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2012: Tax, the Euro and the Gold Standard: A Roundup

Monday, January 7th, 2013

By Mark Rogers

Tax

In a move practically designed to prove my assertion that the Inland Revenue is behaving more like the Stasi than a branch of democratic government, it was announced on Friday 4 January that the H.M.R.C. was publishing the names and photographs of some of the worst tax “cheats” of the previous year. Yet the lack of clarity persists: “The Government invested £917m in tackling tax evasion, avoidance and fraud in 2011-12, with an additional £77m planned over the next two years. ‘Most people play by the rules and pay what they owe, but HMRC is cracking down on those who don’t,’ said Exchequer Secretary to the Treasury David Gauke. ‘We hope that publishing these pictures will help get across that it always makes sense to declare all your income, and tax dodgers are simply storing up trouble for the future.’”

While the news report does give details of an overtly criminal gang, the persistence in lumping together criminals on the one hand and dodgers and avoiders on the other is deeply worrying; the latter are people who have committed no crime. Until and unless the law is specifically changed the pursuit of those who legally avoid paying tax is a direct assault of the rule of law. And it will not do to pass legislation criminalising avoidance: avoidance only takes place because the tax code is too large, too multifarious, too unfair and too confiscatory. It would be an even graver assault on the rule of law if criminalising legal behaviour was to be the government and parliament’s preferred option rather than a serious overhaul of the tax code. But then expecting that is like expecting the EU’s commissioners, politicians and bankers to sort out the euro mess.

The Euro

Where is the promised resolution to the Euro crisis, specifically the problems in the first place of Greece? The European Stability Mechanism merely defers the inevitable, but true to form, the EU’s political class is congratulating itself that “something is being done”.

In his book America Alone: The End of the World as We Know It (Regnery Publishing, Inc. Washingto, 2008), Mark Steyn makes the following observation: “The progressive Left can be in favour of Big Government or population control but not both. That mutual incompatibility is about to plunge Europe into societal collapse. There is no precedent in human history for economic growth on declining human capital – and that’s before anyone invented unsustainable welfare states.”

Thus a decline in the European demographic, which was predicated on the welfare state providing for all and giving a better standard of living which in turn is often taken to mean fewer children, is ensuring that the welfare state is collapsing while its beneficiaries demand more – see, for example, the Greek reaction to “austerity”.

But was “Europe” on any of its models ever going to be sustainable? In an interesting article from an old Encounter that I recently picked up, much food for thought suggesting that the answer was no from the beginning is to be found in an article by François Bondy, The Sick Man of Europe is .. Europe (Encounter, Vol. X, No. 6, June 1958). While he is talking about NATO, rather than the emergent political arrangements that would eventually become the EU as we know it, it must be remembered that The Europeans leapt under the NATO nuclear and military umbrella on the specific assumption that the Americans would be footing the bill; this in turn, allowed France to pursue her squalid little colonial war in Algeria, while allowing them all to begin that slide into welfarism, the effects (or rather, defects) of which are now manifest. Bondy says this of the relations that the Europeans and the Americans thought they were entering into at the time:

The truth is that, in essentials, the West Europeans have relied on the United States for their defence, and that N.A.T.O. is the instrument, not of a partnership, but of a receivership.” [My emphasis]

That note of insolvency struck right at the very beginning!

He also goes on to be very prescient about how things would fall out: “A great and present danger would arise out of an unequal division of privileges, responsibilities, and burdens among the European states; this inequality could generate new national hatreds and rivalries, and make of Europe simply a greater Balkans.”

Which is exactly how to describe the quite deliberate plan to bring this state of affairs about through the melding of the “hardcore” euro currency countries into a fiscal “heartland” for the EU. He goes on to ask: “Balkans or Switzerland? Perhaps neither goal is likely to arouse enthusiasm in the citizens of that Europe which discovered the modern world, established it, and ruled it for so long. But Balkanisation will only be the fate of those who are themselves ready for it, and prefer to be a shrunken power rather than a small state.”

And this was said in 1958.

And the gold standard, what has that to do with welfarism?

The Gold Standard

“The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. … The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty understanding the statists’ antagonism toward the gold standard.” (Quoted in, The Coming Collapse of the Dollar and How to Profit from It, James Turn and John Rubino, Doubleday, New York, London etc., 2004)

Well said, that man! But who was that man? No less than Alan Greenspan, whose views clearly cover the span between what he said in 1966 in an essay, “Gold and Economic Freedom”, and his own genial oversight of “an unlimited expansion of credit”, no doubt thinking the while that this was because this had to be done to counter the expansionist ambitions of the welfare statists, but with, inevitably, the same result.

But as a succinct description of what in effect has happened in the banking crisis, his first sentence is spot on, and this may yet be revealed as not only the way the crisis evolved, but of the very motor at the heart of it, the politically expedient manipulation of the LIBOR.

And the future of the gold standard? We shall see if the Utah sound money scheme catches on in other States in the U.S.A. And we shall see if the arguments for its return start stacking up in the minds of those whose minds need to accommodate it. But the really serious question is if Basel III, if, when, implemented does turn out to be a tentative restoration outside the political system, and if indeed it does turn out to be a de facto gold standard, how will the politicians react?

Basel III is difficult to interpret, and so far this year the main news about it is that the Reserve Bank of India has declared that it is to defer implementing it for at least a few months.

How strange it is that the most perceptive remarks about Europe’s decline and the warning about the welfare state’s destruction of wealth should have been made in 1958 and 1966 respectively. History indeed is a gold mine!

For more on tax go to: STARBUCKS AND ALL THAT TAX, which also contains a link to a brief summary of my arguments and a link to all the previous articles on tax.

Readers curious as to why articles of this nature should be appearing on a gold investment website should read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS

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

And 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

PUNISH BENEFIT CHEATS

Sunday, November 4th, 2012

DO DEALS (IF YOU MUST) WITH SO-CALLED TAX EVADERS

By Mark Rogers

After all the froth over tax evasion, in a remarkably short space of time the taxman is doing a deal: “Hundreds of tax evaders … will escape prosecution and keep their identities secret under immunity deals offered by Revenue & Customs,” reported The Times on Friday, 2nd November, in a front page story. The idea is not to waste Court time and further expense if so-called “secret account-holders” simply stump up their taxes and pay penalties. There has already been one prosecution for “serious fraud” and there will be a select few more.

