Posted on 11/27/2008 7:50:27 AM PST by ovrtaxt
The national debt clock which ticks away over Union Square in Lower Manhattan, showing Americans the speed at which their country is sinking into the red, ran out of digits on Wednesday. The federal government's debt had tipped over $10 trillion and it will take until next year for the property developers who own the clock to update it. They promise to add two digits so that it can go up to a quadrillion.
Meanwhile, in the city's streets and bars, the talk was all about the one commodity holding value: gold. Whether it's a wedding ring, your grandmother's jewellery or a bar of gold bullion, it's what everyone wants. Cash may be king, but gold is God.
The price of gold has been moving upwards all year as smart investors around the world saw what was happening in the world of paper money. The SPDR Gold Trust, an
exchange traded fund which buys and sells gold bullion dependent on investor demand, had 755 tons of bullion on hand last week, the most in its history and more than the reserves of the UK, Japan, China or the European Central Bank. Meanwhile the price of gold relative to currencies around the world has been hitting record highs.
Gold and silver traders are frazzled trying to locate, buy and ship stores of gold, whether coins or bars. With prices so volatile and insecurity so rampant, deals and promises are proving hard to nail down.
Gold Bugs, a curious group of traders who exist on the periphery of global finance, suddenly find themselves smack in the middle. They believe we should liquidate everything held in a bank, print out any stock certificates and lock them away and then retreat under the bed with a shotgun and a couple of gold bars.
All of this should make Gordon Brown squirm about his decision to sell more than half of Britain's gold reserves in 1999 when the price of bullion was at a 20-year low.
The price of gold has since soared three-fold and Brown's decision has cost the Treasury around £3bn. Aside from the direct financial hit, it would have been extremely comforting for the British government to have had 400 extra tons of gold bars in its vaults these days versus stacks of Euro-denominated bonds.
It would be easy in calmer times to dismiss the Gold Bugs as wackos. But the evidence in their favour keeps on piling up. Sixteen per cent of American homeowners now owe more than their homes are worth, up from six per cent last year. One incredulous Wall Street analyst told me that there was a day last week when not a single new car was sold in the United States. The average daily sale used to be about 40,000.
Gold's value is also likely to rise with fears of inflation. The debate over inflation has become impenetrable. Official figures suggest it is under control. All those banks who cut interest rates this week don't seem to be worried about it. And yet anyone who has to fill up their car or go to the supermarket knows the truth: everything is much more expensive than it was a year ago. The only conclusion can be that official inflation figures can no longer be trusted.
There is another reason to believe that inflation is secretly desired by the United States. It would be the quickest way of erasing its debts - far quicker than actually working to pay them off.
Milton Friedman said that inflation is a purely monetary phenomenon. The more money sluicing through an economy chasing a limited supply of goods, the higher inflation goes. Many economists argue that this fundamental link has been broken by globalisation, the rapid growth of emerging economies and more sophisticated money management by Central Banks.
But it is hard not to suspect that all those colossal cheques being written by the US government and others will not have some effect on prices. Ten per cent inflation by the middle of next year will make the gold hoarders look even smarter than they do today.
I wonder if anybody got that with a video camera.
I have money in an untaxed 401k. How can I use that money to obtain physical possession of gold without paying income tax during the transaction?
It says a lot about a society that passes on its debt to future generations.
Retire.. other than that, you will be taxed for any withdrawals.
How is this breaking news?
Gold is a lousy investment. While it’s done well the past couple of years, over the long term it hasn’t done much better than a savings account.
The goldbugs are running amok because of the bailouts. Yeah, our currency is being inflated thanks to Paulson and Bernanke et al. It doesn’t mean that every currency is being inflated to same extent. Cash remains a good place to be. Just not necessarily in US Dollars.
This should be a target-rich environment for the friends of paper money who lurk here. Have at it boys!
(I wrote this a number of years ago when things were NOT going well with the economy. Trust me: They WILL get ugly once again as man — or certain men — cannot resist playing God. We continue to violate the universal, immutable laws of economics at our great peril.)
