Learn how by reading. Article is intended as a poke-in-the-eye for members of the Ron Paul Revolution who complain about the bailouts and the financial, banking, and housing crises and do not realize that they may in fact be hypocrites. by Jake Towne, the Champion of the Constitution
Sunday, September 28, 2008
I think recent interviews on the antics of the federal government are making our fearless grandfather quite hoarse. The fairly dire economic and monetary faultlines and consequences Congressman Ron Paul has predicted for the past thirty (30) years are now evident even to the masses in the American (and global) financial system. All members of the Revolution and the Campaign for Liberty have a stark choice. Listen to him in between the lines and heed his advice. Or listen to the siren song of Bernanke, Bush, and Paulson. Your choice. Let me explain.
Listen to Bernanke, Bush, and Paulson?
It is interesting to hear the pro-bailout talk these days from the likes of our modern-day Roman triumvirate of Bernanke, Bush, and Paulson. Per the very latest from Bloomberg, the latest $700 billion bailout will pass shortly, possibly on Monday, September 29.
Whereas Bush remarked last week that "we must act now to protect our nation's economic health from serious risk" at the start of this year he had (the entire triumvirate actually) adamantly claimed that the economy was healthy, see below excerpt from January 4, 2008:
"The financial markets are strong and solid. And I want to thank [Paulson and his President's Working Group on Financial Markets] for being diligent. This economy of ours is on a solid foundation, but we can't take economic growth for granted."
"If you've got a squirt gun in your pocket you may have to take it out. If you've got a bazooka, and people know you've got it, you may not have to take it out."
Well, Paulson did take out his pocket 'Bazooka Policy' weapon and fire, nationalizing Fannie and Freddie into "conservatorships" earlier this year and in the process introducing this brand-new term to the Marxist dictionary. However, the continued need for the $700 billion Paulson Plan confirmed what I already suspected and now is plain to the entire world. Paulson is not packing a bazooka; he is packing a squirt gun.
Bernanke spends most of his time in Congress as a whipping boy like usual, trying to leave before he has to answer actual questions. When Congressman Paul recently asked him where in the Constitution does it give the Federal Reserve the power to create credit, Bernanke did not even come close to addressing this topic in his response.
Even Sarah Palin, the Washington, economics, and foreign policy newbie and possible soon-to-be-heartbeat-away-from-POTUS, even committed a faux pax by dropping the D-word in this full interview clip where Katie Couric, in my humble opinion, ripped her to pieces and left her for the crows. Jack Cafferty of CNN agrees here.
Couric: If doesn't pass do you think there is a risk of another Great Depression?
Palin: "Unfortunately that is the road that America may find itself on. Not necessarily this as it's been proposed, has to pass or we're gonna find ourselves in another Great Depression. But there has got to be action taken., bi-partisan effort..."
The strange thing is that most Americans believe the latest $700 billion bailout is designed to help assuage the financial pains of common Americans with credit or mortgage problems. Besides assigning Paulson as unquestionable financial dictator, the bailout is aimed at soothing the pain of our investment bankers, those Wall Street geniuses who manage to contribute very little actual economic growth theirs is a realm of financial capitalism, not the layman's idea of traditional production capitalism. Both the bill's sponsor, Senator Christopher Dodd (D-CT) and Paulson have agreed that "the proposal will not help a single family save their home." Perhaps the bailout can help these Wall Street geniuses bring home their six-plus-figure bonuses to their families for Christmas this year. However, I do have to admit that others besides Dr. Paul appear to understand some of the basics. Here is a speech I mostly agree with from Representative Marcy Kaptur (D-OH) entitled "They Want Mama to Make It Better."
Or Listen to Ron Paul and I...
Ron Paul, as one of the few lucid voices in Congress, is finding that it was a good thing he decided to not completely burn his bridges with the mainstream media. Below is an excerpt from the end of a recent 10-minute video with Fox News. My gripe is only now when the country is gripped by the very situation Paul predicted earlier this year (and indeed, for the past 20+ years), ONLY NOW, do they give him a whole 10 minutes when they would not even give him the time of day or even invite him to the NH debate when he was a presidential candidate.
