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Posts Tagged ‘Germany’

Why does Austria wish to repatriate its gold ?

Tuesday, November 10th, 2015

Austria official gold reserves 2009 - 2013

Austria official gold reserves 2009 - 2013

Many central banks around the world are aware the international monetary system is moving away from the US dollar and that the role of gold will (officially) be much greater in the future. In this development central banks benefit from a smooth and slow transition to a new system, as sudden shocks will bring the global economy in a free fall and more time provides better preparations. Central bankers prefer slow and attentive change. Signs of the slow development towards gold by central banks can be seen across several continents. In Europe slowly more and more countries are repatriating their gold from the UK (Bank Of England) and the US (Federal Reserve Bank Of New York).

Austria reserve assets

Austria reserve assets

Certainly not all their gold but weighed amounts and in the case of Germany and Austria the gold is repatriated over several years. If all European countries would repatriate all their gold at once it would cause a panic in financial markets. In the East, Russia and China are increasing their gold reserves every single month by relative small amounts, respecting the slow development towards gold. Asian central bankers differ from their European colleagues because they verbally acknowledge the role of gold in finance.

In 2004 Zhou Xiaochuan, governor of the People’s Bank Of China, said:

… China’s gold market should move from commodity trade to financial product trade. Gold is a commodity that combines the attributes of a currency, financial commodity and general commodity. … gold still has a strong financial nature and remains an indispensable investment tool. In financial centers in the world, the gold market – together with the money market, securities market and FX market – constitutes the main part of the financial market.

Obviously all these central banks are aware what the future will hold. How else can we explain Europe’s repatriating gold policy and Asia’s buying gold policy?

Candid statements from European central bankers regarding their gold policy are scarce. The slow developmenttowards goldpreviously described is usually covered in excuses by European policy makers. I can recall the Dutch Minister Of Finance, Jeroen Dijsselbloem, was asked in a television interview why the Dutch central bank (DNB) had covertly repatriated 123 tonnes of gold from the Federal Reserve Bank of New York in 2014. Dijsselbloem answered with a condescending smile, saying, “ the decision was made by DNB to spread its gold stock in a more balanced way, but it was of little importance”. Of course the military operation that DNB had carefully planned and executed over the course of two years was of utmost importance for the financial well being of the Netherlands, but Dijsselbloem could not openly acknowledge this importance because of the sensitivity of the subject. Just like Jean-Claude Juncker said in 2011:

“When it becomes serious, you have to lie.”

Read more …

The British Sovereign

Friday, November 29th, 2013

The Gold Sovereign is a highly collectable investment coin first introduced in Great Britain in 1489 at the request of King Henry VII. In 1816, there was a major reform of coins in Great Britain which resulted in The Coin Act. This laid down in law, amongst other things, the specifi cations and dimensions of Gold Sovereigns produced from 1817 onwards which have remained in place to this day. The Sovereign weighs 7.99g and is 22 carat Gold (or 916.667‰ fineness).

SOVEREIGN AVERSE AND OBVERSE

Details

The first Gold Sovereign was struck in 1489 for King Henry VII. Sovereigns continued to be issued by monarchs up until the end of the reign of Elizabeth I in 1603. As part of the coin reform of 1816/1817, the Sovereign was re-introduced. A young Italian engraver, Benedetto Pistrucci, was appointed to create the reverse design coming up with the beautiful image of St George slaying the dragon. This design saw many alterations over the years but is essentially the same. As a testament to the design, it still appears on the very latest 2013 edition. Other reverse designs have at times been used during the reigns of William IV, Victoria, George IV and Elizabeth II. The obverse of the Sovereign followed the trend established by the original and portrays an image of the reigning monarch, which remains the case up to the present.

Gold Sovereigns were withdrawn from circulation at the start of World War I in 1914 although production continued at the Royal Mint until 1917. They continued to be produced at other mints of the then British Empire but at lower quantities than before. Sovereigns which were not produced at the Royal Mint carry a mintmark showing their provenance, hence one finds coins referred to as Australian Sovereigns or South African Sovereigns. This “foreign” production stopped in 1932.

