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The Panda 1 ounce

Wednesday, December 4th, 2013

The Chinese Gold Panda is a popular series of Gold bullion coins issued by the People’s Republic
of China in Proof-like, brilliant uncirculated quality. They are issued in a range of sizes between
1/20 Oz and 1 Oz with larger 2 and 5 Oz coins being additionally issued in some years.

Details
panda 1 onceChina issued its first Gold coins bearing the Panda design in 1982. These were limited
to sizes of 1/10 Troy ounce along with 1/4 Toz, 1/2 Toz and 1 Toz. From 1983, the 1/20 Toz size was added and additionally a 2 Toz and 5 Toz coin is sometimes issued.
These strikingly beautiful coins are always issued in Proof-like brilliant uncirculated quality and prove very popular.
A different design was issued each year until the 2000. When the 2001 edition was announced, so too was a freeze of the design and thus the 2002 Panda is identical to the 2001. Collectors spoke up on behalf of the annual change and China responded by reversing their policy so that from 2003 onwards, the designs again change each year.
However, on the reverse side, it always features the endangered Giant Panda. It also features the size, Gold fi newness and monetary value.
The main design on the obverse of the coin has hardly changed, save for minor detail changes in the image. It features Beijing’s famous Temple of Heaven (Tien Tien) in the centre with Chinese characters on the top saying “Zhonghua Renmin Gongheguo” meaning People’s Republic of China and at

the bottom the year of issue. If it is a commerative issue, the theme will also be marked here.
There was an adjustment of the face values of the coins in 2000/2001 – please see
the table overleaf for details.
The Chinese mints usually do not employ mintmarks. In certain years, there have
been minor variations in items like the size of the date, the style of the temple and
so on. These allow the numismatist to identify the originating mint. In some years,
but not all, other marks and Proof marks (signifi ed by a ‘P’) have been added. The
four mints involved in the production of the Panda are Beijing, Shanghai, Shengyang
and Shenzhen.

Investment Advice

INVESTMENT ADVICE

All Panda coins are issued as pure Gold fineness, 999.9‰ and in theory have a low premium just above the value of the Gold.
However, their intrinsic beauty makes them very collectable and they attract good premiums.
As with any coin, the best quality grades will attract the best premiums. The early years in particular will be those with the highest premium. Although the coins were issued in Proof form, many were unpacked and have thus been damaged and are at lower gradings. The mintage figures should be carefully examined – the number originally minted is quoted but it has been found that production continues for various years, hence the total mintage may be quite a bit higher some years after.

SPECS

SPECS

KEY FACTS

All investment coins sold by LinGOLD.com

are EF quality or above.

For further information: +44 (0)203 318 5612
info@lingold.com

How much does 1 gram of pure gold cost ?

Thursday, November 28th, 2013

Who said that only wealthy people could afford buying gold ?

  • Save from 1 gram of gold per month
  • Secure storage in Swiss vaults – FREE*
  • No administration or signup fee
Sign up for the LSP for free

Gradually build your wealth by simply buying each month a minimum of 1 gram of physical gold, for your LinGOLD Savings Plan (LSP) and benefit from freestorage in Swiss vaults outside the banking system.

How to save with the LSP?

  • Connect to your LinGOLD account or create a new account
  • Signup free to the LSP programme
  • Buy each month a minimum of 1 gram of pure gold
  • The gold you have bought is fully referenced : bar code, photograph, certificate of ownership
  • The gold is stored in a Swiss vault outside the banking system
  • You are free at any time to increase or reduce the amount of your savings, or you can unsubscribe from the LSP with no charge or prior notice.
Minimum Purchase 1g pure gold per month*
Maximum Threshold Unlimited
Storage Charges Free*
Signup Fee None
Availability Immediate Resale
Minimum Engagement None

*The storage charges levied on your gold stored in the LSP are FREE, on the condition that you buy a minimum of 1 gram of pure gold per calendar month, before the last day of each month. If the minimum monthly purchase is not made, storage charges will be applied, currently £4 per month per 200g total weight stored.

What are the products that fall within the LSP?

  • All the fractions of pure gold (1 g, 10 g, 100 g) issued from bars or gold investment coins (Britannia, Sovereign, Napoleon 20F, Napoleon 10F, Panda, Vera Valor, etc)
  • A whole coin : Vera Valor 1 ounce
  • A 1kg bar of pure gold

For further information on the LSP.

Manipulation of financial markets ?

Wednesday, November 27th, 2013

What’s happening with the London gold fixing ?

First, Bloomberg reported that the U.K.Financial Conduct Authority (FCA) was investigating over the way gold prices were set every day in London, as the main bullion-trading centre in the world based on information from the LBMA.

Now it is the BaFin, German’s financial supervisory authority, who is actually investigating into suspected price-fixing of benchmark gold and silver prices.

images-2

One should ask ?

The facts :
It would seem that the London fix, benchmark rate used by mining companies, central banks and other companies to buy, sell and value gold, may have been subject to manipulation over the past few months.  According to some traders interviewed by Bloomberg, it seems that ‘insider trading’ around the gold fixing is potentially possible as dealers and customers exchange information. That should lead to a wider investigation into how global rates are being set.
Remember last year when the London interbank offered rate – LIBOR – was being manipulated. Would other financial markets be manipulated ?
Similar investigations would be under way in the Uk and US, no sources

actually confirmed that point.
It wouldn’t be the first time prices are being manipulated.

