Reinke Faces Life

http://www.econtalk.org/archives/2008/06/gene_epstein_on.html

Gene Epstein on Gold, the Fed, and Money
June 02, 2008, Featuring Gene Epstein

Gene Epstein, Barron’s economics editor, talks to EconTalk host Russ Roberts about the virtues of the gold standard relative to fiat money. Epstein argues that privately issued money, backed by gold, would lead to an economy with much greater price stability and fewer and milder recessions.

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Casualties under a gold standard:

* Federal Spending (“Teenager model”)

* Spending upon dubious things

* “Deficits don’t matter” “Guns and Butter both”

* Monetize the debt; index to inflation

* Unfunded liabilities

* Gooferment can fight wars

* Gooferment can make promises

* Foreign entities buy Federal debt giving them a lever politically

* Banks protected by Gooferment; a cartel

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“I, as President do declare that the national emergency still exists; that the continued private hoarding of gold and silver by subjects of the United States poses a grave threat to peace, equal justice, and well-being of the United States; and that appropriate measures must be taken immediately to protect the interest of our people. Therefore, pursuant to the above authority, I hereby proclaim that such gold and silver holdings are prohibited, and that all such coin, bullion or other possessions of gold and silver be tendered within fourteen days to agents of the Government of the United States for compensation at the official price, in the legal tender of the Government. All safe deposit boxes in banks or financial institutions have been sealed pending action in the due course of the law. All sales or purchases or movements of such gold and silver within the borders of the Untied States and its territories, and all foreign exchange transactions or movements of such metals across the border are hereby prohibited…”

– Proclamation by President Franklin D. Roosevelt, April 5, 1933

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In one of our semi-regular meetings of the old foggies’ society, I was trying to defend my love of the shiney metal to Luddite and Frau Reinke. Luddite’s wife stayed out of the fray; she’s the strong silent type. You know! The type that hangs back, listens carefully, and then forms her own opinion.

So why gold?

(1) It’s the only currently available “store of value”. Remember the dismal science’s (Economics) formulation of “money”? The first one was store of value that didn’t rot, erode, or get eaten by rats. Today’s fiat currencies are eaten by the gooferment rats.

(2) It’s not subject to the gooferment’s inflation tax. If you think about it, the gooferment funds its current version of guns and butter by debt to the Chinese, inflating / printing money, and taxes. If there was only a hundred dollars, and the gooferment prints five more, then you could understand that your dollar was worth less. The market place quickly adjusts prices to reflect reality. (In actuality, when more “money” is availble to pay for something, the price will rise due to the action of competing interests.

(3) It’s really an “off the books” investment. While it doesn’t throw off interest, what do you call the increase in purchasing power due to inflation?

[As an aside, you really have to laugh when the gooferment charges you a “capital gains tax” on the inflated value of an asset. If inflation is, for example, 5%. (Some commentators guesstimate it is as high as 18%!) So you buy a hundred dollar stock, in a year it goes up $5 and you cash out. Of your 5$ gain, 15% is paid in tax to the federal gooferment — 75 cents.  And the kicker is that your 105$ is really — if inflation is 12% — only worth 92.5 as measured in the prior year dollars. It compounds annually. Do you really think that a Kendall Park NJ house that was 12k new in 1950 is magically worth 330k in 2007? What did they use golden nails? No the dollars are depreciating and all things held in non-dollars are being repriced to reflect reality.]

(4) There are some interesting  nuances in holding American Gold Eagle, which are produced by the gooferment (i.e., the Treasury Department’s Mint), and are asserted to be dominated in dollars. The one ounce gold American Eagle is stamped 50 “dollars”. AND, it is really worth ~940 “dollars” in Federal Reserve Notes. (There’s a recent tax case where the employer declared his employees earnings in “dollars” as represented on the Eagles he gave them. Everyone paid less taxes.)  Does my estate executor report any coins I don’t give away to my heirs prior to my death in the metal value OR the “face” value.

<< IMHO — this bears on gift taxes, inheritence taxes, and anything where one has to report value.>>>

(5) When one wants to give a gift, you are limited to 12k without reporting it to the gooferment. So, if I give Eagles at face value, that’s 240 ounces. Or,  ~225k$ in Federal Reserve Bank Notes (Those funny green peices of paper).

(6) When one is at the end of one’s life, and the death taxes are facing you, you give a few coins to each visitor. No tax due!

In short, I think you have to think about gold differently.

Now Luddite brought up that in TEOTWAWKI (The End Of The World As We Know It) scenario, gold will be useless.