In 1957, the Royal Mint began again producing Sovereigns in order to meet world demand and to stop the booming counterfeit production which had become rife since the Royal Mint stopped producing in 1917. They were not however reintroduced into everyday circulation. Prior to 1979 only Gold bullion coins had been issued and it was this year that the fi rst Gold proof Sovereigns were issued. Between 1983 and 1999 the Royal Mint ceased producing Gold bullion Sovereigns and only minted proof Sovereigns. Gold bullion Sovereigns were re-introduced in 2000. There are several special designs but essentially, the George & Dragon design remains with the wheel turning full circle where Pistrucci’s design (which was on the Sovereign when the current monarch was crowned) has been re-introduced for the 2013 edition to mark the 60 years reign of Elizabeth II.

Investment Advice

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

SOVEREIGN 1

Whilst older Sovereigns were produced in much larger quantities than those produced today, it is much more diffi cult to source a good quality Sovereign from those times. Sovereigns from the reigns of George III, George IV and William IV are extremely rare in good quality and thus command high premiums. EF quality can be found but are still quite rare. For example, a UNC George IV Sovereign from 1825 made £14,950 at a sale in March 2004! Early Victorian shield Sovereigns are highly sought and therefore an EF quality coin would fetch a high premium. Indeed anything UNC or FDC from the reign of Victoria is a high premium coin.

Edward VII and George V are fairly easy to obtain in EF quality as they were produced in very large numbers. As with Victoria Sovereigns, any UNC or FDC coins would attract a high premium.

The majority of coins on the market is from the reign of Elizabeth II and has lower premiums than earlier editions. However, the quality again affects the premium and the investor should look for the highest grades. Any coin will always fetch a higher premium anyway than the price of Gold and can only become more sought after in the future. There follows a list of certain rare Sovereigns to seek out if possible – finding one of these will command an excellent premium:

SOVEREIGN 2

– 1817, the first year of the modern Sovereign

– 1838, the first Victoria Sovereign

– 1841, the rarest Victoria Sovereign

– 1917, London-minted Sovereigns, not Australian or South African

– 1989, 500th anniversary of the Sovereign edition

– Anything from George II, George III and William IV – FDC, UNC and even EF grades

Specs

SOVEREIGN 3

Detailed reading: https://goldcoin.org/numismatics/the-british-gold-sovereign-the-world’s-most-sought-after-gold-coin/4103/All investment coins sold by LinGOLD.com are EF quality or above.

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

Manipulation of financial markets ?

Wednesday, November 27th, 2013

What’s happening with the London gold fixing ?

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

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

images-2

One should ask ?

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

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

Ext: Mining.com


GOLD THE ANCHOR

Tuesday, April 23rd, 2013

By Mark Rogers

I looked here at the recent drop in the price of gold, and suggested that the problem lay not so much in the price itself as in the perception of the value of gold. This is always a problem with prices; as James Rickards has accurately noted, market transactions (in context, he is discussing financial markets, but the observation applies to all types of market) consist of price discovery between bid and offer. (I first reviewed his exceptionally informative book, Currency Wars, Portfolio/Penguin, New York, 2011 here.) There is an important sense, therefore, in which prices as such are never stable except on the transfer of the asset at the eventually agreed price. This is one of  the senses in which Hayek refers to prices as information.

Rickards goes on to point out, in the context of gold, that the massive gains in stocks and gold in both 1933 and 2010 (85% in the latter year) were just “the flip side of trashing the dollar. The assets weren’t worth more intrinsically – it just took more dollars to buy them because the dollar had been devalued.” That is, consider the price of gold not as a price but as information indicating the present worth of the currency; not what gold is worth but what gold is telling us about the price of the dollar.

His book is an examination of the ways in which governments wage currency wars in order, they think, to increase domestic prosperity, by deliberately devaluing their own currencies. Short-term gains, if any, are rapidly exhausted, and the ill effects for the long term soon emerge. And yet, politicians and central bankers remain oblivious to these effects – and the recent quantitative easing is, once again, the result of that purblindness.

The German Inflation

At the time of the German depression, when the Reichsbank engaged in the biggest currency devaluation in history to date by attacking the value of the Reichsmark, the German people saw prices going up but did not equate that with the realisation that the currency was collapsing; similarly, we see prices increasing without realising that the paper money we hold in our hands is depreciating in value all the time: we moan about “capitalist exploitation”, “wicked bankers” and “supermarket greed”, or we talk knowingly about “inflation” as if the latter was like the weather. Seldom or never do we stop to consider that what is actually happening is that our governments are of set purpose devaluing the currency: the mutilation of our money is hidden from us (see here, here and here).