The newspaper also quotes a former taxman who now works for a law firm as saying: “It is those at the lower end of the social scale who go to prison. There is no immunity for benefit cheats.”

In a development in Greece, a journalist who published 2,000 names of Greek “secret account-holders”, which include industrialists, financiers and politicians, was acquitted of breaching privacy laws, after the prosecution offered no witnesses. The journalist Kostas Vaxevanis is quoted, in a separate story on page 8, as suggesting that the list detailed “groups of people stealing from the Greek state”.

The HMRC deals are being offered to those British people who turned up on a list of account holders at a Swiss branch of HSBC, which list was stolen two and a half years ago by an employee of the bank – thus violating bank-client confidentiality – which was given to the then French Finance Minister, Christine Lagarde (now head of the IMF). She in turn gave HMRC 6,000 names of UK citizens (500 of whom have so far been investigated for fraud).

HMRC, Evasion and the Mis-spending of Savings

Before looking at the moral dilemmas of what has recently happened, and in particular the unfortunate view of Mr Vaxevanis, let us look at some of the more straightforward economic practicalities.

HMRC is assuming that the Lagarde list contains people who do not have a cash flow problem i.e., the deals, which as noted save precious court time, are possible because both the tax and the fines are assumed to be achievable. A deal, to work, requires the agreement of both parties as to what is feasible, whereas justice demands that one party has justice visited upon it in the name of the law, as pursued by the aggrieved party.

As it is deals that are being offered, the back taxes and the fines must come out of savings. This gets to the heart of the problem, which is that among the reasons for the evasion in the first place is the perception that the state misapplies resources, and therefore the taxing of successful businessmen is to mis-spend savings which would otherwise have been applied as investments. This is also another reason, of course, for not sending the majority of these so-called evaders to jail: they are after all a productive element in any economy, producing goods, services and jobs. The problem of UK taxpayers’ assets being held abroad is the simple recognition that the tax regime is too onerous in the UK and that government wastes money.

Deals and assets

So there is at least a tacit recognition that these individuals play a productive part in economic life. What is required is the further recognition that when a tax regime becomes too complex, and the welfare state, which inevitably requires big government, is all-pervasive, then the problem is the government, not the so-called evader.

But these deals usher in another confusion. Hitherto, most of the fuss has been about legal tax avoidance (as discussed for example here, Cowboy Accountants – or Lone Rangers?). Now it transpires that the Lagarde list exposes the problem of hidden assets. This is indeed only, from an anti-Keynesian point of view, the reverse side of the problem of the initial evasion, the hidden assets being on the Keynesian view “hoardings”.

This is the operation of Gresham’s Law in the welfare state economy: bad money/bad monetary policy driving out good money, either into Swiss bank accounts, or, as another aspect of the tax furore initiated by the Chancellor revealed, into good works – this was the attempt by the Chancellor to cap charitable giving; this attempt revealed that many rich donors, who use the tax exemption schemes drawn up by HMRC, actually give more to charity than the exemption is worth!

Whistleblowing? Accountability?

The term “whistleblower” entered the political lexicon largely to describe a civil servant who has come across corruption and incompetence in government and decides to risk all by exposing it – the biggest two in the UK in recent years being the utter incompetence of the immigration department and the corruption of the MPs’ expenses scandal.

So why is the private employee of a private institution being called a whistleblower for sneaking on his employer’s clients? The answer lies in the vexing view of Vaxevanis, the Greek journalist who believes that asset hiders are “stealing from the Greek state”.

That is the welfarist assumption in a nutshell: that private citizens’ money actually belongs to the state. However wasteful the state, and however much that waste prompts the operation of Gresham’s Law, those who avoid taxes, in the hope that more productive times might return (after all, with interest rates so low, why invest?), are branded thieves – for hanging on to their own money.

This view of the vexing Vaxevanis reverses the idea of accountability – as I have remarked before, the state needs to be very sure that taxpayers are getting value for money before accusing citizens of being in effect criminals (and see here for further implications for constitutional government).

Real cheats

Which brings us back to the idea that there are two modes of justice: one for the rich, even when they save their money against government waste, incompetence and malfeasance, and another for those poor who cheat on the benefits system. It is however, wholly commensurate with the idea of justice that the latter are punished: they have devised ways to make claims on hardworking taxpayers’ money to steal what does not belong to them. As the actions of HMRC have implicitly acknowledged, all that “evaders” and “hoarders” have done is to hang on to more of what is actually theirs.

A benefit cheat is breaking the criminal law, a long-sanctioned element of the English Common Law. A tax avoider is simply breaching legislation, often passed in fits of class antagonism “against the rich”, that allows the state to snatch a portion of his wealth, that allows the state to believe that all our incomes belong to it – see the Orwellian notion of “the taxpayer’s allowance”.

This is a morally corrosive view, which leads to constitutional vandalism. That, not tax evasion, is the real problem of our times.

Readers curious as to why articles of this nature should be appearing on a gold investment website should read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS 

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

CHANCELLOR FRAU AUSTERITY: HOW MUCH DID YOUR VISIT COST?

Tuesday, October 9th, 2012

By Mark Rogers

There’s austerity and then some. Why did Chancellor Merkel decide to visit Athens? It certainly wasn’t to boost the revenues from tourism.

It is reported that some 7,000 police officers, secret agents, snipers and commandos were deployed against Greek demonstrators who defied bans on entering certain parts of Athens during her seven hour visit. To attempt to contain the demonstrators, some 50,000 of them apparently, tear gas and stun grenades were fired.

All these men and munitions cost money, a lot of it.

So why did the Chancellor try to boost the chances of the bail outs working by paying a very expensive visit to Athens? She knows that neither she nor her country are at all popular in Greece, in spite of the wish of much of the Greek population to stay in the euro, and therefore the Greeks’ ingratitude for the way in which the German government, against its own people’s wishes, has so far been bailing out the Greeks and keeping their decades’ long corrupt and dysfunctional welfare state and civil service going.

As Sky News reports today, 9 October 2012, online: “GSEE and ADEDY, the umbrella labour unions for private and public sector employees, have called for a three-hour strike across the greater Athens area from noon, bringing the country’s already anaemic economy to a fresh standstill.”

Yesterday, The Daily Telegraph reported that “Alexis Tsipras, who leads the opposition Syriza party in Greece, said: ‘She does not come to support Greece, which her policies have brought to the brink. She comes to save the corrupt, disgraced and servile political system. We will give her the welcome she deserves.’”