Ext: Mining.com


Your savings in a safe place

Tuesday, November 26th, 2013

Traditional investments are at risk because they are inextricably linked to the world wide web of paper debt that exists in futures, bonds, hedges and spread bets.

Pension funds, banks, stock markets and even countries are using your investments to pay off their own debts rather than to seek a profit for you.

These paper investments are all at the mercy of the debt cycle and could be lost completely or become worthless at any time. What happens when these massive debts are called in and can’t be repaid ?  This will happen but nobody knows when. How bad will it be ? How long will it last ? Politicians publicly pretend it can’t happen because they couldn’t handle the panic and their main preoccupation is preserving power or surviving their ‘shift’.

Did you know?

- You can still buy a new car today with the same weight of gold as you needed to buy a new car 90 years ago.

- 300 years ago 2 oz of Gold could buy a cow, the same amount as you need today!

- Current devaluations are decreasing your ‘paper’ savings, investments and pension funds

- Since  2000 stock markets have slumped while the price of gold has increased more than 5 times

LinGOLD.com’s commitment to doing things differently is exemplified through its ‘Vera Valor’ gold coin.  The ‘Vera Valor’ is the first ethically produced coin made from “clean extraction” gold, which is 100% traceable from mine-to-mint.

LinGOLD.com’s vault storage facility is based in the highly secured facility of Geneva Freeport and is independently audited to ensure total propriety and counterparty.

investment in lingold

investment in lingold

Three articles regarding the US economy – and how it affects us all

Wednesday, September 25th, 2013

It has long been accepted that the US economy is in serious trouble. The Quantative Easing program (in plain English, money-printing) which has continued for far too long was at the centre of the news. One of our favourite blogs is King World News and we would like to offer you three articles to read which could not illustrate more clearly that the time to preserve wealth in Gold is NOW. There are going to be a lot of people crying, and soon it seems.

Firstly, by way of introduction, here is the article before the Fed announced their decision (or is that non-decision) to do nothing about anything.

Click here to read a commentary asking how can the Fed taper?

Then the next day, the Fed announced their do nothing so this article appeared.

Click here to read the opinion of the Fed decision

Lastly, what does all this mean for the US economy? A former US Treasury official gave an interview to KWN and you can read this.

Click here to read a chilling warning

So there you have it. Can there be a better time to buy Gold? Do you want to watch your wealth, your children’s inheritance disappear?

Gold getting its shine back

Monday, September 9th, 2013

What a bunch of jokers at Goldman Sachs! In April, they were advising their clients to sell their Gold, as they were expecting an important decline in its price. And, effectively, in the following weeks, the price of Gold fell. Those who had followed their advice thought they made a good deal.

However, the price of Gold seems to have hit bottom, at the end of June, at $1,200/oz, and it has been going up with regularity since, reaching around $1,400 this week. Increasing worries on most markets (emerging, bonds, stocks), not to mention Syria, are creating, of course, a favourable context for Gold. And since most central banks keep printing around the world (the Fed doesn’t even know how to get out of its QE), we can be very confident on the mid- to long term.

Those who sold their Gold just after Goldman Sachs announced their predictions must now realize they have pulled the trigger a bit too soon. That’s one thing. But what’s worse is that, according to Zero Hedge, the bank started, at the same moment, to buy Gold! Since April, “The Firm” has scooped enough Gold ETFs to become the 7th largest holder in the world. It is now in a position to largely profit from the future rise in the price of Gold.

For the rest of this article, visit goldbroker.com (all rights reserved) by following this link

Quantative Easing? Daylight Robbery

Friday, August 16th, 2013

The official justification for the Bank of England’s money-printing policy is that inspite of savers being impoverished, it is a price worth paying to rescue the economy. No mention of the redistribution of wealth from savers (you and me) to borrowers (banks, governments, other spivs).

So a price worth paying? These benefits which it has given us must be worthwhile. There is some measurable amount, some figure which is going to knock our socks off. Across the pond in the US, a new study has been released by senior economists. So ladies and gentlemen, I give you (cue drum roll, fanfare, firework display of Olympic opening ceremony proportions), the results of the latest study. Quantative Easing has boosted economic output by… 0.04%

Ah, that’s a typo, you mean 400%. No, right first time. 0.04%.

To put this into perspective, Vasco Curdia (Senior Economist – San Francisco Federal Reserve Service) and Andrea Ferrero (same job, New York branch) said that merely telling the markets that interest rates would remain low boosted that same output by 0.09%. Mark Carney at the BoE clearly learned this and did the same thing in his recent forward-looking statement.

Those experts did not of course calculate the figures for the British economy but it is fair to assume the story would be similar. If so, the huge amount of pain suffered by savers and pensioners at the hands of QE has been for nothing.

Annuity rates have fallen to record lows. Inflation is eating away at fixed incomes. Keeping interest rates at 0.5% has taken its toll. A scheme designed to encourage banks to lend called (unimaginatively) Funding for Lending, has taken away banks incentive to offer decent interest rates to savers. Banks can raise anything they need from the BoE at bargain basement rates.

