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IN CASE OF CURRENCY DEVALUATION

Friday, March 21st, 2014

What is best : Savings Accounts or Gold/Silver ?

There was a very interesting article published in The Economist on Feb 12th 2013 and more recently on Feb 22nd 2014, what could one hope in case of currency devaluation ?

We all try to save a bit of money each month but, while still in crisis, most people find it hard to make ends meet. So, what would happen if the little money you try to save each month is really worth half of its value ?

We wish to point out the consequences of such currency devaluation :

Many people have savings account which can actually generate a 2% interest rate per year. So imagine if you were to invest 100€ per month, you would have saved 1200€ + 2% (24€ interest/year) = 1224€.  If the currency was devalued by 20%, your saving capacity would go down by 20% due to inflation. Whatever you would have saved in your saving account would be worth less as well. Whereas if you had saved in gold and silver, these tangible assets would have kept their values and would be worth even more … So, before we face a currency devaluation, let’s diversify our wealth.

How can we ? Investing in gold, silver and also investment diamonds is recommended. By splitting an investment, we can avoid the worst.

Lingold Savings Plan allows to save from very little … but it can be worth a lot should our currency be devalued. So, do not postpone your investment plan any longer. Start today


Buying gold coins as a safe haven

Wednesday, January 8th, 2014

Gold coins struck for liberty

Gold is an asset able to provide real freedom of action. It has had an inherent value for over 6000 years and is still going strong. It provides the reassurance to your savings and wealth that allow you to sleep easy at night – real freedom. This concept of freedom should increase with the value of our assets but today it is so often used as just a lure of clever marketing that distorts the truth about your savings and investments without the reassurance.

The culprits? Banks, once again. Indeed, our bankers have long forgotten the fundamentals of their activity and prefer to sell us complex financial products or random diversifications like mobile phone contracts. Many contracts tie us to them day after day. They have forgotten that they were to be the guarantors of our freedom by means of the values and valuables that we entrusted to them and included the right for our investments to remain our property.

We became completely dependant on these same banks: obligatory bank accounts to cash our wages, money blocked on accounts which pay hardly more than inflation (and sometimes less), credit, risky investments, etc. With gold coins it is quite the reverse.

Gold coins as an investment

Gold coins as an investment

Today in France, as in many other countries, their holding, their transport, their purchase and their sale are free. But that was not always the case. During the Second World War, Germans prohibited the French from having more than 6 g of gold, not even a 20F Napoleon coin. To deprive the French of their gold, was also to deprive them of their freedom. Very happy were those who could rely on their treasure being locked up in vaults

in Switzerland, able to convert it into cash on the local market and return to France with the revenue of the resale. Those who could not travel abroad could obviously buy or sell some in France, but they were exposed to the risks, including theft, blackmail and denunciation. Feeling confident with this assessment, many sought to shelter their treasure in Switzerland but not having anticipated the war, they subsequently had to take enormous risks in order to

smuggle their coins across the border by using secret compartments in their walking sticks that would be stacked full of Napoleon gold coins.

Another example: between 1933 and 1975, the possession of gold was prohibited in the USA. That did not prevent Americans from being among the largest hoarders of gold currency. The Swiss vaults were then filled with Eagles, Double Eagles and Sovereigns which reappeared at the end of the prohibition on gold or which were directly converted into cash in Europe.

During the Cold War, the Americans were right and gave their pilots (or their spies) gold coins so that they could have the possibility to buy their freedom in certain countries. Proof that even the king dollar would be insufficient in some cases. In the eyes of the Vietcong soldiers for example, it was just a vulgar piece of green paper bearing the marks of an enemy culture.

A gold coin, even struck by the American administration, remains above all gold with universally recognized and accepted values.

Contrary to bank notes, gold does not preach politics or try to impose any lifestyle. Gold does not have a nationality, it is neutral, and does not preach a doctrinaire approach. Gold coins are thus the last obstacle against attacks on our freedom and they will always be recognized at their rightful value. This is not the case with the fiduciary currencies in the form of banknotes, coins, and today of electronic currencies, which are sometimes so difficult to get accepted from one country to another.

Geographical locations

Gold coins are not in demand in the same way in all countries. Thus, in China or in the USA, Napoleon gold coins are not so well known and investors prefer to buy local coins or Krugerrands and Sovereigns which have an international appeal. In France it would be the reverse: in a period of crisis, the Napoleon national coin will tend to see its price shoot up beyond the value of the metal content whilst coins from other countries will maintain a steady premium.

Ideally, one would want to buy coins that are less in demand in a certain country and sell them to a market with a high demand for that particular coin.

This is possible today using systems like LinGOLD.com, AuCOFFRE.com and LingORO.com which unite French, Spanish and English speaking gold investors around the world, providing opportunities for a Chinese Member to buy Pandas from a UK Member for example.

Extract from the English adaptation of the French book : L’or, Un Placement qui (R)Assure (2011) written by Jean-François Faure,President and founder of AuCoffre.com.

The gold buyer is a contrarian

Monday, January 6th, 2014
contrarian-etfs

Contrarian mind, are you ???

A contrarian is a person who buys or sells his position against the opinion of the market and which is wary of the majority opinion while intervening in the contrary direction. The most famous contrarian is none other than Warren Buffet… the richest man on the planet. One of his best pieces of advice is not to follow the herd. His secrecy lies in a sentence typical of a contrarian: “The average is what everyone else is doing; if you want your shares to perform above the average, you must do something else”.

