By Mark Rogers

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

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

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

What is happening? And why is it happening?

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

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

Declining demand for Chinese exports

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

So does this explain the Chinese flight into gold?

Inside a typical gold retailer in Suzhou, China

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

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

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

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

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

A Chinese Gold Standard?

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

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

A young investor contemplates the potential of gold

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

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

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

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

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

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

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

The Kurdish people have traditions in buying and using gold that are the same as the Indians of the sub-continent: the yellow metal forms an integral part of their marriage customs. Last year about 17 tons of gold were imported into Kurdistan, according to the Directorate for the quality control of gold in the Kurdistan region. The bulk of the gold imports came from Turkey and the United Arab Emirates, and this suggests that it was largely in the form of jewellery, essential for weddings.

However, this statistic for 2011 compares less favourably than the imports for 2010, which were more than 23 tons. By May 2011, the price of 21 carat gold had crept up from 228,000 dinars ($195 or £123) per ounce to 255,000 dinars ($218 or £138) per ounce. A consequence was that brides, who were the only people buying gold in 2011 (everyone else was selling), had dropped the amount purchased from about 50 ounces in 2009 to around 20 ounces in 2011.The rise in price has been attributed to the fall of the value of the dollar, encouraging more and more people in Kurdistan to move out of the dollar and into gold, with the consequence that prices were pushed up until only those intending to get married were purchasing it.

Another likely candidate for the rise in price, and increasingly so as the recent gold rush in Europe has proved, is the eurocrisis which has sent the price rocketing with no end in sight to its trajectory.

A custom in Kurdistan is to arrange for hundreds of marriages to take place on the same day; because of the organisation required, couples register with the agencies that arrange this in advance only to find that they have to postpone their weddings. The Kurdistan Regional Government had established a marriage loan for government employees, but because of the crisis caused by the rising price of gold, decided last year to extend the loans to all.

Gold and Oil Resources in Iraqi Kurdistan

Iraqi Kurdistan has had an annual growth rate of about 10%, which is similar to India’s, though Kurdistan has a much smaller population of course, around 4 million. This was spurred by the no-fly zone policy carried out by the RAF and USAF between 1992 and 2003. The main impact of this policy was to facilitate the development of Kurdistan’s oil fields: reserves are estimated at 45 billion barrels of oil, extraction of which was begun in 2007. There is so much oil that the revenue from it pays for infrastructure and there are no taxes.

A downside to the oil wealth is that although Kurdistan has gold deposits these are not mined because no one sees the point.
That may change of course with the rising price of gold – and the observation that the Iranian government is facilitating gold exploration in the neighbouring Iranian Kurdish province, one of the projects being in conjunction with Rio Tinto. More on this development in a later article.

by Mark Rogers

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

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

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

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

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

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

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

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

By Mark Rogers

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

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

The consequences for the economy…

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

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

Is the A lost forever?

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

The consequences for gold

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

Fools or Gold?

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

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

It’s what they call a no-brainer!

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

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

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

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

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

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

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

By Mark Rogers

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

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

By Mark Rogers

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

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

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

“made-up” reasons for ban?

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

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

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

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

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

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

The Ban backfires

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

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

Is the Europen Union real?

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

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

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

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

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

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

Eurozone Union?

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

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

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

The People decide while Politics prevaricates?

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

by Mark Rogers

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

“In the long run we are all dead”

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

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

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

Euro RIP

By Mark Rogers

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

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

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

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

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

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

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

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

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

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

Choose yours wisely!

By Mark Rogers

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

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

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

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

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

by Mark Rogers

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

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

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

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

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

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

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

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

So why mortgage your salary?

By Mark Rogers

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

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

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

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

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

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

Greek Tragedy?

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

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

US upgrades priority on plans for Iran airstrike

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

UK General strike will paralyse a nation

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

Silvio doesn’t want to spoil a party

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

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

Crisis, what crisis?

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

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

How do you insure yourself against a crisis?