Funding for Lending is not all bad. It was intended to boost the availability of cheap mortgages and judging by the upswing in the housing market, it has succeeded on that front.

Shame the same cannot be said for Quantative Easing.

What next? Money is worthless, so invest in Gold as a wealth preservation tool.

GOLD: SAVINGS AND PENSIONS

Thursday, June 13th, 2013

By Mark Rogers

“Save for a rainy day.” The old adage, but does anyone do so nowadays?

“Saving” is much more likely to mean pensions nowadays, the likelihood of ever having one, and the certainty, if one has been saving towards one, that the recent and continuing bouts of Quantitative Easing (QE) have eroded it. “As much as £30,000 could be wiped off a £100,000 pension pot.” (This is Money, November, 2012)

But QE is only inflation speeded up; paper money is inflationary in and of itself over the long term, and with high tax regimes thrown in, no savings are safe. Those who remember the late 1970s will recall the prudent people who realised that money sitting in the bank was money evaporating, so they reasoned: why not spend it? Slap up meals, theatre tickets, luxury holidays – use it now before it is gone. During the Weimar inflation, industrial wages were eventually paid on the hour, with workers rushing out to spend them before they lost such value as they had by the second.

Converting your savings into gold sounds good, but – those ingots?? Is gold for the ordinary person?

Connect to LinGold.com (either click here, or on the box below this article) and find out. Signing up as a Member of the LinGold Savings Plan at a minimum purchase of 1gm of gold per month gives you a foot on the gold savings ladder: the cost of 1gm of gold compares favourably with the cost of, say, travel passes on London transport. Figures for 2012 on average household expenditure give the highest weekly cost as transport at £65.70, with half of that going on running a car; weekly expenditure on groceries averaged £44.20, with 80% being spent at supermarkets – doubtless because of the loyalty schemes and loss leaders that help keep prices down, as well as all the other prices wars that the supermarkets are more or less permanently engaged in.

Gold therefore, if saved for nothing other than the rainy day of retirement, compares very well with other necessary expenditures. After saving money on the weekly shop at the supermarket, it would be well to consider putting the balance into gold – and thanks to the unique LinGold.com Savings Plan, you too can do it! The democratization of gold is here to stay.

For the raison d’être of these articles on goldcoin.org read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS

For background on the writer: CONFESSIONS OF A LAW AND ORDER ANARCHIST

For a series of articles on the pernicious effects of progressive tax regimes: THE MORAL DILEMMA AT THE HEART OF TAXATION

For a review of one of the most important books on the financial crisis published last year: THE MESS WE’RE IN: WHY POLITICIANS CAN’T FIX FINANCIAL CRISES

GOLD STANDARDS III

Wednesday, June 5th, 2013

By Mark Rogers

I have discussed in Gold is Money, and the previous Gold Standards I and II the advantages of understanding that gold is not a commodity, that it is money that serves the usual purposes of money, as a store of value and a means of exchange, but with the vital difference that it also serves as a standard unit of measurement. The latter function is owed to its intrinsic qualities.

However, in Paper Money Collapse, Detlev Schlichter expounds Carl Menger’s view that gold, like all other things that people have found a use-value for, can indeed be considered a commodity, at least in historical terms. (I have looked at this book twice before in Gold Money A Currency of the Past and What Are Banks For?)

How does this argument work? Menger, says Schlichter, that “money could only have come into existence as a commodity”. It was not the creation of the State, there were no issuing authorities; money arose from mutual trading activities in which all commodities had a use-value. Without that use-value, no commodity was worth anything. Schlichter explains:

“For something to be used, for the very first time, as a medium of exchange, a point of reference is needed as to what its value in exchange for other goods and services is at that moment. It must have already acquired some value before it is used as money for the first time. That value can only be its use-value as a commodity, as a useful good in its own right. But once a commodity has become an established medium of exchange, its value will no longer be determined by its use-value as a commodity alone but also, and ultimately predominantly, by the demand for its services as money. But only something that has already established a market value as a commodity can make the transition to being a medium of exchange.”

Gold the Supreme Embodiment of Value

This anthropological-historical understanding of the emergence of money puts the market, trading, at the heart of the valuation process. Which, in turn, reminds us that the ultimate source of value, what something is worth, is its value to the parties, few or numerous, who engage in the transaction. So what in turn is required of a monetary medium, a currency, is a value that as far as possible stands outside that arbitrary subjectivity. Money itself, whatever its currency embodiment, is an attempt to render value objective in that the currency can be used in any exchanges, unlike bartering.

So in turn, the more objective the currency can become, the more it can become a standard (and this is where it is easy to see why it therefore becomes a unit of measurement), the more reliable, the more valuable that currency unit becomes.

And again, in turn, it is easy to see why gold quickly established itself as the supreme embodiment of exchange value: “it is no surprise that throughout the ages and through all cultures, whenever people were left to their own devices and free to choose which good should be used as money, they most always came to use precious metals.”

Gold is Money

Historically then we can enlarge Turk’s and Rubino’s contention that gold is not a commodity, not at least a commodity like oil or eggs, by allowing that the currency standard will have had a life as an object with use-value until other properties lead people to realise that it may have a value above its use-value. People have become familiar with these properties until it is singled out in use as being dominated by these properties and becomes money.