Fox Talking Head: "Why shouldn't we take [Bernanke and Paulson] for what they are telling us if we don't do this, we are going to be in a lot of trouble?"
Ron Paul: Well, some people believe that but not many people in the country believe it and not a whole lot of congressmen are believing it right now. But they may well have their arms twisted out of fear and vote for it, but illiquid assets are illiquid because the prices are too high. So to dump that on the taxpayer makes no sense! You want the prices [to go] down.
FTH: "...If it's not that dire, why would they be here testifying yesterday and today making such a case for [the $700 billion bailout]?
RP: "Well they believe it, they believe it. But I don't think they have a clear shot at being credible. I mean they've been involved with Wall Street, they've been involved with Goldman Sachs for a long time. But they've studied different economics. They haven't studied Austrian free market sound money economics. They are all Keynesians. They believe in intervention and planning and regulating and inflation. A system that is not viable. And this fiat system been around only since 1971. A fiat monetary system never lasts, it always ends! Gold and Silver money is the only thing that lasts for the ages. We are seeing the ends of Bretton Woods Two. Bretton Woods [One] was predicted to end even as early in 1946, it ended in 1971. Others have predicted that Bretton Woods Two is a pseudo-paper standard and is a dollar standard. We have lived way beyond our means because we got to create all this reserve currency that we didn't have to work for. But now the dollar system is going to be rejected. Everything we are doing right now will be a burden and weight placed on the dollar."
Contained within many of Paul's clips is usually an inference to buy gold and silver, but this seems to be lost on the deaf ears on many of Paul's supporters. Many columns at this site and others, as well as in mainstream media, speak of the conventional wisdom of the moment. The conventional wisdom right now is overall apprehension and a "flight to quality" which is apparently to buy short-term US treasuries with miniscule yields approaching zero.
Don't Americans see the trap? Forget the fact that the "full faith and credit" of the United States dollar is under a grievous assault by Bernanke, Bush, and Paulson. Forget the fact that inflation, stagflation, and possibly even hyperinflation long-term are likely. My fellow Americans, my fellow Revolutionaries, the game is rigged, and a trap is set. Expecting a dollar crash? Actually, I allege this probably will not occur, at least not in the sense that most dollar collapse theorists expect. Follow my Money Matrix series, in the near future I will publish my thinking. The last few months I have been studying economics as if I had a final exam on the morrow. Although I ultimately in theory side with Paul, Rothbard and Mises, I agree with plenty of ideas from Hayek, even Quigley, Greenspan and Keynes. Although I strongly disagree with Keynesian principle of central banking and state-controlled economics, I do agree with these statements from its founder:
"If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has."
Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become 'profiteers,' who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery. Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.
Decide for yourself if you want to ignore Ron Paul and me. We are driving ourselves hoarse trying to explain this to you, but if you want to ignore us, go ahead. Look again at what I bolded above from Paul:
"A fiat monetary system never lasts, it always ends! Gold and Silver money is the only thing that lasts for the ages."
Paul will rarely come right out and say it directly, but he is not going to kick you in the face. Instead you have me writing to you trying to punch you in the brain. If you look up his economic writings, Congressional honest money bills, and stock portfolio, you will notice that he has acted on his principles. Paul is a strong proponent of owning physical gold and silver bullion.
[Aside: Purchasing ETF's such as GLD and SLV is a bad idea since you actually never own the metal and they may default or become frozen by governments at any moment. Think I am overstating the risk from your government? Study the FDR confiscation of the American public's gold in the 1930s and the recent ban on short selling about 800 financial stocks. Or ask a Frenchman, they are banned from crossing their nation's borders carrying any gold.]
