The Signs Swirl All Around Us, so Is the Monetary Reset at Hand?

Published here: http://goldsilverworlds.com/money-currency/the-signs-swirl-all-around-us-so-is-the-monetary-reset-at-hand/

Article written and contributed by Chris Powell.

For most of this decade owning gold and gold-related investments has required the patience of Job, and the sector is so obscure that it is hard to be sure of anything.

But for months now the unusual developments have been piling up so much that it may be possible to regain some optimism.

There are indications of a shortage of metal not just at the New York Commodities Exchange, where for months now most contracts have been settled through a supposedly “emergency” procedure called “exchange for physicals,” but also in London, the hub of the world gold market, where the usual flow of metal to Switzerland recently reversed, with metal flowing back to London amid increasing demand.

This corresponded with announcements of gold acquisitions by central banks that had not shown any interest in gold.

For months, the usual central bank-inspired smashes in the gold futures markets have not been having much effect, even as Gold Anti-Trust Action Committee (GATA) consultant Robert Lambourne has reported increasing intervention in the market by the Bank for International Settlements

The Comex has just quickly authorized a vast expansion in what bullion banks can use as collateral for their selling – “pledged gold” held off the exchange, supposedly in London, for whose existence and unimpairment there is no public evidence.

Amid these indications of shortages, the open interest in gold futures on the Comex keeps hitting record highs. The bullion banks selling the contracts seem to be acting as if the gold supply itself is infinite, not just the supply of gold paper.

Or maybe they are acting as if they have confidence that when real metal is exhausted, as it was in early 1968 when the previous gold price suppression scheme, the London Gold Pool, faltered and then collapsed, they will be immunized by a declaration of force majeure, cash settlement, an official revaluation of gold, and even capital controls on the monetary metal.

Any prediction about the gold price is of course just a guess.

But the developments described here are facts, and surreptitious intervention against gold is longstanding Western government policy amply documented by the GATA and confirmed by the refusal of the U.S. Treasury Department, Federal Reserve System, and Commodity Futures Trading Commission to answer some specific questions we have posed along with U.S. Rep. Alex X. Mooney of West Virginia

Governments less enthusiastic about this market rigging have been on to it at least since 2004 when the Bank of Russia’s deputy chairman, Oleg V. Mozhaiskov, annoyed the London Bullion Market Association’s meeting in Moscow by mentioning GATA’s work.

This Russian central banker called the gold price “enigmatic” and slyly confessing to suspicion that “the real forces acting on the gold market are far from those of classic textbooks that explain to students how prices are born in a free market.”

It is hardly a stretch to suggest that these other governments, including Russia and China, have been acting on Mozhaiskov’s suspicion.

Indeed, the U.S. economists Paul Brodsky and Lee Quaintance hypothesized seven years ago that gold price suppression had become part of a central banking plan to redistribute world gold reserves in anticipation of an international currency reset that would push the gold price way up to hedge central banks against currency devaluations.

The infinite money lately being created and distributed by the Federal Reserve Bank of New York means infinite leverage in the markets, infinite market rigging, infinite speculation, infinite misallocation of capital, and infinite corruption.

But for infinite money creation to succeed, it requires infinite commodity price suppression, or else government currencies are ruined.

So what happens if the primary monetary commodity – gold – runs out, as it more or less did upon the collapse of the London Gold Pool in 1968 and the government-ordered suspension of the world’s main gold market?

Does that lead to von Mises’ crackup boom, a flight to hard assets?

Perhaps no one knows. But “what has been will be again, what has been done will be done again, and there is nothing new under the sun.”

Governments rig markets and particularly the monetary metals markets to sustain their power.

Governments undertake various forms of war against each other – military, political, and economic – to gain or restrict power.

And as his deputy explained to Secretary of State Henry Kissinger at the State Department in 1974, control of the gold price is control of the world, and gold is the secret knowledge of the financial universe.

The signs swirl all around us even as mainstream news organizations strive to ignore them, and governments and central banks refuse to discuss them. So let us confidently hope that a little more light will come into the world again soon.

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Jp Cortez: Sound Money State Index Identifies Friends & Enemies of Precious Metals Investors

Published here: http://goldsilverworlds.com/investing/jp-cortez-sound-money-state-index-identifies-friends-enemies-of-precious-metals-investors/

Mike Gleason: It is my privilege now to welcome in JP Cortez with the Sound Money Defense League, a nonpartisan national public policy organization working to restore sound money at the state and federal level. JP is a proponent of and has studied in the Austrian school of economics and his role at SMDL as Policy Director has him regularly testifying at legislative hearings and speaking at various events around the country. His articles and analysis have appeared in many national news publications including the Washington Examiner, Huffington Post, Mises Institute, Foundation For Economic Education and many more, and he’s a frequent guest on various podcasts and national radio shows to talk about the importance of sound money legislation. And it’s a real pleasure to have him back on here with us on the Money Metals Podcast.