And the dominant characteristic of gold is its stability: soon all other characteristics were subordinated to this one, thereby changing not its nature but its purpose.

Of course, gold can be re-commodified as jewellery or ornament, as Jocelyn Burton, gold- and silversmith, demonstrates in her extraordinary work. People will always have these uses for gold, which are not intrinsically opposed to its properties as money: jewellery after all carries a premium and can, somewhat philistinely perhaps, be regarded as a form of storage, but then this form of storage shares with gold coins the property of portability.

And money can be re-subjectivised, in the past by mutilating it, clipping and shaving gold and silver coinage; and in the present of course the rolling of the printing presses with paper money has made money supremely subjective, its value becoming volatile and it storage properties destroyed.

It may be objected that we have little ancient anthropological evidence for this process, but we do not need to rely upon this as merely an explanation of what “must have happened”, we need only look at how those living in a territory with a devalued currency deal with the depredations of their government: in the twentieth century they have singled out dollars. When I asked an acquaintance from Zimbabwe how Zimbabweans coped with all those noughts, he laughed and said: “We just use dollars.”

The idea that money, and gold as money, emerged from the free trades of people going about their ordinary business also helps explain the deep disdain for gold in today’s political establishment: the idea that people are incapable of looking after themselves has become rooted in modern political thinking.

For the raison d’être of these articles on goldcoin.org read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS

For background on the writer: CONFESSIONS OF A LAW AND ORDER ANARCHIST

For a series of articles on the pernicious effects of progressive tax regimes: THE MORAL DILEMMA AT THE HEART OF TAXATION

For a review of one of the most important books on the financial crisis published last year: THE MESS WE’RE IN: WHY POLITICIANS CAN’T FIX FINANCIAL CRISES

GOLD STANDARDS II

Monday, June 3rd, 2013

By Mark Rogers

In Gold is Money and Gold Standards I looked at the consequences of accepting that gold is not a commodity but rather money. I suggested in the former article that the confusion between a commodity with a price, and money with an exchange value, was part and parcel of the confusions that arise out of the corruption of money, its worth and functions that result from a command economy and its fiat currency.

Here’s a splendid example of this linguistic confusion, straight from the horse’s mouth; in remarks to the National Economists Club, Washington, D.C. on November 21, 2002, Bernard Bernanke said:

“[T]he U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.” [My emphasis; and I shall be making a longer scrutiny of this talk in a later article.]

Talk of “positive inflation” is irresponsible, but it’s what you get when the printing press or its electronic equivalent is set rolling.

Language and Loans

In “Gold is Money” I went on to examine other possible misuses of language in discussing money and value. I raised the issue of whether it was proper to consider the interest one pays on a loan as being in effect the price of the loan, and whether or not the money constituting the loan is in fact sold to one: if it is, then “price” would seem to be the better way to describe the transaction.

Except that this in turn produces confusion, largely because service professions, such as banks, have come to be described in industrial or retail terms: banks have “products” which they “sell” to “customers”.

But this is nonsense: banks don’t manufacture anything, and do not buy in their “goods” at “wholesale” prices which they then try to “sell” at competitive rates.

Take mortgages: if you have one it is on condition that the bank or building society offers to remove a portion of your income every month over a period of years, and if you fail to fund this activity, your house is taken away from you. This is not a “product”. Why do you think you have got one, though? Because you have been beguiled by a metaphor.

Interest and Prices

I suggested: “In considering how we speak about value and prices and fiat money and borrowing and cheap and dear money, it might concentrate the mind if we did indeed speak of the “cost” of a loan, the “price” the bank charges us for lending, or perhaps selling, to us.”

This thought experiment was intended to throw into relief just how we think about what constitutes monetary transactions: there is an important moral sense in which it would concentrate the mind to think about “costs” if credit is extended for non-productive reasons.

When money is “dear” it is likely that the chief criterion for extending credit will be the purpose to which the loan is to be put. If it is for business expansion, say new plant, or into a new market, then the likelihood that the venture will produce a substantial return on the loan means two things: the loan is more likely to be repaid, and that after the loan is repaid the firm will have made a profit on that loan.

The problem comes with credit extended for consumption (and under consumption we most definitely must include homes that are not affordable outright): this is wholly an academic affair. Keynesian economists have persuaded governments that consumption equals an expanding economy (and note again the point in Bernanke’s talk that I emphasized: “a determined government can always generate higher spending and hence positive inflation”). But the question needs to be asked: why do economists think that expense means expanse?

Credit lines extended purely for consumption end up damaging economies. In buying things now that one could not afford without the credit does not add to economic activity, it simply stokes up the personal indebtedness of the debtor and increases the book entries on the bank’s accounts. Because the money has to be paid back out of earnings, not production, it increases the likelihood of the debt being unaffordable and ultimately written off.

There is another problem here: credit lines for consumption imply that there is no real criterion: one’s present income hardly counts because it might not be there when the debt has to be repaid. No, the real irresponsibility is that the loan’s the thing, in and of itself, not whether it will be turned to productive purposes – that is used to make something that wasn’t there before. Failing to see that this distinction needs to be made is what makes Bernanke’s remarks so irresponsible.

