Hard Assets vs. Liquid Assets
Gold & Silver Coins are hard assets,
and liquid assets at the same time.
A democracy cannot exist as a permanent form of government.
It can only exist until the voters discover that they can vote themselves money from the
public treasure. From that moment on, the majority always votes for the candidates promising
the most money from the public treasury, with the result that a democracy always collapses
over loose fiscal policy followed by a dictatorship. The average age of the world's
great civilizations has been two hundred years. These nations have progressed through
the following sequence: from bondage to spiritual faith, from spiritual faith to great courage,
from courage to liberty, from liberty to abundance, from abundance to selfishness,
from selfishness to complacency from complacency to apathy, from apathy to dependency,
from dependency back to bondage."
Alexander Fraser Tyler, Cycle Of Democracy (1770)
No, he wasn't writing about the United States.
This quote is from BEFORE the US Declaration of Independence.
Tyler was writing about the fall of the Athenian Republic.
1910 $20 St. Gaudens Gold Coin.
Here is a nice example of a what some consider the most beautiful of the U.S. Gold Coins.
President Theodore Roosevelt was bothered by the unattractive design of most of our coinage.
He commisioned Augustus St. Gaudens to design a really beautiful coin, and we see this design
some of what is produced even today!
Gold was once over $850/oz. A few years ago, it was at $250/oz. Presently, it is over $1600/oz.
The bottom of a 20-year decline in gold occurred in July 1999 at $250, and a new gold bull market was confirmed in March 2001 at $255.
On April 15th (interestingly, our tax day), NM Rothschild announced its withdrawal from the London Gold Pool, which has "fixed" the price of gold twice a day since that organization created the gold pool in 1919. Many of us are puzzled and are asking WHY? The conclusion drawn by one wag was that: "Gold is on its way out as an investment and a reserve asset. Three cheers for that."
Not part of article... ( WAG = WILD A$$ GUE$$)
I've been personally involved in gold for over 44 years and I don't think, "gold is on its way out…" - quite the opposite! I'm convinced that there is something both imminent and eminent relative to gold - thus this article that contains information I've not seen on "gold-eagle."
The official justification for the Rothschild withdrawal was that: "Our income from commodities trading in London, including gold, has fallen as a percentage of our total income in each of the past five years. Following a strategic review of our activities we have concluded that this is no longer a core area of activity and have, therefore, decided to withdraw from the market." As Mr. Warren Pollock of "The Macroeconomic Newsletter," in an article titled, Something Significant at Rothschild, commented, "…we should consider that the cover story Rothschild provided regarding profitability concerns are absurd." Well, if the announcement is "absurd," what is (are) the real reason(s)? Obviously, we can only speculate - hopefully intelligently.
It's been over two weeks since these items appeared and I've been thinking about them ever since. Yes, I know I'm a little slow and several other articles have appeared since, but none that I've seen cover several items that I consider extremely important. I don't pretend to be able to comprehend everything I read, so I called long time friend Frank (rehabilitated graduate from the school of organized crime for gentlemen - namely fractional reserve banking) to get his slant on these extremely important items. Since Frank's been following gold nearly as long as I have, he's also qualified to make an educated analysis of the matter. The following is an amalgamation of our thoughts.
First, there have been numerous "guesses" regarding WHY Rothschild's has withdrawn from the London Gold Pool. They range from the potential of significant derivatives market problems, to the unfounded perception that Central Bankers don't believe that gold has a function in the world's finances anymore, to the probability of problems in the Central Banks deceptive gold leasing program, to potential lack of liquidity between Central Banks, to Rothschild intelligence that it would have among their extensive banking connections concerning geopolitical threats that may include a more extensive Middle East war, and on and on.
Friend, Jason Hommel stated in his April 30th newsletter: "In the press release, it says the Rothschild's are getting 'out of the gold business.' People will assume they are thus selling gold. This is probably exactly the opposite assumption one should make, just as everyone made the wrong assumptions about what Nathan Rothschild was doing after the battle of Waterloo, namely a pretense of selling British consols (the T-bonds of their day), just prior to the announcement of the British victory at Waterloo hit the London Stock Exchange (see: google.com article, "rothschild waterloo napoleon"). Reading a bit closer, you can see that the Rothschild's are getting out of the gold leasing business." www.goldismoney.com/ssr/SS32.html
But, we can be certain that whatever the reason(s), it must have been of major significance, not some blather about falling income! You don't create, oversee and virtually control the world price of gold for 85 years and then just withdraw because it was "the sound thing to do," according to Baron David de Rothschild.
Our guess is that there is something very significant about to occur in the international gold market that is going to cause major disruptions of global importance, in which the Rothschild's don't wish to be involved. When? Your guess is as good as ours, but the following comments may hold a timing clue.