Jp, thanks for the time today. Welcome and how are you ?

Jp Cortez: Mike. Thanks for having me on. I’m doing great. How are things over there?

Mike Gleason: Well we’re doing well, excited to talk about this topic and as many of our regular listeners know, we had you on several months back to talk about this issue and we figured it was time to have you on again and talk about it and get an update from you on the state of the state, if you will, when it comes to sound money here in the U.S… as things are continuing to develop on that front, some of which is good and some of which is not what we would term as positive. And then we’ll also get into your group’s latest release of the Sound Money Index for 2019. But first let’s begin with having you lay out for us what your group does. What is the mission and why is there a Sound Money Defense League to begin with? Let’s start there.

Jp Cortez: Well, like you mentioned earlier, we’re a nonpartisan national public policy group and we work to restore sound money and that mostly happens on the state level, but we work on the federal level as well. So, primarily what we’re doing here is re-monetizing gold and silver by removing the taxes that surround its use, its sale, its purchase, because that’s most of the reason why people don’t use gold or silver today. It has nothing to do with its legal tender status or anything like that. It’s just that you would practically need a CPA by your side every time if you had to calculate your cost basis every time you wanted to buy a gallon of milk at the store and you’d have to go through this onerous process. So, by removing the taxes on precious metals, we hope to have the metals naturally find their way back into the system.

Mike Gleason: Talk about the successes that you’ve had there, Jp, because I know it’s been a busy couple of years at the state legislative level on the sound money front. Now there’s obviously a lot more work to be done there. We’ll get into that, but talk about some of the achievements of the Sound Money Defense League thus far, Jp.

Jp Cortez: The Sound Money Defense League was started in 2015 and since then it’s grown as a real leader on this issue we’ve been a part of and we’ve led efforts to introduce and pass legislation to remove sales tax on gold and silver in Alabama, Georgia, West Virginia, Wyoming and Louisiana, Wisconsin. In Arizona and Wyoming we’ve also worked to eliminate capital gains taxes from the sale of precious metals and we’ve also defended a couple existing exemptions this past session in Washington and Nebraska. In Washington’s case this was an exemption that was passed back in the mid-eighties that revenue hungry politicians were trying to appeal or were trying to repeal, but thankfully we were able to get that stopped and we hope this year to pick up a couple more victories in states like Tennessee and Mississippi on the sales tax issue.

Mike Gleason: Okay, so let’s get into the 2019 Sound Money Index, which you just released first. Why don’t you give us an overview of how the index was created and what it tells us about the various States about their friendliness or lack thereof towards sound money?

Jp Cortez: Yeah, the Sound Money Index is the first index of its kind where we’ve ranked all 50 states using a variety of criteria to kind of determine which states offer the most pro and anti-sound money climate. This was a project that we started last year, so this is our second annual report. In the first iteration of the Index, we used nine criteria, but and this year we’ve expanded that to 12 different indicators. We did that because we think that this gives us a more robust picture of where each state is at, where each state stands on sound money. And so the index evaluates each state’s sales and income tax policies involving precious metals. Whether a state has holds any precious metals in its pension funds or reserve funds, whether a state has passed or imposed any of these very onerous, very restrictive precious metals dealers or investor harassment laws is what we call them. And some more.

Mike Gleason: Yeah. So I wanted to dive into some of that criteria and so forth. But what did the top rank states do, right that led to their high scores on the index. And then what were those States who scored well?

Jp Cortez: This year, Wyoming, Texas and Utah kind of rounded out our top three. And these are three states that are all excellent on the issue of sales tax on precious metals. They’ve each got a full sales tax exemption on all gold and silver coins and bullion, that is Wyoming, Texas and Utah. They’ve also taken steps to exempt the gold and silver from the income tax. Utah was the first to do so, I believe. Texas has no income tax. And Wyoming, while it does not have a state income tax passed legislation two years ago now that does not allow for a capital gains tax on precious metals if an income tax were ever to be introduced.

