Tag Archives: gold

The Real Value of Gold

You don’t have to be an expert to realize something just isn’t right in the economic world! Peter Schiff and GATA’s Bill Murphy discuss Quantitative Easing, inflation, and the real value of gold!

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The Obama Effect

The following chart shows a comparison of prices of certain commodities from January, 2009 when Obama took office to the prices of the same commodities in January, 2011.

            Sourcing is footnoted.

            Leftist should take a lot of tranquilizers before reading this chart.

Just take this last item: In the last two years we have accumulated national debt at a rate more than 27 times as fast as during the rest of our entire nation’s history.  Over 27 times as fast. Metaphorically speaking, if you are driving in the right lane doing 65 MPH and a car rockets past you in the left lane.   27 times faster, it would be doing 1,755 MPH!

Sources:
(1) U.S. Energy Information Administration; (2) Wall Street Journal; (3) Bureau of Labor Statistics; (4) Census Bureau; (5) USDA; (6) U.S. Dept. Of Labor;
(7) FHFA; (8) Standard & Poor’s/Case-Shiller; (9) RealtyTrac; (10) Heritage Foundation and WSJ; (11) The Conference Board; (12) FDIC;
(13) Federal Reserve; (14) U.S. Treasury 

 

Food Futures Slide Monday

During the mini-crash of August 2011, stories of a market slide and gold going through the roof were prevalent. What no one seemed to be talking about is food futures.

September wheat dropped twenty two and a half cents per bushel to $6.57 and corn dropped 0.17 to $6.86 a bushel. Oats and soybeans also took significant drops as the entire set of major grain futures took a nosedive.

Beef and pork futures also slid lower, but why?

Petroleum products dear friend – that’s why. Across the board Oil, Natural Gas, gasoline, all of them dropped. Usually when commodities sink it’s due to a strengthening dollar. Not this time.

If all commodities futures were falling, a weakening greenback might be to blame, but gold is having no trouble reaching new highs. Closing at 1760+ on Monday, gold is showing all the strength of a temporary safe refuge for money that investors can’t put elsewhere.

Food, grain, oil and fuel are falling because the speculators have seen the same reports the rest of the universe has – the second recession is here. Upon expected dwindling demand, prices will fall.

Gold is NOT seeing anything close to a slowing demand curve. It is precisely where many are moving their money in anticipation of what will almost certainly come next – another round of money printing.

While food may drop short-term, Americans are in for more quantitative easing (a.k.a. federal reserve printing money) which will further devalue the dollar and require more greenbacks to purchase the very goods that are currently on a downward price trajectory.

This is a temporary descending blip. Food and energy will become more expensive as the dollar becomes diluted by further irresponsible printing and that’s what all those gold buyers already seem to know.

Russia, Oil, & The Utah Sound Money Act & Why It Matters

Theresa FlemingIt’s hard to overstate the concern that American families have regarding the economy, but one thing we all need to pay more attention to is the value of the U.S dollar. Imagine, if you will, what would happen to your families’ savings should the U.S. dollar truly crash, especially when unemployment and underemployment are both high. Families, if they can, are already desperately trying to save as much money as possible. But what if the money families have so carefully saved for a rainy day could no longer buy even the basic necessities? This is the reason behind bills such as the Utah Sound Money Act.

Although to some it may seem extreme, we do need to prepare for the possibility that there may come a day that the dollar’s buying power will be drastically reduced. And the truth is, Utah is not alone in their concern. According to State Representative Galvez, House sponsor of the bill, 11 states have either passed currency related legislation or have legislation in process. Other states passing or considering currency related legislation include: Montana, Missouri, Colorado, Idaho, Indiana, Missouri, Montana, New Hampshire, South Carolina, Tennessee, Vermont, Virginia, Washington…

The truth is that with the decline in the value of the dollar and the rise of U.S. debt,more and more countries are becoming concerned about whether the U.S. dollar is a good investment. And unfortunately, Washington’s printing of more dollars will not only not solve the problem , it may quicken the devaluing of the dollar.