And what is Alexis Tsipras recommending in place of the “corrupt, disgraced and servile political system”? Why, the hiring of 100,000 more civil servants, free meals for students etc. – in other words more of the same bankrupt welfarist policies that have brought the Greeks to the brink, and which they managed all on their own.

Merkel’s visit belongs in the same category as the activities of those Greek “anarchists” who, in protest at austerity, set fire to a cinema and other private property in Athens: the effect of their actions, just as Chancellor Merkel’s, is to cause the unnecessary spending of more money when there is already no money.

Austerity, anyone, at all?

Well, yes as it happens, and in Greece too, by people who have actually understood what is happening and are quietly re-ordering their lives and, in doing so, are prepared for the worst… we met them here.

Readers curious as to why articles of this nature should be appearing on a gold investment website should read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS 

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

THE EURO GOES ON – ON AND ON AND ON…

Saturday, August 25th, 2012

By Mark Rogers

Now that the main Olympics are over and the daily newspapers have recovered their normal size and weight, it is possible to see what else is happening in the world. Surprise, surprise… while London was full of sportsmen and women doing their best to out-compete each other to make some sort of achievement, those other Olympians – the gods of the Eurozone – have got precisely nowhere. Which in practical terms means less than nowhere…as we have previously seen here.

The Greek Prime Minister has been smiling his way from Paris to Berlin – but it isn’t going to make much difference. The German government is under huge popular pressure not to make any more concessions to the Greeks, the idea being that as the Greeks have, again, failed to make progress to meet any of the commitments they had already made, where is the logic or reason in renegotiating?

The problem is simple, and is well understood by Chancellor Merkel: the only way in which Greece (and Italy? Spain? Portugal?) can be kept in the euro is by the Eurozone becoming a real fiscal union with Germany permanently underwriting the poorer countries’ debts. But this is completely unacceptable in Germany, and other northern European countries (Austria, the Netherlands and Finland) are equally opposed. Was this one of the original compromises made before the euro was launched? While knowing that the single currency might only succeed if the proper fiscal union was created ab initio, but also knowing that this would have been politically unacceptable, the politicians went ahead with their vanity project knowing that it would be botched…  No wonder they’re desperate to patch it up somehow, but their inability to do so, because of the impossible circumstances they have created, has led to this apparently never-ending stasis…

But perhaps not quite, because from a completely unanticipated direction a break-up of the eurozone may be on the cards sooner than anyone expects, except those who have prepared for it: the Finns.

The current issue of The Economist (August 25, leader) states: “efforts to shore up the euro might be scotched not in Berlin but in another austerity-minded northern capital: Helsinki.”

The Finns have already made contingency plans for the break-up of the euro. On July 6, 2012, the Finnish Finance Minister was quoted in The Daily Telegraph as saying:

“Finland is committed to being a member of the eurozone, and we think that the euro is useful for Finland,” Ms Urpilainen told financial daily Kauppalehti, adding though that “Finland will not hang itself to the euro at any cost and we are prepared for all scenarios”.  She went on: “Collective responsibility for other countries’ debt, economics and risks; this is not what we should be prepared for.”

It is worth keeping in mind that Finland is one of very few EU countries that has managed to maintain its triple-A credit rating; the finance minister therefore speaks with a good deal more authority than most other players in this wretched game: “We are constructive and want to solve the crisis, but not on any terms,” she said [my emphasis].

The Economist goes on to point out that “uniquely, Finland has demanded collateral for its part of Greece’s second bail-out and for the funds it underwrites to support Spain’s crippled banks. If a grand bargain on the mutualisation of debts is ultimately required to keep the euro together, the Finns could block it. A few observers even think a “Fixit” (a Finnish exit from the euro) is more likely than a Grexit.”

This is quite a turn around. It should be remembered that in the 1990s the Finns pulled out of a banking crisis entirely on their own, demanding no assistance from anyone: no wonder they are hostile to bail-outs!

The Economist says that the longer Chancellor Merkel prevaricates, hoping to come up with some grand unifying scheme, the more the cost of bail-outs will increase; but surely the real point is that while prevarication has prevailed, the money itself has run out.

Readers curious as to why articles of this nature should be appearing on a gold investment website should read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS

MONETIZATION OF GOLD IN THE U.S.A. – NOW!

Friday, August 17th, 2012

We saw here how the gold standard is likely to make a return, and specifically how it could be managed. We took a look at how Iran and China have been conspiring to revive payment in gold for bulk purchases of Iranian oil, a pseudo-return to gold as a currency, pseudo, that is, if it remains a means of payment for a limited period of time and limited to a single commodity. We have also speculated about the possibility that China may be planning to launch the renminbi as a reserve currency backed by gold.

We also saw here how sensible Greeks are forming credit unions and devising alternative currencies.

In the U.S.A., however, States are going for the real thing: under way is a revival of gold (and silver) as legal tender, and the pioneer is Utah and the Utah Gold and Silver Depository.

The move is in deliberate protest at the Federal Reserve’s monetary policy. Republican state representative Brad Galvez, sponsor of the bill, is quoted as saying: “If you’re mad about government debt, ditch the cash.  Spend your gold and silver!”

The Utah Gold and Silver Depository states:

“On March 25, 2011 history was made when Utah Governor Gary Herbert signed into law Utah HB317 thereby monetizing precious metals in the form of Gold and Silver American Eagles and United States numismatics (rare coins dated 1792 to 1964) in the state of Utah. The Utah Gold & Silver Depository was founded on the belief that every citizen of the global community has the fundamental right to legally create, preserve and store wealth. To meet the global demand for safe, secure transactions and storage, UGSD has developed a number of depository account options from which a customer can choose and tailor to best meet that customer’s needs and goals.”

The idea is that citizens who wish to monetize their gold and silver will lodge it in an account with the Depository which will then issue them with electronic money in the form of a debit card, which stores the dollar equivalent which is debited against the gold and silver which backs it. A simple idea, but one with radical implications.

The Fed can hardly claim that this sort of thing, especially if it starts to spread to other states, will undermine its authority – the Quantitative Easing it has been indulging is already doing that!

See here also for the Sound Money Act.

DEBT AND DEMOCRACY

Wednesday, May 23rd, 2012

By Mark Rogers

Having looked at the recent elections in France and Greece (here and here), and raised questions about the political outcomes and their effect on the euro and the EU as a whole, it would be pertinent to ask what part democracy based on universal suffrage plays in economic decline.