Mike Gleason: So, what states are the worst on sound money? JP

Jp Cortez: So Arkansas, New Jersey, Maine, Ohio, Tennessee, Vermont. Unfortunately there are a couple of kind of a real baddies here. And these are the worst states in the country. These are states that levy sales tax on precious metals. They hammer you with income tax on the sale of sound money. They hold no metals in any of their reserve funds, any of their pension funds. They restrict dealers and investors with some of these crazy regulations regarding collecting personal data, reporting, regular submission to police. And these states, the ones I just mentioned are rife with these kinds of onerous laws and just generally they have high rates of taxation compared to the rest of the country. Ohio here kind of stands out last year in the first annual Sound Money Index, Ohio ranked 17th. This past year, unfortunately, Ohio voted to repeal its sound money sales tax exemption and it fell, talk about a fall from grace, all the way from 17th to tied for 49th place.

Mike Gleason: Yeah, ouch. We’re of course well familiar with that here at Money Metals Exchange, we are now collecting sales tax in a half dozen States. Ohio is one of those, this all happens in the wake of the Wayfair Supreme Court decision that forces out of state companies to charge tax and submit it to the states where there is no sales tax exemption for precious metals. Wayfair obviously was dealing with this not necessarily precious metals related, but we’re now sort of falling under law. So, there’s about 15 to 20 states that don’t have a sales tax exemption for precious metals and we and other national dealers are having to charge sales tax now and collect those in those jurisdictions even though we don’t have a physical business presence in those states. That’s what Wayfair a addressed kind of hitting those online retailers. So, this is a very important issue and passing laws in the remaining states that haven’t passed a bill exempting sales tax on precious metals yet would be huge for the citizens in those states.

But yet sales tax is not the only thing we have to deal with when it comes to taxes, Jp. You alluded to this a moment ago with some of those states that don’t have this, but we also have the income tax in most states and certainly at the federal level that are owed when there is a gain, and I say the word gain in quotes because it’s really just an illusory gain as we know because it’s not that the price of gold and silver has risen necessarily, it’s more a matter of the fact that the dollar has lost value, but yet the governments both at the state and federal level wants to tax you on the inflation that they’ve created, that’s caused that nominal gain. Talk about that Jp.

Jp Cortez: That’s right. Like you just said that this gain many times isn’t an actual gain. It’s not a real gain. It’s just a nominal gain that results from the inflation caused by the Federal Reserve. An ounce of gold is still an ounce of gold. The value of the ounce of gold hasn’t changed. It just takes more individual Federal Reserve notes to purchase the same ounce of gold. The Federal Reserve note is losing value. It’s not the gold is gaining value and yet, like you mentioned, this gain is taxed at the federal level and then again at the state level. To make things worse in states with no sales tax exemption then you’re hit with a nefarious kind of double taxation here where you’re taxed on the purchase of your metals and then taxed again on the sale.

Mike Gleason: Not to mention that the gain is at the 28% a collectibles rate to begin with, and in many cases, this isn’t collectible, this is bullion and yet it’s still taxed at an onerous 28% rate.

Jp Cortez: Yeah, that’s right. Long-term capital gains rate, discriminatorily high 28%. So, that’s taxed just as if you were talking about beanie babies or baseball cards or art. The IRS unilaterally decided that precious metals are collectibles and so now here we are.

Mike Gleason: Yeah, it’s the height of ridiculousness. I know at the federal level our good friend Alex Mooney, a Congressman from West Virginia has I believe, introduced a bill in Congress to repeal that tax at the federal level at anything you can tell us there. I do I have that right.

Jp Cortez: Yeah, that is correct. Congressman Mooney from West Virginia has introduced a couple of laws to remove these capital gains that we see here and hopefully these get passed. There are a couple of these laws that are coming down the pipes and hopefully we can kind of gain some traction and get some or one or maybe some of these passed.

Mike Gleason: Yeah, obviously many things happen at the state level and that sort of builds the momentum nationally and I know that’s where you’re focusing most of your efforts and it’s very important to do that. That’s where things often get started when it comes to change at a federal level as well.

Well, what other kinds of owner’s restrictions do states place on dealers and investors? Is there anything else that we haven’t covered aside from the tax issue that your group is focusing on, fighting and bringing to light?

Jp Cortez: Yeah, this is a new criteria that we’ve included this year on the Sound Money Index. We call it a dealer harassment laws, investor harassment laws, and some of these are really quite ridiculous. Some states require collecting your fingerprints, your physical measurements, your height, your weight, your hair color, your eye color, your social security number, other forms of identification, all of these things that the state requires precious metals dealers or sellers to collect. And then you couple that with the requirements to submit all of the sensitive information to law enforcement in some cases daily and some cases weekly. So, it’s really quite restrictive and quite pervasive. Some states have made it to where you can’t sell any gold or silver purchased from the public for a specified amount of time. In an industry like precious metals where prices are regularly changing, asking dealers to hold on to inventory for days or weeks could make a huge difference and could cause huge harm.