Among the politically incorrect followers of gold, one finds visionaries like William Bonner, historian and specialist in the US economy, who warns his compatriots living on credit:

“Imagine a shopkeeper whose biggest customer was having a hard time paying his bills. The shopkeeper extends credit, hoping the man will get his finances in order. But the more credit he gives him, the worse the man’s finances are. It would be very nice if that could work out. But it rarely does. Instead, it eventually blows up. The customer has to stop buying and the shopkeeper has to stop lending. There’s going to be hell to pay, in other words.”

“What should an investor do to protect himself,” our friend asked.

“Buy gold.”

“Gold? What a strange idea. I haven’t heard anyone mention gold in many years. It seems so out-of-date. I didn’t think anyone bought gold anymore.”

“That’s why you should buy it.”

And that is the person who is currently buying gold.**Extract from the book by William Bonner Empire of Debt : The Rise of an epic financial crisis(published by John Wiley & Sons, 2005).

To put an end to the generally accepted idea according to which gold savings is the act of nostalgic older men, one only needs to go onto some specialized forums to realise that this type of saver is not only younger than the average but that he or she also has a very informed view on the global economic system. From his profile one would say above all that he or she is a careful saver with a different vision of value in the future. This new generation of gold investors is logical, practical and in search of a different type of security than that offered with traditional investment or savings instruments. They have witnessed the demise of their parents “trusted” plans and they are not keen to

repeat the mistake. They may share the perfectly normal aspiration to save for their future but they are looking for security, reliability and protection of the

purchasing power stored up in their savings.

Given the current high street offerings with returns on investment equivalent to a net loss due to the effects of inflation, it is no surprise that savers and investors are turning to something tangible and an asset they can own.


Gold, an alternative Currency of Confidence?


Where would we turn to if the known currencies of the world suddenly devalued and became worthless in real terms?

Throughout history there have been instances when all faith has been lost in the official currency usually because it has become worthless and therefore all confidence has been lost. However, people have always looked for an alternative to maintain commerce and everyday survival. This has sometimes taken the form of bartering but it is limited by the difficulty of assigning recognisable value to a wide range of goods and services. There has to be some common denominator and unit value that is commonly recognised and therefore allows the cycle of trade to turn.

During the French revolution the state coffers were completely empty and so the emerging Constitutional Assembly created a system based on “assignats” which gained their value through selling off the assets of the church. These “assignats” would be guaranteed by the state and the objective was to reconstruct a functioning economy. However, they became greatly over subscribed to the tune of 47 billion causing inflation, zero rates of interest and

ultimately ended in collapse.

Extract from the English adaptation of the French book : L’or, Un Placement qui (R)Assure (2011) written by Jean-François Faure, President and founder of AuCoffre.com.

Gold Trends Analysis

Tuesday, December 24th, 2013

Gold Medium Term and Resistance Line
Long Term Trend ~ Neutral since 4/12/13 @ 1501 ~ Moving averages 1560 – 1561
Medium Term Trend ~ Bearish since 4/5/13 @ 1575 ~ Moving averages 1321 – 1370

From a medium term perspective, as long as price is below the UPPER RED LINE near and below the moving averages, the overall medium term trend is still down. We need a close above the moving averages in order to neutralize the downtrend and take it out of bearish mode. The moving averages have now come down to 1321-1370 as we enter this week.

The potential for the year end to be another low cycle has not been eliminated.   We’ve got to get above the averages and the red line in order to become more favorable towards the medium term.  Last week we lost the 1220-1222 area and came within 8 dollars of our target (1180) if broken.

If you look at the end of 2008 you see that the green channel line was broken right at the crash low.

If the lines do break the June lows on the downside the next support is the dotted line near 1100 and then the 1000-1040 area where the white line crosses.   The key for gold is for price to get back above 1370 on a weekly basis for the medium term trend to get out of this bearish mode.  Support is getting thin as we’re at the weekly trend lines.  The June lows can still be taken out if those lines give way but there is a weekly support at 1172 on a Friday close basis that would be the next point to watch for support before the line near 1000 on the chart comes into play.


Gold Trends Analysis

Gold Trends Analysis

Ext : http://www.goldtrends.net

The Australian Nugget 1 ounce

Monday, December 16th, 2013

The Australian Gold Nugget is a popular series of Gold bullion coins issued by the Perth Mint. They
have legal tender status in Australia and are one of the few legal tender bullion coins to change
their design every year, the most notable other being the Chinese Panda.

Details

Australian Nugget 1 ounce

Australian Nugget 1 ounce

Australia issued its first Gold Nugget coins in 1986. From 1986 to 1988, the reverse of  these coins featured images of various Australian Gold nuggets, hence the name. From 1989, the design changed to feature different Kangaroos, a more world-recognised symbol of Australia. The coins are sometimes referred to as Kangaroos but the name

Nugget seems to have stuck. The coins up to 1 Toz change design each year. Each year, a Proof edition is issued and that design becomes the bullion coin design for the following year.

The coins have a unique market niche for two reasons; a “two-tone” frosted design effect and individual hard plastic encapsulation of each coin. Provided they remain as they came from the mint, the quality is maintained and thus premium.

The initial sizes offered were 1/20 Toz, 1/10 Toz, 1/4 Toz, 1/2 Toz and 1 Toz. In 1991, the 2 Toz, 10 Toz and 1 Kg sizes were added. These were created with the intention of using economies of scale to keep premiums low. The face values of the two larger coins were lowered in 1992 in order to bring them more in line with the smaller sizes.