To blame the economic consequences of the euro and the welfare state solely on politicians would be mistaken. After all, the electorate votes, and therefore must take some responsibility for putting into effect the policies for which they vote. Even if the mismanagement and over-reach of government cannot be directly laid at the feet of electorates, the general tendency of what their votes tell the politicians what it is they, the voters, want is certainly something for which voters are culpable.

The current decrying of “austerity” is a measure of this, a considerable proportion of the French and Greek electorates voting for “anti-austerity” measures. There is much confusion as to what “austerity” is in practice: a sharp analysis by Peter Martino on the Gatestone Institute’s website makes this very clear.

The irony is that the thrust of austerity is correctly understood – and rejected by very large numbers of people in Europe. The measures themselves, as Mr Martino points out, are anything but austere. In making the reduction of deficits through increased taxation the focus of policy is only to reward profligate governments and encourage the failure to think through what is actually happening, as I have frequently pointed out.

When Mrs Thatcher was campaigning for election in the late seventies, she was much abused for using homely analogies about domestic housekeeping. Her ever-so-sophisticated critics chortled at her supposed naivety in not realising that a state is not like a household, so her constant invocations of the housewife who cannot spend if her purse is empty were mocked as exposing a shallow, as well as, somehow, a nasty mind.

Well indeed, a state is not like a household in this sense: it takes real statesmanship and foresight to run a state as if it is a household. Politicians who decide that, given that a state is not a household, they are therefore licensed to make free with the state’s economy will soon learn Mrs Thatcher’s lesson – that is, if they are disposed to learn…

The Greeks are going back to the polling booths in June, but it is not likely that the new votes will change much: what needs to change is the electorates’ attitude to the boondoggles of European policy. Doubtless there are many Greeks, as there are many voters throughout Europe who do not bother to vote, which in itself is a vote of a sort. One must hope that a sufficient number of them are like the Greeks in this story, who, having taken the measure of the disaster, have quietly foreseen that there are no easy solutions and have therefore set up alternative currencies and friendly associations to make ends meet.

Greece is commonly referred to as the birthplace of democracy; democracy has over the centuries come to be defined in many different ways, so much so that it is pertinent to ask: were the ancient Greeks democrats? And is democracy the same as freedom? To be continued….

HOW LONG DID IT TAKE HOLLANDE TO DO A SARKOZY?

Wednesday, May 9th, 2012

By Mark Rogers

One day.

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

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

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

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

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

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

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

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

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

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

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

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

Why do investors buy gold?

Thursday, April 5th, 2012

A lucid analysis from France on the logic of gold investment

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

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

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

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

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

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

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

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

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

That’s why gold is bought.

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

GREEKS TRADE THEIR WAY OUT OF GOVERNMENT CHAOS

Wednesday, April 4th, 2012

… and the government follows their lead

By Mark Rogers

In recent posts I have looked at what money is, what underlies the knowledge economy and suggested the role of “de-development” lying at the core of the financial crisis.

It is therefore interesting to report on how ordinary Greeks have rapidly over the course of the last few years started building informal economies, part-barter, part-alternative currency.

As reported in The New York Times, October 2011: “‘Ever since the crisis there’s been a boom in such networks all over Greece,’ said George Stathakis, a professor of political economy and vice chancellor of the University of Crete. In spite of the large public sector in Greece, which employs one in five workers, the country’s social services often are not up to the task of helping people in need, he added. ‘There are so many huge gaps that have to be filled by new kinds of networks,’ he said.”

In Volos, a fishing port in Central Greece, an alternative banking system has been established based on something called a Local Alternative Unit: its value is at par with the euro and can be used to exchange local goods and services. Members even receive books of vouchers, proofed against forgery, which can be used like cheques. (This is reminiscent of the way in which in nineteenth century Hong Kong, cheques themselves were simply circulated as currency without ever being cashed!)

“In Patras, in the Peloponnese,” continues the story in The New York Times, “a network called Ovolos, named after an ancient Greek means of currency, was founded in 2009 and includes a local exchange currency, a barter system and a so-called time bank, in which members swap services like medical care and language classes. The group has about 100 transactions a week, and volunteers monitor for illegal services, said Nikos Bogonikolos, the president and a founding member.”

The most significant aspect of the story is how the Greek government has responded: legislation was passed in the last week of September 2011 which recognised these “alternative forms of entrepreneurship and local development”, giving these groups non-profit status. In the light of the severity of the Greek position, it could not very well do anything else, but that is not where its significance lies.

Extra-legal economies are the time-honoured way in which poor and impoverished peoples have banded together to build an economy from scratch; eventually, the pressure on the legal economy, in 18th Century Britain and throughout the developing world today, which largely exists to protect the monopolistic privileges of the guilds of yore and the professional castes and trade unions of today, forces it to give way: monopoly privileges are legally rescinded, and legal protections extended to those in the extra-legal economy so that they can operate beyond the immediate locality (i.e. safely do business with strangers) and realise their assets.

It is this that the Greek government with admirable perspicacity and speed has enabled for its beleaguered citizens. The Greek government over the decades has acted as one enormous vested interest, which coupled with the incredible way in which Greece was permitted to enter the euro, reduced its citizens to these bare economies. But is there the seed of something else?

There is here the potential to wean people off the whole concept of welfarism: “‘The most exciting thing you feel when you start is this sense of contribution,’ [said Maria Houpis, a retired teacher at a technical high school and one of the Volos group’s six co-founders]. ‘You have much more than your bank account says. You have your mind and your hands.’”

GOLDEN NUGGETS: THE ANCIENT GREEKS

Saturday, March 10th, 2012

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

By Mark Rogers 

The Ancient Greeks had no gold.

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

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

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

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

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

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

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

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

Greek savers ditch Euros for Gold coins!

Wednesday, July 6th, 2011

The worsening crisis in Greece has prompted savers to empty their bank accounts to exchange their Euros for Gold coins.
Concern is growing over the stability of the Greek banking system and of course the astronomic sovereign debt which is crushing Greece.
The Prime Minister George Papandreou may well have persuaded the parliamentarians to back further austerity measures and have won the vote from them but that will not change the resolve of the Greek people.
Greece would need 12% growth annually for at least 30 years to come anywhere near having the means to repay its debts.
How likely is that?
The Greek economy does not have the means to recover and the fact that they have secured the next gigantic loan from the EU and IMF changes little in real terms. This money will only payback the Banks’ debts and therefore not stay in Greece. Surely the only way to help the Greek economy is to inject some funding into it. The only winner in this situation is the Banks who’ll feed their greed for profits and the loan sharks of the IMF and EU who obviously take their cut of interest.
The losers are the Greek people who will still have an impossible sovereign debt blighting their future whilst falling below the poverty line from increased austerity.
On top of this the Government has agreed to prostitute the future of Greece to the lowest bidders who have the cash to buy whatever “good” state assets they have.