Additionally, if you consider that now dealers have to hold more inventory maybe than they would feel comfortable with otherwise by law, now it’s a liability. Now the dealer has to provide security, has to provide insurance to adequately safeguard these now these precious metals that they’re being forced to hold. And then I think the worst of all probably in my opinion is that a few states prohibit cash transactions when buying gold or silver. The argument being of course that sales are better tracked. Safety is a priority and so we need digital records of every transaction. But this is nearly unprecedented in American commerce. To restrict metals purchases to digitally tracked credit purchases or checks only is quite invasive.

Mike Gleason: Yeah, I couldn’t agree more. Obviously we’ve got the $10,000 cash payments money laundering, sort of restriction Form 8,300 that people have to fill out. If you’re buying over $10,000 in cash in anything where there’s gold and silver, a vehicle or what have you, you’re supposed to submit that form if you’re taking payment that way in that amount. But yeah extending it beyond that. And lower thresholds is pretty ridiculous. There is a nearby cities here, and we’re in Idaho, which is a pretty friendly state when it comes to precious metals, but there’s a nearby city that has a lot of those laws in place. And as it stands, there’s zero precious metals dealers. There’s zero local coin shops because they don’t want to have to fingerprint everybody, submit it to the local police. Just completely ridiculous. They’ve driven several businesses out of the city completely. It’s a real shame.

Jp, it also looks like there’s zero states that have at least 10% of their reserve funds held in in gold and silver. I know you’re trying to work to change that, talk about that.

Jp Cortez: Well, frankly, the financial powers that be simply haven’t allowed for it. An allocation of gold and silver provides many helpful things to investors, and to states if they choose to invest in gold and silver, that is a hedge against inflation debt, default risks, stock market declines volatility. And yet there isn’t a single state that’s holding at least 10% of its reserves in the metals. And of course, that it is more egregious when it’s coupled with the fact that their portfolios are full of nothing but risky assets. A considerable amount of emerging market debt, risky bonds, ETFs, different trading instruments, people chasing returns rather than protecting and taking prudent care of money that retirees and savers and pensioners rely on.

Mike Gleason: Yeah, they certainly should not be risking that money and of course, gold and silver and the ultimate safe havens, gold specifically. And you would think that there would be at least some appetite for some of those states to put some of those reserves in in some kind of a gold fund or physical gold better yet. None has really done yet. I guess Texas has, is it the state teacher’s pension funds that that has some physical gold? Is that the only one that’s done that?

Jp Cortez: Yeah, Mike. That’s correct. The Texas Teacher Pension Fund, they’re holding about a billion dollars’ worth of physical gold. Wyoming considered a few measures this past year to protect some of their reserve funds, their rainy day funds, their pension funds with physical metals held within the state or near the state. And believe it or not, these measures were not received warmly by different constituencies, by the pension fund managers, the reserve fund managers, banking. There were several constituencies that were not too keen on this idea.

Mike Gleason: Imagine that, the financial elites or wall street types, not wanting to see money leave the system and go into gold and silver. I can’t say, I can’t imagine why they wouldn’t like that.

Well, before we let you go here, is there anything else you would like to share with our listeners today maybe that we haven’t covered yet? Or certain things that you see in movements of sound money that you think people should be keeping in mind?

Jp Cortez: Yeah. I think just one more note on the Sound Money Index. We’ve taken the time this year to kind of extend out what we’re doing and so we’ve scored different states on a number of interesting criteria. Some of the stuff we didn’t get to hear in this conversation, like the enforcement of gold cost contracts for example, or holding metals in state reserve funds like we mentioned, whether a state has established an in-state depository, of course Texas. And then this year we’ve included a section on whether or not a state has issued a gold bond. So, it’s really interesting stuff. We encourage everyone to check out the Sound Money Index.

Mike Gleason: Yeah, they can do that either at SoundMoneyDefense.org or on the MoneyMetals.com site as well, that information will be available there. Keep up the great work Jp in our industry, the sales tax issue has become quite a big one. So, the work you’re doing there is vitally important, and we appreciate all you’re doing to defend sound money. We appreciate the time today and look forward to having you on again in the future to update us on a lot of these legislative fronts, because I know you’ll have your finger on that pulse as much as anyone and we wish you continued success in those efforts. Take care and thanks for coming on.

Jp Cortez: Great. Thanks a lot, Mike.

Mike Gleason: Well, that will do it for this week. Thanks again to Jp Cortez Policy Director at the Sound Money Defense league. For more information or to follow these ongoing sound money efforts or even to make a donation to help support the mission of sound money advancement, please visit SoundMoneyDefense.org.

