Tag Archives: Precious Metals

The Real Reason for the Shocking New Developments in the War on Cash, by Jeff Thomas

When cash vanishes so too will any vestige of financial privacy other than transactions in real money, i.e. gold and silver. From Jeff Thomas at internationalman.com:

war on cash

International Man: Australia has proposed a law that provides a $25,000 fine and two years in jail for those who make cash transactions of $10,000 or more. If passed, the Currency (Restrictions on the Use of Cash) Bill could be implemented in 2020.

Do you see this legislation as Orwellian?

Jeff Thomas: Oh, yes, very much so. The claim by the Australian government’s Black Economy Taskforce is that the law will help stamp out tax evasion, money laundering and other crimes.

What we’ll be seeing is a plethora of laws popping up in all the countries that were a part of the post-war prosperity boom – the US, Canada, Japan, Australia, Europe and others. All those jurisdictions dove headlong into the debt pit that the US created after 1971. All of them are now facing an economic crisis as a result.

Consequently, all of them will be creating capital controls. My belief is that each will host several of these laws, and the others will all adopt them. Each law will be justified as protection against money laundering, terrorism, tax evasion, a rising black market or a combination of those scare tactic focal points. As such, the populace of each country will welcome them, not understanding that the real purpose is to have the banks determine how much you’re allowed to spend.

By having each country put forth a portion of the laws, then having all the others copy them, they’ll hope to make the laws appear to be less draconian. After all, how bad could they be, if all these countries support them?

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How to Survive the “Deep State”, by Doug Casey

The deep state will be your enemy, not your friend, when collapse finally arrives. From Doug Casey at internationalman.com:

Almost everyone looks for a political solution to problems. However, once a Deep State situation has taken over, only a revolution or a dictatorship can turn it around, and probably only in a small country.

Maybe you’re thinking you should get behind somebody like Ron Paul (I didn’t say Rand Paul), should such a person materialize. That would be futile.

Here’s what would happen in the totally impossible scenario that this person was elected and tried to act like a Lee Kuan Yew or an Augusto Pinochet against the Deep State:

First, there would be a “sit-down” with the top dogs of the Praetorian agencies and a bunch of Pentagon officers to explain the way things work.

Then, should he survive, he would be impeached by the running dogs of Congress.

Then, should he survive, whipped dog Americans would revolt at the prospect of having their doggy dishes broken.

Remember, your fellow Americans not only elected Obama, but re-elected him. Do you expect they’ll be more rational as the Greater Depression deepens? Maybe you think the police and the military will somehow help. Forget it…they’re part of the problem. They’re here to protect and serve their colleagues first, then their employer (the State), and only then the public. But the whipped dog likes to parrot: “Thank you for your service.” Which is further proof that there’s no hope.

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150 years of bank credit expansion is near its end, by Alasdair Macleod

Alasdair Macleod’s innocuously titled article has enormous implications. From Macleod at goldmoney.com:

The legal formalisation of the creation of bank credit commenced with England’s 1844 Bank Charter Act. It has led to a regular cycle of expansion and collapse of outstanding bank credit.

Erroneously attributed to business, the origin of the boom and bust cycle is found in bank credit. Monetary policy evolved with attempts to control the cycle with added intervention, leading to the abandonment of sound money. Today, we face infinite monetary inflation as a final solution to 150 years of monetary failures. The coming systemic and monetary collapse will probably mark the end of cycles of bank credit expansion as we know it, and the final collapse of fiat currencies.

This article is based on a speech I gave on Monday to the Ludwig von Mises Institute Europe in Brussels.

Introduction

So that we can understand the financial and banking challenges ahead of us, this article provides an historical and technical background. But we must first get an important definition right, and that is the cause of the periodic cycle of boom and bust. The cycle of economic activity is not a trade or business cycle, but a credit cycle. It is caused by fractional reserve banking and by banks loaning money into existence. The effect on business is then observed but is not the underlying cause.

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America’s long-term challenge #3: destruction of the currency, by Simon Black

Inflation is a thief so subtle that most people have no idea they’re getting robbed. From Simon Black at sovereignman.com:

On April 2, 1792, George Washington signed into law what’s commonly referred to as the Mint and Coinage Act.

It was one of the first major pieces of legislation in the young country’s history… and it was an important one, because it formally created the United States dollar.

Under the Act, the US dollar was defined as a particular amount of copper, silver, or gold. It wasn’t just a piece of paper.

A $10 “eagle” coin, for example, was 16.04 grams of pure gold, whereas a 1 cent coin was 17.1 grams of copper.

The ratios between gold, silver, and copper were all fixed back then.

But if we apply today’s gold price of $1292 per troy ounce, we can see that the current value of the original dollar as defined by the Mint and Coinage Act of 1792 is roughly $66.75.

In other words, the dollar has lost 98.5% of its value since 1792.

What’s incredible about this constant, steady destruction of the currency is how subtle it is.

