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Gold Prices and Panic (Feds actions tantamount to government counterfeiting)
Mises Institute ^ | December 13, 2010 | Doug French

Posted on 12/13/2010 7:49:16 PM PST by sickoflibs

With gold selling for around $1,400 per ounce, it seems like everyone has jumped on the yellow-metal bandwagon. Resource-investment guru Rick Rule said about gold investing recently, "we're no longer lonely in the gold trade. You couldn't describe this as a contrarian activity, and you couldn't describe this as a low-risk activity."

But while Rule and the likes of David Einhorn aren't alone keeping some, or a lot of, money in gold, the Wall Street Journal ran a profile of a more typical investment guide who claims, "There's no utility of gold." Investment advisor Tim Medley says people only trade their dollars for gold when they're afraid, and they won't be afraid much longer.

Medley is old enough to remember overflow crowds at financial conferences in the early 1980s listening to presentations about gold, only to have the metal's price plunge and go nowhere for two decades. He's figuring the same will happen again. "Given a choice between first-rate common stocks and gold over the next five to ten years, I feel strongly that stocks will do much better," says Medley.

Unless his clients specifically tell him to buy some gold or gold stocks for their accounts, Medley won't touch the stuff. "There's no organic growth" in gold, he says.

For sure, gold coins and bars silently gather dust. Gold has no staff, makes no product, earns no profit, and incurs no loss. The yellow metal owes no one, but at the same time it collects no interest either.

However, to say gold has no utility? Time and history would say otherwise. Murray Rothbard listed seven necessary qualities for money during a History of Economic Thought lecture at UNLV back in the fall of 1990. For a substance to be used as money it must be (1) generally marketable, (2) divisible, (3) durable, (4) recognizable, (5) homogeneous, and have a (6) high value per unit weight and (7) fairly stable supply.

Gold happens to meet the test of all seven attributes. However, investment advisor Medley seems to be equating the macroeconomic landscape today with that of 1980, when gold hit $850 per ounce, thinking that it's all downhill from here for the price of the yellow metal, just as it was 30 years ago.

But he turns a blind eye to the fact that M2 was just short of $1.5 trillion in January 1980, while this past October it was $8.7 trillion. Gross debt in 1980 was $909 billion, on November 2 of this year, $13.7 trillion. As a percentage of GDP, the debt was 33.4 percent in 1980; today it's 93.2 percent.

On February 15, 1980, the discount rate was goosed up to 13 percent and federal funds were yielding 14.5 percent to 15 percent (on the way to 20 percent a year later) Today, the discount rate is all of 75 basis points and federal funds fetch a yield of zero to a quarter percent.

And while Volcker's policies spurred widespread protests due to the effects of the high interest rates on the construction and farming sectors, causing irate, bankrupt farmers to drive their tractors onto C Street NW, blockading the Eccles Building, Ben Bernanke invited 60 Minutes into the Fed's chambers to go on camera assuring people he will keep rates near zero for as long as it takes.

Bernanke assured the national audience that the Fed was not printing money; however, he didn't explain where the Fed was going to get the funds to buy $600 billion worth of treasuries.

Rick Rule already knows the answer; and it's not just the Fed that's creating money out of nowhere to buy government bonds. "The decision by the European Central Bank to emulate their American peers to print money to buy existent European bonds is tantamount to government counterfeiting," says Rule.

And while central-bank bureaucrats come up with fancy names for this counterfeiting, like "quantitative easing," the owner of Global Resource Investments differs with that characterization. He says, "I disagree; I think it's a form of fraud. I think they are printing money to buy bonds that they couldn't otherwise sell."

$10 $8 Tim Medley believes stocks are selling at good prices and have the potential to reward investors with significant gains, while he believes the gains in gold prices are likely short-lived. Rule also remembers the late 1970s gold bull market, and he contends this market hasn't yet become the "echo market" that that one was:

In an echo market, the market might be kicked off by fear buying like we're seeing in gold now, and the momentum established by the fear buyers attracts the greed buyers. The momentum associated with the greed buyers sparks more fear buying and backwards and forwards.