A decision that Greece will regret


Without a doubt this line of action will never save the Greek economy or start to rebuild some confidence for a decent future. Greece will stay in Debt for generations. The Greek people will never accept this and their strong protests are understandable. Headlines talk of a possible Greek default – Why? Greece has been bankrupt for over a year, since it first asked for a “bailout”.

The only route to recovery is to restructure the debts or simply declare the country bankrupt. This would be the best solution for the Greeks but of course they’re in a weak position and all recent decisions, including the political waffle and rhetoric, have been taken to secure the European banks that are hugely exposed to the Greek debt. Be under no illusion that the only reason for this action is to appease the power brokers that support the European Governments. The politicians including the Greek government don’t care one iota for the regular people of Greece and why would they because they are all sufficiently immune to the deepening crisis because their deep pockets are lined with personal wealth that removes them from harm’s way and any sense of reality or empathy with those suffering the effects.

The people’s retribution

The one way Greek people have of preserving and protecting their personal wealth is to opt out of the normal system and there is evidence that they have started to empty their bank accounts (maybe à la Cantona – see Eric Cantona’s French Revolution).
Firstly they are taking retribution on the Banks by weakening them and also showing their distrust for reckless, uncaring institutions.
Secondly they are storing their wealth in something tangible and much more reliable than invented currency which could devalue or collapse anytime – they are buying gold coins as they did during the Second World War because they know that this will maintain real value and purchasing power through the difficulties ahead.
Here is some evidence provided recently in the Financial Times by Kerin Hope

ATHENS — Greek citizens are emptying savings accounts and buying gold as they brace themselves for the possibility of a sovereign default and a run on the banks.

Pledges by socialist Prime Minister George Papandreou that his government would “save the country” have been widely discounted by the public. However, parliament gave him a vote of confidence late on Tuesday night. The socialists have a six-seat majority in the 300-member house.

Sales of gold coins have soared as savers seek a safer and fungible source of value.

“When the global financial crisis started, our sales of coins to investors overtook bullion for the first time,” said Harry Krinakis, at Sepheriades, a Greek precious metals trader. “Now the sales ratio has reached five to one.”

Tomas, a computer technician, has exchanged his euro savings for gold coins: “I keep them at home just like my grandmother did in the Second World War.”
Monthly bank withdrawals were running at E1.5 billion-E2 billion in the first quarter. Last year, depositors withdrew E30 billion, equivalent to 12.3 per cent of total savings, according to the central bank. Greek deposits worth an estimated E8 billion were transferred to banks in Cyprus in 2010. But the flow has dried up this year amid fears that Cypriot banks could suffer contagion.

Andreas, a supermarket manager, transferred the family savings to Munich earlier this year. “The Swiss banks aren’t interested unless you’ve got several hundred thousand euros,” he said.

“We can’t trust the politicians to get us out of this mess [and] have to protect our families,” said Sakis, a garage owner, at an anti-austerity protest in Athens’ Syntagma Square. “A bank collapse has got to be in the cards.” He added he had withdrawn his savings and placed them in a bank safe deposit box “for security. Who cares about interest right now?”

Others put their savings into land when prices fell after Greece’s first European Union-led rescue last year. Angelos, a software specialist, bought a neighbour’s olive grove. “I grabbed the opportunity,” he said.
“A year ago I wouldn’t have considered making such an old-fashioned investment.”

It is no accident that other European countries, particularly Germany and France, have experienced dramatically increased investment in gold coins during the last three months. In France investors own more gold than the Bank of France and transactions in coins have increased by 35% (source AuCoffre.com) since January. These countries have aan historical reference to gold coin investments and their benefits so it is no surprise to witness such an increase during periods of crisis. In fact one can determine the “temperature” of concern from this rising activity and people are seriously concerned about an impending crash on the horizon that will have global significance.

Countries like the UK are rather slow on the uptake and the gold investment market tends to be reserved for the extremely well-off and well-connected. What a shame so many people are misled by false information to detract them from participating or they are just ignorant of the facts.

Anyway their loss is someone else’s gain and come the day they will be left holding bits of paper good for burning while their European neighbours use their gold coins to pay for provisions and ultimately survival!

Remember that the signs of crisis were ignored by myopian political rhetoric pre-2008 leaving millions of ordinary folk open to its consequences. The signs of crisis have been with us ever since and still they pretend all will be well and their policies are “working”.

2008 was just the prelude and the worst is yet to arrive.
Be warned and be prepared or once again you will be hung out to dry!

An investment in gold is a survival kit for your future.

The chaos of a currency collapse

Thursday, June 16th, 2011

Last month Belarus witnessed the effects of a collapsed currency when the Government cut the rouble’s value against the US dollar by almost half. Previously 3155 roubles would buy a dollar but in the blink of an eye they decided 4930 would be needed. This was not even the reality because perception of the collapsing currency meant the situation was even worse as people scrambled for foreign exchange on the black market where you needed at least 6000 roubles to buy a dollar.

So what sparked this crisis?

President Lukashenko had promised to raise public sector wages by a third during his election campaign, which he duly carried out. This was sustainable only because of the support Belarus received from Moscow in terms of loans. However, as fears grew about the country’s finances, support from Russia waned and even near neighbours from the EU didn’t fancy the risk thus sparking a sharp drop in confidence in the currency.
To exacerbate the problem there was a shortage of foreign exchange currencies, dollars or euros, in the country.

The consequences of a collapse

Shelves quickly emptied of food and any "tangible asset" that would hold value better than their currency

Wide spread panic broke out as the economy effectively became paralyzed and people suddenly realised their currency was of diminishing worth. Shops were quickly emptied of everything that could be bought. Everyday food was snapped up at “luxury” style prices as people thought of survival but also they also bought electric goods like toasters, microwaves, canned goods and virtually anything that was for sale as they rushed to convert their currency into “any tangible assets” that were not losing value as quickly as their roubles.
The empty shelves throughout the towns seemed eerily reminiscent of the Soviet controlled days.
Shoppers knew that anything they could purchase could be more useful as a form of barter than the diminishing currency in their purses and wallets.

