money supply

Gold, Silver, Copper, Nickel and the Slow Death of Money

Gold, Silver, Copper, Nickel and the Slow Death of Money

A huge opportunity to hedge against both inflation and deflation is lying out there in the open. There are no transaction costs and right now there’s even a built-in discount. But most people will never realize any of this. In 1933 President Franklin Delano Roosevelt signed Executive Order 6102, which made it illegal for U.S. citizens to hold gold bullion. Prior to that, the $20 bill was essentially a warehouse receipt for a one-ounce gold coin. Prior to the Federal Reserve Act of 1914, the $20 bill actually told you this. After Executive Order 6102, $20 notes weren’t allowed to be exchanged for gold anymore. Americans couldn’t legally own or trade gold as money and savings, only as jewelry or collectible coins. A year after making monetary gold ownership illegal, FDR revalued gold from $20.67 per ounce to $35 an ounce with the Gold Reserve Act. The Act also required all gold and gold certificates to be turned over to the Treasury. The dollar was debased. A chunk of the gold it used to be good for was legally removed. Instead of  “containing” 1/20 an ounce of gold, each dollar now only contained (or represented) 1/35 an ounce. And of course you couldn’t actually own the gold itself. In 1971 Nixon severed the last official ties between gold and the dollar. The dollar quickly sunk to its real value, which had been debased by years of money supply inflation. By 1975 Americans were allowed to own bullion gold again, but during the roughly 40 years bullion gold ownership had been illegal, the dollar had been drastically debased. At its former lowest point in the summer of 1980, the dollar …

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Inflation in (Mostly) the Wrong Places

It is often claimed that inflation is a benign, even positive, force. People assume that prices, wages, and assets will all rise together… In the real world, inflationary episodes don’t play out that way. Wages don’t keep up, and bubbles form in unexpected (and unwanted) places. In America, compensation is clearly stagnant. And the outlook for future pay raises is not good, as this chart from David Rosenberg shows: Contrast that with this next chart, which shows the percentage of companies planning to raise prices: Combine stagnant wages and slow growth with high unemployment and rising prices, and you get a recipe for stagflation. This scenario is being played out around the world. In the UK, consumer prices rose 4% in 2010. As noted by the Financial Times , wages aren’t keeping up: The prices of everyday goods and services are rising about twice as rapidly as average wages, Tuesday’s inflation figures confirmed — which means that the standard of living of many Britons is already falling. According to the Bank of England, average pay at the end of this year will be able to buy no more than it could in 2005. It is the first time that the purchasing power of earnings has fallen so far since the 1920s. I expect this trend to continue as long as the Fed’s mad experiment is ongoing. The thing about Central Bank “easing” is you never know where inflation will pop up… Easy money will always fuel speculators, who have little skin in the game, to find another bubble to “invest” in. Silver, gold, oil With printing presses switched “on” for the foreseeable future, we remain bullish on precious metals. Silver is holding above $30 today and could hit $37.50 on the next leg up. Coal, oil, and natural gas investments should continue to do well. And as my colleague Nick Hodge of Energy and Capital says, “Buy it if it burns.” If you’re not yet convinced that Fed printing is directly related to rising commodity prices, examine the following chart. (The solid blue line represents the Austrian Money Supply (AMS), and the solid teal line represents commodity prices ( IMF Commodity Index )): Note: The version of money supply shown

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Inflation and the Damage Done

Filed in AMAG, BP, economy, Gold, inflation, money supply, o, silver by on January 14, 2011 0 Comments

The Mogambo Stupidity Prize (MSP) is a not-so-rare honor bestowed to highlight the laughable kind of stupidity about inflation that is so prevalent these days that I find myself screaming at the radio, the newspaper and the TV, wildly ranting, arms akimbo like some kind of demented old man, about how inflation is the Worst Inflation and the Damage Done originally appeared in the Daily Reckoning . The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

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A National Debt That Will Never Be Repaid