Despite the apparent economic strength of the American economy, history proves that EVERY house of cards eventually comes down. And the higher the card house, the harder the fall when it finally comes. And when it does, the more freedoms we will voluntarily surrender to “restore order.” It was the Founders’ concern about this historically valid problem which prompted their attempt — now ignored — to keep American “money” sound and honest.) Dick Bachert 1998
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UPDATE: Now that the inevitable economic catastrophe is upon us, how much fun is it to watch the idiots in congress who triggered this thing scramble for cover by blaming everyone else? Not much!
“Liberty lies in the hearts of men and women; if it dies there, no constitution, no law, no court can save it.” — Judge Learned Hand, 1944
DB 10/2008
* * * * * * * *
The Forgotten History of Money
This is the fascinating story of the efforts by certain of the Founding Fathers to prevent the economic distress we find all about us today. It is also a sad story on the basis that modern, “sophisticated” Americans have abandoned the corrective institutional mechanism that remains in place to this day. As you read it, think about a world with many fewer S&L, banking and political scandals and economic problems now considered the norm.
“Blood running in the streets. Mobs of rioters and demonstrators threatening banks and legislatures. Looting of shop and home. Strikes and unemployment. Trade and distribution paralyzed. Shortages of food. Bankruptcies everywhere. Court dockets overloaded. Kidnappings for heavy ransom. Sexual perversion, drunkenness, lawlessness rampant. The wheels of government are clogged, and we are descending into the vale of confusion and darkness. No day was ever more clouded than the present. We are fast verging on anarchy and confusion. (George Washington in a 1786 letter to James Madison, describing the effects of fiat paper money inflation then ravaging America in the pre Constitutional period.)
“The annihilation (of the paper money) was so complete that barber shops were papered in jest with the bills; and sailors, on returning from cruises, being paid off in bundles of this worthless money, had suits made of it, and with characteristic lightheartedness, turned their loss into frolic by parading through the streets in decayed finery which in its better days had passed for thousands of dollars.” (Contemporary writer, Breck, 1786)
“Paper money polluted the equity of our laws, turned them into engines of oppression, corrupted the justice of our public administration, destroyed the fortunes of thousands who had confidence in it, enervated the trade and husbandry, and the manufactures of our country, and went far to destroy the morality of out people.” (Peletiah Webster, 1786)
At the drafting of the U.S.Constitution, there were many “Friends of Paper Money” present. On August 16, 1787, when the discussion arose on Article 1, Section 8, the proposed wording was this: “The Legislature of the United States shall have the power to...coin money...and emit bills of credit of the United States.”
A hot argument ensued on the power to emit bills of credit, which is another way of saying “printing paper money”.
Here are the actual words James Madison wrote describing the debate in his diary: “Mr.G.Morris moved to strike out *and emit bills of credit.* If the United States had credit, such bills would be unnecessary; if they had not, unjust and useless.
MADISON: Will it not be sufficient to prohibit the making them a tender? This will remove the temptation to emit them with unjust views. And promissory notes in that shape may in some emergencies be best.
MORRIS: Striking out the words will leave room still for notes of a responsible minister which will do the good without the mischief. The monied interest will oppose the plan of the Government, if paper emissions be not prohibited.
COL.MASON: Though he had a mortal hatred to paper money, yet as he could not foresee all emergencies, we was unwilling to tie the hands of the Legislature [Legislature = Congress].
MR.MERCER:(A friend to paper money) It was impolitic...to excite the opposition of all those who were friends to paper money.
MR. ELSEWORTH thought this was a favorable moment to shut and bar the door against paper money. The mischiefs of the various experiments which had been made, were now fresh in the public mind and had excited the disgust of all the respectable part of America. By withholding the power from the new Government, more friends of influence would be gained to it than by almost anything else...Give the Government credit, and other will offer. The power may do harm, never good.
MR.WILSON: It will have a most salutary influence on the credit of the United States to remove the possibility of paper money. This expedient can never succeed whilst its mischiefs are remembered, and as long as it can be resorted to, it will be a bar to other resources.