Based on what Bernanke said on 60 Minutes, it is hard to imagine that it's really too late to be afraid.

Douglas French is president of the Mises Institute and author of Early Speculative Bubbles & Increases in the Money Supply and Walk Away: The Rise and Fall of the Home-Ownership Myth. He received his masters degree in economics from the University of Nevada, Las Vegas, under Murray Rothbard with Professor Hans-Hermann Hoppe serving on his thesis committee. French teaches in the Mises Academy


TOPICS: Business/Economy; Editorial; Government; News/Current Events
KEYWORDS: economy; gold; mises; schifflist; silver
The Peter Schiff/Austrian Economics ping. (Washington Bankrupting our Nation by Spending your past, present and future money!)

If you realize both parties in Washington think that our money is theirs and you trust them to do the wrong thing, this list is for you.

If you think there is a Santa Claus who is going to get elected in Washington and cut your taxes, spend a few trillion and that will jump-start the economy, this list is not for you.

You can read past posts by clicking on : schifflist , I try to tag all relevant threads with the keyword : schifflist.

Ping list pinged by sickoflibs.

To join the ping list: FReepmail sickoflibs with the subject line add Schifflist.

(Stop getting pings by sending the subject line drop Schifflist.)

The Austrian School’s Commandments plus :From : link

1) You cannot spend your way out of a recession
2) You cannot regulate the economy into oblivion and expect it to function
3) You cannot tax people and businesses to the point of near slavery and expect them to keep producing
4) You cannot create an abundance of money out of thin air without making all that paper worthless
5) The government cannot make up for rising unemployment by just hiring all the out of work people to be bureaucrats or send them unemployment checks forever
6) You cannot live beyond your means indefinitely
7) The economy must actually produce something others are willing to buy
8) Every government bureaucrat should keep the following motto in mind when attempting to influence the economy: “First, do no harm!”
9) Central bank-supported fractional reserve banking is an economically distorting, ethically questionable activity. In particular, no government should ever do anything to save any bank from the full consequences of a bank run, no matter what the short-term consequences.
10) Gold is God’s money.

Add mine:

1) Businesses don't hire workers just because of demand for products or services, they hire because it makes them money. Sorry to have to state the obvious.
2) Government spending without taxing is still redistribution
3) Taking one man's money and giving it to another is not a job.
4) Paul Krugman and Bernake have been wrong about everything, as well as the other best and brightest Keynesian's who have been fixing our economy for over a decade.
5) Republicans in the minority (esp out of the White House) act like Republicans, in the majority they act like Democrats .

1 posted on 12/13/2010 7:49:24 PM PST by sickoflibs
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To: Harrius Magnus; mojitojoe; Pelham; mom2twinsn2; LongLiveTheRepublic; ConservativeOrBust; ...
The Peter Schiff/Austrian Economics ping. (Washington Bankrupting our Nation by Spending your past, present and future money!)
2 posted on 12/13/2010 7:51:50 PM PST by sickoflibs ("It's not the taxes, the redistribution is the federal spending=tax delayed")
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To: Flavius

Pingiohsis


3 posted on 12/13/2010 7:57:59 PM PST by Flavius (A)
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To: sickoflibs
I like you. A lot.


Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.

4 posted on 12/13/2010 8:06:24 PM PST by The Comedian (Government: Saving people from freedom since time immemorial.)
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To: sickoflibs

austrian school bump for later..........


5 posted on 12/13/2010 8:06:43 PM PST by indthkr
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To: sickoflibs

Jus’ wonder how good is the gold they are pushing?
Same as gold plated “gold” discovered recently?