Perhaps part of the problem lies in the fact that governments themselves do not produce anything: there are some seven million people who work for the British government, on average higher salaries than those in the private sector and with gold plated pensions (insofar as an unfunded liability can be said to be “gold plated” – the latter phrase really means that the government won’t break its promises to look after its own). These people produce nothing.

So while consumers intending to consume above earnings are anxious to find low interest loans to fund extra, unproductive consumption, it might indeed concentrate their minds to talk about prices, because that might put the nature of what they are doing into perspective.

In the serious world of productive business, however, interest is the proper term to use: the bank takes depositors’ funds and lends them at interest to enterprises that have been considered on balance likely to succeed for the purposes of the loan. In 100% reserve banking this process would perhaps be a great deal more transparent. And using gold as the ever-present unit of measurement will tell us what our money is really worth.

For the raison d’être of these articles on goldcoin.org read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS

For background on the writer: CONFESSIONS OF A LAW AND ORDER ANARCHIST

For a series of articles on the pernicious effects of progressive tax regimes: THE MORAL DILEMMA AT THE HEART OF TAXATION

For a review of one of the most important books on the financial crisis published last year: THE MESS WE’RE IN: WHY POLITICIANS CAN’T FIX FINANCIAL CRISES

THE GOLD SPOT: RICARDO ON GOLD AS VALUE

Sunday, June 2nd, 2013

The Gold Spot is a regular feature in which Mark Rogers excerpts a passage from his reading as the Text for the Day and then comments on it.

Extracts from ON THE PRINCIPLES OF POLITICAL ECONOMY AND TAXATION by David Ricardo, from the collected Works and Correspondence edited by Piero Sraffa with the collaboration of M.H. Dobb, published for The Economic Society by Cambridge University Press, Cambridge, 1951

Adam Smith, after most ably showing the insufficiency of a variable medium, such as gold and silver, for the purpose of determining the varying value of other things, has himself, by fixing on corn or labour, chosen a medium no less variable.

Gold and silver are no doubt subject to fluctuations, from the discovery of new and more abundant mines; but such discoveries are rare, and their effects, though powerful, are limited to periods of comparatively short duration. They are subject also to fluctuation, from improvements in the skill and machinery with which the mines may be worked; as in consequence of such improvements, a greater quantity may be obtained with the same labour. They are further subject to fluctuation from the decreasing produce of the mines, after they have yielded a supply to the world, for a succession of ages. But from which of these sources of fluctuation is corn exempted? [Chapter I On Value, Section I]

It has therefore been justly observed, that however honestly the coin of a country may conform to its standard, money made of gold and silver is still liable to fluctuations in value, not only accidental and temporary, but to permanent and natural variations, the same manner as other commodities.

By the discovery of America and the rich mines in which it abounds, a very great effect was produced on the natural price of the precious metals. This effect is by many supposed not yet to have terminated. It is probable, however, that all the effects on the value of the metals, resulting from the discovery of America, have long ceased; and if any fall has of late years taken place in their value, it is to be attributed to improvements in the mode of working the mines.

From whatever cause it may have proceeded, the effect has been so slow and gradual, that little practical inconvenience has been felt from gold and silver being the general medium in which the value of all other things is estimated. Though undoubtedly a variable measure of value, there is probably no commodity subject to fewer variations. This and the other advantages which these metals possess, such as their hardness, their malleability, their divisibility, and many more, have justly secured the preference every where given to them, as a standard for the money of civilized countries.

If equal quantities of labour, with equal quantities of fixed capital, could at all times obtain, from that mine which paid no rent, equal quantities of gold, gold would be as nearly an invariable measure of value, as we could in the nature of things possess. The quantity indeed would enlarge with the demand, but it value would be invariable, and it would be eminently well calculated to measure the varying value of all other things. I have already in a former part of this work considered gold as endowed with this uniformity […] In speaking therefore of varying price, the variation will be always considered as being in the commodity, and never in the medium in which it is estimated. [Chapter III On the Rent of Mines]

Comment: Apart from the importance Ricardo attached to machines cropping up in this discussion (his famous Chapter XXXI On Machinery), the interesting thing to note in these passages is that the argument with Adam Smith about sources of value devolves on gold as having the least variability when compared to other possible sources. Smith laid so much stress on corn, partly because it is a staple foodstuff and people must eat, and partly because the labour used to plant and harvest it was an easily quantifiable volume of work; Smith’s theory of value ultimately depended on labour, because the fact, the necessity of labour is an everyday constant.

Ricardo took exception to both corn and labour as measures of value, because the fact that both are necessary does not therefore bar them from continual accident and misfortune: exceptionally bad weather before a harvest destroys not only the crop but the need for labour at all, and has almost the same complete effect should bad weather occur during the harvest. The resulting famine may cause seed prices for next year’s crop to go up. That people must work for a living may be a constant, but their ability to work at any given time is contingent. Similarly, improvements in machinery may have a longer term effect on labour even as these improvements increase the harvest in a good year.

Therefore, these cannot be units of measurement of value: they fluctuate, or are capable of fluctuating too wildly.

