By Paul-Martin Foss
We read in the Wall Street Journal that “Mom and Pop Buck Trend to Snap Up Physical Gold.” News flash: there is no such thing as non-physical gold. Gold is an element that is alloyed with other elements and minted into coins or melted into bars. If you can hold it in your hand, it’s gold. If you can’t, it’s not. And like most other goods, when the price of gold drops, demand to purchase it increases. No surprises there, except to those in the financial press who are confusing gold (“physical gold”) with gold funds and derivatives (“paper gold”). As Zerohedge pointed out the other day, there is a tremendous disconnect between the amount of gold available for delivery and the amount of gold “owned” by investors. Too many people treat physical gold and paper gold as equivalents.
It really isn’t any different than with cash. If you own a dollar bill ($1 Federal Reserve Note) you have a dollar. If you deposit that dollar bill into your bank account, you no longer own a dollar, you have a $1 deposit balance, a claim to a dollar. That is not the same thing as owning a dollar. There may be a 1:1 exchange ratio between dollar bills and bank deposits, meaning that you can go to your bank and reduce your bank account balance by $1 and receive a $1 bill in return. Buyers and sellers may treat bank deposit balances as functionally equivalent to cash for making purchases. But at the end of the day that $1 bill and that $1 bank account balance are not the same thing and that 1:1 ratio is not a given. It may hold 99% of the time, but when that 1% occurs and you can’t access that cash, or you have to take a haircut on your bank deposits, or you’re limited to $60 a day ATM withdrawals, or whatever crisis rears its head, that bank account balance isn’t going to do you a lot of good.
The same thing happens with gold, and you find this type of confusion all the time throughout the financial press. Financial markets may treat paper gold and physical gold as equivalents. Governments will tax paper gold the same way that they tax physical gold. But paper gold and physical gold are not the same thing. So let’s clarify things. If you own a gold coin or bar that you can hold in your hand, you own gold. If you own gold coins or bars that are stored somewhere else, you don’t own gold, you own a claim to gold. If you own shares in GLD or another gold-based exchange-traded fund (ETF), you don’t own gold, you own shares in a fund that claims to own gold and tie the value of its shares to the price of gold.
Putting gold in a safe deposit box or buying shares in a gold ETF as a protection for when the SHTF is like building bug-out bags and then packing them into a self-storage unit. You’ve probably heard the stories of Jews who fled Germany to Switzerland, hoping to withdraw money from their Swiss bank accounts, only to find out that the banks refused to give them their money. They thought they owned that money but found out the hard way that they didn’t. If you own gold and put it in a bank safe deposit box, good luck getting it out in the event of a bank crisis. If you own shares in GLD or a similar ETF, you’re not going to be able to take delivery of that gold. Gold is gold. Paper gold is a derivative. It derives its value from the underlying asset, gold, but it is not gold itself. For financial writers to talk about the decrease in the spot price of gold, which is largely driven by markets in paper gold, as though it reflects a decline in trust in gold is bogus. Maybe people who were just looking for a quick return are tired of paper gold, but there is no reduced trust in gold itself.
Nor is there a trend of dumping gold. You want to sell your shares of GLD, an ETF that won’t even let you take physical delivery of gold? That’s great, but you’re deluding yourself if you think you’re selling gold. Gold is like a lot of other assets in that, ceteris paribus, as the price decreases the demand increases. We’re living in crazy economic times, going on nearly seven years of near-zero interest rates and with some central banks pushing interest rates into negative territory. The 2007-08 financial crisis was the front of the hurricane and now we’re in the eye. Things may seem to be somewhat back to normal, but there’s a weird feeling. The economy is only barely humming along because of artificial stimulus introduced by central banks, which is why we’re still at zero interest rates with a so-called “recovered” economy. Employment is still middling and all the “good” economic data is constantly revised downwards after the fact. We’re in the eye of the hurricane and we know once the eye passes over us we’ll be whacked by the hurricane’s tail end. People realize that the coming crisis is likely going to be far worse than what we saw in 2008, which is why they’re rushing to scoop up gold while it’s cheap. So attitudes toward gold haven’t changed one bit, it’s still just as highly in demand as it’s ever been. The mom and pops buying up physical gold is the trend, the dumping of ETFs is not.