As you read this, the U.S. government owes just a sliver under $14 trillion dollars to various suckers who’ve lent it money. And it wants to borrow more. Timothy Geithner warned that a failure to raise the debt limit would mean the government would not be able to make the payments on the current debt in the very near future. Consult the official record and you’ll read that the U.S. has never defaulted on its obligations. That’s technically true…but then what about when France’s prime minister Charles de Gaulle politely asked the U.S. to hand over the gold it promised was backing the U.S. dollars held by France and other nations? “No gold for you!” Nixon was heard to say. That’s because the U.S. had printed a lot of dollars in order to pay for Lyndon Johnson’s social programs and war (among other things). There was no way that the ratio of dollars to gold held by the U.S. was still anywhere near an amount that would support the official $35/oz. What was the real price of gold with all those extra dollars floating around? Who knows? But when they were allowed to own gold again beginning in 1974 Americans bid gold up to over $887/oz in just six years. Nixon knew back in 1971 that there was no way the U.S. could make good on the dollar at the official rate. The official rate was a lie. If every yahoo with $35 U.S. were to show up at the gold window then, only a small percentage of them would get their gold. So Nixon “closed the gold window.” But a default by any other name apparently isn’t really a default. And now Mr. Geithner tells us that in order not to default, the U.S. government has to take on more debt. Remember, there are certain ways government gets purchasing power… Steal it directly by openly taxing its subjects (on income, payrolls, transactions, imports, exports, etc)… Steal it sneakily through currency debasement (inflate paper money supply or clip the coins). Borrow it. Number three really isn’t really income, however. And it often leads to number two. Geithner just admitted that if the U.S. doesn’t borrow more than the current debt ceiling allows, the government wouldn’t be able to meet its obligations. When you can’t pay for your expenses — including the interest on the debt you already owe — is it really a good idea to borrow more? Maybe you should cut up the credit card, move to a smaller apartment, sell the car and take public transportation, stop eating out so much…any of these things in any combination would help. Borrowing more to fund your lifestyle doesn’t make the list. It just guarantees there will be even more pain to reckon with later. Borrowing is what got them in this jam. Raising the debt ceiling at this point is about as healthy …

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The Last Angry Man’s Problem With IMF Gold Sales

Filed in BP, economy, Gold, Gold Investing, gold-sales, inflation, money supply, o by on December 30, 2010 0 Comments

Adrian Ash of BullionVault.com writes that “the International Monetary Fund said it has completed the gold bullion sales program begun in October 2009,” and now 403 tonnes of gold have been sold. I bring this up all the time because the whole thing pisses me off because we gave those IMF bastards the gold to The Last Angry Man’s Problem With IMF Gold Sales originally appeared in the Daily Reckoning . The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

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Money to Burn: 10% of Cash Supply to be Destroyed

Money to Burn: 10% of Cash Supply to be Destroyed

Here’s a story that is sure to leave the gold bugs shaking their heads. It seems as though Uncle Sam can’t even print his own fiat currency without screwing it up. A full 10% of all existing U.S. currency is going to be quarantined and burned at a cost of over $120 million. From Yahoo News by Zachary Roth entitled: Government can’t print money properly “ As a metaphor for our troubled economic and financial era — and the government’s stumbling response — this one’s hard to beat. You can’t stimulate the economy via the money supply, after all, if you can’t print the money correctly. Because of a problem with the presses, the federal government has shut down production of its flashy new $100 bills, and has quarantined more than 1 billion of them — more than 10 percent of all existing U.S. cash — in a vault in Fort Worth, Texas, reports CNBC. “There is something drastically wrong here,” one source told CNBC. “The frustration level is off the charts.” Officials with the Treasury and the Federal Reserve had touted the new bills’ sophisticated security features that were 10 years in the making, including a 3-D security strip and a color-shifting image of a bell, designed to foil counterfeiters. But it turns out the bills are so high-tech that the presses can’t handle the printing job. More than 1 billion unusable bills have been printed. Some of the bills creased during production, creating a blank space on the paper, one official told CNBC. Because correctly printed bills are mixed in with the flawed ones, even the ones printed to the correct design specs can’t be used until they ‘re sorted.It would take an estimated 20 to 30 years to weed out the

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Why the Government Hates Deflation