I disagree. You will be able to trade gold for stuff. You’ll need tools to keep what you have (like a gun). But, gold has a demonstrated history of being the “money of last resort”. In turbulent times, gold is highly valued.  His argument was that an ounce of gold was too much to pay for a loaf of bread. (Depends upon how hungry you are.) But Eagles come in different weights half, quarter, and tenths of an ounce. So just as today, you’ll need “change”. (Try buying a loaf of bread with a hundred dollar bill!)

I don’t give much credence to the TEOTWAWKI  scenario that trading gold for stuff will be difficult. I think that is the low probablility scenario. But gold does have value as part of portfolio and financial plan. (The coins; not gold stocks,  not gold IRAS,  not any kind of paper representing gold!)

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http://investmentpostcards.wordpress.com/2008/01/02/gold-glitters-brightly-at-start-of-2008

Gold glitters brightly at start of 2008
Posted by Prieur du Plessis under Gold
Tags: Bullion, Business, Commodities, Economy, Finance, Gold, Investment, Markets, Money

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Waving the old year goodbye with a few new records under the belt is no mean feat, but the real glitter for gold bullion is that most indicators seem to point to more good news down the line.

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With gooferment spending out of control — several ongoing “wars” — foreign and domestic, the sub-prime mess, social security ponzi, medicare costs, medicare drug costs, presidential candidate promising higher taxes — it’s hard to imagine this reversing any time soon.

About the ONLY hope is an unexpected Ron Paul win. (Then, I’d be a “buy everything — the good times are here” nut!)

But, if one assumes he doesn’t win, then I’d look for gold to have an unlimited run up.

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http://articles.moneycentral.msn.com/Investing/CompanyFocus/WhyGoldsGoingStraightTo1000Dollars.aspx?page=1

Why gold’s going straight to $1,000

Gold is about to soar to new highs, and here are four compelling reasons why. Take a look at four gold-mining stocks that could make your portfolio gleam.
By Michael Brush

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Gold beat a hasty retreat after setting records by trading north of $840 an ounce earlier this month, but don’t be fooled.

It’s only taking a breather before it climbs past $1,000.

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Clearly in an accumulation phase. It’s how the little guy takes profits and puts them on ice during turbulent economic times. Though out history, a few gold coins squirreled away meant the difference between disaster and survival.

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http://www.vestopia.com/Blogs/DirectorBlogEntry.aspx?postId=13090&piid=32

Gold as an Alternative Investment
Nov 7, 07

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Gold has had a great run lately. As I indicated in one of my previous blogs, if you look at the long term monthly close chart of gold, $700 provides a major resistance, because gold had never stayed above $700 for over a month in its entire history, neither in 1980 nor in 2006, until now. This is the main reason why it had taken over a year to overcome it, and the reason of the current explosive upward movement. Now we have expanded the chart upward beyond the $700 line into the new uncharted territory, I feel that gold will possibly never go below $700 again.

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Uncharted territory. So what is the upside? 2500/oz with a US$ collapse.

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I never read any stories about the Iraqi economy during the regime change process. I would believe that bullion coins would be a store of value. Better than the worthless fiat currency.

Any one see anything?

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http://www.lewrockwell.com/north/north565.html

Bernanke’s Speech on September 18
by Gary North

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“We need a return to the free market. No more central bank follies in trying to set an appropriate interest rate – any interest rate. Let borrowers and lenders work this out among themselves. Why should anyone trust a group of academic economists with tenured positions in a government-created monopoly? I can’t think of a good reason.”

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The Learned Lord North’s attempt to put words into “Helicopter” Ben’s mouth is amusing. At least, there’s no record of him advocating the Gold Standard like Greenspan and losing his mind when he became Fed Chairman. Like Darth Vader, Greenspan turned to the dark side — fiat money. Ben is just inexperienced in the obfuscation. When this Ponzi scheme runs out, maybe the people will be in the streets looking for someone’s head. I’m sure that all the FED will be “off shore”.

No, until we get honest money, we will all be poor and tempest tossed. The only humor is what are the Chinese going to do with 5T of worthless green paper.

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Russell on gold bullion

The central bankers believe they can control the quantity of fiat money so that the junk they create will always possess purchasing power. History tells us that the central bankers are dreaming (or lying). When it becomes obvious that the central banks are producing too much paper and are therefore devaluing their fiat currencies, seasoned investors take that fiat currency and buy Picassos or homes near some shoreline or collectibles or gem-quality diamonds — or gold Gold moves up when people worry about fiat currency, and they want to accumulate real money.

Source: Richard Russell, Dow Theory Letters, August 23 2007.

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