Few people seem to notice, because modern day central bankers try to “manage” inflation between 2% to 3% per year.

2% to 3% per year is pretty trivial. But it happens again the next year. And the year after that. And the year after that.

After a decade or so, it really starts to add up.

But there’s an important, other side of the equation: income.

Costs are clearly rising. And it’s fair to say that incomes have been rising too. But which one has risen more?

In 1982, back when I was a toddler, the price of a Ford Mustang was $6,572. Today the cheapest Mustang starts at $25,680 according to Ford’s website.

So a Mustang today is around 4x as expensive as it was 36 years ago.

US Labor Department data from 1982 shows that average earnings were $309 per week, or $16,086 per year. That was enough to buy 2.45 Mustangs.

Today’s earnings are $881 per week, or $45,812 per year. That’s only enough to buy 1.78 Mustangs.

So when denominated in Ford Mustangs, people’s incomes have fallen 27.3% since 1982.

To continue reading: America’s long-term challenge #3: destruction of the currency

The End of the Debt-As-Currency Era, by Jeff Thomas

The end of that era can’t come too soon. From Jeff Thomas at internationalman.com:

Gold is the currency of kings, silver is the money of gentlemen, barter is the money of peasants, but debt is the money of slaves.

—Norm Franz, Money and Wealth in the New Millennium

We are nearing the end of the debt-as-currency era.

This is quite a broad statement and, of course, since debt is the foremost currency of our day, it would be quite understandable if the reader were to regard such a prognostication to be utter nonsense.

Indeed, many would say that, without debt, the world couldn’t function. Debt has always existed and always will. However, in eras past, debt often played a much smaller role, and those eras were marked by greater progress and productivity.

We’re now living in the era of the greatest level of debt mankind has ever created. In fact, we’ve come to regard it as “normal.” Most governments are far beyond broke. And they won’t be saved by confiscation or taxation, as their people and corporations are just as heavily in debt. For this reason, a collapse is inevitable. And, since the severity of a collapse is invariably directly proportional to the severity of the debt, when it arrives, it will be a collapse that eclipses all previous collapses.

The present uncontrolled level of debt is made possible through the ability of central governments to create more currency at will. And this is only possible through the existence of a currency that is fiat in nature—that has no inherent value.

Aristotle was right on the mark when he stated that for something to be appropriate as money, it must have intrinsic value—independent of any other object and contained in the money itself.

The great majority of what passes for money today is digital, although, for daily use, paper currency is still widely used. But it must be said that paper currency is also fiat, having a far lower intrinsic value than the denomination printed on it.

To continue reading: The End of the Debt-As-Currency Era

Is Bitcoin Standing In For Gold? by Paul Craig Roberts and Dave Kranzler

Governments and their central banks may be pushing down the prices of precious metals to obscure their debasement of their own currencies, and this may be diverting people into cryptocurrencies. From Paul Craig Roberts and Dave Kranzler at paulcraigroberts.org:

In a series of articles posted on http://www.paulcraigroberts.org, we have proven to our satisfaction that the prices of gold and silver are manipulated by the bullion banks acting as agents for the Federal Reserve.

The bullion prices are manipulated down in order to protect the value of the US dollar from the extraordinary increase in supply resulting from the Federal Reserve’s quantitative easing (QE) and low interest rate policies.

The Federal Reserve is able to protect the dollar’s exchange value vis-a-via the other reserve currencies—yen, euro, and UK pound—by having those central banks also create money in profusion with QE policies of their own.

The impact of fiat money creation on bullion, however, must be controlled by price suppression. It is possible to suppress the prices of gold and silver, because bullion prices are established not in physical markets but in futures markets in which short-selling does not have to be covered and in which contracts are settled in cash, not in bullion.

Since gold and silver shorts can be naked, future contracts in gold and silver can be printed in profusion, just as the Federal Reserve prints fiat currency in profusion, and dumped into the futures market. In other words, as the bullion futures market is a paper market, it is possible to create enormous quantities of paper gold that can suddenly be dumped in order to drive down prices. Everytime gold starts to move up, enormous quantities of future contracts are suddenly dumped, and the gold price is driven down. The same for silver.

Rigging the bullion price prevents gold and silver from transmitting to the currency market the devaluation of the dollar that the Federal Reserve’s money creation is causing. It is the ability to rig the bullion price that protects the dollar’s value from being destroyed by the Federal Reserve’s printing press.

To continue reading: Is Bitcoin Standing In For Gold?

 

 

Beyond Jenga, by Robert Gore

Built as they are on flawed philosophical and intellectual foundations, current political and economic arrangements may prove remarkably tenuous, upended by random, seemingly trivial perturbations, which SLL has analogized to a crashing Jenga tower. (“Orwell or Jenga?” 10/13/15). While those who are currently in power clearly desire increasing centralization, supranationality, and state control, those desires are running smack into the centrifugal forces engendered by modern technologies and markets, and the obvious incompetence and corruption endemic in present state structures.

