An article on the emergence of new trading and commerce platforms in the Orient and middle east: http://www.silverdoctors.com/jim-willie-the-coming-isolation-of-usdollar/
According to reports on Chinese imports of gold from Hong Kong, the People’s Republic is on track to import more gold bullion in 2012 than the entire official holdings of the ECB. What does it mean for us, fellow taxpayer? Our guest contributor Brad Evans, who is writing on behalf of BullionVault, explores this economic trend and possible implications for your portfolio in the following insightful editorial. Enjoy and stay fresh!
Should You Accumulate Gold Like China?
In recent years, much has been written and speculated about the idea of Chinese authorities buying up massive amounts of gold bullion. Indeed, the amount of gold going to China has increased notably over the course of the past few years, and it certainly seems as if the country is making a concerted effort to accumulate a great deal of the precious metal resource. Is this just a passing trend, representative of independent economic movements, or a greater strategy with implications for the worldwide economy? Ultimately that remains to be seen, but one result of China’s accumulation of gold bullion is clear.
With many of the world’s dominant economies located in the United States and the Euro zone, the U.S. and countries that use the Euro generally prefer to keep the cost of gold low, if possible, so as to avoid the strengthening of the resource against their respective currencies. As things stand now, and have for some time, the U.S. dollar and the Euro are generally seen as popular reserve currencies, meaning that people in other economic zones frequently turn to the U.S. dollar and the Euro as the ultimate safe haven. As long as the price of gold remains relatively low, the dollar and Euro remain strong as reserve currencies. Therefore, it is plain to see why China buying up massive amounts of gold bullion may lead to an unwanted shift in gold prices that could take the focus away from the reserve currency status that U.S. dollar and Euro enjoy.
Perhaps more important for many people is how this economic strategy of China’s could affect your finances. World economic trends will come and go, and economies will strengthen and weaken accordingly – but can you benefit from buying up gold bullion in your personal life, on a smaller scale, in the same way that China hopes to benefit in the long run internationally? While you certainly can’t hope to influence any worldwide economic trends on your own – accumulating gold bullion may not be a bad strategy to consider if you feel that the price of gold will be rising relative to other assets in the coming years.
Buying gold bullion is simple enough. You just need to head to a precious metal trading site such a s BullionVault, where you can buy and sell gold as you please according to constantly updated world prices. These sites also offer you various convenient and secure storage options, meaning that if you want to you can easily accumulate a great deal of gold bullion. However, before making this or any investment decision it is important to formulate a sound investment strategy. For example, if you are looking for short-term stability or gains, gold investment may be risky at the moment, as the dollar is strengthening and gold may be weakening. But for long-term gains, this may be a strategy worth considering.
This has been a guest post on behalf of BullionVault, written by freelancer Brad Evans.
1/31/2012 Portland, Oregon – Pop in your mints…
Free money also renders null and void any arguments as to what constitutes good or bad money, for this determination will be made on a daily basis by producers and consumers rather than a monetary authority who is acting on mere theory with severely limited data.
Absent the government declaration of what is money and how much said “money” is worth, there is no longer bad money driving out good money, as Gresham’s Law so perceptively observes. What remains, then, as the ultimate determinant of what is money and how much it is worth are the two parties to a transaction, who are generally in the best position to determine such matters.
“But this would destroy exchange as we know it!” comes the cry from apologists of legal tender laws. “No one will know what anything is worth, let alone how to pay for it!”
On the contrary, the free operation of the money supply would, by necessity, cause everyone engaging in exchange to be acutely aware of both what constitutes money and how much it is worth. It is legal tender laws which serve to pull the wool over everyone’s eyes as to the true value of money.
When seen through a different lens, that of the free operation of the money supply, the absurdity of legal tender laws becomes clear. Commodity (free) money is unhindered by the artificial restraint of existing debts and is constrained only by the productive will of society. Commodity (free) money is free to accurately reflect the price of goods and services in light of the perceived supply and productive capacity of both goods being exchanged, that being offered in exchange and that offered in payment as money.
Money, as most people instinctively understand it, is simply an ordinary good whose utility and value are greatly enhanced by its wide acceptance in trade. If one strives to remove the “cost” of producing money, as Adam Smith so nobly aspired to do, it is clear that the best way to do this is to allow the good which is acting as money to be produced in the most efficient way by the greatest number of artisans as are necessary to fulfill the present demand for money.
