US Government’s Financial Bluff Is Called

By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com

There was a tremendous amount of news last week that will have long lasting impact on the lives of Americans and people around the world.  Both major US Supreme Court decisions affecting illegal aliens and the 2010 health care law got tremendous press coverage and will doubtless figure prominently in the US November elections.

The so-called “final solution” to Europe’s fiscal crisis is nothing of the sort.  The plan has many loopholes and proposes a number of standards that will never be achieved.  Already the mainstream media is catching on that the solution isn’t worth the paper on which it was written.

uncle sam suicide US Government’s Financial Bluff Is CalledThere was another significant development last week that received almost no coverage by the mainstream media that I suspect will have more long-term global impact than the other developments I mentioned.

Last Thursday was the deadline that the US government had set for other nations to cease trading with the Central Bank of Iran.  The threat to those countries that did not comply was to be prohibited from using the SWIFT system for settling international financial transactions.  The global impact of not being able to use the SWIFT system is significant enough that the government of Iran announced that a ban from using it would constitute an act of war by the US.

The US government’s demand had a relatively modest impact on most European nations, with most choosing to knuckle under to comply with the order.

It was different in Asia.  China and India are major trading partners with Iran, They are the two largest importers of Iranian oil, for instance.  India quickly looked into the possibility of paying for imports from Iran using other currencies and possibly gold.

China announced that it would launch a competing system for settling international financial transactions that did not use US dollars at all.  Such a move by China would make a serious dent in international demand for dollars, which would mean in that instance that billions or maybe trillions would be repatriated to the US for settlement by delivering tangible goods or services.  If this were to occur, the US government and economy would be struck a huge blow.

Because the demand specifically prohibits dealing with the Central Bank of Iran, several nations and businesses began using a third party to disguise the transactions.

Still, as the deadline approached, India, China, and Russia, along with some other countries, were obviously not going to meet the demands of the US government.

When the deadline approached, the US government, representing the largest economy on the globe, blinked.  Instead of imposing the financial penalty of cutting off nations from the SWIFT international payment system, the federal government announced that it was extending the deadline by six months.

What does this action mean?

It means that the US government’s financial clout is no longer strong enough to automatically force other countries to do as Washington orders them to do.  It means that the use of US dollars in settling international financial transactions have declined by so much that some other nations can openly defy the US government without being punished.   It means that foreign governments realize that the fiscal mismanagement by the US government will destroy the value of the US dollar and cripple America’s economy.

Six months from now, the US government will have even less financial clout to boss other nations.  The politicians in Washington know it as do governments around the world.  It is one of the clearest signs that the US dollar is on the way out.  The decision by the US government to extend this deadline last Thursday is just the latest warning to protect your wealth by getting out of dollar-denominated paper assets such as stocks, bonds, and cash and convert them into assets that will hold their value.  Gold and silver have a track record of holding their values that go back thousands of years.  There are also other options.  Protect yourself sooner rather than later.

pat heller US Government’s Financial Bluff Is CalledPatrick A. Heller owns Liberty Coin Service and Premier Coins & Collectibles in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed athttp://www.libertycoinservice.com. Other commentaries are available at Numismaster (http://www.numismaster.com under “News & Articles). His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com.

About the Author:

Patrick A. Heller was honored with the American Numismatic Association’s 2012 Harry J. Forman Numismatic Dealer of the Year Award. He owns Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com). He is also the financier and executive producer of the movie “Alongside Night”.

46 Comments on "US Government’s Financial Bluff Is Called"

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  1. V.Kurt Bellman says:

    I have a new policy: no longer will I refer to “Austrian School” economic theory. I will now refer to it as the far more desriptive “Austrian Fool” economics.

    • V.Kurt Bellman says:

      Why are they “fools”? Because instead of doing actual economic analysis, that is, actually looking at the real data, they instead choose to rely on a quasi-religious belief in a dogma that they read in a book years ago. This “religion” even includes (false) prophets whose Word shall not be taken in vain – Griffin, Dr. Paul (the ob-gyn non-economist wannabe President), Hayek, now Heller. They use veneration of icons – discs of metal that apparently achieve mystical status by having atoms with either 47 or 79 protons in them. Oooh, prime numbers! I’m starting to believe now. Save me, Hayek! I repent of my fiat currency sins, Dr. Paul! Pffft!