The Gold Price

One result of currency depreciation is capital flight, and the recent drop in the price of gold could be looked at in this light. Just as paper money is suddenly recognised as worthless, causing the flight of capital, so the sudden flight from ETFs in gold, another form of ultimately worthless paper, is in the same order of events. In fact, the gold price can be seen as operating both ways: the purchases of gold which pushed the price up over the last two years were a capital flight caused by quantitative easing as that devalued the pound and the dollar. And now, the plunge in the price of gold is also a capital flight because, whatever else may be going on, it is a flight from the ETF paper gold (the source in more ways than one of the market manipulation that may have been the immediate cause of the price drop) into physical gold, in this instance into gold coins.

Thus, one way of looking at the price of gold in a volatile paper money system is as an indicator of the current levels of volatility and a measure of what at any given moment should be done about.

As noted at the beginning of this article, prices are never stable and in terms of market transactions and international trade are in need of an anchor to make it easier for bidders and offerers to discover the prices at which they are willing to settle. The classical gold standard was just such an anchor. In the absence of a return to that standard, gold nevertheless still performs as a bellwether.

NOTE: “volatile paper money” is of course a tautology!

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

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

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

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

THE PRICE OF GOLD

Monday, January 21st, 2013

By Mark Rogers

The other morning a friend of mine who deals in antiques including gold and silver, rang me up to ask me whether I thought the price of gold had bottomed out or would fall further, and when and by how much it would rise.

I reflected that there is simply too much uncertainty about the euro crisis, the motives behind the Deutsche Bundesbank’s recalling of its gold from New York and Paris, and Basel III to be able to say anything about the price except be watchful. Of course there are those who are known to call the shots accurately, but even they cannot be relied upon: past performance is no predicator of future performance.

This of course is the well-known Humean scepticism, that just because something has happened before is no reason for it to happen again. In broad terms, and especially of human behaviour, this is a reasonable position to take, and it is Nassim Nicholas Taleb who has popularised this attitude in financial affairs as “black swan” events, although his own adherence to what in his hands has become a doctrine has practically paralysed him (see the essay on him in Malcolm Gladwell’s What the Dog Saw).

How do we know? Let me give an example that happens to be to hand in Nudge (already mentioned here). In describing the activities of unpractised investors the authors Thaler and Sunstein note: “Their market timing was backward. They were heavily buying stocks when stock prices were high, and then selling stocks when their prices were low.”

Surely, though, this is only knowable with hindsight. At the time they were buying, presumably the investors thought or had been advised that the price was right, i.e. low, in relative terms. When that turned out to be incorrect and the prices fell, they sold, and for an equally valid reason: not to lose too much given that they now had new information.

A Gold Standard?

So where is the price of gold likely to go? One school of thought suggests that the price of gold is artificially low because of the uncertainty created in the market by paper gold, the ETFs that are so abundant – and this is surely likely to be correct. Be that as it may though, what else is going on?

At the end of the Second World War, Germany’s gold was divided into four, with one quarter being held by the Bundesbank, and the other quarters kept in London, New York and Paris. There were two reasons for this: one to have leverage on the Germans doing again what they had twice already done, and, more immediately, to prevent the Soviets from grabbing too much gold should they mount a successful invasion on West Germany.

Two and a half years ago the Bundesbank repatriated the quarter held by the Bank of England; towards the end of last year it made claims for repatriation of its gold in New York and Paris. Why? Well, one reason may well have to do with the very public argument between the Bundesbank and the ECB over the latter’s quantitative easing: the Bundesbank rightly says that QE is damaging any chance of recovery of the euro, and therefore the repatriation of the gold may well have something to do with shoring up the German position should the euro finally collapse. Remember, we noted at Christmas 2011 that Deutsche Marks were in circulation, though certainly no-one knows how many there are. But would it not be a fine irony if Germany were the first to exit the euro, with a Mark backed by gold!

Elsewhere, as Ambrose Evans-Pritchard noted in The Telegraph on 17 January 2013, the buying of gold by central banks presages a return to a gold standard. He is wary about this return, and thinks it will only work as part of a tripartite system underpinning value. Whether the latter can work is very uncertain, as it effectively puts gold in a competitive position rather than an absolute one and therefore gold would surely not operate as a brake on the ambitions of politicians, and thus in effect be no gold standard at all.