For those who do not believe that the U.S. dollar may be in trouble, please consider the following: according to The China Daily, China and Russia have used a number of currencies in the past, but especially U S Dollars for “bilateral trades”. However according to a report in The China Daily in November 2010, “China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade”. The formal announcement was made by Premier Wen Jiabao and Russian Vladimir Putin.

PutinIn addition, Russia has also been reaching out to Europe. In Putin’s appearance in front of top German industrialists at a business forum in Berlin, he called for closer economic ties between Russia and the European Union. In his speech he outlined his vision for the future and his desire to create a Free European – Russian Trade Zone. However, the most critical part of his speech came when he showed what his true intentions may be towards the U.S. In his speech Putin said, that the “Euro is slightly fluctuating, but as a whole it’s a good , stable world currency that should take its rightful position as the world reserve currency. I think over the last 10 years there has been one wrong aspect that we should definitely eliminate. It’s the excessive monopoly of the dollar as the sole world reserve currency. This is certainly something negative.”

However, whether the dollar remains the world reserve currency is not the only concern at hand. As Senate Majority Leader Scott Jenkins said, a more immediate concern may be the efforts that are being made to decouple the dollar from oil. If that occurs, efforts such as the Utah Sound Money Act may well turn out to produce the solution that we need.

But there is some good news as well…

While news reports by their very nature tend to focus on the negative, there are public servants working hard to find a solution to the problems that we face. Utah Senate Majority Leader Scott Jenkins and State Representative Brad Galvez are working hard to find a solution to protect us, and our children, from the potential fall of the US dollar. As Senate Majority Leader Scott Jenkins said, “inflation is hurting the ability of families to purchase the items that they need. With the buying power of the dollar going down, if we do not act the purchasing power of the American family will continue to suffer. We must begin to study potential solutions and we must act.”

And make no mistake, we can no longer afford to sit on the sidelines and hope that someone else finds the answer. As a country we need elected officials who are willing to act and willing to do the research needed to find the best possible way to protect American families and that is why the Utah Sound Money Act and efforts like it are so very important.

As for the legislation itself, The Utah Sound Money Act will not only allow gold and silver coins issued by the Federal government to be used as “legal tender” in Utah, it will exempt them from capital gains taxes. Although the United States Constitution already allows states this freedom, the Utah Sound Money Act would codify this right in Utah law. The law would not mandate that the coins be used, but simply allows people the choice. The legislation also creates a panel to study how Utah families might use the alternative “legal tender” system for every day purchases such as food or medicine. Since the value of gold and silver constantly fluctuates, a system would have to be designed that would provide a practical way for Utah families to use the new system for daily purchases, which is why the panel is being formed.

As for Utah, there’s a reason Americans may want to start taking a look at how they operate and the recommendations made by their state’s leaders. Utah has been named, “the best managed state in the nation and has been salt lake cityrepeatedly ranked as one of the best states to do business”. And it appears Forbes agree, for in their 2010 look at the Best States For Business, Utah was ranked number one when it comes to fostering growth! Check back for more information on exactly how Utah became the “best managed state in the nation” and what public servants such as Senate Majority Leader Scott Jenkins and State Representative Brad Galvez are doing that is making such a huge difference for their state!

Change is always hard, and sometimes scary, but Utah’s system does not seek to replace our current monetary system. However, what it does do is start the process of designing, and planning for a possibly implementation of a secure money system should the dollar fall. And while, as State Representative Galvaz said, we may not like the changes that have occurred in our economy, our job as parents, and their jobs as legislators, is to do our very best to give our children the best possible opportunities to succeed in the world in which we live. And while many of us, including myself, wish that we could return to a simpler time, the fact is, right now, we can’t. But what we can do, is work together to find the solutions that our children will need, no matter what crisis we face.

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Recent Legislation Allows Congress to Track You

The new paradigm in Congress: Pass legislation first, then figure out what’s in it.  We have certainly learned much about the worthless health care reform bill and now a real head scratcher.  Section 9006 of Obamacare amends section 6041 of the IRS code so that when you buy or sell more than $600 of anything, within a fiscal year, you have an obligation under the new law to issue 1099s.