MR.READ thought the words, if not struck out, would be as alarming as the mark of the Beast in Revelation.
MR.LANGDON had rather reject the whole plan than retain the three words *and emit bills*”.
The motion for striking out carried.
Historian George Bancroft later wrote: “James Madison left his testimony that *the pretext for a paper currency, and particularly for making the bills a tender, either for public or private debts, was cut off.* This is the interpretation of the clause, made at the time of its adoption by all the statesmen of that age, not open to dispute because too clear for argument, and never disputed so long as any one man who took part in framing the constitution remained alive.”
(Bancroft – founder of the U.S.Naval Academy at Annapolis among other accomplishments – wrote a book on this very subject entitled “A Plea for the Constitution of the United States: Wounded in the House of Its Guardians.” During WWII, FDR – a serious friend of paper money – ostensibly to supply the war effort, ordered the printing plates for many historical books smelted. Bancroft’s book was among them. A photocopy of one of the remaining originals can be found here
ROGER SHERMAN(1721 1793)should be a name familiar to every American. As familiar as Washington, Madison, Jefferson and Adams. He is the only man to have signed all 4 documents surrounding the formation of the United States of America: The Continental Association of 1774, The Declaration of Independence, The Articles of Confederation and The United States Constitution. He was a Judge of the Superior Court in New Haven, Connecticut, serving that office with distinction from 1766 until 1788. He served as Treasurer of Yale University from 1765 to 1776. He was renouned for his high intelligence and unswerving honesty and was described by John Adams “as honest as an angel and as
firm in the cause of American independence as Mount Atlas.” He served in the U.S.Senate from 1791 until his death in 1793.
Why is Roger Sherman*s name unfamiliar? HE WAS AN ENEMY OF PAPER MONEY!! In 1751, Roger Sherman and his brother William sued James Battle for paying a debt to their shop in New Milford, Connecticut, in depreciating paper currency. Over a period of 15 months, Battle had charged “divers wares and merchandizes” amounting to 129 pounds of what
Sherman assumed were pounds of Connecticut “Old Tenor”, a stable currency whose value were well preserved by taxation taking it out of circulation. But Battle assumed the debt was denominated in pounds of ever depreciating Rhode Island currency, tendered in same, and the Shermans took a beating in the payment and sued for recovery of loss by depreciation. The Shermans lost when Battle argued that he was merely following the accepted custom of the day. In 1752, Sherman wrote his book “A Caveat Against Injustice or An Inquiry into the Evils of a Fluctuating Medium of Exchange” indicting UNBACKED PAPER MONEY.
It was this experience that Sherman brought to the Constitutional Convention and prompted him to rise on August 28,1787 and propose new, more restrictive wording to Article 1,Section 10. The standing version under consideration was worded this way: “No state shall coin money; nor grant letters of marque and reprisal; nor enter into any Treaty, alliance, or confederation; nor grant any title of Nobility.” (From Madison’s Notes of the Convention) “Judge Sherman and Mr. Wilson moved to insert the words *coin money* the words *nor emit bills of credit, nor make any thing but gold and silver coin a tender in payment of debts* making these prohibitions absolute, instead of making the measures allowable with the consent of the Legislature of the U.S. Mr. Sherman thought this a FAVORABLE CRISIS FOR CRUSHING PAPER MONEY. If the consent of the Legislature could authorize emissions of it, the friends of paper money would make every exertion to get into the Legislature in order to license it.” Mr. Sherman*s and Mr. Wilson*s motion was quickly agreed to and became the supreme law of the land.