The human cost was quickly evident from the stories of employees sent on unpaid leave as companies also struggled to cope and comprehend the impact. Andrei, a computer company employee explained how he queued for a week in Minsk trying to buy dollars but didn’t even get one. “In just one month, I have been made bankrupt, the entire country is bankrupt” he said, adding that “even during the Soviet collapse we never suffered such a nightmare”.

There are many more stories of hardship, families without food or the means to buy any, shops without stock for them to buy even if they had the means.

Dmitry who is a 48 year old factory worker explained how he closed his bank account to get out 5 Million roubles in cash so he “could buy something before my money turns to dust”.

Tensions are growing as many people blame the President for mismanaging the economy.
Staple food supplies are now hoarded but people feel anxious that unrest is starting that could spill over into conflict at any time.
Revolution is always more likely when the population are starving.

Which country is next?

This may all seem so far away from wherever you are reading this but the causes of currency collapse may be closer to your doorstep than you think.

How many countries are in deep debt and reliant on support loans and bailouts right now?
Greece, Ireland, Portugal, Spain, Italy, Japan, USA, Belarus and virtually all of Eastern Europe and the Euro zone (only they never put it in the headlines!)

What happens when the support cannot be maintained?
Currency Collapse.

It could be the US Dollar, the Euro, the Yen who knows?
But even if it isn’t your currency that collapses what will be the knock on effects in every developed country if one of these currencies collapses?
The same as in Belarus.

Globalisation has been the buzz word for expanding Capitalism but it also means that economies are now inextricably linked and inter-twined to such an extent that when one sneezes they all catch a cold!

Remember the level of Sovereign Debt is spiralling out of control in the US, Greece, Ireland, Portugal and others are close behind such as Spain and the UK. Austerity measures in all countries are hurting normal folk badly – they are losing their jobs, suffering pay freezes, inflation and pension erosion. Social unrest and industrial action looms large across Europe and this will itself impact the recovery and debt repayment. This has already started in Greece, Portugal, Ireland and large scale protests in the UK are gathering momentum with the Autumn likely to be the boiling point of anger.

The discontent and despair of regular folk is understandable as they are bearing the brunt of all the hardship and it just isn’t fair.
Politicians spout their practiced rhetoric about how to fix things but the reality is they just don’t care that much as they are not the ones affected. They have means to isolate them from the hardships and many of them are actually responsible for producing the mess. How can they care about regular people or preach what we need to give up when they don’t – ever met a poor politician? Enough said!

There is now even talk of a “sub-prime” type problem in China because of over-indulgence in property speculation, leaving huge swathes of developments empty or under-occupied and therefore leaking money and ready to default.

We need more than lip service!

Mainstream news outlets are all controlled by self-interest groups (private and Governments) and they never provide the whole story about global economic frailty as there would be worldwide panic if they told the truth. The situation right now is on a knife edge and the next Belarus is not far away. Politicians won’t admit it but then again they won’t suffer like the rest of us as they’re all rich enough and well connected to see out any storm. They care too much for their own popularity to be honest.
Posh boys and rich kids rule the world and their assets are well protected in advance.

Remember what happened when panic struck in Belarus, people bought any tangible asset they could because it would maintain value better than their currency.
This phenomenon is happening daily – your bank account is the best place to keep currency if you want it to devalue!

Currency is not a means of preserving wealth because it has no inherent value especially when confidence is lost – then it is just a piece of paper.

The only real money available is a tangible asset that maintains its value whatever happens to printed bits of paper currency – and that is gold!

A lesson on Money and currency

We need to understand the difference between money and currency as one is real and the other a promise. Money can be defined as a medium of exchange and a store of value and until fairly recent times was in fact coins made out of precious metal with an intrinsic value or for ease of use, notes backed by precious metal.
Money, when considered as the fruit of many years’ industry, as the reward of labor, sweat and toil, as the widow’s dowry and children’s portion, and as the means of procuring the necessaries and alleviating the afflictions of life, and making old age a scene of rest, has something in it sacred that is not to be sported with, or trusted to the airy bubble of paper currency. Thomas Paine (1737 – 1809)
Currency is still a medium of exchange but is not a store of value as it only derives its value by government degree or “fiat”. It’s value is based on the issuing the authority’s guarantee to pay the stated (face) amount on demand, and not on any intrinsic worth or extrinsic backing. All national currencies in circulation, issued and managed by the respective central banks, are fiat currencies.

A days wages in Germany 1923

The problem is that fiat currency runs the risk of central bankers printing too much and causing large inflation or worse. The more that is printed the more the currency is debased just as the Fed is doing now with the dollar. This has been going on for decades with central banks indiscriminately creating money to cover expenditure and ever increasing debt. There are examples throughout history and in the 20th Century most of us are aware that in Germany in 1923 it would take a barrow load of Deutschmarks to buy a loaf of bread but an ounce of gold could buy a reasonable house and one dollar was worth 4 trillion marks.

This irresponsible printing of money has eaten away at the value of the world’s reserve currency the USD dollar and dollar based assets, to such an extent that they have lost 82% of value since 1971, the year the US cut links with the gold standard. The GBP has fared even worse that the USD losing around 85% of value since 1971. There are many illustrations of then and now and how owning gold with intrinsic value would have more purchasing pro rata than currency. E.g the latest model Cadillac Eldorado would have taken 180 ounces of gold at $42.02 to pay the showroom price of $7,546. This same 180 ounces is now worth over $200k and would buy two Cadillac convertibles with enough left over to fuel to first service. In the UK an average family car cost £1000 around 60 oz of gold and now the same would cost £17000 around 23 oz of gold. The 60 ounces would have bought the same family car for you a sports car for your wife and a hatchback for your son or daughter. Gold retains its purchasing power year after year.

Not long ago the gold standard imposed monetary discipline on countries as they had to hold enough gold to cover the money in circulation but this all changed with the Jamaica agreement in 1971 when the decision was taken by President Nixon on the 15th August 1971 to suspend the direct convertibility of dollars into gold, the keystone of the financial system created in July 1944 (the Bretton Woods Agreement). On the 1st October 1971 the general assembly of the IMF asked the board of trustees to study and propose a comprehensive reform. This would be adopted by member States during a meeting held in Kingston (Jamaica) on the 7th and 8th January 1976, and included a set of provisions which put an end to the reign of gold. The US money supply in 1971 was $776 billion and quickly became an upward curve which rose dramatically over the last decade where the US money supply doubled from below $7 trillion to $14.3 trillion indicating that spending is out of control.