The purpose of the 1099 form has traditionally been to report income for contract labor.  In fact, contract work is often referred to as working under a 1099.  Now, the government may have chosen to use it to track something else: precious metals, barter and any other activities the government wants to track.

Combining section 6041 of the IRS code with the amednment (section 9006 of Obamacare) yields the following according to  FreeRepublic.com post

All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, amounts in consideration for property, premiums, annuities, compensations, remunerations, emoluments, or other gross proceeds, fixed or determinable gains, profits, and income (other than payments to which section 6042(a)(1),6044(a)(1), 6047(e), 6049(a), or 6050N(a) applies, and other than payments with respect to which a statement is required under the authority of section 6042(a)(2), 6044(a)(2), or 6045), or $600 or more in any taxable year, or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for,shall render a true and accurate return to the Secretary, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary, setting forth the amount of such gross proceeds, gains, profits, and income, and the name and address of the recipient of such payment.

Why would the government need to do this?  Gold isn’t used in any significant quantities for the performance of business transactions.  Do the Bourgeoiscrats in Washington worry that the dollar will decline to a point that more Americans will start using alternative methods of commerce like a barter system or gold?  Or is there some other reason for tracking precious metals – specifically gold.

In the South during the civil war and reconstruction, currency became worthless.  Southerners didn’t turn to gold as form of currency, they reverted to the barter system.  The new law says that a 1099 should be created if it transaction exceed $600.00 in a single year.  So although some feel that this is an attempt of the government to track commercial transactions paid by other means than dollars – that, at first, seems unlikely.  An article at Rofasix’s blog explains the case that the government is planning to track barter-based transactions

The government wants to make it illegal to have a transaction such as a barter or trade that goes unreported to the state. So now, whatever the exchange, if you don’t file a Form 1099 you just broke the law. The reason for the need the thousands of new IRS agents as well as the massive 12-gauge pump shotgun buy for the IRS starts to become clearer now, doesn’t it?

While a nefarious purpose seemed plausible, preventing untaxed barter commerce did not seem to me to be the target.  The amended law clearly defines that the transactions must result in $600.00 of payment for services or goods within a fiscal year, right?  The law seems to quantify itself using U.S. dollars and would therefor not apply to in-kind trade.  But as a  David Ganz  post at Numismaster.com pointed out:

It doesn’t matter in what form payment is made, whether cash, check, credit card, or Yap stone money, the $600 threshold applies.

That’s disconcerting at a minimum and Orwellian at it’s worst.  David Ganz makes the case that it is the worth of the goods, regardless of form of payment.  The law is not clear here, so David may have something.  This would force Americans to report all forms of trade and if it were a barter trade, wouldn’t both sides have to report it?

Another possibility is that the $600.00 amount could be used to track the purchase, sale and trade of gold.  This has been speculated to be the original intent of the law.  For what purpose?  In, “Inflation and How it May Affect You”, I used the government’s own historical actions to explain the issue with gold:

While gold is a hard asset, I have one basic concern with owning gold as a hedge to inflation. If gold becomes a better currency than paper money, the government could do what it has done in the past – take it from you. In 1933 President Roosevelt forced citizens to sell all of their gold at a price that had not adjusted for inflation (roughly $21.00/ounce), once the government had all of the gold, they re-adjusted it for inflation and deemed it worth $35.00/ounce. Gold did not function well as a hedge in that case, and I believe a liberal government would do the same thing again to increase the money supply if all else had failed (which it would have if we were relying on gold as currency).

It becomes obvious why the government may want to know who has gold so that they can make sure they get it all at the pre-inflation price and can resell it after re-adjusting it’s value.

This could also be a way that liberals are seeking to control activities that they cannot constitutionally control.  How about closing the “gun show loophole” without specifically writing a law?  That hunting rifle someone buys at a gun show.. previously, no federal forms were required, but now – if it’s worth $600.00, I have to tell the government that I bought a gun and who I bought it from.  If I trade one gun for the other, we both have to tell the feds about it or we are guilty of tax evasion.  Imagine all the other freedoms the government could impinge upon using this section of the health care law.

Speaker Pelosi told us we wouldn’t know what was in the health care reform law until it was passed.  The hits just keep on coming.