Some additional quotations to ponder:
“All the perplexities, confusion and distress in America arise not from defects in the constitution or confederation, nor from a want of honor or virtue so much as from downright ignorance of the nature of coin, credit and circulation” (John Adams in a letter to Thomas Jefferson, 1787)
“I deny the power of the general government to making paper money, or anything else, a legal tender.” (Thomas Jefferson)
“You have been doubtless been informed, from time to time, of the happy progress of our affairs. The principal difficulties seem in great measure to have been surmounted. Our revenues have been considerably
more productive than it was imagined they would be. I mention this to show the spirit of enterprise that prevails.” (George Washington in a letter to the Marquis de LaFayette, June 3, 1790 AFTER the United States Constitution prohibited unbacked paper money at Article 1, Section 10)
“Since the federal constitution has removed all danger of our having a paper tender, our trade is advanced fifty percent. Our monied people can trust their cash abroad, and have brought their coin into circulation.” (December 16, 1789 edition of The Pennsylvania
Gazette)
“Our country, my dear sir, is fast progressing in its political importance and social happiness.” (George Washington in a letter to the Marquis de LaFayette, March 19, 1791)
“The United States enjoys a sense of prosperity and tranquility under the new government that could hardly have been hoped for.” (George Washington in a letter to Catherine Macaulay Graham, July 19,1791)
“Tranquility reigns among the people with that disposition towards the general government which is likely to preserve it. Our public credit stands on that high ground which three years ago would have been
considered as a species of madness to have foretold.” (George Washington in a letter to David Humphreys, July 20, 1791)
“It is apparent from the whole context of the Constitution as well as the times which gave birth to it, that it was the purpose of the Convention to establish a currency consisting of the precious metals.
These were adopted by a permanent rule excluding the use of a perishable medium of exchange, such as certain agricultural commodities recognized by the statutes of some States as tender for debts, or the still more pernicious expedient of PAPER CURRENCY.” (Andrew Jackson, 8th Annual Message to Congress, December 5, 1836)
DESPITE WHAT YOU WERE TAUGHT IN SCHOOL, THE HISTORICAL RECORD IS CRYSTAL CLEAR: AMERICA WAS TO HAVE BEEN SPARED THE DESTRUCTIVE EFFECTS OF AN UNBACKED PAPER MONEY SYSTEM. MOST OF THE PROBLEMS WE FACE TODAY CAN BE TRACED TO WHAT ANDREW JACKSON CALLED “THE PERNICIOUS EXPEDIENT OF PAPER MONEY”.
HISTORY TEACHES THAT AN “ARTIFICIAL” MONEY CREATES AN “ARTIFICIAL” WORLD WHERE THE PRICE FOR SOME ITEM...EVEN OUR MOST POPULAR WELFARE “PROGRAM”...CAN BE DEFERRED TO FUTURE GENERATIONS (OUR $11 TRILLION
NATIONAL DEBT) OR PAID WITH A “MONEY” CREATED OUT OF THIN AIR WHICH ROBS THE VALUE FROM THE MONEY WE MIGHT BE UNFORTUNATE ENOUGH TO HAVE IN OUR POCKETS AT THAT MOMENT (INFLATION). AND ONE THING YOU MUST REMEMBER ABOUT INFLATION IS THAT IT IS NOT AN “EQUAL OPPORTUNITY” DESTROYER: THOSE FIRST IN LINE TO GET THEIR HANDS ON THE NEW MONEY ROLLING OFF THE PRESSES (THE MODERN FRIENDS OF PAPER MONEY) HAVE A CHANCE TO SPEND IT BEFORE IT LOSES ITS VALUE. THE LITTLE PEOPLE (THAT’S US, FOLKS!) FARTHEST DOWN THE LINE ARE THE ONES WHO FEEL THE FULLEST EFFECTS OF THIS DESTRUCTIVE PROCESS.
I don’t know. You can hold gold in an IRA, maybe there’s a way to transfer your investment dollars within a framework like that?
Maybe some tax pros can answer that question, my knowledge of tax law is very limited- all I care about is how to keep those IRS bastards as far away from me as possible.
yea now i see the liars thieves and SAB bastards are out now pimping and pyramiding and running up gold just to them at some point leave everyone holding the bag in that commodity just like all the rest....
No one wantw to address the real issues like...
Who is culpable for the great 2008 fraud in the theft of middle class baby boomers 401k, IRA, SEP wealth - the redistribution scam of our hard earned money...who is going to pay?