But how would all of these artisans, blindly creating all of this commodity money, know when to stop producing were it not for legal tender laws?
Here, there is no risk of oversimplifying the answer, for the answer is painfully simple. As persons competing in the free market who have chosen to produce money, they are likely to be the first to know when there is too much money in circulation, for their orders for new money will uncannily drop when the economy has enough money to function efficiently.
Further, any commodity that is only marginally used in the production of money will quickly and smoothly have its supply directed to other, more efficient uses as the incentive (realized margin) to use it as money is incrementally reduced as supply begins to overtake demand. Each producer is therefore free to choose his or her exit point.
Take the case of copper. If copper becomes monetized by the free will of the participants in the economy, it stands to reason that it could be demonetized by the same free market operation. Should economic activity slow to the point where the pace of saving and exchange no longer calls for copper to assume a role as money, as copper is demonetized those holding copper will find it more efficient to melt the copper that they have in monetary form and sell it as a consumer good.
The process of demonetization is simply a matter or free choice when something occurring in nature is used as money. It first moves to the fringes of use as money, as a Jeton or modern day casino chip is used in place of money. In time, the material will be demonetized completely.
Debt, when used as money, enjoys no such elasticity. By necessity, when debt is forced into a role as money, it causes an unnatural proliferation of credit, so that when the inverse of Gresham’s law begins to operate (good credits push bad credits out of circulation) the unnatural restriction on the money supply assures that even the best of credits will go bad, and the money supply along with them.
When debt is demonetized, usually by force, the result is more often than not a severe hyperinflation followed by war.
Legal tender laws, such as the modern laws which declare that debt is money, are futile at best and generally destructive. They do, however, permit a small group to reap the monetary margin that the artificial monopoly on money creation allows them for at time.
Accepting that an inanimate object is no longer worth what one thought it was can be disappointing, but at least one still has said inanimate object. In the case of debt, accepting that someone cannot deliver what they promised tends to create feelings of resentment and remorse which, depending upon the size of the failure, can lead to violence.
Soon, the world will learn that using debt as money is a dangerous violation of the very laws of nature. As with any violation of natural law, the consequences may be withheld for a time, but they are never avoided. The longer they are artificially withheld, the more swiftly and severely the consequences will be meted out when they can no longer be repressed.
For no man, or group of men, regardless of their number, clairvoyance, or special powers they profess to have, can suspend or accelerate the operation of natural law. The Creator alone reserves that power for himself.
There is a perfect balance in God’s creation. Yin and yang, male and female, mercy and justice, heat cold, money and debt. Calling one extreme the by the name of other is futile and leads only to confusion and destruction.
It is only a matter of time.
Stay tuned and Trust Jesus.
Key Indicators for January 31, 2012
Gold Price Per Ounce: $1,737 PERMANENT UNCERTAINTY
1/23/2012 Portland, Oregon – Pop in your mints…
Natural law is always operating, always demanding a balance of accounts in the real world, not simply on an accountant’s ledger or numbers on a bank statement.
It is then foolishness for anyone to assume that a central authority, no matter how clairvoyant, can properly estimate the money supply necessary for human economic activity to continue at the optimal rate, balancing both the quantity of debt and money to provide for both the present and future using all of the information which is collectively available.
It is for this reason that it is imperative that people be free to declare both what will serve as money as well as its value in exchange. History has shown that, if people chose gold or anything natural as money, economic activity and the resulting benefits to society will accumulate so rapidly that the supply of gold will quickly act as a constraint. If gold is money by decree, this becomes a problem.
However, if gold has simply been chosen for use as money by the majority, the same majority will quickly and tacitly gravitate to a secondary natural source of money with which to augment the primary natural money supply. Historically, this secondary source of money has been silver.
Once economic activity further accelerates and the benefits continue to accrue to a larger portion of the population, the supply of silver will act as a restraint. Again, if left to their own devices, the majority will quickly and tacitly adopt another item occurring in nature to be used as money. Historically, this third source has been copper.
Yet even the supply of copper, abundant as it may be, will eventually serve as a restraint, and so on, and so forth. Eventually, in this example of what we like to call “Free Money,” gold will tend to operate as a form of savings and settlement only in the largest of transactions, with silver serving as money at an intermediate level while copper would be the most widely circulated currency for smaller transactions.