 

Mike Gleason is a Director with Money Metals Exchange, a national precious metals dealer with over 50,000 customers. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.

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Understanding Gold (and Silver) Comes from the Heart, Not the Brain

Published here: http://goldsilverworlds.com/gold-silver-price-news/understanding-gold-and-silver-comes-from-the-heart-not-the-brain/

The title of this essay is part of a statement made by Stewart Thomson, editor of the investment letter, Graceland Updates. His full comment reads, “It takes more than viewing charts and government debt numbers to understand gold as the world’s ultimate asset. What it really takes comes from the heart, not the brain.”

For thousands of years, humankind has understood the magical draw (and sense of security) that owning precious metal can bring.

It satisfies the core requirements that make it a medium of exchange par excellence.

It’s durable. It’s divisible. It’s consistent. It’s convenient. It’s intrinsically valuable.

There’s a sixth reason, which Doug Casey elaborates upon when he talks about gold’s attributes above.

Unlike what David Morgan refers to as “paper promises” created at the stroke of a pen, run off on a printing press, and devalued to the point where a central bank can no longer afford to pay for the paper and ink – neither gold (nor silver) can be created out of thin air.

As Doug so ably concludes:

These are the reasons why gold is the best money. It’s not a gold bug religion, nor a barbaric superstition. It’s simply common sense. Gold is particularly good for use as money, just as aluminum is particularly good for making aircraft, steel is good for the structures of buildings, uranium is good for fueling nuclear power plants, and paper is good for making books. Not money. If you try to make airplanes out of lead, or money out of paper, you’re in for a crash.

 It’s why central bankers around the globe are adding gold to their “monetary” reserves at the quickest pace in 50 years. It’s why Germany has – for the first time since WW II, begun buying gold. And it’s why they are engaged in a multiyear effort to repatriate it from the U.S. and Great Britain, where it’s been stored for security reasons since before WW II.

It’s why Poland not only has been making new purchases lately, but recently took delivery of 100 tons of the yellow metal that had been in “safe-keeping” from London, since just before Germany overran their country in 1939. Why now? Maybe because, well, your gold seems to be so much more secure when you have it “in hand.”

It’s why small scale (artisanal) miners around the world risk their lives and health – often damaging the environment – in order to acquire even the smallest amounts of it.

And it’s why you should hold some too. Reflect on the state of geopolitical affairs around the globe. Look at the trend in motion where banks are – or soon will – charge you for the privilege of saving some of the paper currency you’ve earned.

Forcing you to spend seed corn on things you don’t need, just to keep their own financial Ponzi schemes from falling to earth.

They want to drive you into a non-cash environment where your assets are nothing more than digital entries that can be monitored as to what, when, and where you spend them. That can be “debited” by the government at will. All of which you’ll have the privilege of being penalized for if you don’t spend as much of your savings as edict demands.

What’s the definition of a bull market? In classical technical analysis (TA), when the price of something – in this case gold (and in our discussion silver too, since the two metals’ directional pricing is so closely correlated) – drop below or break up through an area that previously hosted a well-defined price level, chartists see this as something important.

Earlier this year, gold rocketed above $1,360, a level suppressing prices for over 5 years, giving evidence that it could now could move much higher. Sure enough it did, hitting $1,560 just two months later.

A second “tell” was that in breaking above $1,360, it left a large gap (area where no trading takes place), which as of this writing has yet to be filled (traded back into).

But one of the most important clues as to the staying power of a new bull or bear run is when a formation like the one shown for gold nearby is created.

A series of higher highs and higher lows tells anyone who looks at such a chart, that as long as this pattern continues going forward, the bull shows serious intentions of “movin’ on up”!

The fact that gold penetrated $1,400 and then $1,500 so easily on the upside, gives us confidence that the yellow metal has the potential to challenge still higher levels during the first quarter of 2020.

Holding gold and silver in your hand will make you smile. If you’ve already started a gold and silver acquisition program, take out a coin or bar and hold one of each in your hand (As long as it’s not a collectable coin with numismatic value beyond its metal content!).

Rub your thumb and forefinger back and forth on its shiny surface. Feel its weight in your palm. Think about how for much of recorded history these two metals have “been there” as insurance, providing a store of value during the most unpredictable and dangerous times in history.

Think about how they’re recognized and accepted around the world in exchange for goods and services – maybe even for one’s life! (To this day, elite military units operating anywhere on the globe carry a few 1/4 and 1/2 ounce gold coins in their kit – just in case.).