I recommend we find the bastards, civil employees, congress and their staffs, CEOs of investment groups, financial groups, hedge funds, CEO of other businesses, CEO and officers of fannie may and Freddie Mac
Begin class action suit against all, criminal prosecution…these funds, particularly those in conservative IRA, 401k, SEP retirement accounts where not invested as we were lead to believe and in most cases were gambled away by these drunken with greed self servers earning commissions, bonuses and attempt to create higher interest income on the monies most of us had indicated we wanted invested wisely and conservatively with less income for our protections….they instead invested in junk investments without vetting them for our protect to earn more on the margins at our unknown risk…felon scams and fraud…know by dodd franks scheumer and the raines and Johnson and gorlick and the other greed agents who have also lied and were themselves dishonest with the American people in the last election lying about what they knew and when did they know it just to get elected by ignorant masses …this is huge…the guilty need to go to jail…it is Fraudgate…the theft and redistribution of the baby boomer generation retirement wealth.
wonder where they store the gold.
could one government confiscate it?
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Not really, but borrowing from your 401(k) account seems like it qualifies. However, that isn't a wise move unless it's your only option to avoid homelessness. You have to pay a nominal interest rate (a little above prime with most plans) until it's paid off, you have to pay it all back within 5 years, 10 years if you use the money to buy a house, and the money you would use to pay back the loan would be after tax dollars.
That means, in effect, you are still paying the tax on the money you borrow from your account.
So, as you can see, it's usually a real stupid idea, unless you absolutely, positively have to do it.
I don't believe that.
That won’t work.
If your 59 1/2 you don’t pay the 10% penalty, but you still pay the income tax. It still may not be a bad thing though...
Taking out 380K and paying 36% income tax may be cheap. If you withdrew it at 36K per year for the next 10 years you would still pay up to 15%. Which means you would be paying an additional 20% to have it now. Inflation can and probably will e more than that over the next 10 years.
Good post. I will admit, there’s a bit of a maniacal air about the original article I posted.
But as for me, I’ll take the opinions of guys like Ron Paul, Jim Rogers and Peter Schiff over the blabbering bigmouths on CNBC any day. I do not trust the present state of dollar strength- math is stil what it is, and inflation is coming.
By the way, if there’s a run on physical delivery of metals in the COMEX market, these unrealistically low spot prices are going to evaporate very quickly.
Transfering from one tax deferred account to another is not a taxable event. Find a gold fund you like and let them handle the transfer. Ask the fund’s reps your tax questions. They will confirm what I just told you.
“I have money in an untaxed 401k. How can I use that money to obtain physical possession of gold without paying income tax during the transaction?”
I am not advising anything, but if you wanted to buy some gold (or silver), you could borrow $9,000 against your 401(k)and buy physical. Then when the price of gold goes up, and the interest rate increases, you could sell the gold, pay off the loan, keep the profit, and look like a financial genius.
Remember, this is NOT financial advise. I will not be responsible if the price of gold falls, and you lose the back 40 acres of the proverbial farm.
.....Bob
I don’t know the details, but I have heard that you are permitted to use that money to buy specifically US Eagle gold coins, which are produced by our government.
Don’t know about that but I heard that China just spent some of our dollars that they have and bought tons of gold. They are dumping the US dollar.
Dubai also. HUGE gold purchases.
Uh, the danger at present is deflation, not inflation.
That, and the opportunity to sell at historic highs.
Anyone advertising gold now is looking to take their profit, and they probably know more about the market than most people.
If you buy paper that says you own gold, you own paper.
Auto and computer manufacture is scaling back. Jewellery stores are bankrupting. This means less demand for gold and platinum (Catalytic converters).
If you do not have physical control over something, you do not own it.
These TV ads are annoying, and a little insulting. No one succedes by buying high.
3 to 4 days (think hurricane Katrina) = have $100 cash on hand
30 days = $1000 cash on hand
90 days = 100 oz silver coin on hand
1 year = 10 oz gold coin on hand
They also recommend having a supply of coins on hand in the event of major deflation. A loaf of bread could go from $3 to 5cents, so you want coinage. Use the copper-clad coins first, then silver. Paper money also begins to disintegrate, and if there's an extended crisis, the paper dollars will not be replaced. Coins last longer.