In October 2011, the Perth Mint created a one tonne Gold coin to break the record for the biggest and most valuable, previously held by the Royal Canadian Mint. It is approximately 80 cms diameter and 12 cms thick. The face value is A$1 million but at the time of minting, the Gold price made it worth over A$53 million.

As mentioned, the reverse of the coin features in the early years a Gold nugget and thereafter a Kangaroo. It states the year of the coin, the weight and Gold fineness.

There is also a mintmark ‘P’ which signifies the Perth Mint.

The obverse features a profile view of Queen Elizabeth II designed by Ian Rank-Broadley. The portrait is surrounded by her name, the denomination of the coin and the word AUSTRALIA.

The Australian Gold Nugget coins should not be mistaken for the Australian Lunar Gold Bullion coins. Both coins are minted by Perth Mint and have 999.9‰ fineness but Lunar coins use different animals from the Chinese calendar instead of the Kangaroo.

Investment Advice

There are various grading systems in use around the world. However, the British system is as follows:

All Nugget coins are issued as pure Gold finewness, 999.9‰ and in theory have a low premium just above the value of the Gold.

However, their intrinsic beauty makes them very collectable and they attract good premiums.

As with any coin, the best quality grades will attract the best premiums. The three early years in particular will be those with the highest premium. Although the coins

were issued in Proof form, many were unpacked and have thus been damaged and are at lower gradings. The mintage figures for all sizes of Nuggets are in general quite low, thus every coin will have numismatic premium value also. All round, the Nugget is both a collectable and investable product.

Specs

Tax Free Savings

Wednesday, December 11th, 2013

A Tax Free Savings Account in physical gold that you own

UK Taxpayers have a unique opportunity to save in pure gold, a real tangible asset, without paying VAT or Capital Gains Tax. Start from just 1 gram a month.

Gold Britannia and Sovereign investment quality coins offer a unique advantage to investors because they offer between 18% -28% additional benefits over other investments. Why? … because they are completely exempt from Capital Gains Tax. Furthermore, they are exempt from VAT.

Britannia 1 ounce_averse

Britannia 1 ounce averse

Gold Britannia 1 ounce coin

Britannia 1 ounce obverse

Britannia 1 ounce obverse

A beautifully struck gold bullion coin that has UK legal tender status and a face value of £100 – although its actual value is many times greater. The Gold Britannia coin was originally alloyed with Copper, but from 1990 the decision was made to alloy with Silver. This is why the earlier Gold Britannia’s have the deep Gold colour, as opposed to the lighter yellow gold colour of the Britannia since 1990. The latest 2013 coins have no alloy and are pure gold and 999.9°/oo fineness.

Sovereign Elizabeth II_averse

Sovereign Elizabeth II averse

British Gold Sovereign coin

Sovereign Elizabeth II obverse

Sovereign Elizabeth II obverse

The full British Sovereign is one of the most recognised gold coins in the world, with UK legal tender status and it can attract a healthy premium as it is always in demand, at home and abroad. Their legendary reputation comes from their use in a pilot’s survival kit by many air forces, being sewn into their jackets and used to negotiate their safe passage home if downed during a mission. The attraction was the integrity of their British origin which provided the utmost trust to their owners.

Capital Gains Tax (CGT)

Coins which are legal tender in the UK are exempt from CGT. The Britannia and Sovereign investment coins fall into this category. The UK Customs authority has issued a notice to accountants and financial advisors numbered CG12602 which deals with exemptions and in particular currency in sterling. It refers to:
– TCGA92/S21 (1)(b) which states “Currency in sterling is not an asset for capital gains purposes”. >Learn more
– Further notice from HMRC is given in CG78308 which states “Sovereigns minted in 1837 and later years and Britannia Gold coins are currency but, like all sterling currency, are exempt because of TCGA92/S21 (1)(b) >Learn more Value Added Tax (VAT)
Coins which are of investment quality do not attract VAT. Investment quality is defined as coins which contain a minimum of 900 one thousandths Gold. (900.000 ‰). Rather than being a specifically British rule, it is in fact from the European Union. See notice number 2011/C 351/07. The notice refers to all coins from various countries which would fulfill the investment quality criteria. >Learn more


Confidence in physical gold

Tuesday, December 10th, 2013

According to kingworldnews.com and also confirmed on jsmineset.com, the Shanghai Stock Exchange would have delivered more gold than Fort Knox in the States. Needless to say the strong impact that would have on the gold price in the forthcoming future.
Some people even expect tapering to happen again or at least at some point.

Shanghai stock exchange
Shanghai Stock Exchange

The dollar is being printed on such a large scale that it leads to a complete devaluation of the US currency. That may be a satisfaction to the American to have more bank notes printed out but on the other side this does not help other countries like China who is presently sitting with some $3.7 trillion of foreign exchange reserves – other countries are actually in a pretty similar case with lesser quantities but still the concern remains …

Kingworldnews visited the Shanghai Stock Exchange in 2009 and said that they had delivered some 8655 tons of gold since 2009. The Chinese bought something like 1.700 tons of gold in the first eight months of this year. It means that gold is actually feeding the Chinese’ foreign exchange reserves. We know that the renminbi is already the second largest currency used in global trade … How long before the dollar becomes fully obsolete ?

Let’s have a closer look at the dollar :

Well, one should be scared when looking at that 14 year perspective published on jsmineset.com

a 14 year perspective for the de-dollarization

a 14 year perspective for the de-dollarization

In our article published on Nov 19th 2013 – China remains the world’s largest gold consumer in Q3’13 – we were actually talking about the lack of confidence in the global financial market and systems altogether. As Jim Sinclair was saying ‘Credibility speaks to Confidence and Confidence speaks to Gold’.