The US National debt is now greater than this!

The US though still likes to play the rich kid on the block and bizarrely gives aid to those supporting its debt as a report in the Daily Mail of London illustrates:
The U.S. is providing hundreds of millions of dollars of foreign aid to some of the world’s richest countries – while at the same time borrowing billions back, according to report seen by Congress.

The Congressional Research Service released the report last month which shows that in 2010 the U.S. handed out a total of $1.4bn to 16 foreign countries that held at least $10bn in Treasury securities.

Four countries in the world’s top 10 richest received foreign aid last year with China receiving $27.2m, India $126.6m, Brazil $25m, and Russia $71.5m. Mexico also received $316.7m and Egypt $255.7m.

And yet despite the massive outgoings in foreign aid, the receiving countries hold trillions of dollars in U.S. Treasury bonds.

China is the largest holder with $1.1trillion as of March, according to the Treasury Department.

Brazil held $193.5bn, Russia $127.8bn, India $39.8bn, Mexico $28.1bn and Egypt had $15.3bn.
Maybe it’s just additional interest on the debt to keep them sweet!

Greece figures predominantly in the spotlight and unrest is growing – will the Government have to mortgage the Acropolis and Parthenon or even sell them off to pay their debts?
Clearly they can never work their way out of this debt because they would have to increase GDP by 12% a year for 30 years in order to grow their way out of debt.
The Sovereign Debt crisis is well and truly out of control and the only solution will be to default on the debts and devalue currencies.

As discussed in the example of Belarus, chaos ensues when currencies collapse and regular folk suffer badly as they don’t see it coming or refuse to believe it could happen to them.

Be warned: A currency collapse is coming near you.
Be prepared: don’t put faith in bits of paper which have no inherent value.
Protect yourself: Invest in tangible assets that hold real value at all times, especially during a crisis.
Remember: Real money has inherent value, it is worth something because of what it is not because of what is written on it.
Now you know why people buy gold to protect themselves from crisis – it always holds value and is the only real money.

In summary:
Currency is not money and its value can be changed by monetary policy makers
Currency can be created and printed at will with no substance to support it
• Currency depreciation in value is accelerating with subsequent loss of purchasing power
• National debt is increasing to disastrous levels with threat of sovereign debt default
• Confidence in the USD is waning and its use as a reserve currency is under threat
Countries and investors are shedding their dollar assets
Central Banks are diversifying into gold and out of dollar assets
Smart investors are diversifying their portfolios with a proportion of gold
• The value of gold has been consistent in retaining its purchasing power
Gold is insurance for your wealth
• Gold is the only real money

I rest my case!

Financial Meltdown and Black Swans – Myth or Reality?

Monday, May 16th, 2011

“A black swan is the illustration of a cognitive bias (error in decision-making or of behaviour adopted when faced with a given situation).

If one encounters or observes only white swans, one will quickly deduce in error that all swans are white and that is what Europeans believed, for a long time, before making the discovery of the existence of black swans in Australia, in the 17th century.

In point of fact, only the observation of all existing swans may give us the confirmation or invalidation that these are indeed still white but taking the time and means to observe all swans on Earth before confirming that they are all white is just not possible.

It is thus preferable to make the hasty assumption that they are white, in the expectation of seeing the theory dropped by the observation of a swan of another colour.

Thus we create arguments by starting off with incomplete information, which leads us ending-up with false certainties.”

What is the relevance of this story to the economy and your investments?

Quite simple really. Read on and observe the trend emerging.

– The University of Texas uses gold for its cash-flow….
Important information that has gone unnoticed is that the University of Texas has just invested approximately 1 billion of its cash-flow in gold. You will find below the article by Bloomberg.

The Board members see gold “just as another money but one which cannot be devalued by an additional printing of notes”.

Interestingly, they asked to take delivery of their gold – 6,643 gold bars,  which is stored in a New York vault because of the fear of a Comex paper gold scam.

It should be noted that this university also trains economists.
So what should one think of such a strategy?  Only that more and more private individuals and institutions are starting to have increasing doubts on the continuity of the global economic system in its current make-up. It also suggests that those in the know prefer hard physical assets to “paper promises”.
Yet “experts” previously thought that this was unimaginable and impossible!

.

But that is not all. These last weeks have been exceptional in terms of alarm signals.

– Two year rates for Greece exceed 25% for the first time ever. It means that Greece is perhaps only a few days away from a re-scheduling of its debt over which inevitably world banks, starting with French banks, will ruffle a few feathers. For information purposes, it is the Crédit Agricole which is the most exposed to the Greek risk, with all banks being nevertheless concerned.
Yet “experts” previously thought that this was unimaginable and impossible!

The monitoring of the US debt by the credit rating agency Standard and Poor’s,

For those who have not yet understood or who really do not wish to understand, the US economy remains the leading global economy. A US default in payment would lead the world into an economic chaos without precedent. Inveterate optimists tell us that they do not believe in it. The very same people who did not believe in a seism of a magnitude higher than 9, followed by a tsunami of more than 15 metres in height, coming to destroy 6 reactors of a nuclear plant… and which exposed a whole country to radiation if not making people tremble with fear over the prospect of the entire contamination of the Northern hemisphere.

Yet “experts” previously thought that this was unimaginable and impossible!

– So what else have we learnt? –  that the Morgan Stanley Bank has just made a voluntary default in payment of $3.3 billion on a 32 storey tower building which it owns in Tokyo. This repayment failure is significant because it was the largest of its kind in Japan and marked the latest fallout from a series of highly leveraged investments by Morgan Stanley, one of the most aggressive investors in worldwide property markets before the global financial crisis In short their loss seems of little importance to them because the value had plummeted and they just had to get rid of this building. What can be the motive of such a decision which is a historical first for this “venerable” institution?

Yet “experts” previously thought that this was unimaginable and impossible!

– To this we can add that CDSs (Credit Default Swaps) currently reflect an anticipation of cancellation of debt of some European countries able to reach 75% (CDSs act as “insurance” against the risk of bankruptcy).

Yet “experts” previously thought that this was unimaginable and impossible!

And then there is China which wishes to diversify its foreign-exchange reserves and significantly reduce its holding in American dollars. Indeed, the depreciation of a currency is a means of refunding one’s debts only in devaluated monopoly currency. But it is done at the cost of the currency holder. Our Chinese friends no longer seem to want to be the guinea pigs and are looking to diversify into the Euro.

