to develop new products which were going to make it possible to get out of the crisis. It was then that the Bank of Mexico, under the leadership of Gustavo Romero Kolbeck, entrusted the project to the Museum of Currency to manufacture a gold coin with the weight of one ounce, and who would be historically-speaking linked to the famous coin of `50 pesos Centenario’ (about which we wrote in another article), and which represented the centenary of Mexican Independence.

Features

Its weight is of 34.55gr, 900 thousandth of gold (of those struck between 1981 and 1991), with a diameter of 34.50 mm, 2.50mm in thickness, that is to say a total weight of 31.03gr. of gold with the remainder in pure silver.
At the time of the first run between the years 1981 and 1991, the coin was struck in 3 distinct weights, namely: 1 ounce, ½ ounce and ¼ of an ounce.
Between 1989 and 1991, the run of the Libertad was stopped then restarted in 1991 by supplementing the range with two new weights: 1/10th of an ounce and 1/20th of an ounce. Which meant that the coin was offered in 5 different weights.
In 1991, the purity of gold was also reviewed for this coin since it moved to 99.9 (0.999) – as well as the weight of an Ounce to 31.10gr.
These changes were from now on classified under Type II.

1 Ounce

1/2 Ounce

1/4 Ounce

1/10 Ounce

1/20 Ounce

Obverse and Reverse

Libertad' gold coin of 1981

The obverse of these coins bears the coat of arms of Mexico while the reverse `the Alada Victory’ – the same as on the coins of 50 pesos Centenario. In its right hand, it bears a laurel wreath which represents victory and in the left hand a broken chain which represents freedom – in the background, the Popocatepelt and Iztaccihualt volcanos, the first considered as a divinity during pre-Hispanic times and venerated by the Aztecs.

Overlooking the volcanoes and inserted next to the Alada Victory is written `1 Ounce of Pure Gold’ (on the left side), the year 1981 (on the right-side) and below: Mexico City (this was for the coin of the year 1981).

On the coin of 1994, appears `1 Ounce’ on the left side, `Pure Gold” on the right-side, and, on the edges of the lower part, we see the year, Mexico City and the law.

Libertad' gold coin of 1994

The Eagle takes up the middle part of the obverse, left profile outlined, with raised wings, in position of combat, inserted on a prickly pear cactus (national symbol of Mexico), holding a snake in its beak. Across the whole coin is written Estados Unidos Mexicanos (United States of Mexico).

In 1996, the appearance of this coin underwent a few changes. The Bank of Mexico decided to apply these changes in order to make this coin more attractive to the public. In this way, the obverse now bears in addition to the central eagle of the Mendocino Codex, the letters of 10 escudos all around as well as various types of eagles belonging to the succession of governments of the Mexican State, including the First Empire of Iturbide, Porfirio Díaz, the Aztec Eagle, etc…

On the reverse, the Alada Victoiry, today regarded in a very different way, highlights the column which supports it.
The layout of the letters also changes and these can now be seen on the top part, on the edge. The order of the inset appears thus – first: 1 ounce of Pure Gold, then the year of striking and the law.

Libertad' gold coin of 1996

Through its beauty, its purity, its quality and its fame over so many years, this coin is a coin of excellence, a reference for investment purposes at global level

Amadeo I of Savoy

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

Marks of guarantee of the Amadeo I coins

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

Engraver: L.M.: Luis Marchionni

Testers and Beam Balancers:

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

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

25 Peseta gold coin

Amadeo I 25 Peseta coin

Characteristics:

Fineness: 900 Thousandths.

Diameter: 24mm.

Weight: 8.0645g.

Workshop: Madrid.

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

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

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

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

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

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

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

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

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

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

100 Peseta gold coin

Amadeo I 100 Peseta coin

Characteristics:

Fineness: 900 Thousandths

Diameter: 35mm.

Weight: 32.25g.

Workshop: Madrid.

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

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

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

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

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

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

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

Re-striking of these coins

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

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

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

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

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