Soon we may have part of our savings confiscated. How trustworthy are the banks? 

Investing in physical gold has never been so important. Making it affordable to everybody is our main concern and feasible thanks to our LSP.

For further information with regards to the confiscation in the USA, please read our article The Great Confiscation : Gold ownership was illegal in the USA from 1933 to 1975.

The Krugerrand 1 once

Monday, December 9th, 2013

The Krugerrand is probably the original Gold bullion coin. It was introduced in 1967 as a vehicle for private ownership of Gold whilst also being circulated as currency, hence being minted in a durable alloy. From 1980, further sizes were introduced. See specification table overleaf.

Details

pict krugerrand 1 ONCE The history of the Krugerrand begins with the South African Chamber of Mines which had the inspired idea to market South African Gold by producing a one Troy ounce bullion coin to be sold at a very low premium over the intrinsic Gold value. It was intended to be circulated as currency, hence it was minted in a more durable alloy and contained 2.826g copper to resist scratching and thus giving the coin its golden hue. At the time of launch, the Krugerrand was the only accessible Gold investment opportunity for the everyday buyer and this thought came through from the inception. It was the fi rst coin to contain exactly 1 Troy ounce of Gold.
Despite the coin’s legal tender status, economic sanctions against South Africa made the
Krugerrand an illegal import in many Western countries during the 1970s and 1980s. These sanctions ended when South Africa abandoned apartheid in 1994 and the Krugerrand once again regained its status as one of the worlds’ leading bullion coins.
In 1967, only the one ounce coin was available. From 1980, the fractions were available, namely, one half ounce, one quarter ounce and one tenth ounce. The name is derived from a combination of Paul Kruger, a well-known Boer leader and later President of the Republic and the Rand, the monetary unit of South Africa. The obverse side features the Otto Schultz image of Kruger along with the name of the country “South Africa” in the two languages, English and Afrikaans. The reverse side, designed by Coert Steynberg features the image of a Springbok Antelope, one of the national symbols of South Africa.
By 1980, the
Krugerrand accounted for 90% of the Gold investment coin market. For example, it is estimated that between 1974 and 1985, some 22 million coins were imported into the United States alone. Although it is not a beautiful coin, many millions have been sold since its introduction due to the policy of selling with a very low premium. The success of the Krugerrand led to many other Gold-producing nations minting their own bullion coins, such as the Canadian Maple Leaf in 1979, the Australian Nugget in 1981, the Chinese Panda in 1982, the US Eagle in 1987 and the British Britannia in 1987.
The
Krugerrand is interesting in that the government of South Africa has classed the coin as legal tender although it has no face value. It therefore fulfills VAT-free criteria for investment coins.

Investment Advice

There are various grading systems in use around the world. However, the British system is as follows:

investment advice krug
Essentially, the bulk of
Krugerrands are produced in a non-proof form although the South African Mint produces limited edition Proof quality Krugerrands as collector’s items. These coins in particular attract a healthy premium and are priced well above the value of the bullion alone. However, non-Proof coins also have a premium above the value of the bullion.
The Proof and non-Proof coins can be distinguished by the reeding, that is, the number of serration on the edge of the coin. Proof coins have 220, non-Proof have 180.

key facts krugerrand

Krugerrands are made of an alloy of Gold and Copper – this effect also being known as Crown Gold as it has long been used for the British Sovereign coins. Due to the popularity of the Krugerrand, there are also many fakes in existence and the investor should be wary. Copper alloy gives a much more orange appearance than silver alloy. Likewise copper is very durable and coins should be in good condition always.
The best marker of authenticity is the weight and this should be checked carefully using the table below since the Gold weight and total weight are known. Check also the reeding.

Specs

specs krugerrand
All investment coins sold by LinGOLD.com are EF quality or above.

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


The Panda 1 ounce

Wednesday, December 4th, 2013

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

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

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

Investment Advice

INVESTMENT ADVICE

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

SPECS

SPECS

KEY FACTS

All investment coins sold by LinGOLD.com

are EF quality or above.

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

Gold on fire!

Wednesday, August 7th, 2013

On Sunday, it was incorrectly reported that the JP Morgan Gold vault in Broad Street, London, had caught fire. It is true to state that the Olympic Champion in Pyromania would probably fail to burn down a Gold vault.

Gold vaults are constructed not to burn. They are made of reinforced concrete and other non-combustible materials. And then what is inside a Gold vault? Er… Gold – which is not combustible. So perhaps somebody had left a fag-end burning in an ashtray which set the alarms off. Or they were holding a test of the system.

The best vaults are either inside a mountain, or ground-supported and built on material that does not burn, using material that does not burn. All high-end vaults have fire extinguishers too, although maybe superfluous except in the case of errant smokers. Generally once any bits of paper in a vault have burned, there is little else combustible for a fire to take hold.

LinGOLD.com owns state of the art private vaults in the Geneva Freeport which has exemplary ratings. And we’re not allowed to smoke when we are inside!

However, let’s look at the Gold market and it would be fair to say that there is a bit of a fire going there. Most of the recent technical indicators suggested Gold would resume the bull market position and start to climb. This happened right on cue with a $40/ounce rise but we also suggest this is only the beginning. A more rapid rise is forecast for the Autumn and we should see new highs.