      It’s all hocum, gentlemen! Call me when you want get serious about economics and stop relying on 5,000 year old historical metal-based hysteria.

  2. Scott says:

    Mr. Bellman,
    Your mindless rant exposes the real fool. Go ahead and think what you want, but please keep the following in mind. Gold is and always will be money, but there’s very little difference in fiat paper and what everyone uses to wipe their ass.

    • V.Kurt Bellman says:

      Gold is absolutely NOT money. Money can be made of gold, and some is. But no, gold itself is not money.

      • Scott says:

        Gold is an excellent store of value that is timeless, durable and transportable. 80 years ago a paper $20 bill and gold a double eagle had the same value. Today it takes more than eighty $20 bills to buy one double eagle. Which one has stood the test of time? Why would tomorrow or 50 years from now be any different?
        If gold’s not money, then money doesn’t really exist.
        http://www.gold-speculator.com/gold-investing-101/4476-aristotles-qualities-good-money.html

        • V. Kurt Bellman says:

          And yet for millenia, at least on THIS side of the Atlantic, the essence of “money” was not gold, but cylindrical beads drilled out of Quahog clam shells. Gold was a fetish of Europeans and Middle Easterners primarily. There is nothing about gold as money that can’t be substituted. Scott, what the article you linked is describing is “gold”, not money, conveniently enough. Money can even be 8-foot diameter circular stones. Depends on where you are.

  3. CoinWeek says:

    No doubt that is why the US government still holds 8,965.6 tons of Gold reserves valued at $418.39 billion and that for the first time in 20 years Central Banks are now net buyers of Gold.

    People who believe that the world could function as it does today based on a hard asset currency foundation may indeed be fools, but IMO it is indicative of a lack of trust and “faith” in the economic system, Wall street, the banks and government as a whole.

    Our financial systems,have become a morass of near unintelligible complexity to the point that even the experts have no clue as the the unintended consequences of both their actions and in-actions.

    The US is supposed to be the most financially sound country on the planet, and we haven’t even been able to pass a budget in three years. Not a real inspiring performance.

    So feel free to mock and and belittle all those who might suggest that the current path that we are on is unsustainabale. Just pass the kool-aid and put your faith in our elected officials and the wall street crowd, because they have done such a good job up to this point.

    • V.Kurt Bellman says:

      Don’t try to paint me into a corner with something I never said or even indicated, CoinWeek. I have next to ZERO faith in Wall Street or the mega-banks. To me, they are the “kleptocracy”. What I do have a deep and abiding faith in is the ingenuity and industrious of the working man of America. All we need is a government to get the heck out of his way and let the same forces that built this country into the sole world superpower do it again, and for generations to come. Eliminate the handwringers and naysayers and turn Americans loose to conquer the cosmos again. We used to have “The Right Stuff”. We can again. And metal discs having a mystical significance wasn’t ANY part of that.

      I love certain metal discs, too. But I value them because of what’s stamped onto them, not what the image was stamped into. That’s just so many protons, neutrons and electrons. Without ANY particular value.

      THESE particular elected officials don’t much impress me. But we have better available, by the bucketload.

      • CoinWeek says:

        Kurt, I wasn’t trying to paint you into a corner. I thought we were talking about economic theory and your point that “followers of the Austrian school” were fools.

        So it follows that Keynesian economics requires active policy decisions by governments and financial entities to create efficient macroeconomic outcomes. If that is so, then you have to put your faith and trust in the government, politicians, the Fed and the banks to do the right things.

        I see little evidence of that happening either in the past or in the future. These people can barely maintain the status quo much less chart a future path. So I guess what I am really asking is, What’s Plan B?

        • V. Kurt Bellman says:

          I don’t accept your premise that the only two options are the kleptocracy (status quo) or the idiocracy (being governed by Austrian Fools). There are myriads of other options. Saying if you oppose A, that must mean you support B, is a fallacy a junior high schooler can point out.