The beauty of free money is that, should the supply of copper become a constraint, steel, nickel, or some other more abundant natural resource will take the place of copper for use in smaller transactions, and so on, so that the money supply, in a general sense, will always be perfectly suited for the rate of economic activity which is occurring.
It is important to note that, while history has shown a preference for metals to be used as money, in the free money (and by extension, free banking) theory there is no requirement that what be adopted as money be metal. In fact, money can be anything that those participating in exchange bilaterally accept as payment for goods and settlement of debts. As you will recall, the only thing that money should not be, by definition, is debt.
While it is obvious that debt can be exchanged in the place of money for a time, as the past 100 years have shown us, common sense, logic, and natural law will demand that the debts which circulate be settled in real terms. The creation of debt as money severely distorts economic reality and the more debt that is created, the greater the demanded settlement in real terms will be, regardless of how many times one chants the Keynesian mantra recently made famous again by former Vice President of the US Dick Cheney “Deficits don’t matter.”
The superiority of free money is that the money supply is free to adapt to the rapidly economic activity, which is nothing more than an expression of the changing wants and needs of consumers. The money supply is not hindered by unnatural constraints which have nothing to do with economic reality and are imposed by what is at best an uninformed or disinterested and at worst a malicious monetary authority.
The current debt as money system, far from providing a perfectly elastic money supply, has created the economic equivalent of concrete, which is now hardening the economy instead of providing it with the much needed lubrication. If this insanity carries on much longer, society will be shattered as economic reality takes a jackhammer to it.
Stay tuned and Trust Jesus.
Key Indicators for January 23, 2012
Gold Price Per Ounce: $1,677 PERMANENT UNCERTAINTY
1/19/2012 Portland, Oregon – Pop in your mints…
As the world descended further into depression which eventually led it into the Second World War (Editor’s Note: It should come as no surprise that the only two World Wars have come after the declaration that debt is money), The Keynesian adherents clamored for more debt as the only answer to the world’s economic ills.
What Keynes and his Harvard trained legions fail to comprehend is that the only permanent cure for an economic depression is to allow each individual to declare what he or she will use as money and allow market participants to coalesce around what at that time is best suited for the role of money. For balance sheet recessions, such as the one the world is currently experimenting, are merely symptoms of a rigid money supply which has failed to keep up with the demands of a dynamic economy.
Under current theory, the government sacrifices the dynamic economy in the name of preserving the “integrity” of the monetary system.
When it is quite obvious that it is the monetary system that has failed, the government’s response can only be seen as idiotic at best.
What makes the situation of the past 100 years even more untenable is that money, instead of operating as a lubricant for economic activity, is more like concrete. Such is the inherently destructive nature of debt as money.
For the only rule with regards to money which is imposed as a matter of natural law is that debt cannot ever be money. It is a concept so clear that it escapes most academics and government officials.
Now, the Keynesian indoctrinated readers of these words are no doubt dusting off the “silver bullet” of Keynesian theory: That gold, which is widely held as the logical alternative to the “debt is money” insanity, is a “barbarous relic.” In layman’s terms, Keynesian theory holds that any attempt to limit the money supply via natural means, the most popular being a gold standard (fixing the price of gold in terms of monetary units) will cause a deflationary spiral which will bankrupt the entire world.
Even Adam Smith argued that the mining of metals for use as currency was essentially a lamentable waste of resources.
We could not agree with them more. The limited amounts of gold in the world make it wholly unfit for everyday exchange. Gold, rather, is generally agreed upon to be the most perfect savings vehicle that the world has yet discovered.
So Keynes, despite promoting a theory which sacrifices the yang (savings) and glorifies the yin (debt) is right after all? Not quite…
Using the same logic with which the Keynesian so adeptly slays the gold standard, it quickly becomes obvious that by declaring that debt is money is not only a violation of natural law, it makes debt, rather than gold, the new barbarous relic.
Debt has a distinct disadvantage to gold in that it can be quickly and completely destroyed. Once it is assumed by the majority that a certain debtor will not be able to make good on their debts, the debts owed by the debtor, and any money in circulation which is either directly or indirectly related to the existence of these debts, is destroyed. For debt, at its base level, is a figment of the imagination until it is settled in real terms by the delivery of money in settlement of the debt.