If hyperinflation is thrown into the mix, then extraordinary rises are forecast and preservation of wealth is an urgent action for the savvy investor. Silver will perform as well although remember the price is much more volatile than Gold and not for the faint-hearted. Remember also that Gold is money and Silver is an investment and industrial metal. For the end game, Gold will probably be safer than Silver but we are looking longterm here.

So Gold is sitting pretty. With Japan, Europe, UK, USA, maybe China, all printing money as fast as it will come off the press, Gold will be on fire! And that fire would not be extinguished with a quick blast of the Halon.

THE GOLD SPOT: GOLD ON THE OUTBREAK OF THE GREAT WAR

Monday, May 13th, 2013

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

Extract from MONEY AND FOREIGN EXCHANGE AFTER 1914 By Gustav Cassel, Constable & Co. Ltd, London 1927 (originally published Constable 1922)

ABOLITION OF THE GOLD STANDARD

The first thing that happened in the financial sphere upon the outbreak of the World War was that the existing gold standard was abandoned – not only in the belligerent countries, but also in the majority of neutral states. Upon the entrance of the United States into the War, corresponding steps were taken in that country. A realisation of this fact is of fundamental importance for a proper understanding of all the occurred later. From the moment of the outbreak of war, the various currencies had in the main to be regarded as free paper currencies, and consequently as currencies which were not limited to any metal, and therefore were not in any relation to one another. Only an economic theory which from the very outset takes cognisance of a system of free currencies can be in a position to offer a true and intuitive picture of the essential points in the development of which followed. Wherefore, it is of primary importance to realise that the value of the monetary unit in a pure paper currency can manifestly only be based upon the scarcity in the provision made by the country for means of payment, and that, therefore, the responsibility for the value of the currency, in cases where the gold standard has been abandoned, must exclusively lie with those in whose hands rests this provision of the means of payment.

When I say that the gold standard was abandoned, I refer to an actual fact. Its form one has everywhere sought as far as possible to avoid, and it may, therefore, be possible to assert, with a certain amount of plausibility, that the gold standard has not been abandoned – nay, even that it still obtains. But from an economic point of view that has no meaning. Economics have only to reckon with facts. When the essential conditions for a gold standard are removed, then the gold standard, as viewed from an economic standpoint, is abolished.

Comment: These are the first two paragraphs of Cassel’s book, and what follows is a dense and, at times, difficult to follow analysis of the convolutions that followed when the Great War was over: the institution of the gold exchange standard, free floating currencies and floating exchange rates. One of the reasons that the analysis is hard is that Cassel shows that throughout the period he deals with – 1914 to 1922 – there were great misunderstandings, misapprehensions, misassumptions and false assumptions of which few had a practical, factual grasp. The form of the abandonment allowed merchants, financiers, bankers and politicians to avoid realising its consequences, and to pretend that not only had the gold standard been maintained in its pre-War form, and but to also pretend that it was remotely possible to return to pre-War prices and values. The classical gold standard was not re-introduced, and it was, in the circumstances, impossible to return to pre-War values, indeed the attempt to do in the light of the wartime inflation, or indeed, the pretence that this had been done, was in no small measure responsible for the economic chaos that dogged Europe in the aftermath of the War and in a way continues to confuse and confound the economic managers of the global economies ever since. If one allows that the pegging of the dollar to gold at Bretton Woods was not a true gold standard, not even a gold exchange standard, but a continuation of those post Great War pretences, then it has been almost a century since the world abandoned gold and abolished the gold standard.

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

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

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

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

Rule of law or rule of Banks?

Friday, March 8th, 2013

The gold investor should always seek opinion from a broad spectrum of sources in order to get the whole 360° picture of current markets, tendencies, geopolitical influences, economic news and sales.
To this end we offer a compilation of pertinent information for you to peruse and digest at your leisure.

Here at Goldcoin.org we take a dim view of the perpetual impunity afforded to private companies that feel they are so big they are above the law which is the case for so many of the banking giants. Here are some tasters to articles revealing just how the US Attorney General has admitted that it is too difficult to prosecute large groups that could have a direct and detrimental effect on National and even International economies.
Needless to say the usual suspects are amongst the perpetrators/

Banks above the law

“At the same Wednesday judiciary committee meeting where Attorney General Eric Holder hemmed and hawed before acknowledging that the president cannot authorize a drone strike on American soil, against an American terrorist suspect posing no imminent threat, he explained why the Justice Department has failed to bring criminal charges against a single Wall Street bank. Mr. Holder suggested, as a Financial Times headline put it this morning, that some banks are “too big to jail.”Here’s what happened. Senator Chuck Grassley, a Republican, asked for more information on why federal and state authorities chose not to indict HSBC after it acknowledged laundering money for Mexican drug cartels, helping rogue states avoid international sanctions and working closely with Saudi Arabian banks linked to terrorist organizations.
Mr. Holder said: “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.”
It’s nice and all that Mr. Holder cares about the stability of the global financial system, but that is not Mr. Holder’s job. As attorney general he is the country’s top law enforcement officer, and in that capacity he should prosecute criminals and criminal institutions.”

How Many Billions Of Drug-Laundered Money Does It Take To Shut Down A Bank?

Here is the transcript from testimony regarding the Banks secrecy Act involving the US Treasury, Department of Justice and Financial Industry.
Merely confirms the worst – the banks have impunity………. and can continue to mis-sell products, ignore international sanctions, deal with rogue states and drug cartels …. because making money has no conscience, no boundaries, no morals, no ethics, no remorse ….. and therefore has no place in a world where us mere humans actually matter.