The importance of having some precious metal becomes easy for our minds to grasp, does it not? When you consider having some in your hand, in your pocket, or stored away in some safe space known only to your and trusted family members – there to serve as insurance for loved ones and yourself…

…chances are it will bring a smile to your face, and you will be able to see and feel that a true understanding of what gold and silver represents really does come from the heart.

 

 

David Smith is Senior Analyst for TheMorganReport.com and a regular contributor to MoneyMetals.com. For the past 15 years, he has investigated precious metals’ mines and exploration sites in Argentina, Chile, Mexico, Bolivia, China, Canada, and the U.S. He shares his resource sector findings with readers, the media, and North American investment conference attendees.

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Inflation Threat Looms in 2020 as Fiscal and Monetary Stimulus Ramp Up

Published here: http://goldsilverworlds.com/economy/inflation-threat-looms-in-2020-as-fiscal-and-monetary-stimulus-ramp-up/

The Federal Reserve left its benchmark interest rate unchanged as expected last week. However, Fed Chairman Jerome Powell made news with some of his most dovish remarks to date – stating flatly that he won’t hike rates again until inflation moves up significantly.

“In order to move rates up, I would want to see inflation that’s persistent and that’s significant,” Powell said at a news conference following the Fed’s announcement.

He would be anticipating “a significant move up in inflation that’s also persistent before raising rates to address inflation concerns.”

He could get his wish in the months ahead as monetary policy, fiscal policy, and the economy all seem to be lining up to push the inflation rate higher. In 2020, inflation may become a front-page problem for the first time in many years.

The government’s release of a blockbuster jobs report this month diminishes the odds of the economy falling into a recession next year. At the same time, it increases the likelihood of inflation rates rising.

It’s not that the economy is at risk of “overheating.” Overall GDP growth is likely to come in moderate at best next year.

Rather, the economy is merely showing signs of sustaining its expansion at a time when fiscal and monetary policy are extremely stimulative.

The U.S. government is now running trillion-dollar budget deficits for the first time since the aftermath of the 2008 financial crisis. It will effectively pump $1 trillion worth of artificial demand back into the economy in 2020.

Needless to say, there is no will or way in Washington to cut spending or raise taxes in an election year.

At the same time, the Fed is holding its benchmark short-term interest rate at 1.50%-1.75%, which is a negative real rate.

Explains Barron’s columnist Randall W. Forsyth, “The fed-funds rate is actually below zero in real terms, that is, after factoring in inflation. Negative real rates usually are imposed to spur spending and investment to stimulate an economy in recession, which is far from the present state.”

Inflation as measured by the Consumer Price Index is running at 2.1% annually according to the latest data reported by the Bureau of Labor Statistics on Wednesday. Consumer prices have climbed more than expected this fall on rising energy costs.

But it’s still not enough inflation for the Fed’s liking!

The central bank’s preferred inflation gauge is the core Personal Consumption Expenditures index, which is running only at an estimated 1.5% year-on-year. Jerome Powell and company want to push it to 2%…and above, on a “persistent” basis, before tightening monetary policy.

Let’s not forget (like some in the financial media apparently have) that the Fed is also pursuing a massive balance sheet expansion. Even though policymakers refuse to call it QE, the monthly liquidity injections and T-bill purchases are of similar magnitude as previous rounds of Quantitative Easing.

In fact, since “not QE” was announced in September (and subsequently expanded), the Fed’s balance sheet has been growing at a 28% rate. The money supply itself is expanding at an 11% clip.

All this stimulus will have consequences, and they won’t just show up in the form of higher stock prices. Although the stock market seems poised to continue advancing, higher commodity and consumer prices could begin to spread through the economy as well.

Though long depressed, crude oil prices have started to trend higher in recent months.

Copper and precious metals prices are also showing some strength and could be on the verge of major breakouts heading into year end.

When Americans think of nasty inflation, they tend to recall the late 1970s stagflation. It coincided with spikes in gold and silver markets.

The inflation monster wasn’t finally tamed until Fed chairman Paul Volcker stepped in and jacked up interest rates to double-digit levels, triggering a recession. Volcker’s decision wasn’t popular on Wall Street or in Washington, but it did restore confidence in the dollar and set the stage for the expansions of the 80s and 90s.

The current crop of central bankers is too cowardly, too beholden to bankers and politicians, to do what Volcker did. He passed away this month and will be remembered as an inflation hawk.

But today, the doves are in charge at the Fed – and they bound and determined to create a new inflation cycle.

 

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

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Gold ETF Holdings Surge… But Do They Actually Hold Gold?

Published here: http://goldsilverworlds.com/investing/gold-etf-holdings-surge-but-do-they-actually-hold-gold/

Gold-linked exchange-traded products are growing in popularity with investors. Assets held by gold ETFs have grown 38% globally in 2019.