There is no shortage of material on preparing for outcomes running the gamut from Orwellian police states to anarchy. If for no other reasons than that the world is embarking on the biggest debt contraction (after the biggest debt expansion) in history, most governments are essentially bankrupt, and police states are an expensive proposition, a probability distribution of possibilities skews toward disorder and the more anarchic outcomes.

“Orwell or Jenga” suggested that current financial arrangements based on fiat currencies and debt could well be a source of Jenga instability. SLL maintains that such currencies and debt are not money (“Real Money,” 9/9/15), because they are liabilities of either governments or central banks and have no intrinsic value. Precious metals, on the other hand, are not liabilities and have intrinsic value. They have been money in the past and it’s possible they will be so again, both during an anarchic phase that it is to be hoped will be transitory, and later as new political and economic arrangements emerge.

When prices were close to their recent lows, SLL suggested that it was a good time to buy gold and silver. (“Buy Gold and Silver,” 7/20/15). Prices have rallied somewhat, but your perspective should be your ability to exchange precious metals for goods and services, not “value” as measured in fiat debt units. You buy gold and silver for the same reasons you stockpile essentials and keep your firearms and shooting skills in good working order: as reasonable preparations for a future that may be far different than today.

However, obtaining precious metals raises a number of issues. SLL has discussed buying them, but has said nothing about the mechanics of doing so. Although the SLL website carries various online advertisements, it does not endorse specific businesses. (It has yet to come up, but SLL would not hesitate to criticize an advertiser, or carry a guest post that did so, even if it meant the loss of that advertiser’s business) While no dealer will be recommended, here are some guidelines for buying precious metals.

Precious metals can be purchased online or at physical stores. There is something to be said for developing a relationship with a local dealer. Go with recommendations from people you trust, but whether you have a referral or you’re trying to evaluate a dealer cold, there are a few reliable benchmarks. The longer the dealer has been in business, the higher the probability it is reputable. Check online reviews. Compare dealer prices against both the premium to spot metal prices and “live” prices for the same items posted by Internet dealers. If you have a smart phone you can do it in real time. One trick to keep dealers honest is to ask for both bid and ask quotes, without indicating whether you are buying or selling. Compare bid-asked spreads to those on the internet. If they’re wide or the dealer won’t give you a two-way quote, find another dealer.

It is difficult to buy precious metals from a reputable dealer without generating a paper or computer-stored record. Assume any Internet transaction will generate a record, but cash transactions at a store probably will as well. Dealers are subject to the Patriot Act’s anti-money laundering rules. They also have to report cash receipts in excess of $10,000, which is not a large transaction for precious metals (http://www.fincen.gov/statutes_regs/guidance/html/faq060305.html). If you make a series of sub-$10,000 transactions, the dealer may have to file a Suspicious Activity Report. Assume most dealers will want at least your name and address for even small cash transactions, if only to protect themselves if they’re audited by the government. For those worried about government access to your purchase records and a repeat of President Roosevelt’s 1933 confiscation of gold, there is reason to worry. However, there doesn’t seem to be legal ways around the problem if you are buying gold or silver from a dealer. SLL welcomes knowledgable information on this issue in the comments section.

There are a number of reputable online precious metals dealers. Check and compare online reviews and Better Business Bureau complaints, the time dealers have been in business, posted prices and premiums, bid-ask spreads, selection of products, shipping rates, volume discounts, and online and phone customer service policies. Many dealers offer to store your metals (some offer storage in foreign depositories) and guarantee that they will be segregated, identified as yours, and delivered on demand. This solves the security issue of keeping metals safe at home or a business, or the risk of keeping them in a bank safety deposit box, where they may be subject to government seizure.

However, since the focus here is on Jenga-style upheaval where gold and silver become a medium of exchange, what good will yours do you if it is in a depository, especially if it is in a foreign country? Don’t think a depository outside the country will protect your metals from confiscation; the long arm of the US government reaches around the world. With access to purchase records, it may force you to bring your stash back to this country and cough it up.

If gold and silver are mediums of exchange, you want your immediately available reserve in small units. Who’s going to make change for a 100 ounce silver bar or a one ounce gold ingot or coin? There is no reason to pay the premium for gold and silver coins over ingots if ingots are available in the same weights as coins. You may want to keep the bulk of your precious metals in a depository as a store of wealth, but have a sufficient number of smaller units at home in a secure place in case of sudden apocalypse. Smaller units are also less likely to be confiscated.

However, do not convert all your financial assets to precious metals. There is the confiscation danger, and if things get really bad, their exchange value against scarce day-to-day necessities like food, water, medicine, fuel, and the like may be low. Make sure you have an adequate stockpile of essentials before you spend much on precious metals. A hunk of metal will not sustain life, and items you can barter from your stockpile may have far more exchange value than precious metals. A carton of toilet paper may command more than a ounce of silver. Your precious metals should not be ends in themselves, just components of a well-devised and diversified plan for a risky, uncertain future.

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