Filed in BP, deflation, economy, Gold, Gold Prices, inflation, money supply, o, silver by on November 26, 2010 0 Comments

Being the naturally cynical type of guy that you would expect from someone so angry, so depressed, so outraged, so paranoid and so “Howard Beale” (“I’m as mad as hell, and I’m not going to take this anymore!”) as I am, people want to know “what is with” all of this “deflation” stuff that the Why the Government Hates Deflation originally appeared in the Daily Reckoning . The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

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Myriad Responses to the Global Financial Crisis

Filed in BP, economy, euro, Gold, Gold Investing, money supply, o by on November 26, 2010 0 Comments

Yes, dear reader…we are on the job. Reckoning away… And we are spoiled for choice this morning…so much to reckon with. First, let’s begin with the US stock market. Up…down…up again. The Dow rose 150 points, Wednesday. Gold fell $4. What does that tell us? Nothing… Meanwhile, in Europe, poor Ireland is suffering. On Wednesday, Myriad Responses to the Global Financial Crisis originally appeared in the Daily Reckoning . The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

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Return to Jekyll Island

Welcome to the Wealth Daily Weekend Edition— our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles. In the end, the crooks always return to the scene of the crime. Just days after announcing a $600 billion money drop , the members of the Federal Reserve retreated to the place where it all began: Jekyll Island, Georgia. Only this go-round was nothing like the covert operation that took place 100 years ago… This time it was just a bunch of backslapping as Bernanke and Co. spent the weekend hidden in plain sight, celebrating themselves as the smartest guys in the room. Advertisement Breaking: Fed’s Dirty Little Secret Could Make You Rich Economists agree… The Fed’s out-of-control printing press guarantees the dollar will soon crash. But while most investors panic, thousands already started taking advantage of one, very unique investment. It not only protects their portfolios, but it also makes them filthy rich in the process! Click here for your exclusive, inside peek. Back to where it all started For this, we have the most expensive hunting trip in history to thank. You see, while you didn’t learn this in school, the Federal Reserve Bank actually began in a New Jersey train station on a November night shrouded in secrecy. Leaving from the Hoboken Railway station in 1910 were a group of the nation’s leading financiers, along with a handful of powerful Washington insiders and their staff members. And while a few reporters suspiciously witnessed the gathering of these big wigs, none of them bothered to report on it. These men, they were told, were simply going “duck hunting.” But ducks had nothing to do with it… Leading the secret trip to Georgia was Senator Nelson Aldrich, head of the National Monetary Commission. Joining him were A. Piatt Andrew, Assistant Secretary of the Treasury; Frank Vanderlip, President of National City Bank of New York; Henry P. Davison, senior partner of J.P. Morgan Company (generally regarded as Morgan’s personal emissary); Charles D. Norton, President of the First National Bank of New York; Benjamin Strong, a known Lieutenant of J.P. Morgan; and Paul Warburg, a recent immigrant from Germany who had joined the banking house of Kuhn, Loeb and Company of New York as a partner. And while you may not recognize any of these names, they were among the most powerful and well-known men of their day. Together they represented approximately a quarter of all the world’s wealth. On an island off the coast of Georgia, the nation’s banking system changed forever… Once ensconced in their private and discreet playground, the rich and the powerful went to work creating the plan that would eventually become the Federal Reserve Bank. So it was out of these secret meetings that the control of the nation’s money supply was handed over to the very bankers and private corporations that earlier generations of Americans— including Thomas Jefferson and Andrew Jackson — found to be so onerous. Some three years after that now famous “hunting trip,” the plan conceived on Jekyll Island became law. On December 22, 1913, while many members of Congress were celebrating Christmas at home, the Federal Reserve Act was rammed through Congress, and later signed into law by President Wilson. Ideas have consequences We have been at the mercy of their printing presses ever since… Which is why …