On January 23rd of last year, Jim Sinclair wrote an extensive and insightful paper for his email readers. The title was "Gold to be Remonitized: First by the 'Malaysian Dinar' in June of 2003 followed by the 'US Dollar' in June of 2004. The Gold Price Will Continue to Float." At that time, I'm quite certain that Mr. Sinclair had no inkling that NM Rothschild would ever bow out of the London Gold Pool, which it founded. Frank and I are convinced that there's a connection between what Mr. Sinclair wrote 16 months ago and the Rothschild's action - but what could it be?
Brief excerpts of Mr. Sinclair's email are quoted here for your consideration.
Early in his 6½-page article, Mr. Sinclair indirectly inferred the number one economic rule: everything is political. He pointed out that, "June 2004 is when the Bush re-election campaign will make its push for the November elections…You must see the 18-month (at that time, January 2003 to June 2004) time line that the economic stimulation tax plan has for those that will fund the 2004 Bush Campaign." Was the Rothschild withdrawal done in anticipation of something really significant to occur between June and November of this year? We think so.
This article gives some insight as to how this may happen, namely, an international accord to stabilize the paper currencies of the world.
But, to continue with the salient points in Mr. Sinclair's article, a lengthy quote is necessary: "Gold will not be set in price as there is no way anything monetary can be fixed at this time...It is enough that we know what is planned and how it will occur. I disagree entirely with the author (a Mr. Murenbeeld) of the National Post article on the basis of Chairman Greenspan and Governor Bernanke's statements that the goal for gold is $350 and it will be fixed at that price. That simply will not and cannot happen in today's floating exchange world.
"The (National Post) article did not approach the means by which gold would re-enter the system but only said it would. Convertibility is out of the question in light of the profuse use of dollars as the primary international settlement mechanism. (Frank points out that the majority of dollars are "computer blips" for which the Fed has zero responsibility.) Gold is headed back into the system by a modernized and revitalized Federal Reserve Gold Certificate Ratio tied to the expansion of M3 (the broad monetary aggregate figure). The value of Treasury gold (if there is any) on the day of enactment will be considered to be that value which is required to have (for) that size M3. From that point forward, more gold, (and) or a higher price for gold will be required in order to expand the broad based monetary aggregate (M3) beyond a modest percentage. The Treasury could simply benefit from a higher price or could buy gold in the open market to effect a higher price (does such an increase in our central bank buying of gold lead you to believe that the gold price would go down?) should the need arise to expand beyond the present level in M3, beyond a predetermined expansion of (say) 3% per year." (highlighting and underlining added)
Upon reading these two paragraphs 16 months ago, friend Frank said, "Very interesting! If the open market price of gold 18 months hence will be the criteria, look for our M3 to be greatly expanded between now and then." Since then, M3 has risen from $8.5 to nearly $9 trillion, or about 6%. This would be much more dynamic if it weren't for the numerous deflationary factors such as bankruptcies and business failures of the past year.
If Mr. Sinclair is correct, and the new Federal Reserve Gold Certificate Ratio is to be introduced in an effort to stabilize the dollar and government bond market and get President Bush reelected, here are some figures to consider. The euro currency has risen (because it's inversely related to the US$) from a low of a bit over 80 to a recent high of about 127, and is currently about 119 due to the recent rally in the US$. One of the primary reasons for this rise in the euro is that it's backed by 15% in gold (WHY, if it has no monetary value?). At $390 spot gold, the US$ has approximately a 13% gold ratio to currency-in-circulation. Problem: as gold rises in price, the euro will exceed that 15% ratio and the US will need to either increase its holdings of gold or reduce the currency in international circulation (not likely). Solution: block US domestic currency, removing it from the equation thus rendering it valueless outside the US; as history shows other nations have done from time to time (likely). Result: 1. domestic inflation, as the domestic gold price goes ballistic in terms of the domestic currency (almost a given), and 2. US living standard plummets! (almost certain)
If the same ratios are applied to the M3 money supply, there are two probable scenarios: 1. with M3 divided by the (supposed) US gold holdings of 260,000,000 ounces, this would equate to a per ounce gold price of approximately $34,600. If a 15% "Gold Cover Clause" were to apply (ala the euro percentage), the gold price would equate to approximately $5,190, and 2. currency-in-circulation if divided by the 260,000,000 ounces of gold that is supposed to be in the US Treasury assets, gold would compute to a per ounce price of approximately $2,600. All other aspects of the money supply are simply "computer blip money," fiction, made possible by the fractional reserve banking system. M3 is approximately 13 times the currency-in-circulation, the majority of which is held in foreign hands.
It seems likely that some combination of 1) and 2) will be required to give meaning and credibility to a new gold cover index; the Fed lacking sufficient control of M3, even with their control of the short term interest rates.