In October, according to the World Gold Council, gold ETFs attracted $1.9 billion in net inflows to reach a new record high total gold holding of 2,900 tonnes – at least on paper.

There is good reason to be skeptical of whether all these “gold” vehicles actually hold physical metal sufficient to back their market capitalizations on a 1:1 basis. Some of them very well might; others almost certainly don’t.

In fact, many of these gold instruments hold futures contracts and other financial derivative products that merely “track” the gold price.

The biggest of them all – SPDR Gold Shares (NYSE:GLD) – purports to have 100% backing of its $42 billion market capitalization in physical bullion. But it’s practically impossible to achieve around the clock since the fund’s assets are a moving target.

As an open-ended fund, GLD doesn’t hold a fixed quantity of gold. A close inspection of its prospectus reveals that it relies on layers of financial intermediaries to create shares and manage its gold inflows and outflows.

That creates a tremendous amount of counterparty risk, including the risk that some of the gold claimed in vaults by GLD may be rehypothecated, or simultaneously owned by another party. Rehypothication is defined by Investopedia as “the practice by banks and brokers of using, for their own purposes, assets that have been posted as collateral by their clients.”

According to Chris Powell of the Gold Anti-Trust Action Committee, “The custodian of the vault holding GLD’s gold is the investment bank HSBC, perhaps the biggest short in the gold market… the bank is the beneficiary of a new New York Commodities Exchange rule apparently allowing the bank to inject more ‘paper gold’ into the futures market.”

Banking and gold don’t go well together – not for gold investors, anyway. The whole point of owning a hard asset is to have wealth outside of the financial system!

Chris Powell continues, “GLD itself facilitates the shorting of real metal through the borrowing and conversion to metal of its shares and the sale or lease of that metal by enormously well-funded brokers executing central bank market-rigging policy.”

It’s clear that a great bulk of GLD owners aren’t paying particularly close attention to what they’re investing in. If they were, why they would prefer GLD (which levies annual expenses of 0.40%) over lower-cost rivals that do the same thing?

Why would they prefer GLD over more secure closed-end funds that hold a fixed amount of metal? Why would they prefer cash-out-only GLD over instruments that allow for physical redemption above certain quantities?

The only reason seems to be that GLD is always presented as the Wall Street stand-in for gold on CNBC and in mainstream financial publications.

Are Rising ETF Inflows a Bullish Signal for Gold?

Despite all of the foregoing drawbacks to precious metals ETFs, their rise isn’t necessarily a bad sign for the physical market. More people are wanting exposure to gold and silver. That’s good news for bulls.

It’s easier for billionaires and institutional investors such as hedge funds to move millions of dollars into gold via an ETF rather than through the purchase of gold coins. Some “smart money” may be moving into gold via this route.

Owning gold indirectly through financial instruments obviously isn’t the smartest strategy for obtaining true diversification out of financial assets. But people who have made fortunes in financial markets tend to perceive it as the only game in town.

And that’s the way Wall Street brokers and analysts tend to pitch precious metals investing to the public. If it doesn’t trade like a stock, it doesn’t even register.

That so much demand is being diverted into Wall Street products instead of bullion products has certainly suppressed buying of bullion to some extent. That, in turn, may be working to keep a lid on spot prices as well.

The opportunity is that tens of billions of dollars parked in gold and silver derivatives meant to represent precious metals may create something of a force majeure on one or more of the bullion banks – or the futures market itself. If one link in the system fails or is exposed as fraudulent, then confidence could collapse in all forms of paper gold.

Paper/IOU gold may be “convenient” but it is inherently untrustworthy as compared to the real thing. When fear grips markets, convenience considerations go out the window, and wealth preservation becomes paramount.

When the next financial crisis comes, physical gold can be expected to trump paper gold.

 

 

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

 

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R.I.P. Paul Volcker, the Last “Good” Central Banker

Published here: http://goldsilverworlds.com/gold-silver-general/r-i-p-paul-volcker-the-last-good-central-banker/

The last true enemy of inflation the Federal Reserve has seen died earlier this week.

Paul Volcker, former chairman of the Federal Reserve from 1979-1987, has passed away.

Credited with tampering incredibly high levels of inflation during the Carter and Reagan administration by jacking up interest rates to unpleasant levels, Volcker’s passing harkens back to a time when central bankers weren’t afraid to make tough choices.

Volcker instinctively knew that central planning of the economy by tugging on monetary policy levers was not only a tall order, but also wouldn’t ultimately succeed.