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Profit from Currency Wars

Profit from Currency Wars

Right now, the world is going through a massive economic re-balancing. The old idea that China will sell us stuff— while lending us the money to buy it — is unwinding. In fact Ben Bernanke has declared a currency war on China’s undervalued RMB. Good ol’ Ben says we can make the dollar cheaper than the Chinese yuan, and he aims to prove it. The Fed recently proclaimed its desire to create and buy $600 billion in U.S. Bonds. “The FOMC intends to buy an additional $600 billion of longer-term Treasury securities by mid-2011 and will continue to reinvest repayments of principal on its holdings of securities, as it has been doing since August,” said Bernanke. Ben is taking this approach because it works right up until it doesn’t. It worked after the past five bubbles popped, and it looks to be working this time. When Ben floated the idea of a $600 billion cash infusion, stock prices rose and long-term interest rates fell in anticipation. I know some of you will point out that the RMB is pegged to the dollar, and therefore the dollar can’t fall… But it does cause an inflation problem in China, which is a de facto re-balance. According to Bloomberg , “Over the past five years the real-estate prices have tripled. And as property makes up a third of living costs on average, this alone means the real yuan value has doubled.” Chinese Commerce Minister Chen Deming said as much in an interview on October 26th: “Uncontrolled” issuance of dollars is “bringing China the shock of imported inflation.” Chinese poor There are some downsides to printing more dollars. For example, easy money just creates the next bubble, and currency destruction doesn’t create wealth. China has been holding down its currency for years. It now has the world’s second largest economy; but in terms of per capita income, it ranks at 102 — right behind Turkmenistan, Algeria, and El Salvador. Clearly, an artificially low currency isn’t a path to prosperity… But it does lead to a boom in all asset classes. There used to be an inverse ratio of commodities to equities. When one went up, the other went down. In the 1970s, when gold was flying, stocks were dead in the water. In the 1980s, the reverse occurred. In the mid-2000s, when Federal interest rates fell, stocks went up, gold went up, housing went up, oil, uranium, copper— everything went up… This was a direct result of easy money. Now, due to 0.25% Fed interest rates and $600 billion in QEII, almost every asset will continue to go up — with the exception of your salary and your returns on your bank account. And to top it off, the U.S. isn’t alone. The rest of the world from Europe to Brazil is increasing the global money supply. The question isn’t whether low quality growth can work, because it does. Easy money and debt have funded the past twenty-five years of U.S. growth. The question is, How do you keep up with it? The tunnel of doom When I was a kid riding in…

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Ben Plans, Commodities Soar

Welcome to the Wealth Daily Weekend Edition— our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles. Don’t look now, but the Fed has just driven the magic bus right off of the cliff. Nowhere to run, nowhere to hide, it’s break on through to the other side. With nearly $1 trillion in new money now set to roll off the printing presses, the Fed has finalized its course. Inflation is the destination. It does so with a giant magical checkbook that creates money out of nothing. And as we know, since the 70s, it is one that is no longer tied to gold. It’s what the gold bugs mean when they denounce the dollar as being nothing more than “fiat money.” That is, it’s backed up only by the “full faith and credit of the U.S. Government.” That’s why commodity prices have been going nuts as of late, as investors place their bets against all of Big Ben’s phony new greenbacks. For instance, did you know that copper has surged 28% on stronger demand and a weaker U.S. dollar? Or that cotton and gold traded recently at all-time highs for the same reasons? They have— and along with everything else, including oil, commodities are likely headed much higher from here… In fact the dollar’s weakness, inflationary pressures, and stronger emerging-market demand, all mean that commodities are going to be very bullish over the next 12 to 18 months. Advertisement The Options Guide Your Broker Doesn’t Want You to See… Most people think profiting from options requires years of investment experience or a seasoned stock broker. That’s why people are losing thousands of dollars everyday. Our in-house options expert Ian…

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Alamos Gold (TSE:AGI), IAMGOLD (NYSE:IAG), Fronteer Gold (AMEX:FRG) Shares Skyrocket on Record Gold Prices

Alamos Gold (TSE:AGI), IAMGOLD (NYSE:IAG), Fronteer Gold (AMEX:FRG) moved up strongly in share price as the gold prices soared to record levels in response to the new round of inflating the money supply, or quantitative easing, as the Fed likes to call it now. Spot gold prices soared to over $1,390 as the trading session approached its closing moments, up by $42.50. The gold miners, and other

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