6 posted on 12/13/2010 8:07:05 PM PST by Leo Carpathian (fffffFRrrreeeeepppeeee-ssed!)
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To: sickoflibs
Has everyone seen "Fear the Boom and Bust" a Hayek vs. Keynes Rap Anthem?
7 posted on 12/13/2010 8:08:11 PM PST by DeaconBenjamin (A trillion here, a trillion there, soon you're NOT talking real money)
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To: sickoflibs

sfl


8 posted on 12/13/2010 9:04:29 PM PST by phockthis
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To: sickoflibs

About a year ago in a tax sheltered account I bought the premier copper stock, a carefully chosen silver ETF, a carefully selected gold ETF, and a leading independent oil company all in a single investment account, as a dollar denominated commodity play hedging against the falling dollar, and against the continued folly of triple deficit US economy political policy during a world-class recession. The account is at 150% of investment now and all remains a good long-term hold for dollars. Fundamentals are still the same.


9 posted on 12/13/2010 10:15:04 PM PST by FlyingEagle
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To: All; sickoflibs

“With gold selling for around $1,400 per ounce ..”

But dealers don’t give $1,400 to buy back the gold. I wonder how much (approximately) they do pay their customers??


10 posted on 12/14/2010 12:52:56 AM PST by Sun (Pray that God sends us good leaders. Please say a prayer now.)
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To: FlyingEagle

You have FCX.....look for GDXJ


11 posted on 12/14/2010 1:28:15 AM PST by dennisw (- - - -He who does not economize will have to agonize - - - - - Confucius)
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To: sickoflibs
Coming soon, the sequel, to a theater (or safe deposit box) near you...................

The Gold Confiscation Of April 5, 1933

______________________________________________________________________Forbidding the Hoarding of Gold Coin, Gold Bullion and Gold Certificates By virtue of the authority vested in me by Section 5(b) of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933, entitled

An Act to provide relief in the existing national emergency in banking, and for other purposes~', in which amendatory Act Congress declared that a serious emergency exists,

I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section to do hereby prohibit the hoarding gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations and hereby prescribe the following regulations for carrying out the purposes of the order:

Section 1. For the purpose of this regulation, the term 'hoarding" means the withdrawal and withholding of gold coin, gold bullion, and gold certificates from the recognized and customary channels of trade. The term "person" means any individual, partnership, association or corporation.

Section 2. All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion, and gold certificates now owned by them or coming into their ownership on or before April 28, 1933, except the following:

(a) Such amount of gold as may be required for legitimate and customary use in industry, profession or art within a reasonable time, including gold prior to refining and stocks of gold in reasonable amounts for the usual trade requirements of owners mining and refining such gold.

(b) Gold coin and gold certificates in an amount not exceeding in the aggregate $100.00 belonging to any one person; and gold coins having recognized special value to collectors of rare and unusual coins.

(c) Gold coin and bullion earmarked or held in trust for a recognized foreign government or foreign central bank or the Bank for International Settlements. (d) Gold coin and bullion licensed for the other proper transactions (not involving hoarding) including gold coin and gold bullion imported for the re-export or held pending action on applications for export license.

Section 3. Until otherwise ordered any person becoming the owner of any gold coin, gold bullion, and gold certificates after April 28, 1933, shall within three days after receipt thereof, deliver the same in the manner prescribed in Section 2; unless such gold coin, gold bullion, and gold certificates are held for any of the purposes specified in paragraphs (a),(b) or (c) of Section 2; or unless such gold coin, gold bullion is held for purposes specified in paragraph (d) of Section 2 and the person holding it is, with respect to such gold coin or bullion, a licensee or applicant for license pending action thereon.

Section 4. Upon receipt of gold coin, gold bullion, or gold certificates delivered to it in accordance with Section 2 or 3, the Federal reserve bank or member bank will pay thereof an equivalent amount of any other form of coin or currency coined or issued under the laws of the Unites States.

Section 5. Member banks shall deliver alt gold coin, gold bullion, and gold certificates owned or received by them (other than as exempted under the provisions of Section 2) to the Federal reserve banks of there respective districts and receive credit or payment thereof.