In an interview the former chairman said about the Keynesian “religion,” “…I was a bit turned off by the precision and certainty that these people attached to the doctrine. The analytical framework was very convincing but this feeling they had, that they could press the right buttons and manage the economy pretty exactly, for some reason it turned me off.”

Tall Paul (Volcker was reportedly 6’7”) was also the last chairman of the Federal Reserve who maintained plausible political independence, publicly butting heads with President Carter and President Reagan.

Though Volcker was one of the main architects of closing the gold window and once declared that “gold was the enemy,” he nevertheless seemed at least to understand the severe damage that inflation causes.

In an interview with PBS, Volcker said, “inflation is thought of as a cruel, and maybe the cruelest, tax because it hits in a many-sectored way, in an unplanned way, and it hits the people on a fixed income hardest. And there’s quite a lot of evidence, contrary to some earlier thinking, that it hit poorer people more than rich people…”

At a lecture in Singapore in 2008, when asked about a return to fundamentals of the Austrian school of economics as a response to the Great Recession, Volcker acutely answered, “you know, they [Austrian school economists] have some insights that maybe we have forgotten about…The idea of credit creation being important as one symptom of what is going on has certainly been vindicated.”

Volcker continued, “[Financial firms, investment banks, and commercial banks] all built up the balance sheet on the liability and asset side because of a sense of easy credit and no problems. That’s what’s come home to roost because suddenly they haven’t got enough capital to support the credit, which wouldn’t surprise most Austrian economists, I suspect.”

Former Chairman Paul Volcker wasn’t an Austrian economist – or even a strong proponent of sound money, despite including the term in the title of his memoir. But he understood the perils of inflation and the harm wrought by technocratic manipulation of the economy.

Volker’s approach stands in sharp contrast to that of current Fed Chairman Jerome Powell and his ilk. Far from fighting inflation, they are openly engaging in a campaign to push it higher.

 

Jp Cortez is a graduate of Auburn University and a resident of Charlotte, North Carolina. He is the Policy Director of the Sound Money Defense League, an organization working to bring back gold and silver as America’s constitutional money. Follow him on Twitter @JpCortez27

 

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Wyoming, Texas, Utah Top 2019’s Sound Money Index — Vermont, Arkansas, New Jersey Among the Worst States

Published here: http://goldsilverworlds.com/gold-silver-experts/wyoming-texas-utah-top-2019s-sound-money-index-vermont-arkansas-new-jersey-among-the-worst-states/

Precious Metals Dealer, Sound Money Group Rank the 50 States’ Gold and Silver Policies

Charlotte, NC (December 4, 2019) – “Is Your State Destroying Your Money?” asks the Sound Money Defense League and Money Metals Exchange with the release of the 2019 Sound Money Index.

The Sound Money Index is the first index of its kind, ranking all 50 states using twelve different criteria to determine which states maintain the most pro- and anti-sound money policies in the country.

The Sound Money Index evaluates each state’s sales and income tax policies involving precious metals, whether a state recognizes the monetary role of gold and silver under the U.S. Constitution, whether a state holds pension, reserves, or debt denominated in gold or silver, whether a state has imposed precious metal dealer/investor harassment laws, and other criteria.

Wyoming, Texas, and Utah emerged as the best states on sound money in the nation, and South Dakota, Alaska, New Hampshire, and Washington are not far behind.

Maine, Tennessee, Ohio, and Kentucky joined Vermont, Arkansas, and New Jersey as the worst states on this issue.

Money Metals Exchange, a national precious metals dealer recently ranked “Best in the USA,” and the Sound Money Defense League, a national, non-partisan sound money advocacy group joined together to produce the authoritative ranking

“Federal policy and the privately owned banking cartel known as the Federal Reserve System are the root causes of inflation, instability, and currency devaluation,” noted Jp Cortez, Policy Director at the Sound Money Defense League.

“However, there are steps states can take to protect their citizens from the ill effects of America’s unbacked paper money system, and many of them are taking those steps,” Cortez noted.

The complete 2019 Sound Money Index is available here: https://www.moneymetals.com/guides/sound-money-index

To arrange media interviews or for more information, please contact:
Jp Cortez, Policy Director, Sound Money Defense League
404-948-8935
jp.cortez@soundmoneydefense.org

 

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About the Sound Money Defense League and Money Metals Exchange:

The Sound Money Defense League is a non-partisan national public policy group working on the state and federal level to bring back gold and silver as America’s constitutional money.

Money Metals Exchange is a national precious metals company recently named “Best in the USA” by an independent global ratings group and serves nearly 100,000 investors in physical gold, silver, platinum, and palladium. For more information, please visit https://www.moneymetals.com/

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