Another writer, Noah Smith, says “If you followed Austrians’ advice and bought gold at the peak, you have now lost more than a third of your money.” He couldn’t be any more wrong. Leaving aside the fact that most Austrians would not have bought at the peak, nor advised anyone else to do so, if you bought 20 ounces of gold, you still have 20 ounces of gold. It didn’t go anywhere. It might have lost a little bit of paper value, assuming you mark the value of your holdings to the spot price, which is not a realistic indicator of the market value of coins anyway. But let’s be honest, the reason people buy gold is not because they hope its nominal value will increase or that they can make a good return on it, it’s because gold is the ultimate hedge against the breakdown of the monetary system. When everything else fails, gold is still there to be used and accepted as money. That is its real utility. There’s a reason central banks hold gold and not diamonds, oil, or other assets. When fiat paper money fails, when government money and banking systems break down, gold is there to step into the breach, fulfilling the monetary role it has played for thousands of years.
This article was originally published at The Carl Menger Center
By Chris Rossini
During last night's Republican Presidential "Debate," Donald Trump had the privilege of making the final closing statement. He chose to say just a few sentences, and they were laced with protectionism.
Protectionism is a policy that restricts trade in order to protect American industry from foreign competitors. It is the anti-thesis of free and voluntary trade.
Our country is in serious trouble. We don’t win anymore.
First of all, trade is not a zero-sum game. You don't "beat" someone by trading with them, nor do they "beat" you. When a trade occurs, it signifies that both parties to the exchange are better off than before the trade took place.
As long as the trade is free and voluntary, there are no losers. Only when government coercion and force are introduced does the dynamic of a zero-sum game come into play. If government forces you to purchase a company's product or service, and you have no way of declining, then you "lose". If you were free to do so, you would have made a different, and more beneficial decision for yourself.
If the U.S. government slaps a tariff on a foreign-made product, you also "lose" because they are forcing you to pay the tax (which generates revenue for the government) and you cannot use that money to satisfy other wants and desires that you may have.
Government force turns trade into a zero-sum game, and unfortunately Trump shows no interest in reducing government's role in making it so. In fact, he wants to turn up the heat even further. Americans are satisfying their wants by purchasing "millions and millions of cars" from Japan, and Trump wants to put an end to it. This type of thinking shows that Trump needs a crash course on the concept of "comparative advantage". Murray Rothbard did the heavy lifting for Trump right here.
Protectionist policies are a destroyer of prosperity. Ludwig Von Mises summed it up perfectly when he wrote:
“Nationalist policies, which always begin by aiming at the ruination of one’s neighbors, must, in the final analysis, lead to the ruination of all.”
By Jason Ditz
Fresh off of a farcical situation where US officials revealed a hack against the Office of Personnel Management, suggested an unnamed “state actor” might’ve done it, and media and Congressional attention ended up blaming China by the end of the day, US officials look set to be doing the exact same thing in the hack of the Pentagon’s unclassified email system, only this time blaming Russia.
The email system was compromised late last month and brought down, in what officials say was a spear-phishing attack, getting email users on the system to click on harmful links. One US official, speaking anonymously, said it seemed “fairly sophisticated,” concluding it may well have “come from a state actor such as Russia.”
That Russia could conceivably have done it is, in the eyes of most covering the story, as good as unimpeachable proof, and they’re already linking this and the OPM hack in a narrative of Sino-Russian hackers going after the US in some vague plot.
With no more evidence than one official saying ‘maybe Russia’ there’s no way to confirm or deny anything, and that official seemed to be trying to downplay his uncertainty by saying attribution is “virtually impossible.” That seems to be the case, to the extent that the US rarely even tries to provide evidence of culpability and instead starts plotting revenge attacks at whoever the first guy on the scene thinks may well have done it.
This article was originally published at Antiwar.com
As commander-in-chief, I have not shied away from using force when necessary. I have ordered tens of thousands of young Americans into combat. . . .
By RPLR Staff
Glenn Greenwald writes at The Intercept:
"President Obama yesterday spoke in defense of the Iran Deal at American University, launching an unusually blunt and aggressive attack on deal opponents...
Judged as a speech, it was an impressive and effective rhetorical defense of the deal, which is why leading deal opponents have reacted so hysterically...
Beyond accurately describing Iran Deal opponents, Obama also accurately described himself and his own record of militarism. To defend against charges that he Loves the Terrorists, he boasted:
By 'ordered military actions in seven countries,' what he means is that he has ordered bombs dropped, and he has extinguished the lives of thousands of innocent people, in seven different countries, all of which just so happen to be predominantly Muslim."
Read the rest of Greenwald's commentary here.
By Thomas E. Woods, Jr.