Section 6. The Secretary of the Treasury, out of the sum made available to the President by Section 501 of the Act of March 9, 1933, will in all proper cases pay the reasonable costs of transportation of gold coin, gold bullion, and gold certificates delivered to a member bank or Federal reserve bank in accordance with Sections 2, 3, or 5 hereof, including the cost of insurance, protection, and such other incidental costs as may be necessary, upon production of satisfactory evidence of such costs. Voucher forms for this purpose may be procured from Federal reserve banks.

Section 7. In cases where the delivery of gold coin, gold bullion, or gold certificates by the owners thereof within the time set forth above will involve extraordinary hardship or difficulty, the Secretary of the Treasury may, in his discretion, extend the time within which such delivery must be made. Applications for such extensions must be made in writing under oath; addressed to the Secretary of the Treasury and filed with a Federal reserve bank. Each applications must state the date to which the extension is desired, the amount and location of the gold coin, gold bullion, and gold certificates in respect of which such application is made and the facts showing extension to be necessary to avoid extraordinary hardship or difficulty.

Section 8. The Secretary of the Treasury is hereby authorized and empowered to issue such further regulations as he may deem necessary to carry the purposes of this order and to issue licenses there under, through such officers or agencies as he may designate, including licenses permitting the Federal reserve banks and member banks of the Federal Reserve System, in return for an equivalent amount of other coin, currency or credit, to deliver, earmark or hold in trust gold coin or bullion to or for persons showing the need for same for any of the purposes specified in paragraphs (a), (c), and (d) of Section 2 of these regulations.

Section 9. Whoever willfully violates any provision of this Executive Order or these regulation or of any rule, regulation or license issued there under may be fined not more than $10,000, or,if a natural person may be imprisoned for not more than ten years or both; and any officer, director, or agent of any corporation who knowingly participates in any such violation may be punished by a like fine, imprisonment, or both.

This order and these regulations may be modified or revoked at any time.

/s/ Franklin D. Roosevelt
President of the United States of America
April 5, 1933

___________________________________________________________________

If your gold or silver is in a "safe deposit box", it isn't safe, and it isn't deposited. It is in a box. Just keep that in mind.

12 posted on 12/14/2010 3:55:22 AM PST by SkyPilot
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To: sickoflibs

Thanks for the ping.


13 posted on 12/14/2010 4:17:34 AM PST by GOPJ (Sharpton wants Limbaugh off the air- if you don't hate liberals yet, you're not paying attention.)
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To: Sun

Sometimes they pay a bit more. Usually a bit less, the markup for government issued coin is quite low in fact. Figure 2 to 3 per cent.


14 posted on 12/14/2010 5:25:20 AM PST by Freedom4US
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To: Sun

The bid on nucleo exchange is $1430 for an eagle coin.

http://www.bulliondirect.com/nucleo/showProducts.do?cat=Gold_Bullion&category=3


15 posted on 12/14/2010 5:56:15 AM PST by FightThePower! (Fight the powers that be!)
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To: SkyPilot

Anything you put in a Safe Deposit Box, Legally BELONGS TO THE STATE, if you don not access the box for more than 1 Year, they will seize it as ABANDONED property and SELL IT. Then you have to make a claim for it, and you are only entitled to the the amount they got for it after they stole it. Not what it is worth when you discovered the THEFT.


16 posted on 12/14/2010 6:15:34 AM PST by eyeamok
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To: sickoflibs

Tim Medley says people only trade their dollars for gold when they’re afraid, and they won’t be afraid much longer.

What? Until the out of control spending is STOPPED I will be very afraid.


17 posted on 12/14/2010 7:02:06 AM PST by 2001convSVT (That Beck guy was right about gold, too.)
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To: sickoflibs
Rick Rule already knows the answer; and it's not just the Fed that's creating money out of nowhere to buy government bonds. "The decision by the European Central Bank to emulate their American peers to print money to buy existent European bonds is tantamount to government counterfeiting," says Rule.