Yet “experts” previously thought that this was unimaginable and impossible!

– More dramatically, Mc Donald’s (the restaurant chain) launched a big campaign to recruit  50,000 jobs in a single day. Pathetic scenes showed to what extent the situation of many American families is disastrous. Almost 3 million people turned up to get work, some even camping the day before just to be sure of being interviewed. The situation simply turned to drama in Cleveland (click here to see video ) when a crazed driver ran over 4 people in the car park!.

Yet “experts” previously thought that this was unimaginable and impossible!

– And finally, on a lighter note, after the initiative by ex-footballer Eric Cantona even Mayors are having a go, at least the Mayor of the city of Ghent in Belgium for one, who has just taken  the decision to withdraw his funds from two banks, namely Dexia and KBC, in order to protest against the policies of these two institutions and has invited all cities to follow his example…

Yet “experts” previously thought that this was unimaginable and impossible!

It is now obvious that more than ever before how vital it is to adopt a particularly defensive investment strategy.

I invite all private investors to take their potential profits out of the share market and to quit the financial markets. Particular caution is advised with regards to all the securities of insurance companies and banks.
A share in gold of approximately 10% of the total financial assets is to be seriously considered in order to protect one’s financial assets.
It is also strongly advised to get out of bond investments, except from a speculative point of view, starting first with Euro funds in life insurance contracts. These Euro funds are overwhelmingly made-up (approximately 75%) of sovereign debt, i.e. government bonds. Imagine how vulnerable they are to default and complete collapse.

and remember this is NOT impossible, unimaginable or unthinkable – it is highly likely to the point of being inevitable.

I do not know if you have noticed, but I find that lately we can see more and more black swans.

Yet, as everyone knows, swans are white…. until proved otherwise.

Translated and Adapted from an original article by Charles Sannat

Gold Trends Intra Day Gold Update – Mar 23rd

Thursday, March 24th, 2011

In last nights website update resistance was listed at 1434-1444 and the high so far today is 1434.50 —- support was listed at 1419-1424 and the low so far today is 1425.50 —

London Gold Fix $1433.00

In the early action today, April gold has managed a rise above the prior session’s high but has reached the key 1435-1444 price area of resistance this week. This is the key area to watch this week. A close above 1435 would add to the bulllish potential towards 1460.

Reports that the Japanese disaster might end up costing as much as $300 billion. However, the upward track in gold and other commodity prices might be held back because of fears that containment of the #3 reactor at Fukushima has seen a setback overnight as commodities generally don’t like to see developments that could end up slowing the economy.

Talk that a Chinese gold company might be looking to acquire gold mines in other countries was viewed as favorable in today’s trade.

The Fed’s Fisher is a scheduled to speak today and yesterday he generally sounded a hawkish tone. The US Fed Chairman BERNANKE is also scheduled to speak just ahead of mid session today and some traders think he will largely countervail the dialogue from Fisher.

Gold will garner some support from a bullish price forecast from a gold company executive, who suggested that gold might have a “couple” more years of upside action before a top is formed.

While equity markets in Asia were mixed during overnight trading, stock indices in Europe are generally weaker this morning and the US stock market is a bit lower this morning. Home sales plummeted in USA — down 175 from January.

The Dollar is stronger against most of the major currencies during overnight trading, although posting a loss against the Yen. With the US dollar on the brink of NEW LOWS for the year and at a key chart point, we couldn’t help noticing that Portugal is in the NEWS headlines and the “spin” is that Portugal may be the third country that will ask for a Euro bailout. This has caused a Euro pullback and a BID for the US Dollar today. Coincidence ? Who knows anymore, but the US Dollar is higher in trading today. The Prime Misister of Greece also stated that any restructuring of Greek debt would bring on collapse of banks in his country.

Coalition air strikes have grounded the Libyan air force, but rebel forces have been unable to take advantage as fighting has reached a stalemate.

Going to the chart – Gold is up against key resistance today at the 1435 area — and this is probably the most important area for this week. A close above 1435 will favor higher towards 1444. Gold has attempted to move above this 1435-1445 area since Feb 28th so it is approaching decision time. The price pattern continues to show “capping” as Darth likes to call it —- but they can only hold it for so long and it looks like a decision point is coming in on the short term today or tomorrow. The upside still has the advantage but keep in mind that BERNANKE is scheduled to speak today and that can cause some choppy action.

Resistance for the remainder of the day is 1435-1444 and support is 1422-1426. The trend remains up.

In summary — but gold and silver are at key price points —and a close above these levels will keep the favored short term uptrend in place.

by Bill Downey

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Financial Armageddon from worthless Paper Money

Monday, February 28th, 2011

Maybe you think it sounds extreme but daily we move closer to the real possibility that a major fiat currency such as the US Dollar or the Euro could collapse in the blink of an eye.
The mounting economic pressures mean that eventually something will have to give.
Inflation is rising.
Oil prices are rising.
Debt is unresolved.
Property prices are falling.
Unemployment is rising.
The cost of living is rising.
Wages are stagnating.
Raw material costs are almost out of control.
Energy costs are rising.
Growth is negligible (and most estimates are over-egged by floundering politicians)
North Africa and the Middle East are unstable. The knock on effects are pure guess work at best.
What will happen next?
What will be the net effect of all these things stirred up with a huge dose of uncertainty?
It’s like a tinderbox to start a Finacial Armageddon.
Just one single event could trigger an unstoppable domino effect that would lead to financial meltdown.

Don’t believe me?
What if Greece cannot keep to the rescue plan imposed on it? What if it defaults? Will a whole country go broke? And then what?
What if the Eurozone feels the knock on effect or what if another bigger Eurozone country requires a bailout?
Any of the major currencies could be put under extra pressure resulting in a run and a collapse and at any time.
The US dollar is a benchmark for the world, for oil prices, trade, banking etc.
Is it conceivable that this , the most important currency on the planet as we know it , could collapse.
Take a look at this video and decide for yourself. Impossible, Possible, Probable or highly likely?

This is a timely reminder to the fragility of wealth stored in currency or as a paper promise reliant on the success and existence of a large institution.
Wealth needs protection for survival and the acquisition of valuable physical assets that can survive a crisis is the only way. No wonder Central banks and the biggest fortunes on the planet are stocking up on Gold!