Bernie Sanders has generated tremendous enthusiasm for his presidential campaign. His ideas, though, are garden-variety leftism, based in envy, misplaced anger, and economic absurdities.
By Norm Singleton
During his years in Congress, Campaign for Liberty Chair Ron Paul worked to reduce taxes on working Americans. One of Dr. Paul's most notable initiatives in this area was his legislation to reduce taxes on tips.
I was reminded of this when I came across a fascinating article on Mises.org by Dr. Ken Zahringer, Research Fellow in the Division of Applied Social Sciences at the University of Missouri:
So why do we tip? At first glance it seems rather odd that a waiter should be paid by two different people — employer and customer — for the same job. But in fact we, as tipping customers, are paying for a very different aspect of the waiter’s job than is the employer. The restaurant owner needs a way to get the customer’s order to the kitchen and the food out to the customer. Most anyone who can walk a straight line and operate a pencil can perform that task. But the restaurant owner also wants happy customers, and customers are happy when they have a waiter who can solve problems, handle special requests, and generally make their meal a pleasant experience, and that is a special skill set indeed. Coordinating these two different, and not closely connected, aspects of the job is what tipping is all about.
Read the whole article here. Also see Dr. Zahrngier's article on Uber and the Economics of Tipping, and Bob Murphy's In Praise of Tipping.
The argument that tipping provides a way for business owners to encourage their employees to provide excellent service to their customers supports Dr. Paul's case for not taxing tips as wages. Tips are not part of a worker's wages, since in most cases a customer is under no formal obligation to tip (he may feel an obligation to leave a tip because of social custom even if dissatisfied with the service, although someone who gets sub par treatment is likely to leave a smaller tip then someone who receives exceptional service).
Since taxing tips reduces the amount a worker can get from tips, taxing tips reduces the incentive to provide excellent services, thus taxing tips damages consumers as well as employees.
Here is Dr. Paul's official statement on the Tax Free Tips Act:
THE TAX FREE TIPS ACT
This article was originally published at The Campaign For Liberty.
By Chris Rossini
The great Austrian economist Ludwig Von Mises wrote: "History is a struggle between two principles, the peaceful principle, which advances the development of trade, and the militarist-imperialist principle, which interprets human society not as a friendly division of labour but as the forcible repression of some of its members by others."
Fortunately, in the battle of the development of trade vs. the militarist-imperialist principle, we have some nice news on the side of peace:
Italy has agreed to give Iran a more than $3 billion dollar line of credit following several meetings this week between senior Iranian and Italian officials...
Von Mises would be pleased to hear about a "rush to conduct business". During his lifetime, he was not so lucky, as he had to dodge nations that were rushing to war.
Trade between Italy and Iran is booming, according to Iranian officials. [...]
The more that individuals trade, the harder it is to convince them to go to war.
There's nothing better than making a warmonger's life harder.
By Chris Rossini
Donald Trump recently made a comment on The Federal Reserve:
“Right now, we have the low rates. In terms of real estate, if I want to develop … from that standpoint I like low interest rates. From the country’s standpoint, I’m just not sure it’s a very good thing, because I really do believe we’re creating a bubble.”
With regard to pinning the blame on The Fed for creating (yet another) bubble, Donald should be commended. Politicians like to avoid talking about the Fed as much as they can, let alone blame them as the source of economic bubbles. Good for Donald for pointing the finger right where it belongs.
The rest of Trump's understanding of The Fed needs a little work though. He says that as a developer, he likes "low interest rates". Now, with sound money (which, because of The Fed, we do not have) enjoying low borrowing costs makes perfect sense. But The Fed creates artificially low interest rates, which means investments must be made in error (and en masse) by businessmen.
During the artificial boom, Trump and many other businessmen will feel like geniuses, on paper. It will appear to them that their investments were brilliant decisions, and thanks to The Fed, they were able to make those investments. However, just because Donald can build, it doesn't mean that he should build.
Every artificial boom that The Fed creates, must have a concomitant bust. It cannot be avoided. It is during the bust, that all the investments that should never have been made, are exposed. Being a real estate developer does not exonerate you from the bust either. Head down to Florida, and you'll still see empty shopping centers and homes that should have never been built. Or, head over to Atlantic City, where you'll see a $2.4 billion Revel Casino that stands there empty, with not a person in sight.
Artificially-low interest rates are a poison. They create a false euphoria in the economy, that must end in a nightmare. As a real estate developer, Donald Trump should desire sound money and interest rates that are untouched by anything but the marketplace. That way, a person like Trump could see the truth as to whether or not a particular investment should be made. The Fed creates nothing but lies.