Is this guy stupid?
18 posted on 12/14/2010 8:20:38 AM PST by wafflehouse (RE-ELECT NO ONE !)
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To: Sun
But dealers don’t give $1,400 to buy back the gold. I wonder how much (approximately) they do pay their customers??

have you ever even laid eyes on a gold coin?
19 posted on 12/14/2010 8:23:13 AM PST by wafflehouse (RE-ELECT NO ONE !)
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To: sickoflibs

cool dude...didnt know about this ping list...sign me up...


20 posted on 12/14/2010 8:41:01 AM PST by Gilbo_3 (Gov is not reason; not eloquent; its force.Like fire,a dangerous servant & master. George Washington)
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To: wafflehouse
Operation Bernhard was the codename of a secret Nazi plan devised during the Second World War by the RSHA and the SS to destabilise the British economy by flooding the country with forged Bank of England £5, £10, £20, and £50 notes. It is the largest counterfeiting operation in history and has been fictionalised in books, the BBC comedy-drama miniseries Private Schulz and a 2007 Oscar-winning Austrian film, The Counterfeiters (Die Fälscher).

Who knew the British voters would vote to do this to their own country after the war?

21 posted on 12/14/2010 8:45:03 AM PST by sickoflibs ("It's not the taxes, the redistribution is the federal spending=tax delayed")
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To: Sun
But dealers don’t give $1,400 to buy back the gold. I wonder how much (approximately) they do pay their customers??

Any coin dealer worth their salt will buy back at spot, and sell at spot plus $20-30. That's the way it was in Ohio. Can't find an actual coin dealer here in southeast Tennessee though.

22 posted on 12/14/2010 9:21:53 AM PST by meyer (Hey Obama - It's the end of the world as you know it.... ..... and I feel fine!)
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To: meyer

I guess the spread is more like $50 or so now. I’m thinking from back in the “old” days when gold was cheap!


23 posted on 12/14/2010 9:25:38 AM PST by meyer (Hey Obama - It's the end of the world as you know it.... ..... and I feel fine!)
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To: meyer

“Any coin dealer worth their salt will buy back at spot, and sell at spot plus $20-30.”

That’s good to know.

I think people who buy gold and silver should call the dealer and ask what they are PAYING, so they know who to deal with when they BUY. And that includes Goldline, and all the others we hear advertise on the radio, imo.


24 posted on 12/14/2010 9:13:26 PM PST by Sun (Pray that God sends us good leaders. Please say a prayer now.)
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To: meyer

“I guess the spread is more like $50 or so now. I’m thinking from back in the “old” days when gold was cheap!”

I bought a little silver and gold when it was cheap, but I can’t afford it now, at least not the gold.


25 posted on 12/14/2010 9:15:47 PM PST by Sun (Pray that God sends us good leaders. Please say a prayer now.)
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To: sickoflibs
Who knew the British voters would vote to do this to their own country after the war?

i dont get all the wailing and gnashing of teeth over this. In a fiat money system, one of the reasons for the central bank's existence is to print money, thereby stealing money from the savers. This is the system. It was designed this way on purpose.
26 posted on 12/15/2010 7:30:19 AM PST by wafflehouse (RE-ELECT NO ONE !)
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To: wafflehouse
RE :”i dont get all the wailing and gnashing of teeth over this. In a fiat money system, one of the reasons for the central bank's existence is to print money, thereby stealing money from the savers. This is the system. It was designed this way on purpose.

I agree with your premise. For the ‘good’ of society as a whole they steal from savers to give to borrowers, or in some cases just give away to consumers (ie voters) ‘create jobs’ (ie keep the voters happy)

The problem becomes when it results in nuking the economy.

27 posted on 12/15/2010 7:59:00 AM PST by sickoflibs ("It's not the taxes, the redistribution is the federal spending=tax delayed")
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To: meyer
Any coin dealer worth their salt will buy back at spot, and sell at spot plus $20-30. That's the way it was in Ohio. Can't find an actual coin dealer here in southeast Tennessee though.

my dealer's current buy prices

28 posted on 12/15/2010 8:13:09 AM PST by TheRightGuy (I want MY BAILOUT ... a billion or two should do!)
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To: TheRightGuy

Looks like about $45 difference between buy and sell. That falls in line with what I’m seeing today. My earlier post was relating to prices back when gold was in the $300-350 range. I haven’t been buying or selling lately.


