BREAK UP THE FINANCIAL CONGLOMERATES. The only thing that will save our economy is to end "too big to fail." Why? Because: A) investment banks are run by very smart people who assume enormous risks with private capital through complex investment vehicles. If they win they justifiably make a killing. If they lose they go out of business. B) Commercial banks are run by hail-fellow-well-met, look-good-in-a-suit dull normals who get money from the government for free and lend it out at 5 percent, and make the difference as profits. And if they can't even manage that the government can bail them out and put slightly smarter types at the helm to manage a business model that has worked for hundreds of years. C) If you combine the two - as we have with the assinine repeal of Glass-Steagel - the smart guys will use the free government money to gamble, and then sell the dumb guys on complex instruments they don't understand. And if it all goes wrong, the government still has to bail them out. This is exactly was has happened. And continues to this moment. This has to end. Volker understands this. Unfortunately the financial industry owns congress.
NOTE: The history of gold is the history of political power in the world. The ebb and flow of governmental gold selling and buying shows the ebb and flow of world power. Right now: Net sellers: IMF, United States, ECB. Net buyers: China, Russia, Vietnam, Brazil, India. Draw your own conclusions. BUYING! Top quality coins are rapidly disappearing from the market. I am always seeking new ancient, medieval and world high quality material. Because of low overhead I can pay top dollar. Please contact me if you are looking to sell. I am only interested in coins of the highest quality. HOW DID SUPPLY SIDE ECONOMICS DESTROY THE WORLD ECONOMY? Massive debt + opaque financial system = tremendous short term profits for the very few. The 'supply' in supply side economics is easy money. The idea is that a ready supply of easy money would iron out the business cycle. Easy money is a synonym for debt. We create money in this economy by floating debt. The Supply Siders figured any amount of debt would be manageable since we could always pay it back in printed dollars. After all, we have the world's reserve currency. Other countries with strong currencies followed suit. What resulted is an absolute orgy of debt. The debt was bolstered by monetary policy that kept interest rates low for an extended period of time, tax policy that favored debt over equity, and regulatory policy that allowed financial institutions to operate opaquely. Policy was justified by a systematic doctoring of government figures such as the CPI which in turn bolstered GDP numbers. Moreover, as more and more debt was created through financial engineering and policy prescription, the prices of these were bid up higher and higher. This led these products to become grossly inflated in value compared to any inherent economic worth they might possess. The risk inherent in these products were purposefully misrepresented (in collusion with the rating agencies) and sold throughout the world to investors who were ill equipped to assume such massive risk. Once the bubble burst, the value of these products dropped precipitously. If marked to market and sold at market value, these instruments would bankrupt the world banking system. Thus mark to market has been suspended and the Fed is "helping" (with 27 TRILLION DOLLARS of bailout money) bankrupt banks buy these toxic assets from each other at inflated prices. The public sector, as always, is assuming the risk, while the bankrupt banks can give the illusion of solvency in order to pay off its officers and it major bondholders. How long can this game last? THE NEW GAME IN "BANKING" The US government bails out Goldman Sachs to the tune of 70-200 Billion dollars (depending on accounting). Goldman Sachs levers the money 30-1 and uses it to engineer naked short sales in distressed markets (like your mortgage) and then buy the beaten down securities for pennies. Goldman Sachs is then turned into a Commercial Bank. The US Government then lends trillions dollars more to Goldman Sachs at the Fed Funds rate of 0 percent. Goldman Sachs then lends the money back to the US Government in the form of buying 10 year treasuries. The US Government pays Goldman Sachs 4 percent on the money Goldman Sachs has loaned back to them. Goldman Sachs pays itself tremendous bonus on this astute financial engineering. Then Goldman Sachs pays back some tarp money plus interest with some of the rest of its "Earnings." The US Government then claims it made a profit on the tarp money. Everybody wins. Except you and me, since this fantastic Ponzi Scheme is ultimately paid for with our Tax Dollars. A WORD ON GOLD COLLECTING/INVESTING: First off, gold is not an inflation hedge. During periods of massive inflation you could buy almost any commodity and make a killing. You don't need gold. Gold is a monetary instability hedge. Say it 10 times slowly. It is a monetary instability hedge because it is a currency. You must analyze it in relation to other forms of currency. World Financial Assets excluding derivatives (500-2000 trillion) and world real esate (75 trillion?)
They key however is the 500-2000 trillion in unregulated derivatives. This will be the issue of the next 5 years that must and will destroy the dollar. How to invest in gold: Gold bullion coins are the most popular and most liquid form of bullion. They trade at a premium to the spot price which rises and falls according to a demand which is linked to the overall financial stability of the current period. Bars are cheaper, but somewhat less popular, hence they trade closer to the spot price. Paper gold (futures, gld, cef) track the spot price, and are extremely liquid, but like all paper assets, they are subject to possible default. Paper gold during periods of high instability can also be extraordinarily volatile. 99% of gold futures contracts are never exercised. There is no question that there are far more contracts than underlying bulllion. What will happen if some large player demands delivery and the bullion isn't there? Historical Investment coins tend to move with the overall public (collector, investor) interest in gold, though the bullion content comprises only a tiny percentage of overall value. The rest of the value depends on demand which in turn depends upon historical importance of the periods, events, and personnages depicted; as well as rarity, state of preservation, and overall beauty of the compostions, as well as the skill (and perhaps fame) of the artists who rendered them. High grade investment coins have been appreciating right through the financial crisis. Check out recent NGSA and Millenium auctions. Confiscation? During periods of great financial dislocation governments may suspend gold trading, and make illegal gold bullion ownership, as they did in 1933 during the great depression. Some feel that pre-1933 gold coins will be indemnified from such a confiscation, because of collector value. There is a thriving market in 20th century pre 1933 gold coins because of this. Certainly, historical investment coins will be indemnified because of their small bullion content and high collector value. Gold Stocks. Gold stocks also tend to rise and fall with the price of gold. But a down market can bring stocks down regardless of gold action. Ancients vs US coins: Test your coin IQ. Take this pop quizz at home: A top quality lincoln wheat penny in a scarce year and mint can cost 15,000 dollars. There might be 5000 of these pennies in similar condition. And it looks subatantially similar to a billion other pennies you can get at the bank for 1 penny. A top quality Julius Caesar portrait denarius can cost 15,000 dollars. There might be 30 coins in similar condition in all the world. And it looks substantially different from any other coin minted in world history. Which will be more valuable in 10 years?
Resources: To learn more about gold coin prices at auction: www.coinarchives.com To see coins for sale in an on line coin mall: www.vcoins.com To learn more about gold stock investing: www.midasfunds.com/gold-investing.html To follow the ancient coin market subscribe to: The Celator magazine:
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Glossary: (Grk) tongue Coin: Koine (Grk): common.
Contact me: Jeff Kahn, PMB 280, 123 Seventh Ave, Brooklyn NY 11215. Phone: 347 517 4055 |