[Also, on retrospect, I did not quite mean for this article to rant so militantly pro-gold and -silver, which it certainly does. Note that I do not advocate putting all of your eggs in the precious metal basket, and I also really do not care how much you have - 1 oz., 2oz, or a lot more, principally speaking its all the same to me. Again, my key point that I am trying to support here is that if you support Ron Paul and the Campaign for Liberty but do not own any precious metals, I view it as hypocritical. That said, do whatever you want with your money :) However, I will comment that its interesting that if you browse conservative saving and investing literature from the 1990s, many recommend holding 5% gold. In the 2000s, the typical strategy does not mention gold, and just recommends owning some real estate, 80% stocks and index mutual funds/ETFs and 20% bonds.]
To wring your hands, moan about the government powers that be that will "bailout" and "protect" our financial system without believing and possessing honest money, primarily gold but also silver, is the hypocrisy of the weak. C'mon! Gold and silver are even enshrined in our constitution as the very definition of money in Article 1, Section 10. I seriously do not want to read another unprincipled bailout article that portrays its author as shivering in fear without a clue instead of recommending honest money or something likewise sensible like the Monetary Reform Act or at least buying a g**damn assault rifle to protect their family.
That said, as I write here, the gold market (and also silver) are artificially suppressed by the central banks, so the spot prices could easily drop precipitously or rise 10% in one day as they did earlier this month. However, that does not change the fact that contemporary global fiat currencies must inflate or die. Concentrate not on the price of the metals, but on how many grams you physically control remember the true unit of an honest currency is mass not bucks and cents. Furthermore, there is no telling exactly what will happen if the price of gold and silver take off I suspect the central banks may quickly create and then spend their fiat money to purchase all available metal on the market while governments pass laws designed to block or inhibit precious metal ownership.
We must help force the debate on monetary policy. Ownership of physical gold and silver in the hands of We the People is crucial. Here is a checklist in case you agree with what I just wrote. I do realize I have ranted a bit here, sorry. If anyone wants to post either additional sources, or better yet, counter-arguments, please paste in below. I have tried to make it up to you with a list of educational (but yes, dominantly pro-gold and pro-silver) source list below. Let me stress here though to make up your own mind.
Get Physical Gold and Silver. Visit a US Mint authorized dealer near you and buy Silver or Gold American Eagles. Or Canadian Maple Leafs. Or South African Gold Kruggerands. Except they might not have any. In that case, buying Bag Silver' or pre-1964 silver coins (Halves, Quarters, Dimes) that are 90% silver by mass is your best bet. For the troy ounce (31.1 grams) they will be about the spot price of silver and so will be cheaper than Silver Eagles. (The easiest way to remember this is that $1 of Face Value = approx 0.725 TOz silver, but its typically sold at 0.715 TOz to account for wear and tear.) At this point, buying gold or 10, 100, or 1000 oz. silver bars is fine too. Do note that if you do ever decide to sell, capital gain taxes will wipe away 28% of your profits until we get that unconstitutional law repealed.
If gold and silver is not available locally, the next place is a spot dealer, of which you need to search for one, or if you have large sums of money you could try buying paper contracts and taking delivery (I am no help in either case). For a spot dealer that will act as a warehouse I can only recommend one, which is www.goldmoney.com. You can create an account for free, but need to pay for the postage to send in an application which takes about a week. The site's idea of being an insured money warehouse or electronic debit card backed by physical gold or silver may well be our next monetary system. The owner is James Turk, an ex-banker of the "Atlas Shrugged"-mold who is a board member of GATA. Research him and www.GATA.org. Since GoldMoney deals in London Good Delivery Bars, they are able to procure bars on the same scale as central banks and major exchanges. [Unless you have an extra $350K for gold or $135K for silver lying around, you are locked out of the market without a spot dealer too.] To date, there have not been shortages in these banking bars, just in the much smaller coins. The key risks are that if the company ever fails you may be paid in crappy fiat currency instead of metal, the metal is not in your physical possession, and you never have perfect certainty the vaults indeed have the metal. I believe the latter to be negligible due to independent and frequent internal audits, security setup and the published bar lists. The site claims absolute ownership and no counterparty risk. This is just my humble opinion, so decide for yourself. This is no substitute for physical ownership but is a nice way to diversify.
Don't have much money? Just buy a few ounces of silver at $14/oz or so and I will shut up.
