Liberty Maven

by John Browne, Senior Market Strategist at Euro Pacific Capital

As a result of active “demonetization” efforts by the IMF and its member central banks, gold and silver have experienced the type of volatility that has given conservative investors reasons not to perceive the metals as dependable cash alternatives. Instead gold and silver have become known as the asset class to hold as a hedge against inflation.

However, during the 1990′s, when inflation was in general much higher than it has been since the turn of the millennium, gold and silver prices drifted lower and stagnated. However, since 2000, gold and silver have risen by over 400 and 700 percent respectively. Remarkably, this has occurred over a time frame during which, by most accounts, low inflation has prevailed.  How can this be explained?

In 1944 when the U.S. dollar was considered ‘as good as gold,’ it was made the international reserve currency. This unique status is the reason that Fed Chairman Ben Bernanke was recently able to say that, “The U.S. Government has a technology, called the printing press that allows it to produce as many dollars at it wishes at essentially no cost.”

Read More »

by John Browne, Senior Market Strategist at Euro Pacific Capital

It is rare in recent history for precious metals to appreciate in parallel with the broader stock market. Yet, this has been the case in the two years since the stock market began crawling out of the wreckage of the 2008 financial crisis. Although metals have vastly outperformed US equities over that time frame, it is noteworthy that stocks have gone up at all. Since January 2, 2009, the S&P 500 stock index is up just about 50%. Over the same time, gold is up 68% and silver is up a staggering 267%. With rising interest rates, oil at over $100 a barrel, and the recovery running out of steam, many investors are wisely asking if the markets are set for a sharp pullback. Given the correlation that we have seen across asset classes, some are making the seemingly logical conclusion that metal prices are vulnerable.

The results of 2008 loom large in many calculations. In the second half of that year, when the extent of the financial catastrophe emerged into the light of day, the S&P 500 dropped some 31%. At the same time, gold dropped by more than 7% and silver almost 39%. Recent volatility in the shares of gold and silver mining stocks reveal that the fear of such reversals may be a growing concern among investors.

But one example does not a rule make, especially the example of a panic rush into dollars and US Treasuries. Wise long-term investors make decisions based upon fundamentals, and those for precious metals remain strong.

Read More »

by Peter Schiff, CEO of Euro Pacific Precious Metals and author of the hit economic parable How an Economy Grows and Why It Crashes.

While gold and silver coins are nice to look at, and there’s a certain sense of independence one gets from owning them, most purchasers buy physical precious metals with the goal of eventually spending them.

by John Browne, Senior Market Strategist at Euro Pacific Capital

Earlier this month, J.P. Morgan made an important announcement that received scant coverage in the media: the bank would now accept gold as collateral for loans. The move appears to have been well-timed, for in the ensuing weeks, the price of gold and silver climbed steeply, based largely on political turmoil in the Middle East. But why should Morgan’s decision be of interest to anyone outside the bank?

It can be argued that J.P. Morgan is the world’s premier major bank. As such, its decision to accept gold as collateral offers a rare glimpse into the very private financial decision-making of some of the largest and most sophisticated investors in the world, whether governments, corporations, or wealthy individuals.

By reopening its former gold vaults in New York, as well as new facilities in Far Eastern financial centers – which cater to investors who typically have larger gold reserves than Western counterparts – Morgan is telling the world that gold is gaining greater traction as a medium of exchange.

Given that a bank continually looks to provide services that its clients demand, the move suggests that a strategy has taken hold among the highest echelon of investors based on core holdings of precious metals.

Read More »

by Michael Pento, Senior Economist at Euro Pacific Capital (www.europac.net)

There can be little doubt that Fed Chairman Benjamin Bernanke has been a very, very good friend to gold investors. However, some of those who have benefited from his largesse now fear that the recent selloff in gold indicates an imminent end to Bernanke’s monetary high-wire act. Most assume that a cessation of the Fed’s stimulative efforts, if it were to occur, would spell the end of gold’s bull run. But a closer reading of Bernanke’s economic philosophy and the Fed’s own recent history, shows that once central banker begins a strenuous routine starts, it is very hard, if not impossible, for them to dismount.

It is widely believed that the unemployment rate, core inflation and home prices are the three key pieces of economic data that Bernanke and his Fed cohorts rely upon when formulating monetary policy. Although other data points, such as regional manufacturing surveys and the producer price index (which have rebounded significantly in some cases) attract some attention, they do not carry near the weight of the big three. With the unemployment rate remaining north of 9.4%, YOY core CPI inflation still less than 1% and the Case/Shiller Home Price Index down .8% from the year ago period, the Fed is in no mood to downshift. If anything, my guess is that Bernanke will step on the gas.

More importantly, in light of Bernanke’s often stated conclusion that premature Fed tightening in 1937 and 1938 led to a prolongation of the Great Depression, even if the big three metrics were to show marked improvement, any future increase in interest rates will be moderate and held in abeyance for as long as politically possible.