However, there is a simpler explanation for these purchases: Basel III. The latter’s revision of gold as a Tier III asset to Tier I was no secret, and so central banks having been asked by the Basel Committee to revise their attitude towards gold have done so in the only proper manner – by buying it. This ought to stimulate the price, but perhaps the reason it has not is that gold buyers and investors are waiting to see just what might happen as a result. The Basel III accords should have come into force on 1 January 2013, although there were several pleas from central banks towards the end of last year for deferment, until next year in some cases. Already the Reserve Bank of India has announced it will not implement Basel III until April at the earliest.

There therefore seems to be a degree of nervousness in relation to gold at present: but it does seem like a good time to buy.

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

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

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 EUROPEAN STABILITY MECHANISM IS A LIE

Sunday, October 7th, 2012

By Mark Rogers

The Euro: How to be Muddled

A short Reuter’s report of October 5th gives the gist of an article (published on Saturday 6th October in the Rheinische Post) by the head of the European Stability Mechanism, Klaus Regling. Perhaps unwittingly, its brief precis of Herr Regling’s concerns manages to encapsulate the extraordinary mixture of muddle and mendacity that occupy centre stage in trying to avoid the obvious when it comes to dealing with the euro crisis.

Herr Regling’s “biggest worry” concerns the problem that “some crisis-stricken countries do not have the political power to persevere with their painful but effective reform programs until the end”.

Muddle Number One: given that it is thought – in this case, with justice – that countries like Greece do not possess this political will, how can it be said, as they have not as of yet persisted until the end and indeed, in his opinion, cannot do so, that their reform programmes are “effective”. That would, by definition, only be apparent at “the end” and “the end” is presumably defined as arriving at a point where the reforms appear to have worked.

Herr Regling’s next item of concern is that a Greek exit would be the most costly solution.

Muddle Number Two: if he is right about the paralysis of political will, then the “costliness” or otherwise of a Greek exit is irrelevant: it would be the right, indeed, the only solution. What of course in this context is meant by “costly” is that once one country has pulled out of the euro (and remember, it might be Finland, a country that is not crisis-stricken), others would inevitably follow; “costly” in this sense is to be understood as: embarrassing to the projectors of the euro…

“He also said the euro zone’s crisis strategy was working better than many people acknowledged and that the region was more than halfway through national structural adjustments.”

Muddle Number Three: this is the usual habit of lying which is always fallen back on: having asserted that there is little to no political power to persevere to the end with “effective” but unworkable solutions, it is then announced that the solutions are working after all, and the only problem is that the critics of this whole boiling are not “acknowledging” that everything is in fact hunky-dory – or will be, perhaps, one day, if only everyone would stop complaining…

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 GOLD STANDARD: FURTHER ENCOURAGEMENT FROM WISE EMINENCES

Sunday, September 30th, 2012

By Mark Rogers

September has been an important month for the Gold Standard. In The Times of London, on Friday 28 September, Lord Rees-Mogg wrote a further analysis of the hazards of paper money. He concluded:

“In any reform of the global system, some measure will have to be used to replan the stabilisation that was provided by the Gold Standard.

“I do not expect governments or central bankers to abandon the ability to issue their own currency. But what governments will not do, private individuals can. If individuals want to protect the purchasing power of their savings, gold can do it; paper will not.”

There are, however, two banks that are taking the ideas of the problems of fiat money and of a return to gold very seriously indeed. Can it be a coincidence that they are both German Banks?

We saw that on the 12th September, the German Constitutional Court gave guarded assent to Germany’s participation in the European Stability Mechanism. This cautious response must be seen in the context of the devastating consequences of fiat money systems.

Six days later, 18th September, the London head office of Deutsche Bank published a Global Markets Research paper by Daniel Brebner and Xiao Fu called Gold: Adjusting For Zero, which makes the case for a return to the gold standard and argues for how it may be done. (I shall be writing about this later.)

On that very same day, Dr Jens Weidmann, President of the Deutsche Bundesbank and Member of the Governing Council of the ECB, made the opening speech at the 18th colloquium of the Institute for Bank-Historical Research (IBF) in Frankfurt. His address is entitled: Money creation and responsibility. It is a short and compelling speech, in which he too analyses the hazards of fiat currencies and does so by recalling the money creation scene in Goethe’s Faust. It is a speech so full of good things that commentary is otiose. I urge readers to click here and read the full text.

THE EUROPEAN STABILITY MECHANISM AND THE GERMAN CONSTITUTIONAL COURT

Wednesday, September 26th, 2012

By Mark Rogers

It was widely reported two weeks ago that the German Constitutional Court had blessed Chancellor Angela Merkel’s baby, whose Herculean task is to save the euro. Germany could ratify the proposal and participate in the European Stability Mechanism.