          Yes, my option requires Joe and Jane Average to think differently about public policy and voting. It may mean voting for the guy you’ve never heard of, instead of the guy whose ad you saw eight times a night, because he’s been bought by Wall Street, lock stock and barrel. If America won’t wise the h*ll up, well, we get the government we deserve. And if you can’t FIND an honest candidate, then it’s your OBLIGATION to BE that candidate. Yes, I’m calling for voting in public elections to be more important than sitting on your *ss and voting on American Idol.

          As far as I’m concerned, the ONLY entity that did EVERYTHING right in this mess was the Fed. Not politicians, not mega-bankers, not AIG, not Obama, not Congress. Obama, facing the worst labor recession maybe EVER, went h*ll bent to vastly increase the total cost of hiring people (Obamacare). That is just frickin’ INSANE!

          The Fed saed the whole economic world. They deserve a parade and medals of honor, not the butt-kicking we coineys give them daily.

          • CoinWeek says:

            Kurt: You are leapfrogging the issue. I didn’t say these were the only two options, but they are, at least in the developed economies the prevailing economic theories. If the Austrian fools are wrong and the Keynesians appear to be ineffective, I was just asking what sort of economic path you think we might or should take, and as importantly, do you think that the government is the solution compared to many who think they are root of the problem. BTW, I doubt most Jr High students would follow the fallacy logic :-)

          • V.Kurt Bellman says:

            Yes, CoinWeek, I do believe a wise temperate government does indeed have a crucial (not quite central, merely crucial) and legitimate role in managing a modern economy. Fiscal policy (what to tax and what to spend) has ALWAYS been politically charged and a legitimate question of public policy, dating back to the founders when import tariffs provided most federal revenues (If only…). Monetary policy (money supply and interest rates) up until EXTRAORDINARILY RECENTLY was a politically “taboo” subject matter, and I submit it still should be. The Fed was created with HUGE amounts of political insulation from passions of the day, almost as much as the Supreme Court’s, but not quite as much as the Court’s, yet more than the U.S. Senate’s (6 year terms).

            Central bankers need to be able to tell politicians, AND THE PUBLIC OCCASIONALLY, to sit down and shut up before you hurt yourself. Let the professionals work. I don’t understand what my surgeon does either. I don’t criticize his work much. I am classically trained in all this big scary complicated macroeconomics stuff, just enough to be able to keep up with the new stuff when it’s explained to me. The average guy on the street doesn’t have a prayer in the world of understanding it.

            The solution to that is NOT to retreat to 5,000 year old belief systems and solutions, any more than not understanding brain surgery is a justification to going back to blood-letting.

            The solution is to find a field you DO know backwards and forwards, ask the average guy to trust YOUR specialty, and then return the favor and let the Princeton economist (Bernancke) alone to do what he knows best.

  4. CoinWeek says:

    Money can be anything that is generally accepted as a medium of exchange. It is simply a measure of value.

    Commodity Money is is a unit of measure for a physical item. It can be gold, silver, Grain, whatever. Shells and stones have been used as well. The common denominator is that all parties to the transaction accept these “units” as having intrinsic value and/or “use” value.

    Representative money is similar except that notes or other valueless items were used that “represented” the underling commodity money. So if gold, for example” was the accepted commodity money, a note or receipt would be acceptable payment as the holder knew it was backed by the underlying commodity itself.

    Fiat Money has no intrinsic value and is backed by nothing. It is declared to be Legal Tender by the government that issues it and requires that it be accepted as payment within the boundaries of the country that issued it.

    • V. Kurt Bellman says:

      CoinWeek,

      I simply fundamentally disagree. One U.S. dollar is backed by the same thing every time – what I spent it on. In the last few months, some of my U.S. dollars were backed by… 1/88 of a train fare from Philadelphia to Indianapolis, 1/47 of a gorgeous 1913-D Type 1 Buffalo Nickel in MS-63/64, 1/10 of a day at the Indianapolis Motor Speedway on a practice day, 1/3.149 of a gallon or about 40.65 fluid ounces of gasoline I bought an hour ago, 138 million bytes of RAM storage I added last week to this computer, and 1/25 of my subscription to another numismatic newspaper.