29 posted on 12/15/2010 2:26:30 PM PST by meyer (Hey Obama - It's the end of the world as you know it.... ..... and I feel fine!)
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To: sickoflibs
The problem becomes when it results in nuking the economy.

This is also part of the system. As a politician it is always easier to print money than to take the 'credit' for a contraction in the economy.
Their JOB depends on them printing money.
30 posted on 12/16/2010 8:23:04 AM PST by wafflehouse (RE-ELECT NO ONE !)
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To: wafflehouse

sorry, i should have said ‘phoney-bologna job’


31 posted on 12/16/2010 8:24:28 AM PST by wafflehouse (RE-ELECT NO ONE !)
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To: wafflehouse; ding_dong_daddy_from_dumas; stephenjohnbanker; DoughtyOne; calcowgirl; Gilbo_3; ...
RE :”The problem becomes when it results in nuking the economy. This is also part of the system. As a politician it is always easier to print money than to take the ‘credit’ for a contraction in the economy. Their JOB depends on them printing money.

Considering the overwhelmingly positive public opinion poll reception of that Obama/RINO tax/spending compromise that puts the US in another trillion dollars of debt and may even lower our national credit rating, I would say they were hired to devalue our currency and bankrupt the country. Christmas presents for everyone.

32 posted on 12/16/2010 12:08:59 PM PST by sickoflibs ("It's not the taxes, the redistribution is the federal spending=tax delayed")
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To: sickoflibs
Considering the overwhelmingly positive public opinion poll reception of that Obama/RINO tax/spending compromise that puts the US in another trillion dollars of debt and may even lower our national credit rating, I would say they were hired to devalue our currency and bankrupt the country. Christmas presents for everyone.

And what would the opinion polls look like had there been NO unemployment extentions or bailouts? Are you one of those folks that think the 'recovery' is moving right along and life will be back to roaring economic growth any time now? Because if you are, then theres no point in arguing with you. We are in a bad situation now, and (by doing the wrong thing) they will make it last much longer than it should (taking the minimum amount of public discontent), whereas if we had gone the route of iceland when the crash hit, we would have had massive pain for a while (and likely lynched politicians and bankers alike) but we would be back on the road to real recovery at this point.
33 posted on 12/17/2010 10:36:50 AM PST by wafflehouse (RE-ELECT NO ONE !)
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To: wafflehouse
RE :”And what would the opinion polls look like had there been NO unemployment extensions or bailouts? Are you one of those folks that think the ‘recovery’ is moving right along and life will be back to roaring economic growth any time now? Because if you are, then there's no point in arguing with you. We are in a bad situation now, and (by doing the wrong thing) they will make it last much longer than it should (taking the minimum amount of public discontent), whereas if we had gone the route of iceland when the crash hit, we would have had massive pain for a while (and likely lynched politicians and bankers alike) but we would be back on the road to real recovery at this point.

I cant tell if we agree or disagree from that. I think that stimulus packages like this one (and the first two) prolong the recession indefinitely by trying ease the short term pain. I don't see how those particular tax measures, especially Obama payroll tax cuts, do any good except but buy votes. You can make a case that raising taxes is bad in a recession but to continue to add more and more spending at the same time ensures no long term recovery but maybe inflation. This payroll tax cut is very welfare like as it goes to those that pay no income taxes and puts those on SS even more on the public dole, as with those on food stamps.

It's obviously popular, everyone got something except those that must live in the future, Peter Schiff put it perfectly when he predicted the stimulus's failure and when he predicted the crash:”We are selling our cows to buy milk.

The polls will take us to hell.

34 posted on 12/17/2010 12:20:59 PM PST by sickoflibs ("It's not the taxes, the redistribution is the federal spending=tax delayed")
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