This is for the sort of crisis that could cause global markets to shut down, or even the electricity to be shut off for a period of time (as in Katrina). Think about how you'd get your money out if the ATM wasn't functioning. You also wouldn't be able to use a credit or debit card if there was no electricity.
This is the basic outline that I'm following, and any further investment will be icing.
Remember what happened to oil as a commodity? Is gold any safer? No salesmen please.
You can buy ETFs, which work like mutual funds in that what you buy is aggregated into a pool; GLD and SLV, however, hold gold and silver instead of buying shares in companies.
Can you rollover your 401K to an IRA? If so, there are some IRAs that are set up to allow you to hold gold of various kinds in them.
If anyone knows of an a plan that permits delivery of gold, let me know.
deflation-inflation. It is like a childs seesaw, one always follows the other.
Precious Metals Ping list
Caveat emptor, as always.
Definition of the current gold bubble: a planet-wide scam soon to burst, characteristically.
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bump for future read...
Yeah, that claim was a little much. I think we would have heard about it lol
Notice the author did not verify it? Just somebody he knew said so... right.
Of Course.
FDR did exactly that in ‘33.
Gold was confiscated by the US at the Federal Reserves set price.
Ownership of gold as bullion or “hoarding” of gold in any state remained illegal in the US for many decades.
This is a fatal weakness for gold as a hedge.
And the people who say that are the same ones who claimed in 06 there was no housing bubble or subprime crisis.
I will never listen to a Keynesian economist or commentator again.
i trade the GLD etf in my ira. if tracks 10% of the price of gold so it is around $80 right now. this is one way to do it......
That’s why you shouldn’t hold it in a safety deposit box.
“Remember what happened to oil as a commodity? Is gold any safer?”
In my view, no. Oil at least has a significant usefulness beyond it’s intrinsic value. Gold can be used in jewelry, and has some limited use in electronics and I believe in catalytic converters. That’s about it. You might note that sales of cars and jewelry aren’t doing real well right now.
Gold is just like any other commodity. I’m not against buying gold as a commodity per se, I just think that it’s better to own something that has a usefulness beyond the fact that it’s pretty. And I also think it’s grossly overvalued right now.
Look around you. Fuel prices are crashing. Housing prices are crashing. Commodities are crashing. Tens of trillions of dollars in wealth has been wiped out. The deflation is real, and it’s happening NOW.
This one seems to have stopped, too. Maybe it’s just off for the Holiday?
http://www.brillig.com/debt_clock/
You pay the tax when you cash it in, not when you purchase it.
“Gold is a lousy investment. While it’s done well the past couple of years, over the long term it hasn’t done much better than a savings account.”
Timing is everything. My gold and silver are worth 4x their value 10 years ago.
Pooh-pooh it all you want; I’m laughing all the way to the bank. :)
I don't believe that.
Aw common man.
One banking analyst told me that things are so bad that there was one day this past week where nobody deposited any money in the United States.
Um..okay?
Now can I sell you a few shares of Goldilocks Mining.
But FDR did that to take gold out of the monetary system.
At that time, since gold WAS money, just about everybody who had money, had some gold.
Today, with the exception of rather small amounts of jewelry, it is probably a stretch to say that 5% of Americans own any gold.
It simply wouldn’t be worth it to the government to try to confiscate any gold.
And it wouldn’t make them very popular either... if the gold price zooms, and the government decides to just take it, think about that relative to the government just flat out giving 700B to their Wall Street buddies...
Yet gold is holding. Amazing, huh?
I actually think silver is a better investment, it should outperform gold percentage-wise. There is a shortage of retail silver these days because the price has been so artificially depressed that it is uneconomical to pull it out of the ground. Not only that, a lot of silver is mined as a byproduct of copper and zinc, both of which have suffered an enormous decrease in demand.
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