“Now in December, HSBC admitted to money laundering. To laundering $881 million that we know of for Mexican and Colombian drug cartels. And also admitted to violating our sanctions for Iran, Libya, Cuba, Burma, the Sudan. And they didn’t do it just one time. It wasn’t like a mistake. They did it over and over and over again across a period of years. And they were caught doing it. Warned not to do it. And kept right on doing it. And evidently making profits doing it.

Now HSBC paid a fine, but no one individual went to trial. No individual was banned from banking. And there was no hearing to consider shutting down HSBC’s activities here in the United States. So what I’d like is, you’re the experts on money laundering. I’d like your opinion. What does it take? How many billions of dollars do you have to launder for drug lords and how many economic sanctions do you have to violate before someone will consider shutting down a financial institution like this?”

Goldman Sachs and Morgan Stanley Near Bottom of Stress Tests

Interesting that 2 of the most powerful banks on the planet are dangerously low to the bottom limits required to pass the tests. Chances are that even these tests are skewed and really exist to pay lip service to the demands of politicians. In reality, both Banks would be in danger during another crisis. Their skullduggery innovations department must be on overtime working on their next get-rich quick scheme to reward themselves by robbing the “sheep” consumers who never seem to learn. They were of course big actors in the Facebook saga that saw someone make over $4 Billion in a few days due to the manipulated launch price.

Gold bar sales in China jump twofold during Spring Festival

Sunshine, Valentine and a Lunar New Year have helped boost sales of gold in China this year. Figures released by the Ministry of Commerce have shown a doubling in sales of gold bars.
We have long supported a theory that lots of individual investors buying gold is less suspicious than a huge purchase made by the central bank but at a point in the future if all gold was deposited in National banks it could prove the backing for the Yuan – directly valued against gold by a new gold standard – that allows it to pose as a reserve currency with meaning and true value.

Leonard Melman: Are You Prepared for Hyperinflation?

During an interview with the Gold Report with 24H Gold, Leonard discusses his analyses of the precious metals outlook for 2013 which includes references to the many areas of growing concerns regarding currency debasement and inflationary pressures often and previously discussed here. His conclusions like our own is that gold is not bursting its bubble but readying itself as the perfect store of value when the effects of a deepening crisis set in further during 2013.

PAUL SAMUELSON ON THE TROUBLE WITH ECONOMIES

Tuesday, December 11th, 2012

By Mark Rogers

Hagiography

“Rare is the opportunity to see, much less own, an original. Economics by Paul Samuelson is the classic textbook that gave birth to modern economics, and sold millions of copies in more than 40 languages. Now, in this unique and carefully crafted reproduction edition, Samuelson’s original words, text, and layout are recreated from the original classic edition. More than just a historical curiosity, however, this book’s power to explain economics to both the expert and the novice shines on every page. As fascinating now as when they were first published in 1948, the wisdom and applicability of Samuelson’s words remain vital in today’s turbulent economic world.”

(Publisher’s description on Amazon for new edition (1998) of the 1948 edition, McGraw-Hill

“Samuelson’s text was first published in 1948, and it immediately became the authority for the principles of economics courses. The book continues to be the standard bearer for principles courses, and this revision continues to be a clear , accurate, and interesting introduction to modern economic principles. Bill Nordhaus is now the primary author of this text, and he has revised the book to be as current and relevant as ever.”

(Publisher’s webpage for the 2010 edition.)

“It is difficult to exaggerate the world-wide impact of Mr Samuelson’s Economics.”

(The Economist)

Samuelson’s textbook has been one of the most influential sources of Keynesian ideas ever since it was first published.

Samuelson meets “Adam Smith”

George J. W. Goodman writing under the pseudonym “Adam Smith” published Paper Money in 1982 (Macdonald & Co. (Publishers) Ltd, London & Sydney). Amongst many other activities business as well as journalistic and academic, by the time he published this book he had been serving on the Advisory Council of the Economics Department of Princeton University.

Paper Money is an investigation of the financial crises of the 1970s and their unravelling. It is also an attempt to discover why so much of the economic orthodoxy was unable to explain what was happening or offer cures and preventatives. This may sound familiar.

Chapter 2, “Why Not Call Up the Economists?”, is his account of some of the economists he paid visits to in order to answer that question. He interviewed Paul Samuelson, and posed the question: “Is Keynes really dead?”

Samuelson’s answer somehow seems to encapsulate the air of unreality fostered by Keynes and the Keynesians:

“The fact is that what we’ve got, a Keynesian economy, is economically stable. It’s just politically unstable. The self-interest that the early economists counted on as a balance leads, in a modern economy, to collusion among the self-interested groups.” He further conjectures: “The malaise just isn’t in the figures. Something else must be going on.” Though what, he didn’t know. (That “just” is an emphasiser, he doesn’t mean that the malaise is elsewhere too; he means that the “malaise” (whatever he means by that – the general sense of economic disorder that is somehow not disorder?) isn’t recorded in the figures at all.

“Adam Smith’s” gloss:

“We have an economic system that works, except for the people in it? But the people are in it.”

Samuelson’s bizarre understanding of self-interest will be the starting point for further discussion…

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

IRAN, CHICKENS AND VALUE

Thursday, October 25th, 2012

By Mark Rogers

While the world watches with an alarmed fascination the stasis over the euro; while we doubt our own governments’ predictions of “recovery”, Weimar-style levels of financial woe long ago engulfed Zimbabwe, and are currently engulfing Iran. The rial has lost 80% of its value, most of that loss occurring just in the last few weeks, with a catastrophic plunge at the beginning of this month.