The subject was to crop up again in Ricardo’s “Notes on Malthus”, where he takes issue with the gloomy Mr Malthus’s misreading of the points Ricardo makes above, in particular Malthus’s overlooking the qualifications about gold being “nearly an invariable measure of value” and his consequent assumption that Ricardo meant that as things stood, here and now, gold was such a measure. Indeed, Ricardo gets so hot under the collar in pointing out to Malthus that he had not been so simple as to claim this that he practically reverses himself as expressed above, almost implying that gold has no such intrinsic virtue! But indeed, he was quite cross with Mr Malthus all round; he did, in correspondence, express himself as being even less pleased with Malthus’s book on his second reading than he had been on first reading it, his further disgruntlement with Malthus leading to the “Notes”.

What is important about Ricardo’s quarrel with Adam Smith is that it is a very early rebuttal of the notion of labour as the source of value, and an equally important claim for precious metals as that source, as being the closest thing we are ever likely to possess for the purpose. That this claim is hedged with qualifications demonstrates two things: a prudent mind, and, secondly, that the major and long term experiments with paper money lay, of course, well in the future, i.e. the Twentieth Century. What Ricardo was doing was to estimate which of all possible sources of value, supposing such a measure to be desirable (and he concludes that it is), would best serve. There are obvious attractions in Adam Smith’s approach: it is practical, deals in vital constants of human action, and is empirical. But in the end it is insufficient. There is a discussion of paper currency in Ricardo’s book but it is fairly narrowly focused, as the experience of it in his day was narrowly focused, primarily on its promissory nature in terms of specie. Nothing like what we have experienced in the Twentieth Century was available to the political economists of the Eighteenth Century.

Nowadays, while accommodating the arguments to prudence as is always desirable, a stronger case for gold as “nearly an invariable measure of value” can and must be made because the realities foisted upon us by the advocates and practitioners of paper have been so dire.

For the raison d’être of these articles on goldcoin.org read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS

For background on the writer: CONFESSIONS OF A LAW AND ORDER ANARCHIST

For a series of articles on the pernicious effects of progressive tax regimes: THE MORAL DILEMMA AT THE HEART OF TAXATION

For a review of one of the most important books on the financial crisis published last year: THE MESS WE’RE IN: WHY POLITICIANS CAN’T FIX FINANCIAL CRISES

GOLD STANDARDS

Wednesday, May 29th, 2013

By Mark Rogers

The proposition was examined in the last posting, Gold is Money, that gold is not a commodity or at least not in the sense that other commodities are (a distinction that will be looked at in a later posting). This proposition leads to an important observation, that gold is a unit of measurement, but an even more momentous observation arises from this: that whether there exists a gold standard of the classic kind (England from the end of the Seventeenth Century up to 1914, for the world at large 1870 to 1914) or the more controversial gold exchange standard of the interwar years, or the patched up standard of Bretton Woods, as a unit of measurement gold always provides a standard.

As long as gold remains largely in private hands and circulates, its exchange value determined by the markets, with banks holding a modicum of gold reserves, then gold will act as the benchmark against which currencies are measured, its prime function in a world of debased paper currencies to tell us what those currencies are actually worth, a bellwether that provides the information we need about how we manage our assets and how we exchange them for the safe haven.

There is another aspect of this, therefore, that throws up an interesting answer to the question that Turk and Rubino ask in their book discussed in “Gold is Money”. They point out that all paper currencies have collapsed and the reaction of governments has been, perhaps to confiscate wealth, perhaps to tighten currency controls, to generally adopt measures limiting the freedom of action of their subjects.

But this time round, it may not be governments who will take the initiative. The likelihood that the US government will confiscate gold as it did in 1933 must be set against the far less trusting, more cynical attitude of the general public towards government.

Gold has been remonetized in Utah, the Swiss People’s Party recently won the right to a referendum on the Swiss National Bank’s ability to sell off gold reserves, and the same party is arguing for a Swiss gold franc as circulating currency.

More and more people are realising how gold may be managed in such a way that investors are, in effect, re-inventing a free gold standard for the conduct of their monetary and financial affairs. Another example of a spontaneous order emerging? Let us hope so.

For the raison d’être of these articles on goldcoin.org read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS

For background on the writer: CONFESSIONS OF A LAW AND ORDER ANARCHIST

For a series of articles on the pernicious effects of progressive tax regimes: THE MORAL DILEMMA AT THE HEART OF TAXATION

For a review of one of the most important books on the financial crisis published last year: THE MESS WE’RE IN: WHY POLITICIANS CAN’T FIX FINANCIAL CRISES

GOLD TO RETURN AS A PURE GOLD STANDARD IN SWITZERLAND?

Thursday, May 23rd, 2013

By Mark Rogers

Some interesting news from Switzerland: the Swiss People’s Party’s campaign to compel the holding of a referendum on the sale of the nation’s gold by the Swiss National Bank has successfully gathered the required 100,000 signatures; last Thursday, May 16, 2013, the Federal Chancellery announced that the referendum would be held. The Financial Times, however, points out that “it is not uncommon for the period between an initiative being accepted for referendum and a vote being held to extend to several years.” No doubt the Swiss National Bank welcomes such a delay.

At present the SNB holdings of gold form 10% of its reserves, and not all of it is in the bank’s own vaults; the bulk at 70% is in Switzerland; 20% is at the Bank of England, with the rest stored at the Bank of Canada..

The Swiss People’s Party wants that externally held 30% to be returned to Switzerland, and wants the bank to increase its holdings to 20%. Until the constitution was revised in 2000, the SNB had been obliged to keep 40% of its reserves in gold.

