Liberty Maven

by Peter Schiff

As the world awaits another $600 billion flood from Bernanke’s printing press, central bank governors from Brasília to Tokyo are preparing to respond in kind. This is the monetary equivalent of a nuclear war, except instead of radiation, bombs of inflation threaten to make the world economy uninhabitable for saving and productive enterprise.

While much of the attention has been focused on China and accusations that it is a “currency manipulator,” the first shot in this war was clearly fired by the US Federal Reserve. Last month, the Fed came out with a statement that, for the first time ever, said inflation is rising at a rate “below its mandate.” That is, they acknowledged that the deflation threat had passed, that prices were stable – but they still intended to send prices higher.

Since the Bretton Woods Agreement was signed in the wake of World War II, the global monetary system has been based on the US dollar. This means that when the Fed decides to create trillions of dollars of inflation, other countries can’t simply say, “let them dig their own grave.” Instead, because their international transactions are denominated in dollars, they feel a pressure to maintain relatively stable exchange rates between their currencies and the dollar.

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by Michael Pento, Senior Economist of Euro Pacific Capital

Any psychoanalyst looking at the behavior of investors today would see clear strains of schizophrenia in a comparison between the markets for gold and US Treasuries.

Currently, the 10-year Treasury yield is setting new lows on a daily basis. In the financial models all economists were taught at school, this would be an indication of an economy with low inflation expectations and a strong currency. But the dollar has fallen over 12% since June, and the price of gold continues to hit all-time highs. These results are completely antithetical. Bonds are flashing a warning sign of deflation, while gold and the dollar presage hyperinflation.

During the last period in which the US experienced significant economic stress, the late 70′s and early 80′s, the markets in gold and Treasuries showed a much higher degree of harmony. At that time, the Fed’s extreme depression of interest rates led to rapidly rising inflation, a weakening dollar, and a massive spike in the price of gold. More significantly, yields on Treasuries soared as investors demanded higher rates as compensation for the added inflation risk. In other words, everything made sense.

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Quote of the Day: “Are Mr. Weiner and Chairman Bernanke also going to agree to print on every dollar the reasonable expectation that its value will be eroded by inflation?” — Ira Stoll, writing about Representative Weiner’s anti-gold witch hunt

Representative Anthony Weiner, a Democrat from New York, plans to hold Congressional hearings to investigate gold dealers who advertise on TV.

Is it a coincidence that these gold dealers just happen to advertise on shows like Glenn Beck that tend to oppose Democratic polices? Of course not. This hearing is clearly intended to intimidate. Representative Weiner wants to chill speech for a partisan purpose. But it get’s worse . . .

Weiner is also proposing legislation that would require gold companies to disclose “the reasonable resale value of items being sold (so that the companies) would no longer be able to hide behind false promises of profitability.” This makes it perfectly clear that Mr. Weiner has no idea how a free market works.

Prices rise and fall. No future price can be guaranteed by anyone for anything. Imagine what would happen if, for instance, Mr. Weiner’s idea was applied to the stock market, or . . . to the future price of government bonds?

Would people like Representative Weiner go to prison if the government’s promises about the future value of its bonds turned out to be overly optimistic? Of course not. But this is exactly how he wants to treat gold dealers.

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by Mary Anne and Pamela Aden, authors of The Aden Forecast; written for Peter Schiff’s Gold Report, a newsletter devoted to the precious metals market.

Gold is looking good. Since its summer low of $1160 in late June, it has surged to $1275. That’s a nearly 10% gain in less than two months, and even though gold has again broken its all-time record high, it’s poised to move still higher.

What’s Driving the Gold Price Up?

There are several key factors coming together at the same time and all of them are bullish for gold. But if we had to boil it down, the bottom line is uncertainty. This makes investors nervous, which has always been good for gold. But is this response rational?

We think so. Gold is the ultimate safe haven and as the economy stumbles, demand for gold has grown. That’s been the case for almost a decade. In the second quarter of 2010, for instance, the economic indicators were down and gold demand was up 36%.

Investors are concerned. Not only did the economy falter this month, but the stock market declined as well. This has fueled uncertainty about the government’s policies, the potential for a “double dip” recession, and the danger of a deflationary period.

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by John Browne, Senior Market Strategist, Euro Pacific Capital

In the first few days of July, the prices of gold and silver appeared to break a five-month upward trend by drawing back about five per cent from the record June peaks. Despite many similar corrections that have occurred frequently during the long bull market in precious metals, pundits nevertheless looked to draw bold and significant conclusions from the drop. But just as investors were getting comfortable with the leading explanation – that a looming double dip recession will prevent inflation and thereby dampen demand for precious metals – the markets for both metals stabilized.

Most investors still credit the accepted orthodoxy that metals will only gain if inflation is widespread or a financial crisis encourages investors to seek safe havens. The failure of both metals to break below their upward trend lines, despite the lack of news on both fronts, should lay to rest these canards. Unfortunately, nothing appears more resilient than the belief in a gold bubble.

In my opinion, the current rise of precious metals is the direct result of the evident profligacy of governments the world over. Spendthrift politicians in Washington, London, and Tokyo, have caused people to lose faith in paper currencies. Investors, as well as an increasing number of lay citizens, understand that debts cannot be accumulated forever and that the most tempting solution will be to simply print more currency. The only alternative is an unpalatable tax hike that will only serve to reduce long-term revenue, as explained by the famed Laffer Curve.

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Ron Paul has often come out in support of abolishing legal tender laws and the idea of having other currencies compete with the dollar.  Well, in Michigan the legal tender laws may still be in place but many businesses now accept alternative currency such as gold, silver, and copper coins when doing business:

New types of money are popping up across Mid-Michigan and supporters say, it’s not counterfeit, but rather a competing currency.