Please join our 111,200+ force at www.CampaignForLiberty.com. We are looking for more savers, libertarians, constitutionalists, fiscal conservatives, real republicans, and antiwars.
You can also send a note to your Congress representatives to enact Ron Paul's Honest Money initiatives. Join this www.DownsizeDC.org campaign.
My father would want me to add here that, while you are at it, buy a gun. I think you can figure out why.
For Honest Money and the Restoration of the Republic!
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
As always, unlike the NFL, the author grants full permission to allow any accounts of, rebroadcasts, retransmissions, repostings in part or full of this article to your blog or anywhere else in order to promote the Restoration of our Republic.
Veritas numquam perit. Veritas odit moras. Veritas vincit. Truth never perishes. Truth hates delay. Truth conquers.
"You can’t quit until you try! You can’t live until you die! You can’t breathe until you choke! You gotta laugh when you’re the joke! There’s nothing like a funeral to make you feel alive! Just open your eyes and see that life is beautiful!... No one will cry at my funeral!There’s nothing like a trail of blood to find your way back home "
- from Sixx A.M. "Life is Beautiful." I agree. The central banks are dripping blood. Get home and protect your family before they arrive.
GO GATA! The premise of the Gold Anti-Trust Action Committee that the world gold market is artificially suppressed by central banks in order to make their currencies look stronger.
www.GoldMoney.com - See my comments above, GoldMoney is an international gold and silver warehouse with insured vaults in London and Zurich. Ability to hold and pay interest on four major fiat currencies, issue payments in goldgrams, etc. Again, I trust them as an alternative way to diversify where and how my physical metal is stored, but I urge you to be wary and thoroughly investigate this and ANY method where someone else holds your metal for you before investing. The best is always physical possession although you should always be creative with your storage locations :)
The World Gold Council - A wealth of information on central bank holding, gold derivatives, supply and demand statistics and more. Free login required.
Paul, Ron. "Pillars of Prosperity." (2008) A 400+ page compilation of Dr. Paul's writings. After reading these, one realizes that Dr. Paul did very little recent work in putting together his best-selling "The Revolution" as most of this book was written 20+ years ago.
Henry Paulson - A Quick Look at the Man Published: September 27, 2008 Everyone in the country is talking about the Paulson Plan, wherein one clause would make Paulson de-facto financial dictator of the United States, accountable to no one. The article is a summary of my brief investigation and asks for help in finding out WHO IS THIS GUY?
WaMu Gets the FDIC WHAM-O! Published: September 26, 2008 The Seattle-based Washington Mutual Bank is shut down by the FDIC. The Raiders from the last Great Depression, JP Morgan, Strike Again. Have you protected yourself?
US Treasury Seizes Fannie Mae and Freddie Mac! And What It Means Published: September 8, 2008 "You poor kid, there have been centuries of philosophers plotting to turn the world into just that - to destroy people's minds by making them believe that that's what they are seeing. But you don't have to accept it. You don't have to see through the eyes of others, hold on to yours, stand on your own judgment, you know what that is, IS - say it aloud, like the holiest of prayers, and don't let anyone tell you otherwise." - Ayn Rand
The "Pssssst.... We Live in a Police State!" Collection
Spill a Soda, Go to Jail for a Year Published: September 27, 2008 The latest strange-but-true antics of oppression from our dear Police State. Check out the story of the infamous soda-spiller at a Veteran's Affairs Hospital in Idaho.
We the People versus the Might of the US Government Published: March 2, 2008 What do the experiences of SAS trooper Ben Griffin, Hope Steffey, and Jose Padilla all have in common? They show the Might of Government is overwhelming Right. We the People want Justice!
The views expressed
in this article are those of Jake Towne, the Champion of the Constitution only and
do not represent the views of Nolan Chart, LLC or its affiliates.
Jake Towne, the Champion of the Constitution is solely responsible for the contents
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My friend I have a few disagreements with you. First I have gold… and guns. Secondly, suggestions from you are fine but like most Libertarians I don’t like being told what to do. Third, in my opinion it’s not wise to put all your eggs in one basket, even a golden basket.