But the interesting thing about this initiative is that it is part of a much larger campaign by the Swiss People’s Party to return to a pure gold standard by reintroducing the Swiss gold franc as money. Confidence in the Swiss franc and monetary policy has been shaken by the attempts of the SNB to devalue the franc which have resulted in big losses; this combined with the sell-offs at low prices (shades of Gordon Brown’s tampering with the U.K.’s gold) 2001-2006 have accumulated losses of billions of Swiss francs.

Given that Switzerland was the last country to stop backing its currency with gold, only coming off its domestic gold standard in 2000 under the revised constitution, it is noteworthy that the dumping of gold and the devaluing of the franc followed promptly in 2001.

The latest initiatives, for a referendum and for a gold franc, have not unnaturally caused consternation at the SNB; it is concerned at “the monetary policy implications of the demands in the initiative.”

Well, indeed.

For further stories on this issue, see “Swiss Parliament to discuss gold franc”; “Swiss Intiative reveals push for gold-backed currency”; and “Swiss To Vote On Gold Repatriation – “Gold Is The Only Valuable Asset On The SNB’s Balance Sheet

For the raison d’être of these articles on goldcoin.org read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS

For background on the writer: CONFESSIONS OF A LAW AND ORDER ANARCHIST

For a series of articles on the pernicious effects of progressive tax regimes: THE MORAL DILEMMA AT THE HEART OF TAXATION

For a review of one of the most important books on the financial crisis published last year: THE MESS WE’RE IN: WHY POLITICIANS CAN’T FIX FINANCIAL CRISES

GOLD: WHY NO PRICE RISE COMMENSURATE WITH CENTRAL BANKS’ BUYING?

Monday, May 20th, 2013

By Mark Rogers

At the Money Week annual conference (held at Queen Elizabeth II Conference Centre, Westminster, London, Friday, 17 May, 2013), two of the speakers, Mr Dominic Frisby and Mr Simon Popple were asked the same question: was the drop in the gold price in April manipulated, and if so by whom and why? Both speakers disdained conspiracy theories as the likely answer: nothing but fruitless speculation. Mr Frisby asserted that we deal with the cards as they are on the table. Another question was however a good and intriguing one. Why is the price still down given that central banks have been buying “hand over fist”?

ETFs

As I noted in “Gold in Flux”, the main cause of the drop in price was the sudden dumping of huge quantities of paper gold. If this was because those who held these paper stocks had suddenly come to realise that they were worthless, then this was a rational thing to do, in spite of the fact that it would drive the price of gold down. Indeed, at the conference Mr Frisby pointed out that as long as the next crisis is held at bay, or indeed that the present crisis is bottoming out (he was ruefully cautious as to whether this is indeed what is happening!), then it would be reasonable to say that the current price of gold is a fair one. After all it is still high, in comparative historical terms: in 2009 it was $950 an ounce.

This does not, however, address the possibility that the price of gold has over the last year been too low. I first discussed the possibility in “The Price of Gold”. Why might it be considered that the price has been low? Those wretched ETFs. The swelling mass of ETFs had become so much papier-mâché (literal meaning: chewed paper), clogging the market. This might have had the effect of keeping the price lower than it otherwise would have been. Equally, of course, it could have kept the price artificially high.

As previously mentioned in “The Price of Gold”, the probability that the central banks’ buying of gold has been spurred by Basel III is a reasonable inference, whatever else may have caused it, though of course it does not answer the question about why the price continues low (subject to Mr Frisby’s caveat.) In passing, it is interesting to note that unlike European central banks, China did indeed start compliance with Basel III rules on January 1, 2013, when they ostensibly came into force.

DRAG ON THE PRICE

Now it is entirely plausible that the ETFs continue their drag on the price of gold: ETFs have not been abolished or abandoned, merely that a large quantity have been dumped. And the price of gold therefore inevitably mixes (perhaps confuses is the better word) physical gold and paper gold.

Clif Droke quotes Bill O’Neill, principal with LOGIC Advisors: “The biggest negative continues to be the ETFs. We’ve had steady and constant ETF liquidation,” adding that many suspect the exodus is not over, and continuing: “Further, once major hedge funds rotate away from such an asset, they typically don’t jump right back in anytime soon. The big players are going to be slow coming back into the market.”

Mr Droke comments: “The unspoken reality for gold investors is that the increasing institutional demand for equities is taking the wind out of the sails of the gold market,” and goes on to quote Kitco News on Tuesday, 14 May, 2013: “Continued exchange-traded-fund outflows, strong equities and US dollar gains are limiting the upside for gold, while recently strong physical demand and continued central-bank accommodation are providing support.”

Mr Droke elaborates: “While there has been strong demand for physical bullion since the April lows, especially in Asia, the fact that stocks are garnering an ever-growing share of ‘hot money’ flows while gold is largely ignored by institutional and hedge fund investors isn’t helping the yellow metal’s cause.

“Moreover, as the value of S&P 500 Index increases while gold goes nowhere, it’s causing the relative strength for gold to actually decline. This gives the hedge fund and other sophisticated investors who look at technical indicators one less reason to invest in gold in the near term.