Right now, you can buy a meal or visit a chiropractor without using actual U.S. legal tender.

They sound like real money and look like real money. But you can’t take them to the bank because they’re not made at a government mint. They’re made at private mints.

“I sell three or four every single day and then I get one or two back a week,” said Dave Gillie, owner of Gillies Coney Island Restaurant in Genesee Township.

Gillie also accepts silver, gold, copper and other precious metals to pay for food.

Read the rest of the story and watch a short news clip on this topic.

Ron Paul, in his Texas Straight Talk column, discusses the failure of Keynesianism and why the founding fathers insisted on only gold as silver as currency:

This past week several emerging and ongoing crises took attention away from the ongoing sovereign debt problems in Greece.  The bailouts are merely kicking the can down the road and making things worse for taxpaying citizens, here and abroad.   Greece is unfortunately not unique in its irresponsible spending habits.  Greek-style debt explosions are quickly spreading to other nations one by one, and yes, the United States is one of the dominoes on down the line.

Time and again it has been proven that the Keynesian system of big government and fiat paper money are abject failures in the long run.  However, the nature of government is to ignore reality when there is an avenue that allows growth in power and control. Thus, most politicians and economists will ignore the long-term damage of Keynesianism in the early stage of a bubble when there is the illusion of prosperity, suggesting that the basic laws of economics had been repealed.  In fact, one way to tell if a bubble is about to burst is if economists start talking about how the government and the Central Bank have repealed the business cycle.

The truth is the laws of economics are constant and real, no matter how inconvenient they might be to politicians and bankers.  This reality is setting in and the bills are coming due.  In the mean time, countries that have no money have bailed out other countries that have no money, except for the phony money created by politicians, bureaucrats, and their partners-in-crime at the central banks.  This may be preventing big well-connected banks from having to take on massive losses, but it is all at the expense of the taxpaying citizen.

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“I remember a German farmer expressing as much in a few words as the whole subject requires; ‘Money is money, and paper is paper.’” – Thomas Paine

Originally published May 13, 2010 at http://towneforcongress.com/economy/americas-ridiculous-toy-money-1

America’s monetary situation is becoming fairly ridiculous.  This Monday, the Wall Street Journal carried “Will Nickel-Free Nickels Make a Dime’s Worth of Difference?” on its front page.  The article shares the government’s dilemma that minted each $100 box of nickels costs very close to $200, and that the metal content of the coin is worth more than the face value of 5 cents.  The penny, which was already debased from almost 100% copper to 2% copper in 1982 also costs more to mint than its face value.  The pre-1982 pennies are now worth over double their face value.

The nickel’s mass is 5 grams and consists of 25% nickel and 75% copper.  It is the only US coin to never have been devalued by using cheaper metals since it was first minted in 1866.  At that time, both the penny and nickel were worth far, far less than their face value, but were used as placeholders for gold and silver coins.  America’s dimes, quarters, half-dollars were all 90% silver up until 1964 when the silver content became worth more than the face value.  Today’s dimes, quarters, and half-dollars are nickel plating – done on purpose to resemble silver – sandwiched over a cheap copper core.

While the WSJ hems and haws between substituting wood, plastic, aluminum or zinc in the coins, one of the issues with “toy money” or devaluing the coin currency is that it could cause a psychological trigger as citizens realize Congress and the printing operators at the Federal Reserve intends to pursue its permanent monetary policy of inflation, which is a hidden, insidious tax on all Americans who hold dollars.   Read More »

“She was so old that she dried up quickly in the sun… But the silver shoes are yours, and you shall have them to wear.” – the Witch of the North, from Frank Baum’s 1900 “Wonderful Wizard of Oz” (p. 6/72)

Originally published May 2, 2010 at http://towneforcongress.com/economy/one-step-closer-to-the-end-of-the-yellow-brick-road-1

Well, Technicolor changed the unforgettable color of Dorothy’s shoes from silver to ruby red, but Baum’s work had multiple interpretations, including an allegory for sound money.  The silver shoes danced on the “yellow brick road” made of solid gold to the Emerald City of Oz, where everything seen was faked through green classes (the greenback or dollar) run by the little man behind the screen (the FED/Congress).

After watching the Chinese develop a voracious appetite for gold and silver over the last year before I left China to return home and run for U.S. Congress, one of the strange things I noticed after returning stateside was the non-stop newspaper and TV ads for unwitting citizens to bring in their gold and be paid a fraction of their worth.  It was so bad that even The Onion picked up and satirized the whole event, suggesting the US government could pay off the national debt by selling our gold for irredeemable dollars.   Read More »

The New York Post reports a whistleblower’s claim that the Federal Reserve is suppressing the price of gold and silver.

Gold and silver prices signal inflation. If the Fed can silence this signal then it can make its own product, Federal Reserve Notes, look more valuable than they really are.

If you and I tried to manipulate the market in this way we would go to jail. So why should such behavior be okay for an institution that’s supposed to serve the public interest? If this price manipulation is occurring, then . . .

* It defrauds investors
* It tricks innocent Americans into keeping their savings in depreciating dollars, when they might be better off shifting to more stable assets

Even worse, these false market signals will create more malinvestments, bubbles, bursts, and recessions.

And when that happens you can bet that both the politicians and the Fed will add insult to injury by blaming it all on the free market, when it will really have been the fault of the UN-free market that they created.

Is this what you want?

Should the Fed be able to protect itself at your expense?

Don’t you think you could better plan for your future if you had reliable knowledge about everything the Fed is doing?

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