Read More »

by Peter Schiff, CEO of Euro Pacific Precious Metals and author of the hit economic fable How an Economy Grows and Why It Crashes

Last month, I addressed the hype around gold confiscation, and debunked the myth that collectible or numismatic coins would offer effective protection. But there is another sales pitch that many dealers will use while trying to “up sell” you to numismatics. They may argue that on investment merits alone, numismatics are a better bet. While this may be a more rational line of thinking than the typical confiscation con, it is bad advice for investors hoping to protect their assets in an economic slump.

THINK LIKE A PRO, NOT A SCHMO

I have long urged investors to keep 5-10% of their portfolios in physical precious metals, and add even more exposure when appropriate through the Perth Mint certificate program and mining stocks. This advice, far outside of the Wall Street mainstream, stems from my view of the kind of crisis we are approaching.

Many people assume that the crash I wrote about in the original “Crash Proof” was the credit crunch of October ’08. They are mistaken. Though I did accurately forecast the economic events of 2008, my ultimate prediction was that these events would set into motion a larger crash to follow. That crash, the one I have been warning about for a decade, is a collapse of the international dollar standard.

This is the crisis for which the smart money is already preparing. The People’s Bank of China, Reserve Bank of India, Goldman Sachs, Barclays Capital, John Paulson, Jim Rogers, and countless other big names are all protecting themselves from a global monetary breakdown by buying gold. But are they doing it with numismatics? Among the big players, the answer is universally no.

Read More »

CSPAN’s show, Newsmakers, aired this weekend. Their guest was Congressman Ron Paul. Most of the questions revolved around economics and the Federal Reserve. It’s refreshing when Dr. Paul is given the proper amount of time to explain his positions without the interruptions that always occur on the mainstream media outlets.

You can watch the entire show here at CSPAN.org.

Unless Congress acts to fix their mistake, a paperwork tsunami will drown every business, including yours, and all of your favorite organizations, including Downsize DC.

This coming tsunami is the new requirement that every business must fill out 1099s forms for every company with which it spends more than $600. This new burden was a provision of the Obamacare bill.

Everyone hates it. Both parties CLAIM they want to repeal it, but they can’t agree about where to fit it in their tight schedule, or whether or not to “pay” for the lost revenue with spending cuts elsewhere.

Well, they SHOULD cut spending. But let’s be clear: There’s NO revenue loss to contemplate. The 1099 requirement will cut into profits. That would mean less, not more revenue for our bloated government.

Please tell Congress to stop delaying and to please repeal the 1099 requirement immediately.

You may borrow from or copy this letter . . . Read More »

by Peter Schiff

If you’ve spent enough time in the gold community, you might be under the impression that the most imminent threat to the average American isn’t terrorism or unemployment, but rather gold confiscation. Starting with the fact that FDR confiscated gold during the last Great Depression, and continuing to the quite accurate forecast that we are headed into an even Greater Depression, unscrupulous coin dealers have been pushing investors to buy expensive “numismatic” or “collectible” coins that they claim would be protected from government seizure. The only problems are that the original motive for confiscation no longer applies and the “protection” offered by major coin dealers wouldn’t actually help you keep your gold.

THE TYRANT’S ORDER

In 1933, President Roosevelt issued Executive Order 6102, prohibiting the private holding of gold and requiring US citizens to turn over their gold bullion or face a $10,000 fine ($167,700 in today’s dollars) or 10 years imprisonment.

Gold coin and gold certificates in an amount not exceeding in the aggregate $100 [about 5 troy ounces at that time] belonging to any one person; and gold coins having a recognized special value to collectors of rare and unusual coins.

Read More »

Michael Pento, Senior Economist at Euro Pacific Capital (www.europac.net)

The continued bull market in the price of gold has been one of the staple discussions in the financial media for the better part of a decade. But, in that time, almost no consensus has emerged to explain the phenomenon. If you ask ten Wall Street pundits to explain the upward movement, you will most likely get nearly ten different answers. While most logically identify global currency debasement as a primary cause, others say that gold is driven by: fear of economic uncertainty, central bank gold hording, international political conflict, or the ebb and flow of the Indian wedding season. The truth is the main drivers for the price of gold are the level and direction of real interest rates and the intrinsic value of the dollar.

Most people (outside of Washington) understand that printing money dilutes the value of the currency being printed. When a currency drops, the nominal price of hard assets in that currency generally rises. But the relationship between gold and monetary expansion is not that simple.

The act of central bank money printing temporarily drives down nominal interest rates, while at the same time creating inflation and lowering the intrinsic value of the currency that is printed. Therefore, subtracting rising rates of inflation from falling nominal interest rates results in a falling real rate of interest. Once real rates become negative, the liability of holding gold, which offers no interest income, disappears. The more real interest rates fall, the greater incentive for investors to own gold.

Read More »