      • V. Kurt Bellman says:

        In other words, no dollar I will EVER own will EVER be worth 1/1600 of an ounce of gold, because there is absolutely NO chance I’m EVER going to be using MY dollars to buy gold, until and unless we start kicking around fractions much closer to 1/700. There is so much froth, foam, air, bubble-osity in gold’s price today, I’m amazed it’s not being used to raise blimps.

      • Scott says:

        The U.S. dollar is backed by faith in the U.S. government and nothing more. The receiver of said dollars in any transaction has faith the dollars will be redeemable for whatever goods or services they may want in the future. In case you haven’t noticed, this faith is declining around the world as some countries are moving away from the U.S. dollar. There is only one reason the U.S. dollar has been the world’s preferred currency and that sole reason was it’s convertability to gold until 1971.

        • V.Kurt Bellman says:

          Scott,

          No. I have noticed no such thing. Oh, and Scott, I do watch, daily. Foreign exchange rates and bullion prices are on my Windows 7 widgets right on the desktop. I don’t even have to launch an app. I see the U.S. dollar over the last year GAINING against the yen, the Swiss franc, the Euro, the Canadian Dollar, the Pound Sterling, silver bullion, and now even gold bullion, too.

          Yes, until recently the Chinease Yuan gained aganist us, but I hardly count them because their currency exchange is utterly rigged and they aren’t traded like true free market currency exchange is.

  5. Paul E says:

    On the bright side, at least Mr. Bellman isn’t demanding Mr. Heller be silenced this week!

  6. Segar says:

    It’s the Keynesians that are fools. The Keynesians think they can take something totally worthless, put some government ink and numbers on it and give it magical value. The same fools think printing more of said paper will stimulate the economy. In reality, printing more paper without more productivity just devalues all paper in circulation.

  7. V. Kurt Bellman says:

    Segar,

    You’re extremely close to stumbling upon where I am. Rather than decrying the (actually quite ordinary levels of) printing money (yes, even during QE2 – do the math), why not steer policy toward the “more productivity” of which you wrote? If you think we are carrying a too high Debt/GDP ratio, which I ALSO think we are, why is the prescription ALWAYS to reduce the numerator? We can ALSO increase the denominator and employ more people, instead of less. Everybody wins.

    • V. Kurt Bellman says:

      So while the Austrian Fools are chanting, “Less debt, less debt”, and in the process throwing even MORE Americans into deep poverty, I’m the guy yelling, “More GDP, more GDP!”

      My answer is simple. If a government policy restricts DOMESTIC (key word) economic activity, STOP IT AND REVERSE IT IMMEDIATELY. GDP is king. Growth is the panacea. Restricting the money supply is cutting off an economy’s oxygen. Why on earth would anyone want to do that? Do you LIKE having desperately poor people in the streets?!?! I’d rather have them in even a smoke-belching factory making products.

      • Scott says:

        Growth is impossible with our current government policies of perpetual unemployment assistance and throwing parties to encouraging participation in SNAP. In 1984, 85 per cent paid some federal tax, now only 51 per cent pay federal taxes. You’ll never have more GDP with policies and programs that pay people to be unproductive and punish those who are productive.
        http://dailycaller.com/2012/06/27/usda-suggests-food-stamp-parties-games-to-increase-participation/

        • V.Kurt Bellman says:

          NOW you’ve uncovered the true villain, and that needs to be addressed forthwith. That does NOT implicate the Federal Reserve and its work in any way, however. Our true problem lies in our FISCAL policy, not MONETARY policy. We should be able to bend our fiscal policy problems with elections. One’s coming. Be there. If we fail, we have only ourselves to blame. Ben Bernancke will not have been our undoing, we will have been.

  8. V.Kurt Bellman says:

    In view of Scott’s insistence above that gold “is” money, I have made a discovery: green tinted glass “is” the Coca-Cola retail delivery package.

    The parallel is PERFECT!

    Virtually all Coca-Cola retail delivery packages USED TO BE MADE OF green tinted glass. Everybody over a certain age knows it. Interestingly, these people are of the same age to remember metals backed money. In many OTHER parts of the world (Mexico, e.g.) the vast majority of Coca-Cola retail packages are STILL green tinted glass. Factories still make commemorative green tinted glass Coca-Cola pacakges for collectors.