It would hold, then, that debt, the new “barbarous relic,” is exponentially more dangerous than gold when used as money. The reasoning is the following, while the quantity of debt in the world can be suddenly and permanently reduced, the quantity of gold, which is admittedly difficult to increase, is at the same time extremely difficult to decrease.
Yet even given the strong advantage of gold over debt as money, it is obvious that both the Keynesians and the gold bugs are sadly mistaken in formulating their ultimate solution to the eternal problem of the money supply.
When it comes to determining the proper money supply, Adam Smith’s invisible hand of the market can be seen slapping both Keynesians and gold bugs silly!
For the problem with declaring anything, be it gold, debt, or white elephants as money, has nothing to do with the fitness of gold, debt, or white elephants for use as money, rather, it lies in the act of the minority attempting to dictate what will be used as money by the majority.
Money, in a general sense, is a good of the highest order. There is nothing in nature which states that gold, silver, seashells, or anything else must be used as money. The historical association of gold and silver as money is the result of their superior fitness for the role of money. It is simply a product of the collective wisdom of mankind, gleaned from experience as free exchange and the division of labor began to bring order to man’s chaotic surroundings.
However, just because gold and silver were superior in their role as money in the past does not necessarily mean that they enjoy some sort of divine designation as money.
Gold and Silver, like all things occurring in nature, are in limited supply. The fact that they occur in nature gives them a distinct advantage over debt (which is simply a promise to pay in the future) in that debt, which is theoretically in infinite supply, quickly loses value against scarce real goods due to the fact that debt, in theory, enjoys an infinite supply.
Anyone can make promises to pay in the future, it is the function of debt markets to determine what those promises are worth today. Ironically, the value of debt today is perilously tied to speculations about the money supply, which is in turn dependent upon the issuance of debt. Thus, declaring debt as money provides the economy with yet another hindrance in that the debt markets are increasingly disconnected from their noble origins; the debtor’s perceived productive capacity.
It is clear that mankind is in a perilous predicament. Will we take hold of the simple answer, which lies in free banking and free determination of what will serve as money?
More to come…
Stay tuned and Trust Jesus.
Key Indicators for January 19, 2012
Gold Price Per Ounce: $1,657 PERMANENT UNCERTAINTY
1/17/2012 Portland, Oregon – Pop in your mints…
It is turning out to be an unusually dry winter here in Portland. It is a refreshing break from the usual incessant pounding of rain which blesses this part of the world between November and May each year. Perhaps we are just now getting back the lost months of June and July of 2011, as nature has a way of evening things out over time.
We have observed that there is a perfect balance in God’s creation. Some call it a yin and yang, male and female, mercy and justice, freedom and slavery, heat and cold. For every extreme, there is a force which, given enough time, will work to counteract the excesses wrought by the seemingly uninhibited operation of its polar opposite.
It should come as no surprise, then, that in the economic sphere, debt and money fall into the same category of opposing natural forces.
Yes, debt and money are two completely different forces. One takes from the future to provide for the present, the other takes from the past towards the same end.
Simple, right? Male, female, Yin, Yang, case closed.
Yet circa 2012, for some odd reason, there seems to be an abundance of debt and a dearth of money in the world. The world as we know it is perilously out of balance.
How can this be? Why are things so far out of balance? In the interest of time, we will sum up what is otherwise a long and painful explanation in the following way. Roughly 100 years ago, by decree of the financial authorities, debt was declared to be money.
Ever since then, man has lived in a state of economic confusion. On one hand, He has seen an unprecedented level of technological advances and a resulting rise in his standard of living. On the other hand, on net, he, or someone acting in his name, has borrowed an unprecedented amount of money from the future in order to achieve these advances and consequent rise in his living standards.
How is this possible? Didn’t simply declaring debt is money relieve man of having to save? After all, if everyone simply assents to accepting promises to pay in the future for goods or services delivered or performed today, haven’t we trumped the need for savings, the Yang, as it were?
More to the point, have the laws of nature with regards to money been permanently altered?
If only it were so. Unfortunately, the longer man labors under the false assumption that debt is money, the greater the pain which will be incurred by mankind as nature unilaterally brings the earth into balance.
More to come…
Stay tuned and Trust Jesus.