“Chicken has become so scarce that when scant supplies become available they prompt riots. On October 3rd police in Teheran fired tear-gas at people demonstrating over the rial’s collapse. The city’s main bazaar closed because of the impossibility of quoting accurate prices.” (The Economist, October 6th 2012)

Before I discuss what is wrong with that last sentence, here’s a front page headline with its subheading from The Times for today, 25th October 2012:

“Double-dip set Britons back £1,800 every year” and “Economy growing again, Cameron hints to MPs”

How do they know?

The trouble with the sort of hubristic statistics behind that headline is questions such as: by “Britons” do they mean all of us, or just households? If the former, is that just an average for the population, in which case does it exclude children? Those on benefits? The Scots? (In Scotland it was recently computed that 9 out of 10 households are receiving more in benefits than they submit in taxes…)

This is also supposed to be a figure for each year of the double-dip: does it take annual inflation into account? Why is the figure precisely the same for each year? It is not how households reckon their budgets – if they still do…

In other words: how do the authorities know? How is such an exact figure arrived at?

The fallacy lying behind its exactitude is that an averaged abstraction of this kind is impossible to compute by each individual alleged to compose the sample: I cannot look at my income and extrapolate such a figure in terms of how much I was better off over the past few years: I certainly know that I didn’t have £1,800 the year before last which I subsequently did not have the following year.

And why is the Prime Minister “hinting”?  It would be nice to think that this is an acknowledgement of the modesty that ought to be applied to this kind of prophecy, but I somehow doubt it. We live in a world of technical precision-making applied to what can only be generalities. How do they think they know?

Accurate prices?

And that is what is wrong with the sentence in The Economist’s report on Iran.

The bazaar was closed because disputes over prices threatened to spiral out of control: given the colossal collapse in the value of the rial in the previous three days, prices were impossible to assess and agree – remember this is a culture in which open bargaining is likely to take place in bazaars. This serves to throw into relief the whole problem of value (which we have looked at here and here).

There is no such thing as an “accurate” price – that is the scientistic approach of Keynesians and mathematical economists. In my own trade of bookselling, I long ago concluded that there are no such things as fixed prices, there are only sales (I began my career in the London book trade while a form of retail price maintenance, the Net Book Agreement, was still in force – which I never troubled to abide by). More generally, this can be adapted as: there are no prices, only sales – the value that vendor and customer put on an article is an agreement (a price simply encapsulates the terms of agreement), however circuitous the route to that agreement.

In a bazaar or market that route may be fairly direct: haggling. In more sophisticated retail environments the implicit bargain between vendor and customer may be more or less open, for example in the way supermarkets analyse their sales on a micro scale and keep adjusting their prices with price wars, reduced price sales, permanent price reductions, loyalty vouchers, and stocking up on items or withdrawing them, in a never-ending response to the goods that customers are willing to buy and the prices they are willing to pay.

At the extreme end of the conversation is the offer by the vendor – say, filling his window with the latest winning novel of some prize or other – and the simple unspoken refusal of the customer to buy. For example, I never buy the Man Booker prize winner, and, to extrapolate, I don’t smoke, and having recently bought a pint in a pub, something I haven’t done for a long time, I won’t be in a hurry to repeat that contemporary loss-making experience: £4.50 for a pint of lager!

Value not a formula

The vexed question of value, then, is never reducible to a formula, though it may look as if that is what is being done in benign markets with plenty of market flexibility. The formulaic approach leads to horrors such as Prices and Incomes Boards and Trade Unions, which both attempt to stamp their fixed notion of value on the rest of us.

This is one of the important reasons why Hayek’s analysis of price systems as information highways is so valuable: if goods and services never have intrinsic value, in spite of the attempt by the producer to quantify the materials or the time or the education that have gone into production, then value is only what it is agreed to be. Market domination, whether by cartels in the private sector or Trade Unions in the public sector, are attempts to rig or eliminate markets, suppress price information and make more out of the good or service than the customer is truly willing to pay.

The bazaar in Teheran was closed because when there is such a huge degree of uncertainty and widespread loss of confidence in the currency, deals are futile: when the sense of value is eroded, compromise is impossible, and without compromise markets cannot flourish.

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

Savings from 1912 to 2012

Wednesday, July 18th, 2012

Bank Notes or Gold Coins?

A little morality tale from France about fiat money versus true value

By Bé Habba

This article is translated from the French original by Bé Habba who is a contributor to the French site Forum-Gold.fr

On June 24, 1912, a good-natured workman named Anatole puts aside the sum of 100 Francs, for his descendants. He is paid 5 Francs per day for 10 hours work, as typesetter at a printing works. It is a good wage, as many people earn less: a carpenter or a labourer earns 3 Francs per day, a dressmaker earns 2 Francs and a farmhand earns 1.5 Francs.

One kg of bread is worth 0.40 Francs. His 100 Francs thus amount to 20 days’ wages or 250kg of bread. Putting aside one day’s pay per month, he had to save-up for over a year and a half (20 months) to amass his 100 Francs.

To save it, he has three options:

bank notes, for example 2 “pink and blue” 50 Franc bank notes

silver coins, for example 20 “Ecu” 5 Franc coins, that is to say 500g of silver with a purity of 900/1,000.

gold coins, for example 5 “Napoleon” 20 Franc coins, that is to say 32.25g of gold with a purity of 900/1,000.