    We need to ignore the fact that Coca-Cola also comes in aluminum, that used to be steel several years ago, and now most of it is made of increasingly crappy plastics.

    None of that matters, dammit. I’m old and cranky and stuck in my ways, and when I was a boy, Coca-Cola came in green tinted glass, so all green tinted glass is Coca-Cola bottles.

    All I need now is a jack*ss like G. Edward Griffin to write a sensationalistic lying-my-buns-off book about some shady conspiracy to bring out steel cans.

  9. Louis Golino says:

    I am numb from all this theoretical/ideological discussion. I prefer the realm of facts.

    Precious metals are an important part of protecting one’s assets for the long-term, but they are at risk of declining now and in the future just like other assets classes.

    There are no guarantees in life, or in investing. If you only learned one thing from the financial crisis, it should be that there is no where to hide all your eggs.

    I believe diversification is still the best approach. Those who own a variety of assets including PM’s, real estate, stocks, etc. are the ones who have done the best over time.

    In the past Mr. Heller sensibly suggested keeping a certain % in PM’s, depending on your situation. Now he keeps suggesting people “convert” their paper assets into metals. So does that mean all of them? Is there no place for any other type of investment?

    Remember also that while PM’s are liquid generally speaking, it can be a hassle to convert them to cash when you need them. There are tax and logistical implications, storage issues, etc.

    I am so tired of people on both sides of these debates blaming “the system,” banks, etc. for their own mistakes. Take responsibility for your own affairs, and don’t rely too much on what others say. Learn for yourself.

  10. Scott says:

    I agree with you Louis. The facts are Bernanke’s loose monetary policies and near zero interest rates are enabling our government’s addiction to spending and slowly destroying the savings of millions of americans.

    • V.Kurt Bellman says:

      Whoever told you saving was necessarilty virtuous … lied. Look up “The Paradox of Thrift” on Google. What it basically is that while choosing to save more AS AN INDIVIDUAL can be good for you, if everybody chooses to save more, everyone will end up saving less, because the economy will partially collapse. We don’t need to think about this in the abstract. All we need to do is look outside. Aggregate savings is much higher than it was 4 years ago. (Savings increases as debt is paid down. Incresaing one’s debt is negative savings.)

      Look outside at that economy out there. THAT is what increasing net savings or decreasing debt causes. It’s not pretty.

      • Scott says:

        Mr. Bellman,
        Our savings rate is still among the lowest in large economies. Based on what your above theory, everyone should spend more to get us out of this problem that was caused by excessive spending.
        http://blogs.wsj.com/economics/2012/05/31/u-s-savings-rate-falling-amid-stagnant-incomes/

        • V.Kurt Bellman says:

          Yes, SOMEONE has to do the spending. GDP = C + G + I.
          GDP equals consumer spending plus government spending plus net investment (plant, equipment, inventory) spending. If consumers won’t spend (they CAN’T without jobs), government is forced to stop spending (That IS what you’re calling for, after all.) and businesses won’t invest in expansion here, then yes, GDP will crash and we’d all better learn to live as hunter/gatherers again.
          SOMEONE has to do the spending (aggragte spending ALWAYS equals aggregate income). You tel me. Who should be doing it? There are only three options. Pick one.

          • Scott says:

            Mr. Bellman,
            To quote yourself “Don’t try to paint me into a corner with something I never said or even indicated.” Our government has constitutional obligations for spending, but these obligations don’t include bailouts of private banks, coporations or other countries. Nobody is advocating that we force the government to stop spending for its legitimate obligations. Our GDP would be much higher if government confiscated less from its productive citizens so those citizens could more efficiently circulate that money in the economy to create jobs.

          • V. Kurt Bellman says:

            Agreed, Scott, the government DOES need to confiscate less from PRODUCTIVE citizens. Tax policy SHOULD take productivity into account. It doesn’t. It treats all income the same, speaking of the source. In fact, it taxes labor highest of all. That’s nuts! Making a living slicing and dicing companies and offshoring jobs is NOT productive, NOR is trading derivatives and credit default swaps. Those guys should be taxed at pre-1962 marginal tax rates.