“Kitco reports, ‘A number of observers have cited the rotation into equities as one of the factors prompting an exodus out of gold exchange-traded funds so far this year….’”

This seems to be a very acute analysis of what is happening.

Another complicating factor is that while central banks are indeed buying up gold, some of the most important are continuing with, or continuing to threaten, more quantitative easing. This is another paradox waiting to be resolved, for as described in the Deutsche Bank, London Head Office analysis “Gold: Adjusting to Zero” (discussed in “Gold and the Keynesian Groupies”) QE pushes the price up, or is there some Mephistophelean spell that negates the gold price when it is central banks which buy it? (See “The Gold Standard: Further Encouragement from Wise Eminences”)

For the raison d’être of these articles on goldcoin.org read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS

For background on the writer: CONFESSIONS OF A LAW AND ORDER ANARCHIST

For a series of articles on the pernicious effects of progressive tax regimes: THE MORAL DILEMMA AT THE HEART OF TAXATION

For a review of one of the most important books on the financial crisis published last year: THE MESS WE’RE IN: WHY POLITICIANS CAN’T FIX FINANCIAL CRISES

THE GOLD SPOT: GOLD THE REFERENCE POINT

Tuesday, May 14th, 2013

The Gold Spot is a regular feature in which Mark Rogers excerpts a passage from his reading as the Text for the Day and then comments on it.

Extract from CURRENCY WARS: THE MAKING OF THE NEXT GLOBAL CRISIS by James Rickards, Portfolio/Penguin, New York, 2011

The continuation of the trend toward a diminished role for the dollar in international trade and the reserve balances begs the question of what happens when the dollar is no longer dominant but is just another reserve currency among several others? What is the tipping point for the dollar? […]

Barry Eichengreen is the preeminent scholar on this topic and a leading proponent of the view that a world of multiple reserve currencies awaits […] the plausible and benign conclusion that a world of multiple reserve currencies with no single dominant currency […] this time with the dollar and the euro sharing the spotlight instead of the dollar and sterling. This view also opens the door to further changes over time, with the Chinese yuan eventually joining the dollar and the euro in a coleading role.

What is missing in Eichengreen’s optimistic interpretation is the role of a systemic anchor, such as the dollar or gold. As the dollar and sterling were trading places in the 1920s and 1930s, there was never a time when at least one was not anchored to gold. In effect, the dollar and sterling were substitutable because of their simultaneous equivalence to gold. Devaluations did occur, but after each devaluation the anchor was reset. After Bretton Woods, the anchor consisted of the dollar and gold, and since 1971 the anchor has consisted of the dollar as the leading reserve currency. Yet in the post-war world there has always been a reference point. Never before have multiple paper reserve currencies been used with no single anchor. Consequently, the world […] is a world of reserve currencies adrift. Instead of a single central bank like the Fed abusing its privileges, it will be open season with several central banks invited to do the same at once. In that scenario, there would be no safe harbour reserve currency and markets would be more volatile and unstable.

Comment: It is hard to fathom such an unrealistic expectation of lead currencies, swilling about supporting each other and every other currency, as being somehow optimistic and benign; Rickards is not saying that he thinks they would be by using these terms, he is pointing up the authors of these expectations as hailing them as benign: what could go wrong, we’re all good chaps…aren’t we?

Rickards’s view is of a piece with Gustav Cassel’s point (quoted in Gold on the Outbreak of the Great War), that “the responsibility for the value of the currency, in cases where the gold standard has been abandoned, must exclusively lie with those in whose hands rests this provision of the means of payment.” The point being that this is an astonishing level of trust to put into the institutions of government, not just moral trust, but a trust that the necessary calculations, observations and measurements can be made consistently and continuously to keep things afloat and stable. The euro is a very good object lesson that both these sorts of trust are misplaced, which is putting it mildly…

From an Austrian School point of view, the goodness of the humans in charge is irrelevant: it is the utterly impossible nature of the task that is the stumbling block. But it is just there, of course, that the immoral temptation to swing things to the state’s advantage comes to the fore – again as shown up by the euro.

Where there is no reference point, no anchor, no solution is feasible… which is why we keep getting  more of the failed nostrums. Which leads on to a very interesting observation: why taxes must go up in an economic world divorced from the gold standard.

Politicians are incapable of managing monetary affairs (see the article linked to below on The Mess We’re In: Why Politicians Can’t Fix Financial Crises). The gold standard prevented them by and large from acting on economic hubris. Unconstrained by gold, bewildered by their failures, corrupted by their power, they turn to the one nostrum that lies unfailingly to their hand: taxation. That is why it is found important at times of high and progressive taxation to denounce “avoiders” as selfish cheats who won’t do their bit for their fellow citizens (see my The Moral Dilemma at the Heart of Taxation). So the gold standard not only prevented printing money, it also held down taxation. Another reason to vote for gold!

For the raison d’être of these articles on goldcoin.org read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS

For background on the writer: CONFESSIONS OF A LAW AND ORDER ANARCHIST

For a series of articles on the pernicious effects of progressive tax regimes: THE MORAL DILEMMA AT THE HEART OF TAXATION

For a review of one of the most important books on the financial crisis published last year: THE MESS WE’RE IN: WHY POLITICIANS CAN’T FIX FINANCIAL CRISES