As a typesetter, he is fascinated by the latest 100 Franc note issued by the Banque de France, designed by Luc-Olivier Merson. It is the very first polychrome bank note to be put into circulation. Compared to the old monochrome bank notes in black, blue, purple or the blue and pink bicolour notes, what an innovation! He therefore definitely decides to opt for modernity and places this brand-new bank note under his bed-sheets.

During the inter-war period, the “Merson” 100 Franc bank note remains under the sheets, but it loses value as inflation is significant. To catch up with inflation, Poincaré suddenly devalues the Franc under the law of June 25, 1928, which reduces its value, measured in gold, five-fold: the Franc is now worth 65.5 mg of gold with a purity of 900/1000.

The previous value of the Franc, known as the ‘Germinal’ Franc, had been defined by the 1795 Convention and then by the law of 7 Germinal year XI (March 27, 1803). The Germinal Franc was worth 5g with a purity of silver of nine tenths or 322.58mg with nine tenths gold (that is to say a gold/silver ratio of 15.5). This is why the 20 Franc gold coin weighed 0.32258 x 20 = 6.4516g from the revolution up to the 1928 devaluation.

Thus in 1928, silver and gold coins, whose values as noble metals became five times greater than their face value, are demonetized and withdrawn from circulation (or hoarded). But bank notes remain valid, and Anatole leaves his 100 Franc “Merson” under his bed-sheets.

 In October 1936, the Franc is further devalued and it is decided that henceforth it can fluctuate between 43mg and 49mg of gold with a purity of 900/1,000. Then in early 1939, following a new devaluation, the value in gold is set at 27.5mg with a purity of 900/1,000.

During the phoney war, the fall continues, and in February 1940 the Franc is only worth 23.34mg of gold with a purity of 900/1,000 (that is to say 21mg of fine gold).

During the liberation, the situation becomes somewhat chaotic. Pre-war bank notes, notes issued by the French State and notes issued by the Americans are used concurrently. On June 4, 1945, all notes of a value equal to or higher than 50 Francs are withdrawn from circulation. This massive exchange for reserve denominations of 300 and 5000 Francs, was carried out in 12 days throughout the whole of France. Later, when the new “Jeune paysan” 100 Franc bank notes were printed, the son of Anatole obtained one which he once again placed under the bed-sheets.

Post-war, inflation starts-up again, and the purchasing power of the 100 Franc bank note crashes. Two new devaluations took place in 1945 and 1949.

Returned to power in 1958, General de Gaulle announces the creation of a “re-valued Franc” which he entrusts to his Minister of Finance, Antoine Pinay and the economist Jacques Rueff. On December 27, 1958, an order establishes the “new Franc” equivalent to 100 old Francs. As the old Franc was worth 1.8mg of fine gold at that time (33 times less than the Poincaré Franc of 1928, and 12 times less than in 1940), the new Franc is thus worth 180mg of fine gold.

The old coins and bank notes remain valid for some time but the amounts written on them are henceforth worth cents rather than Francs. Anatole’s grandson thus exchanges the “Jeune Paysan” bank note of 100 old Francs which his father bequeathed him, for a brand-new “Semeuse” 1 Franc coin made of nickel. He finds the new coin to be very pretty and shiny. He places it under the bed-sheets.

The value of the new Franc is slightly devalued in 1969 and is worth 160mg of gold. Later the gold standard is abandoned and even prohibited under the Kingston Agreement of 1976.

During the period from the 1970s to 1990s, inflation is still occurring and several additional devaluations take place. In the year 2000, the “Semeuse” 1 Franc coin is still legal tender.

Finally, after 17 devaluations of the Franc during the 20th century, we reach the major revolution with the switch to the Euro: the coins and bank notes are put into circulation on January 1, 2002. The French have 6 months to exchange their Francs at any bank, and a further 3 years for coins and 10 years for bank notes issued by the Banque de France.

In January 2002, Anatole’s great-grandson removes the “Semeuse” 1 Franc coin from under the bed-sheets and exchanges it for Euros: one 10 cent coin, and one 5 cent coin. He again places the 2 coins under the bed-sheets.

And then, on June 24, 2012, Anatole’s great-grandson, who is now 60 years old, feels that the anniversary is an appropriate time and says to his son:

“Pierre, I must tell you something.  Exactly one century ago, your great-great-grandfather Anatole put 100 Francs aside. At the time, that was a significant sum. Each of his descendants carefully preserved this sum and it was handed-down from generation to generation, in the form of bank notes and then coins, through two world wars and several changes of currency. Today, I solemnly give to you the equivalent of the original 100 Francs: 15 Euro cents. It is up to you to preserve them and to pass them on to your eldest, to continue the family tradition.”

“But Dad, what do you want me to do with 15 cents? I can’t even buy a quarter of a loaf of bread! With that, I can barely get 40g of bread!”

EPILOGUE

Today in 2012, Pierre, a workman on the minimum-wage, earns 50 Euros per day for 7 hours work. He earns 1100 Euros per month for 22 days work.

One kg of bread costs 4 Euros, and to buy 250kg one would need 1,000 Euros. By putting aside 1 day’s wages per month, like his great-great-grandfather Anatole, he will need to save-up for 20 months.

However, if his ancestor had saved his 100 Francs in 20 “Ecu” 5 Franc silver coins, he would have approximately 340 Euros, instead of 15 cents. With that, he could buy 85 kg of bread.

But if his ancestor had saved his 100 Francs in 5 “Napoleon” 20 Franc gold  coins he would have approximately 1,300 Euros! That amounts to 26 day’s wages, and over 2 years of savings (26 months). With this, he could buy 325kg of bread…