However, this permission, if that is what really it is, was actually heavily qualified, with three points in particular standing out.

First: Any further amounts in excess of Germany’s already agreed 190 billion euros must have parliamentary approval. That is, the government cannot simply keep pumping money into the mechanism without explicit endorsement by the Bundestag, the German parliament.

Second: In order for this to be possible Germany’s (sole) representative on the ESM must report to the Bundestag – thus breaching the ESM secrecy rule for the members to meet in closed conclave. This is very neat of the judges: to expose yet again the clandestine and unaccountable methods of the EU!

Third:  Perhaps an even tastier judicial morsel: any agreement that Germany has with the ESM must not be in breach of International Law: “No permanent mechanisms may be created under international treaties which are tantamount to accepting liability for decisions by the will of other states, above all if they entail consequences which are hard to calculate.” [Emphasis added.]

Somehow one wonders why the political planners of the EU and the euro didn’t think of that for themselves.

Karin Matussek, in an article on Bloomberg, draws out the implications: “Lawmakers must not allow Germany to shoulder an amount it can’t control or that would result in it being unable to determine its political agenda, the court said.”

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

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:-)

How the loss of France’s triple A could effect Gold

Thursday, January 19th, 2012

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

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

The consequences for the economy…

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

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

Is the A lost forever?

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

The consequences for gold

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

Fools or Gold?

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

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

It’s what they call a no-brainer!

Buy Gold, be wise – it lets you take back control

Tuesday, January 10th, 2012

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

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

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

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

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

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

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

By Mark Rogers

European interest rates to stay low

Friday, November 4th, 2011

Last May in an article with the heading “Has Jean Claude Trichet gone mad”, we explained why the move to increase interest rates initiated at that time had, in our eyes, little chance of being sustainable.

Confirmation came on November 3rd, 2011 with a fall in the official market rate of the European Central Bank, the ECB.

On taking up his post, its new governor, the Italian Mario Draghi, decided for his baptism of fire in the media to lower the interest rate by 0.25 points – this whilst he is supposed to give his first official press conference next Thursday.

What is necessary to understand by the taking of this decision that we had largely anticipated, is that Europe and generally all of the said developed countries have now fallen into the “trap of low rates”.

The best example to illustrate this phenomenon “of the trap of low rates” is of course Japan which for several decades now has been in the situation of financial impossibility with regard to increasing its interest rates.

To finance not the refunding of the debt but solely the interest on the debt, it is vital that the rates should be as close as possible zero. The slightest increase puts the public finances of all nations in danger.

The second reason it is not possible to raise rates is that there is quite simply no growth, nor return to growth, and that here too Japan perfectly illustrates this situation of lack of growth over the very long term.

This decision is excellent for gold. This news is excellent for the banks which will be able to increase their margins through cheaper recapitalization with the ECB and by lending at a higher price to their customers (reconstitution of margins). This news is good for companies because by lowering rates that can make it possible for the euro to drop slightly compared to the dollar giving some breathing space to our exporters. This news is excellent for borrowers at variable rates. This news is excellent to limit and support the risks of a new unavoidable recession (which the ECB expects) in Europe because of the massive austerity plans affecting almost all of the European countries.

The Italians had nicknamed Mario Draghi… super Mario! Our new governor of the ECB has only to finally announce an “unconventional program of quantitative easing” to ignite a bullish trend in the financial markets. This barbaric expression simply means that the ECB would use the money printing instrument according to needs. Like Switzerland. Like the USA. Like the United Kingdom.

The message communicated today by Mario Draghi is an important reorientation. We have from now on one certainty. Rates can no longer go up. We expect for the next few months that the money printing machines will be brought into use. If the attacks continue against Italy, it will be the only solution possible.

Until now the Germans totally reject this solution. If the situation worsens, they will have to accept the recourse for the printing of money, or… leave the euro.
Germany’s exit from the euro is the less considered scenario and yet for us it is the one that is most likely to occur.

It would undoubtedly be the best solution to put an end to the European psychodrama.

Translated from an article by Charles SANNAT
Director of AuCoffre.com
Economic studies
www.aucoffre.com

FRANCAIS ESPANOL ITALIANO CHINESE

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Thoughts
"For a mountaineer, the important things are the effort, the posture and the muscles. The rope that holds him serves no purpose when everything works but it gives him a sense of security. In the same way, all gold does is ensure confidence; it's a safe haven."