WHY? Obviously, the point of this article is an attempt to tie the Rothschild's announcement and the Sinclair article in with the present action in the precious metals markets. If friend Frank and I are correct, there is an excellent likelihood of a major increase in the price of gold when the dust settles. But, whether this scenario is correct or not, we can certainly rest assured that there is some connection between the Rothschild withdrawal from the London Gold Pool that they created, and the perilous gold derivatives market. It's my opinion that they are expecting counter-party derivatives failures in the gold market (and probably silver) in the very near future, and they don't wish to be a victim of the ensuing pandemonium.
If (since?) there will be a gold clause tied to the paper currencies of the world, it will mean that either: 1. the world-wide money supplies will be kept stagnant -- not a chance!, 2. the price of gold will increase -- VERY likely (in conjunction with the increase in the money supply of the respective countries), and/or 3. some, if not all, central banks will need to increase their holdings of gold (to meet or maintain the currency/gold ratio, at whatever level it may be set) - which will obviously put upward pressure on the price of gold -- ultimately. For those of us who hold gold (especially coins), this would be GOOD news! However, it may very well mean that one of my fears for several years now, will come true -- nationalization of the gold mining industry, because our government will need every ounce of gold they can acquire (paid for with paper), by whatever means!
Also, keep in mind that every Central Bank in the world, but especially OPEC, Europe, China & Japan would welcome such a gold-backed program for world currencies with open arms!
The recent collapse of the gold and silver prices couldn't have been better "timed," if Sinclair's pre-election scenario is accurate. Gold dropped from it's interday high of about $440 to an interday low of about $380, and silver from it's high of about $8.50 to $5.63. Now that speculators and weak holders have been washed out of these metals (especially silver), we can have a period sideways movement (accumulation time for the "big-boys"), and then the real reason for the Rothschild's withdrawal from the London Gold Pool can become apparent, where there may be a short position slaughter of illiquid counter-parties.
Is it just possible that, after several generations (since Meyer Amschel Rothschild began his financial enterprises in 1770 - see The Rise of the House of Rothschild by Count Egon Caesar Corti, Western Islands, 1972) of creating the "leading edge" of the financial world, the Rothschild's are anticipating (or perhaps causing?) some financial maneuvering in the monetary world that will cause a dynamic gold market - and they don't wish to be selling anymore to anyone (including Central Banks), in the meantime? Perhaps they need this present time frame in which to buy more, and were precluded from doing so by being members of the London Gold Pool. We'll probably never be privy to the exact answer to such questions, but the next few weeks or months might prove to be very exciting to those of us who are prescient enough to add to our gold assets during this "quiet before the storm."
Frank and I firmly believe that we are presently in the "eye" of a financial hurricane, and since the backside is always the more destructive, it seems that the worst is yet to come. I trust that you have enough physical gold "insurance" to weather the turbulence ahead.
To date, we've been correct in anticipating a rising gold price as the dollar falls. Under a Gold Cover Clause we could expect a rising gold price concurrent with a stable dollar -- not guaranteed, but reasonable.
And not insignificantly, the US$ index had dropped from it's 2002 high of about 124 to a recent low of 85, and is currently about 91 with major resistance at 92. To stop the downward spiral of the US$, something must be done to stabilize it and regain some semblance of long-term faith in that paper asset, or it could trigger a collapse of all paper currencies. A "Sincliar" described "Gold Cover Clause" would fill the bill -- to say nothing of stabilizing all currencies, especially of gold-holding nations. In addition it would reduce animosity between trading nations and buy some urgently needed time for a world currently toying with a systemic fiat-money credit collapse. Should it ever happen, life would become too ugly to write about.
Are we approaching a crisis in the financial world? It would seem that we are, based upon the foregoing items. Should we panic? I believe it would be more appropriate to remember the meaning of the Chinese word for crisis, which is composed of two characters: one represents "danger," and the other represents "opportunity." I see the current dip in the precious metals prices as just that - an opportunity. I sincerely trust that you have enough gold to weather the extremely interesting turbulence just ahead.
I leave you with a recent comment by renowned author of The Dow Theory Letter, Richard Russell, who said this about the recent dip in the gold price: "Personally, I'm going to hold my gold. Holding the metal doesn't worry me. I still have gold that I've carried from the '70s. Gold is the only real money. I don't care, inflation, deflation, boom or bust -- gold is money, and I can't say that about any paper currency. I'm holding all my gold. In the long run, I believe both gold and gold shares will win. But a lot can happen between now and "the long run." Personally, I've decided that I'm going to sit with my gold-share position. But if I do anything additional in the gold area, it will be to buy more coins."
This article is not copyrighted. Feel free to send a copy to anyone about whom you are concerned.
Thank you for your interest!