  11. V.Kurt Bellman says:

    The essential problem is that there is a “Dark Side” growing out of the metals fundamentalist viewpoint. It is starting to morph into a generalized “survivalist” mindset, with hoarding packaged foods, and investing in “other metals, like lead coated with copper mounted on brass”.

    There is an element of this Paul/Griffin/Austrian Fool mindset, and you can hear it talked of openly on late night talk radio, that almost YEARNS for economic Armageddon and societal breakdown. Some of these fools have prepared to be the “winners” of that scenario. Yah. Sure. Just like winning a nuclear war. It’s the same thing either way, minus the radiation burns.

  12. Mike says:

    As usual Mr. Bellman I agree with 90% of what you said,the other 10% is new , but I’m learning. I think the big stumbling block for your opposition is that money is no longer a thing, it’s an idea. As I understand it, FDR took us off the gold standard in 1933,so goverment could insert liquidity in the system when it’s grinding to a halt. After The Great Depression,the system was locking up, people wouldn’t spend, few could borrow to start a business or expand one, it was a big mess. An influx of money, jobs could get the ball rolling again, and it did. But with this new system, you needed regulation to keep it in balence and it worked well for 40-50 years. I see the problems starting with deregulation of the system under Reagan, with those in banking and Wall Street, screwing up the system due to greed. That’s the core of the problem, not that money is no longer a thing.

    I know this is a simplistic overview and I’m certainly no economist. Heck I probably have a few things wrong, but guns, gold and dried food isn’t going to solve your problems. Be careful what you wish for!

    • V. Kurt Bellman says:

      Mike,

      You are farther along the path to truth than you know. While the Reagan years did bring SOME deregulation with SOME risks, those were fairly benign relative to “the big enchilada” – the repeal of the Glass-Steagall Act in 1999 during the Clinton administration.

      The Austrain Fools who (incorrectly) believe savings creates lendable funds by having banks accumulate those deposits and loan them out at a higher interst percentage (like Paul E) are assuming Glass-Steagall is still in place. It isn’t. Savings do not produce any meaningful lendable funds UNLESS your bank has evaded the merger mania and is still a local S&L. If your bank has been merged into a national or regional, your deposits pay employee salary overhead and nearly nothing else. Lendable funds come from 1) the Federal Reserve, and 2) the profits from the investment trading desks and derivative traders, PERIOD! When trades go bad, the Fed provides ALL the lendable funds PLUS making up those losses.

      • V. Kurt Bellman says:

        We have a banking system now that allows bankers to “go to a casino”. If they win, they keep the winnings. If they lose, they lose nothing, the Fed and the taxpayers do. Repealing Glass-Steagall and creating banks “too big to BE ALLOWED TO fail” means it’s all a “heads I win, tails the taxpayer loses” banking system.

        We need to reinstitute Glass-Steagall and chop up big banks until they ARE small enough to fail if they’re stupid. The Fed IS NOT THE PROBLEM! The member banks are. Bernancke should be up for Sainthood.

        • Segar says:

          Helicopter Ben Bernanke(correctly spelled) should be jailed for monetizing our debt and destroying the savings of millions of americans. A reasonable person has some savings for unexpected expenses and their retirement. The real value of that savings grows smaller everyday due to the Fed’s artificially low interest rates. Who ever told you that spending was a virtuos…lied.

          • V.Kurt Bellman says:

            The problem is, my dear Segar, that the primary PURPOSE of central banks, the Fed or any other one worldwide, IS the setting, encouraging, or even “manipulation”, if you will, of interest rates. Primarly short term ones, but longer term too.

            This has been true since the Fed was formed. It is not new. The problem with the Austrian Fool paradigm is that it incorrectly assumes the purpose of central banks is to protect both the principle, and the interest rate yields, of people who have wealth to sock away. Where on earth did you ever get a cockeyed idea like that!?!?!