Key Indicators for January 17, 2012
Gold Price Per Ounce: $1,653 PERMANENT UNCERTAINTY
11/22/2011 Portland, Oregon – Pop in your mints…
After a brief break in our faithful correspondence, we are compelled to pick up the proverbial pen to complete an incomplete thought in a vain attempt to eat Thanksgiving dinner in peace. If you are a new reader of The Mint, we will simply relate that the Mint is the product of a deep felt agitation by its author. It is what could be referred to as therapy. The thoughts, once on paper, leave us in peace. Until then, they stir, deep in our spirit, waiting to escape via these words.
How very fortunate and long suffering you are, fellow taxpayer.
Before we continue our mantra of Anarchy, True Capitalism, Natural Law, and Might Makes Right, we will share a few important observations.
First, the MF Global implosion is now reported to have left a $1.7 Billion hole in the capital base of a highly leveraged commodity and derivatives market. MF Global was a primary dealer, one that had the unconditional trust of the exchange and other secondary commodity dealers. It was a silent pillar of these markets. The aftermath of their implosion, both in loss of capital and confidence, has only begun to unfold. Commodity markets are no longer “safe” by normal standards. This situation is best watched by your money at a distance.
Second, while Europe implodes, the US has been spending most of its time firming its position in Asia. There has been speculation that the US is moving to aggressively devalue the dollar vis-à-vis the Yuan. Will it be the 10:1 reverse split that we have speculated about here? No one knows, but it would appear that the US Dollar will not serve as a reliable store of wealth in the short term. Silver and Gold come to mind as viable substitutes as this drama plays out.
Finally, It appears that the Occupy protesters are now wising up and using tactics which we call the Bolivian tactic, that of blocking major thoroughfares. It is much more effective, not to mention exciting, than urban camping. As a practical matter, if your livelihood in any way relies on a major thoroughfare being open in an area where the protests are growing, we suggest that short term contingency plans be considered.
These events and any pain they cause should be short term, maybe three to four months of adjustments, if they are allowed to simply run their course. If the Government continues to intervene, they will plague us indefinitely. We pray for the former and prepare for the later.
With that off our chest, we continue pondering life as we know it. Our question today is: Why does it seem that the worst morals seem to come out on top? First, a glance at Isaiah:
“ And I will make boys their princes, and infants shall rule over them. And the people will oppress one another, every one his fellow and every one his neighbor; the youth will be insolent to the elder, and the despised to the honorable,” Isaiah 3:4-5
Have you ever complained about a politician? The government? How about your boss? The current state of society? If you haven’t, you are indeed a rarity in this day in age, for there is much complaining, and seemingly much to complain about.
How did we arrive at this, fellow taxpayer? If democracy is supposed to deliver the cream of the crop in terms of leadership in the government, why does it seem that most politicians are the epitome of immoral liars?
This question was thrust upon us as we were reading the “Is there no shame” rant at zerohedge.com and came across the words “Hayek’s theory that the worst always rise to the top.” We then perused Hayek’s theory in an excerpt from the “Road to Serfdom.”
In the section entitled “Why the Worst Get to the Top,” Hayek states that:
“There are strong reasons for believing that the worst features of the totalitarian systems are phenomena which totalitarianism is certain sooner or later to produce.
Just as the democratic statesman who sets out to plan economic life will soon be confronted with the alternative of either assuming dictatorial powers or abandoning his plans, so the totalitarian leader would soon have to choose between disregard of ordinary morals and failure. It is for this reason that the unscrupulous are likely to be more successful in a society tending toward totalitarianism. Who does not see this has not yet grasped the full width of the gulf which separates totalitarianism from the essentially individualist Western civilization.”
Suddenly, it all makes sense. As man has generally chosen to pursue the Totalitarian, or what we call the Might Makes Right ideology, it would follow that those thrust into power should be among the most immoral, unscrupulous, human beings on the planet.
In summary, the Might Makes Right ideology unwittingly promotes the worst individuals to positions of power, as they are best suited to carry out the immoral and contradictory demands which are invariably made of the persons occupying positions of power in such a system.
Depressed? Don’t be. It doesn’t have to be this way. More tomorrow.
Stay tuned and Trust Jesus.
Key Indicators for November 22, 2011
Gold Price Per Ounce: $1,700 PERMANENT UNCERTAINTY