Take a look at the 36 year price history of gold.
That graph ends at 2007 so it doesn’t show the recent spike of $1000 per ounce. But it does illustrate that gold is very volatile and also shows that gold does not always go up. From 1980 to 2001 the trend was down. That’s a 21 year period of negative growth. By comparison the S&P 500 has seen a much more consistent upward trend over the same time period. [link edited for length]
Posted By: Jake, the champion of the constitution
Date: 2008-09-28 14:32:32
David S -
Its true what you wrote, and understand this article certainly wasn't aimed at you, I am trying to reach those who have no precious metals at all, or just that ETF stuff, which I think doesnt count. Gold (and silver even more so) prices are indeed quite volatile. The link you pasted for the gold price needs to be inflation adjusted (right?), but if you adjust the price of gold for inflation the average price since 1971 is still just about $650/oz. Also, remember my comment about just worrying about the grams you own not the amount of fiat currency it translates into. Whether you buy the gold suppression story or not is also up to you.
Time will tell, and I also don't advocate putting all your eggs in one basket either. In the 1980s and early 90s it seemed every conservative investing book recommended 5% of your portfolio in gold, since 2000 you dont see much of that, its 80% stocks-and-index-mutual-funds-and-20% bonds-and-own-a-house.
Everyone can decide for themselves, but 5% isn't a bad recommendation. Thanks for the read and the critical comment, deciding how much, 1oz, 2oz or more is up to each reader
Jake I apologize if my comment sounded rude. I didn't mean it that way. Maybe I'm getting a bit feisty because of the current economic fiasco coupled with the ineptitude of the politicians in dealing with it..
Actually there is quite a bit of gold in my portfolio, much more than 5%. One issue I have with gold is how to value it. With stocks I'm a value investor, meaning I use P/E ratios, dividends, debt to asset ratios, etc to determine if a stock is favorably priced. But with gold its hard to do that. One could do what you did, starting with the price in 1971 and adjusting for inflation to get about $650/oz. You can also look at the cost to mine it, which varies widely, but is generally much less than the current price of $880. Either way it seems overpriced today. My reason for stocking up on it was the belief that we are headed for a period of high inflation. We'll see how that works out in the future but for the past 6 months the best investment was dollars, or maybe foreign currency.
Posted By: Jake, the champion of the constitution
Date: 2008-09-28 23:06:35
David S -
No offense taken, I thank you since it actually made me realize how militant my article sounded to others, but as it does reflect my views so I just added an aside to tone it down a wee bit. To survive we still dont have a Colorado vale like in Atlas Shrugged, so we need to keep some fiat anyways.
As far as how to value gold (silver is even more interesting), in terms of fiat currency, I don't even try. I value it by myself in gold grams and silver ounces. I'm not selling any of it for awhile so its long term. Its actually kinda of fun deciding how much to try to get.... my thinking runs along these lines. boy I bet if I had Al Gore's weight in silver, THAT would be a lot of silver. Or if all the gold ever mined takes up a cube 20 meters X 20 meters X 20 meters, how much do I own of it?
My day job involves silver as a key raw material so that also plays a part in my views. I do agree with the silver bugs that silver is used in a lot of niche applications where its critical but the cost of the silver is basically negligible, so these companies aren't going to care or be impacted too much if silver doubles. Even with the advent of digital cameras, demand is up.
Buy on the dips, my last buys were $11 for silver and $760 for gold. It feels great to get rid of the paper, although before December I will probably develop a serious fondness for nickels until the law that Congress passed turns this coin and pennies into steel since they were losing money on the coining/senioriage. Dr Paul had the smartest idea in all of Congress like normal, which was to just stop printing pennies - they have no purchasing power anymore.
Your timing on the gold and silver buys was excellent. Unfortunately I have a unique talent for buying at the high and selling at the low. :-) Maybe I could sell my services as a reverse bellweather; when I buy everyone else should sell.
Why not divide up $700 billion to every citizen over 18? That's about $3 million for each one. After taxes call it $2 million. Wouldn't most of the mortgages get paid off? If we're going to inflate why not start there this time?