            What makes an interest rate “artifically low”? If the Fed doesn’t basically set interest rates, who should? You? People who have money should unilaterally be allowed to set rates?? How wonderfully CONVENIENT for YOU!!! Just so we’re clear, how high an unemployment rate is acceptable to you? 15%? 25%? 40%? At what point is your private gain sated enough that you agree that enterprise needs to be encouraged at the expense of low-risk interest yields?

            Yes, a near-zero discount rate IS kind of extreme. But the fault lies with the spreads now demanded by banks. The aren’t lending out money at anything near zero percent! And they now charge unprecedented fees, too.

            Want a decent yield? Fine. Invest in a business and hire some people, if not directly, then through an equity firm. Low-risk yields are just above zero. Deal with it.

            The wholel world is marching TOWARD dollars and dollar denominated investments. Even Jon Nadler of Kitco is now saying that metals are risky and the only safe haven is the dollar.

            Do try to keep up – things have a habit of changing just when “true believers” learned their dogmatic lines from a year ago. Jon Nadler was a solid GOLD BUG a year ago. Now he’s bearish on it. He’s a pro. Heller ain’t.

      • V.Kurt Bellman says:

        Mike,

        I’ve been thinking hard about what you wrote for days now. I thiink you’re onto something. “Money” is a legal construct. Now that money is literally created in computers (this is not hyperbole, it is literally true), we cannot BEGIN to think of it as a tangible thing, much less ONE (or even TWO) thing(s).

        “Money” is a concept that has intrinsic value even absent a physical existence. Consider “justice” or “fairness” or even “knowledge”. Money has become analogous to all three. In some perverse “digital world” ways, it has become the least valued of those four virtual goods.

        • Mike says:

          Kurt,

          You really articulated and gave some real depth to this idea. I really like the statement that money is a concept that has intrinsic value even absent a physical existence. It has intrinsic value because , you and I and most other people, including the gold bugs believe that it does. And not only believe
          it does, actually uses in our daily life.

          I came to this conclusion a while back when I was really thinking about-What actuality is money? I remembered the concept of a number, say 3. Now most people think 3 is a thing , like 3 apples, or 3 cars, or 3 gold bars. But 3 is none of those things it represents, it is the idea of a group, which can include those things in that amount. Ah I thought to myself, money is similar, it isn’t a thing but as you stated so well it represents an intrinsic value even absent a physical existence.

          • V.Kurt Bellman says:

            Even the ephemeral version of money does indeed have “value because , you and I and most other people, … believe that it does”.

            But here’s the irony. Even gold (especially gold, more than some industrial metals) ONLY has value because of the very same reason. There is no logic in the value of gold at all. It was $280 an ounce not that many years ago. Now it hangs around $1600. There is no possible justification for that spread. Yes, fiat dollars have been created, but NOWHERE NEAR ENOUGH of them to explain that spread. There simply aren’t enough dollars out there to explain that. It HAS TO BE just a social “agreement” that the value of gold is now higher. Gold itself is almost valueLESS inherently. I own some, but I chose it based on its design elements and date.

  13. phil says:

    Confirmed: Britain’s Gold Was Sold Cheap to Bail Out Banks

    http://truthingold.com/?p=1129

  14. Steve says:

    You let the phrase “final solution” in an article. Extremely offensive to say the least….

  15. V.Kurt Bellman says:

    From Kitco’s site:
    “Speculators Buy Up Most Precious Metals Futures, Options – CFTC”

    Now, boyz n girlz, what else does that mean? The metals market is not being artificially held down by ANYBODY. Speculators are artificially pumping it up! Professional users (fabricators, industrial users) are running for the hills, relatively speaking, compared to “speculators”. The last time that happened, last September, within a few weeks silver took a 25% beating within a few days. Go look at the chart.

    There is a very small but incredibly stubborn group of Austrian Fool true believers out there (and yes, phil, many of them write blogs – WHOOPEE!) who are struggling mightily to keep an overbought metals market afloat (in the air). I sincerely hope they have big deep pockets. I think they’re gonna need them.

  16. V.Kurt Bellman says:

    As I write this post, with full expectation that nothing goes in one direction for long, silver is now under $27 and hasn’t been over $30 for more than 60 days. At no point does the price show over $30 on the Kitco 60-day chart.

    “$60 by the end of May” indeed!

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