Next, when it comes to everyone else in the country, Donald says that he's "just not sure" if artificially low interest rates are a "good thing."
Of course, they are a very bad thing for all ordinary Americans. When a businessman makes an investment during the boom that has no chance once the bust comes, it affects not only himself. Employees and contractors are hired (that shouldn't be hired for that particular job). These people will have to be let go when the bust arrives.
People during the boom buy homes, and second homes, and boats, and cars that they'll never be able to afford when the bust hits. And when it does hit, it hits hard. Not only do those people lose their jobs, but they have debt collectors coming from all angles, to boot.
The Federal Reserve is the source of price inflation. By printing (i.e., counterfeiting) money, they steal the purchasing power of every dollar that everyone holds. That absolutely hurts ordinary Americans, especially the poor. With artificially low-interest rates, people earn virtually nothing on their savings, causing many to speculate in the stock market and other areas that they have no business speculating in.
Even with all the horrendous economic pain that ordinary Americans must suffer during the bust, a final kick to the gut is unleashed when government comes in to bail-out the so-called "too-big-to-fail" banking system. That's called kicking ordinary Americans when their down.
Donald, with his comment, shows a tiny glimmer of understanding The Fed. But he needs help to actually be someone that's able to do something about it, and more importantly understand why he's doing it.
By Daniel McAdams
Remember when then-Secretary of State Hillary Clinton was so intent on a US attack on Libya that she disregarded the US Intelligence Community, the Pentagon, and even her colleagues in the Obama Administration to force her "humanitarian intervention"? Clinton was so distrusted by the Pentagon that they opened up their own lines of communication with Libyan officials -- they knew she was feeding them and the State Department boldfaced lies.
Even members of Hillary's own party in Congress were skeptical of her claims.
Gaddafi's son and presumed heir, Saif, told then-Rep. Dennis Kucinich (an RPI Board Member) that Hillary was using false information to justify the coming US attack on his country. (Thankfully, Mr. Kucinich understood his Constitutional obligation to act as member of an equal branch of government and did his own investigation of Hillary's claims.)
Saif told Kucinich that Hillary's "information" about Libya was:
[L]ike the WMDs in Iraq. It was based on a false report. Libyan airplanes bombing demonstrators, Libyan airplanes bombing districts in Tripoli, Libyan army killed thousands, etc., etc., and now the whole world found there is no single evidence that such things happened in Libya.
Hillary's rebels, according to Saif were, as a Washington Times article reports, "not freedom fighters” but rather jihadists whom he described as “gangsters and terrorists.”
Hillary got her war. The Washington Post, ever the lickspittle in the service of the US regime, shortly after the attack praised Hillary's great foresight in forcing the US war on Libya:
Seven months later, with longtime U.S. nemesis Moammar Gaddafi dead and Libya’s onetime rebels now in charge, the coalition air campaign has emerged as a foreign policy success for the Obama administration and its most famous Cabinet member, Secretary of State Hillary Rodham Clinton.
What a success! Libya is now in the hands of ISIS and various Islamist terror gangs. The population is devastated. Saif was right: they were a bunch of terrorist jihadists.
Gaddafi's other son, Saadi, is currently being held by "Libyan Dawn," an al-Qaeda group that has emerged since the US "liberation" and has taken control of key parts of Libya. This week we see in a new video that Hillary's humanitarian freedom fighters have taken to torturing Saadi Gaddafi in the must un-humanitarian manner (warning, graphic). Hillary's humanitarians are a bunch of torturing thugs, and it's all there on the tape. Will she be challenged on this? Don't bet on it.
Meanwhile, another group of Hillary's extremists have sentenced Saif to death in a mass trial with scores of others from the previous government. The trials were so bad they were even condemned by the International Criminal Court, which would also like to get its hands on Saif. The defendants had little access to legal council in what was a textbook show trial.
Hillary Clinton squealed with joy when Muammar Gaddafi was sodomized with a knife and murdered by her rebels. Is she likewise giggling somewhere as Gaddafi's son has his feet beaten to a pulp with a metal rod while he is bound and slapped in the face and his other son is sentenced to death in a trial with no semblance to actual rule of law?
This is human rights, Hillary-style.
This article was originally published at The Ron Paul Institute For Peace & Prosperity.
...which is why they don’t believe their governments, Ron Paul tells Lew Rockwell.
Listen to the interview below: