A White Paper on Gold

In 1987, I wrote my first essay on gold - 10 pages of information titled “A White Paper on Gold.”  In the last 14 years, I have updated it twice and have mailed out some tens of thousands of copies to people who requested it.  Now, in the fall of 2001, I have totally re-written it, and it is once again current and timely.  This new essay differs significantly from the earlier ones because it has become absolutely clear that the gold investment game has been “rigged” for the last six years.  The price of gold has been manipulated and capped!  Being a “gold bug” since the mid-nineties has been difficult and lonely.  Trust me, we have not been wrong, we have been the victims of policies instituted by former President Clinton’s administration, headed by Robert Rubin and Secretary of the Treasury Lawrence Summers.  Their misguided policies have resulted in the central banks of the West dumping gold at ridiculously low prices ($250 to $300 per ounce) while the Russians, Chinese and Middle Easterners have been gobbling it all up at bargain basement prices, month after month.  They understand what a bargain gold is at these artificially low prices.

But this cannot and will not go on much longer.  Time is running out for you to purchase “cheap” gold.  The day is coming when the “king of metals” will surge up in price as much as $100 in a single day.  Count on it!

[1] Central Bank gold sales will end in less than 6 years and that is what is suppressing the price of gold.  Mine supply is only 2,500 tonnes per year and falling as marginal mines are shutting down due to the orchestrated low price of gold.  Add 600 tonnes of scrap supply per year and the gold supply available to the physical buyer over a 12-month period is about 3,100 tonnes.  Demand for gold is around 4,800 tonnes per year [1]. That leaves a deficit of 1,700 tonnes per year.  So why the price of gold is not substantially higher?  Good question!  The deficit is met by the bullion banks (such as Goldman Sachs and J.P. Morgan Chase) and central banks flooding the marketplace with their gold.

According to Frank Veneroso, the central banks and bullion banks have lent out 10,500 to 16,500 tonnes of the gold [2].  Frank’s gold loan numbers are much higher than the industry’s bullion dealer apologist, Goldfields Mineral Services, acknowledges.  

Since the price of gold is being suppressed by central bank gold sales, the question becomes: How many years of central bank gold reserves are left, factoring in global growth and declining mine supply?  According to a “conservative” Veneroso Associates’ estimate, the central banks in the West will run out of gold in 6 years.  Once this analysis is understood by the gold world, the price of gold will soar toward an equilibrium price of $600 per ounce.  That is what the price will have to be in order to balance the supply and demand in the market.  

The term “loan” is questionable since the bullion banks will never be able to secure all of the gold they have borrowed from the central banks.  When the central banks finally stop loaning out their gold, who is going to fill the 1,700 tonne deficit per year?

The gold price has to explode to curtail demand.  As a result of the recent terrorist attacks, citizens all over the world may decide to sell dollars for gold very soon.  Gold demand is going to explode regardless of price.

[2] Demand is on the upswing.  Bill Murphy, founder of GATA (the Gold Anti-Trust Action Committee) and LeMetropole Café, the outstanding Website (lemetropolecafe.com) puts it this way -  “It is a fact that the Russian central bank gold reserves keep going up and up.  It is a fact that the Chinese are scouring over buying physical gold and it is a fact that they have just opened up and liberalized the gold market to their citizens.  It is also a fact that the Arabs are buying all the gold they can, especially the Saudis.  The West must start buying gold now and end their selling/lending/swapping.  If they do not, the price of gold will eventually go to $5,000, $10,000 per ounce as the dollar becomes worthless.”

[3] Get ready – Inflation is here.  I have long held the view that the Fed would follow a policy of “inflate or die.”  There can be no doubt about that policy now.  According to the Webster’s Dictionary, the definition of inflation is “a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency.”  Webster’s second definition is “the act of inflating.”  The government would have you believe that inflation is “a rise in prices.”  They use their PPI and CPI figures to build a case that inflation is not a problem.  Well, let’s get things straight.  “Rising prices” are not the cause of inflation.  Rising prices are an effect, not a cause.  The increase in the money supply is “the cause” of inflation.

To illustrate what is happening to our money supply, let’s use MZM, or money of zero maturity – cash that can be spent immediately.  It is the most “liquid” form of money, encompassing currency, checking accounts, and cash in money market funds.  In the week immediately following the terrorist attacks on September 11th, Alan Greenspan, the king of inflation, outdid himself.  MZM ballooned at an annualized rate of 168%.  In actual dollars, MZM grew by $172 billion, which is roughly $1 billion dollars an hour for a week.  For some perspective and as a basis of comparison, in 1968 the ENTIRE MZM money supply, an accumulation of nearly 200 years, was less than $172 billion.  Then, in just ONE WEEK, the Greenspan inflation machine injected $172 billion into the system. This was an extraordinary event, one unmatched in our lifetime.  

In early September 1998, in the face of a dangerous derivatives blow-up at Long Term Capital Management, Greenspan pulled out all the stops and inflated MZM at an annualized 43% rate.  In December 1999, on the eve of Y2K, to fend off a potential run on the banks by anxious depositors, the Fed inflated MZM at an incredible 35% annualized rate.  The recent Fed action dwarfs anything in the past.  Fiat money, newly created by the Fed and poured into the economy, can’t be called back.  

What is more scary is that even before the events of September 11th, the Fed frantically reduced interest rates seven times by 300 basis points and MZM inflation levels breached the 50% annualized rate twice!  For most of 2001 the MZM moving average hovered around 25%.  And the Bureau of Labor Statistics keeps telling us that prices are not going up and the cost of living is stable.  The books are being cooked!

Inflation is now in the pipeline and cannot be withdrawn.  There will be a time lag, but the die is cast!  The Fed will continue to lower interest rates and infuse cash into the system until inflation becomes so painful that they are forced to change their policy.

Due to these mega-increases of aggregates and fiscal stimuli, trillions of dollars of wealth will be confiscated through inflation, except, of course, those in gold, silver, and other forms of tangible wealth.

[4] Negative real interest rates.  In the 1970s the Fed attempted to stimulate the economy by lowering interest rates.  When real interest rates turned negative, investors dumped their fixed income dollar investments.  Large amounts of capital flowed into gold and the price exploded from $100 an ounce to a peak of $850.   

A similar situation is developing now.  The Fed has expanded the money supply with abandon.  Greenspan’s Fed has created more money in the last 8 years than all money creation put together in the since the turn of the century.  
The Fed will do anything to prop up the ailing stock market, the over-indebted consumer and the sagging economy.  As a result, real interest rates are pushing into negative territory again.  The Fed has created a situation where an increasing amount of “frightened” capital will be directed into “the metal of kings,” creating the inertia for a new bull market in gold.

[5] We live in an era of increasing currency and trade wars.  It’s a “race to the bottom,” where every country, even , fights to lower the value of its currency in the world markets.  This has become a global policy to prop up exports.  In times like these, gold is the best protection.  In and in , gold is selling at near all-time high prices (in terms of their currencies, which have lost over half their value against the dollar).  

[6] When the dollar starts to fall, gold will rapidly increase in price.  Our current account balance is about to go into deep deficit, and the Fed will have to print more money than ever.  There is no way out.   We just moved from a $350 billion surplus to a $50 billion deficit, which again makes the government a major borrower for the first time in five years.  That will crowd other borrowers out of the market, sending real interest rates higher, the dollar lower and gold higher.  The Treasury could easily need to borrow as much as $300 billion just in short-term paper. The result at best will be stagflation, at worst, depression and inflation.  

Be patient! The dollar and the Dow are nearing the end of their bear market rallies.  is in recession and the dollar and the market will continue their declines over the next three to four years, and gold will ascend.  The dollar should drop 20-25% versus major currencies and the Dow should drop about 50%.  

[7] The Gold Anti-Trust Action Committee (GATA) (gata.org) has spent over two years thoroughly researching the world’s gold markets, and carefully documenting the huge gold short position, major players and their motives, and the probable outcome of this anti-free market outrage.  

Attorney Reginald Howe and GATA have amassed so much conclusive evidence of what has really transpired in the gold markets since 1995 that they have launched an unprecedented legal action against some of the key anti-gold players.  A lawsuit has been filed in Boston against the Bank for International Settlements in Basel, , and also against Alan Greenspan, William J. McDonough, J. P. Morgan, Chase Manhattan, Citigroup, Goldman Sachs, Deutsche Bank and Lawrence Summers, Secretary of the Treasury.[1][3] If this suit is allowed to move forward to “discovery” all hell will break lose.  This will be resolved on November 5th, one way or another.  Howe’s complaint alleges manipulative activities in the gold market since 1994 and has the potential to put some government officials and high-ranking bankers on the hot seat.  Thanks to the fearless work of the likes of Howe, GATA, Bill Murphy and others, alleged improprieties by the Fed, the Treasury and its Exchange Stabilization Fund are published on the Internet and written about in investment newsletters. The first volley is about to be fired on the shores of Massachusetts. [4] Hopefully this lawsuit will put an end to government meddling and interfering in what is supposed to be a free gold market.  It is only a matter of time before the forces of freedom and free markets overwhelm the current anti-gold offensive, and the profits that will be reaped by those who discern the writing on the wall will be staggering.

[8] In spite of poor “price action,” I cannot imagine a more favorable climate for gold: A dollar bear market, negative interest rates in the US, the stock market bubble burst, the war against terrorism, Israeli politician assassinated, anthrax on the loose, attacks on our symbols of financial stability and military on September 11th, Congress closed, our VP in hiding, over a thousand alleged terrorists in captivity so far, etc.   

While the West dumps gold to protect the greedy bullion banks, much of the rest of the world buys.  The Chinese, Russians, Muslims and now the Japanese are jumping in.  Safe-haven buying in the wake of the September 11th terrorist attacks on the has been boosting sales of gold bars at ’s regional banks.  In the two weeks between September 12 and September 30, gold bar sales at 13 regional banks equaled roughly six months of sales.  Shizuoka Bank and Bank of Fukuoka each saw September sales alone exceeding last year’s sales.  Demand is still very strong.  It is widely held that individual investors will continue to purchase gold if the US-led military operations last for a long time.

[9] Are the Russians moving toward the remonetization of gold in place of a collapsing fiat world monetary system?  On August 25th, suspended the export and import of precious metals. ’s reintroduction of the gold Chervonets coin, and related policies, indicates their desire to return to a gold standard or gold exchange standard similar to the Bretton Woods system.  With the Chervonets and silver Sable coins as legal tender, Russians have a more stable alternative to the US dollar, which is highly liquid, tax exempt and can be purchased with rubles.  The decline of the dollar will cause Russians to trade off dollars for the new gold and silver coins.  If the dollar persists in falling it could lead to a gold-backed ruble directly connected to the euro.  Russian gold reserves have increased by 48 tonnes over the last nine months and is coordinating their monetary and gold policies.

[10] Are currency controls and confiscation coming?  Recently, I was reviewing one of my favorite books, The Great Reckoning by James Dale Davidson and Lord William Rees-Mogg, written in 1991.  It dawned on me that this book is perhaps even more timely and important now than when it was first published, some 10 years ago.  Just look at the following excerpt from their section on exchange “controls.”  The government’s credibility will fall sharply as the recession bites into revenues, and the deficit rises.  Caught in a cash crunch, dependent upon foreign credit, the authorities will have little room to maneuver when the music stops.  A slowdown, much less a retreat of foreign capital, would bring pressures for exchange controls and currency investment restrictions.  These would intensify as the US dollar is replaced by the yen and EURO as the world’s reserve currency.

Capital restrictions are common throughout the world.  They are almost universal among debtor countries.  Even creditor nations, such as and , have only recently abandoned currency and investment restrictions.  still employs them.  

Since the September 11th terrorist attacks on the , the government and the Fed are doing everything possible to “manage” the markets.  Be it the dollar, the stock market or gold, the word “free” is absent in the phrase “free markets.”  More than at any time in my lifetime, I fear that gold confiscation is a real possibility.  

Three times before in our history, (after the Revolutionary War, the Civil War, and in 1933 by edict of President F. D. Roosevelt) our government has confiscated gold from the citizens.  Are you willing to gamble that it won’t happen a forth time?  

The best insurance against this is to own your gold in the form of collectable coins, not in bullion.  

“A ‘good money’ should have three qualities: it should be a medium of exchange, it should be a measure of value, and it should be a store of value.”
“The paper dollar is a medium of exchange, it’s an unsatisfactory measure of value and it’s a total failure as a store of value.”

“But what’s important is that the fiat dollar has no intrinsic value.  It’s just a piece of printed paper that the government states is ‘legal tender’ for all debts.”

“I firmly believe that paper currency is immoral.  Why?  Since September 11, the Fed has created $200 billion in increased liquidity.  Who worked for this additional mountain of money?  Who busted their back for it?  Nobody, it was created ‘out of thin air’ by the Federal Reserve.”

“To make a dollar, I have to work for it.  I get up every day six days a week at four in the morning and start work.  Nothing is ‘given’ to me by my government.  I work for my money.  Yet here’s my government creating the same money that I work for.  And nobody in the government worked for the money, nobody sweated for the money – the same money I worked for is created out of nothing by my government.”

“To my mind, that’s immoral.  And it makes me doubt what I’m working for.  Why am I working for dollars when my government can create billions of dollars without anyone working?  Something is terribly wrong.  What is it.”

“It’s a corrupt system.  And I know in my heart that it’s a system that cannot last.  The only real power immorality has – is the power to ultimately destroy itself.  That’s why all ‘paper money’ is eventually destroyed.  It’s doomed.”

“Gold is not perfect money.  One obvious reason is that it is too heavy.  I can’t carry a thousand dollars worth of gold around in my pocket. [6]  Sure, I can park the gold at the bank and the bank can give me a receipt for the gold.  And that used to be the way it worked with a gold-backed currency.  But in 1971 Nixon closed the gold window and after that, foreigners were denied the right to exchange dollars for gold.  This left foreigners with ‘IOU nothings’ by the billions.”

“On our dollar we read the words, ‘In God we trust.’  This is fine, I trust God, you trust God, but when it comes to the dollar I also want a store of value, and God isn’t interested in the dollar as a store of value.  Has God forsaken the dollar?  Hardly, I don’t believe God ever approved of the dollar in the first place.”

“Over the years the dollar has done one thing – lost its value in terms of purchasing power.  Old guys like me can relate well to that.  I remember lunches for sixty cents, I remember new Buicks for $1800, I remember double-feature movies for a quarter, and I remember summer homes for five grand.”

“If you have the money and wherewithal, I’d advise you to own some actual gold in the form of coins.  Put them in your lock box, bury them in your back yard, hide them in a wall safe, because somewhere down the line they’ll be useful.  Those gold coins are real money.  Frankly, I don’t know when the dollar will collapse, I don’t know when foreigners will dump dollars for euros or yen or whether maybe all paper currencies will collapse in favor of tangible items.”

“The future is unknowable, but we do know that the history of all paper money is that it ends up as museum pieces.  It may be that the dollar will some day be turned in for another paper currency.  It may be that the world will go back to gold as money.  Anything can happen, and all you can do is watch the markets and do some diversifying.”

“The big picture as I see it, is that fiat (‘paper’) money is immoral.  For that reason, it is doomed.  The only question is one of timing.”

“Right now we are in a disinflationary or possibly even a deflationary environment.  In this kind of environment the dollar becomes increasingly ‘wanted,’ because the dollar will buy more in the way of goods and merchandise.  Thus, despite the Fed’s frantic efforts to re-inflate, despite the Fed’s massive creation of more liquidity, the forces of deflation are currently in the saddle.”

“We are in a long, drawn out bear market now and gold is usually a good thing to have in a bear market.  Gold is intrinsic wealth.  It can’t be outlawed or destroyed by your government.  Of course, it can be confiscated, and in the 1930s that’s exactly what our government did.  They made it illegal to hold gold in monetary form.  I don’t think the government can do that again.  I don’t think people would turn in their gold this time.”

“So yeah, buy some gold coins.  I think they are dirt-cheap now.  But one thing is certain – if you hold those coins, if you die and leave those coins to your grandchildren and your grandchildren in turn leave the coins to their children – those gold coins will have purchasing power at a time when the dollar as we know it is a memory.  I’m absolutely certain of that (although I confess that I’m not equally certain that Newmont or Barrick or Placer Dome will still be around).”

In his first “official” act in office, President Roosevelt declared a banking “holiday” and issued the order to confiscate gold:

"Your possession of these proscribed metals and/or your maintenance of a safe - deposit box to store them is known to the government from bank and insurance records.  Therefore, be advised that your vault box must remain sealed, and may only be opened in the presence of an agent of the Internal Revenue Service. "By lawful Order given this day, the President of the ."

A few years ago, Blanchard & Co had this to say on the subject of gold confiscation. "When Franklin Roosevelt was inaugurated on March 4, 1933, most commercial banks in the had already closed and the economy was in a death spiral, gross national product having fallen from $103.4 billion in 1929 to $55.8 billion in 1933.

"Wholesale prices had fallen over 35%, hitting debtors with a double whammy: as the value of their collateral diminished, the value of the dollars they used to repay their loans was increasing.  Moreover, gold clauses in loan agreements permitted lenders to be paid either in gold or in currency, thereby protecting creditors against inflation or against actual devaluation of the dollar.

"President Roosevelt took care of the debtors' problems, immediately.  He devalued the dollar by 40%, permitting debtors to repay their loans in depreciated dollars.  He confiscated gold and declared gold clauses unenforceable, preventing wealthy creditors from avoiding the impact of the devaluation.  And he arbitrarily fixed the price of gold, which had been set at $20.67 per fine ounce for ninety-seven years, at $35.00 per ounce, while ordering that persons surrendering gold to the government receive only the former price of $20.67 per ounce.

"Acting under the authority of the Emergency Banking Relief Act, President Roosevelt issued Executive Order No. 6102, which provided that all privately owned gold in the , was to be confiscated by the government.  As compensation, the owners would receive paper money, whether they liked it or not.

"However, the order specifically exempted gold coins having a recognized special value to collectors of rare and unusual coins.  In a single stroke, Roosevelt created a gigantic redistribution of wealth from creditors to debtors.  He had outlawed the export of gold coin and bullion and placed an embargo on all international gold dealings.

"Shortly thereafter, Congress, by joint resolution, voided all clauses in private and public contracts that required payment in gold, declaring such clauses to be against public policy.  All voluntary, private agreements to pay and to be paid in gold – past, present and future - were declared void.  Gold was no longer a medium of exchange between private individuals.

"Roosevelt's primary reason for leaving the gold standard was to give himself the authority to devalue the dollar.  Citizens who did comply were paid the 'official' price of $20.67 an ounce.  Of course, after the confiscation, the dollar was devalued and the new price of gold was set at $35 an ounce.   This allowed him to bolster the balance sheets of financial institutions by increasing the value of assets held by them as collateral to secure loans.  It permitted debtors to repay those loans in greatly depreciated dollars and to raise the prices (in dollar denominated terms) of farm products and raw materials that were traded in international commerce.  He was also able to revalue the government's gold holdings in order to increase the government's assets and stabilize the economy.”

"By devaluing the dollar, Roosevelt increased the wholesale prices by more than 33% by 1935, both increasing the value of the debtor's collateral and also permitting the debtor to repay his loan with $.60 dollars.  The effect was to redistribute income from creditors to debtors and to get the economic machine cranking again." [7]

James Dale Davidson [8] had this to say about gold confiscation.  "Confiscatory taxes, soak the rich policies, and other unhappy developments cannot be ruled out.  Bank accounts could be frozen, as has been the case in Latin America and elsewhere.  Political authorities may decide to unilaterally alter the terms of repayment for some Treasury securities, lowering coupon yields directly or through taxation, or converting short - term obligations into long - term or even perpetual obligations.  Privately owned gold held by Americans within US, borders could be confiscated again as it was in 1933".

“What if Congress enacts currency exchange laws, which prevent Americans from moving US Dollars offshore to a Swiss bank?  What if President Bush makes it illegal for Americans to own gold?  President Roosevelt did, and it could happen again."

Ron Paul (TX) serves in the House of Representatives and was a member of the Gold Commission.  He was one of 16 people who worked with "gold" issues.  He wrote: “If it gets bad enough, they'll declare a national economic emergency.  They'll take over the banks, all business and industry.  They may even try to confiscate our gold.  I served on the Gold Commission for eight or nine months while I was in Congress along with fifteen other members.  I brought up the subject of confiscation.  The power to confiscate gold is still on the books as the law of the land.  I urged the full Commission to recommend Congress repeal the power to confiscate gold in an economic emergency.  We pushed it to a vote and I was the only one that voted to recommend to Congress that we never again contemplate taking the gold of the American people.  The fifteen other members voted it down.  The power is still there on the books, and they can do it any time they wish."    

Dan Rosenthal, former editor of Silver & Gold Report wrote:  "I keep hoping that confiscation of our gold will never happen again.  But I operate my private life as if it could.  I hold my gold and silver myself.  I don't think a bank vault would be a suitable place to keep it.  I also think it's risky to buy gold coins in an IRA account, where a bank trustee keeps coins for you."

Dr. Franz Pick, the noted currency expert and author of The Triumph Of Gold, feared confiscation.  Pick wrote:  "I am afraid that one day the government will indeed call gold in.  Gold bullion will be subject to confiscation.  This is one big advantage of numismatic gold, such as the Double Eagles.  It's an idiosyncrasy of governments that although they may prohibit ownership of gold in any form, they are reluctant to touch collections of numismatic gold coins.”

"Today there are some 49 countries which forbid ownership of gold by their citizens, but do allow holding gold coins for numismatic purposes.  Even the Soviet Union and Eastern countries legally tolerate the acquisition of numismatic gold coins.  For these are the only gold holdings that could be kept in your safe deposit box without any fear of confiscation."

This legislation, passed during WWI, is still in place.  Its article 5(b) states:

"That the President may investigate, regulate or prohibit, under such rules and regulations as he may prescribe, by means of licenses or otherwise, any transactions in foreign exchange for the export, hoarding,melting, or earmarking of gold or silver coins or bullion or currency."

With this awesome power, the President of the may do what he pleases with our money or with gold if he deems our monetary system to be in jeopardy.

Roosevelt used section 5(b) in 1933 to confiscate gold.  President Carter used it to freeze Iranian assets during the hostage crisis.  Will President Bush also use it when we take our money out of the banks and rush to buy gold or wire money offshore?  Don't bet against it.

Historically, governments have banned the ownership of gold prior to their citizens refusing to use that which they call money.  Why should it be different here?  It's already happened before.  All that is required (because of the Trading With The Enemy Act of 1917) is for Bush to issue a decree.

In 1954 The Treasury Department amended the Gold Regulations of the original Executive Order to enable the continuance of the exemption of rare coins from the gold confiscation provisions, and they expanded the definition of "coins" with a recognized special value to collectors of rare and unusual coins to include "gold coin made prior to April 5th, 1933 (Federal Register 4309, 4312 1954, as codified in 31 CFR Section 54.20)

In 1984 the IRS proposed new legislation that distinguished between bullion and numismatic gold and silver.  This could be used in the future as a standard to define what is exempt from confiscation.  They said that gold or silver coins or bars must be worth at least 15% more than their metal value on sell back to qualify as a collectable rather than as bullion.  Why would they possibly make such a distinction unless they planned, at some future date, to recall the bullion?
The Eminent Domain Clause of the Fifth Amendment

The Eminent Domain Clause of the Fifth Amendment is our best chance to keep our “pre-1933” gold coins.  This clause states, in part

“…nor shall private property be taken by the government for public use, without just compensation."  The government paid the "official" price of $20.67 per ounce in 1933. Why did Roosevelt exempt gold coins "having a recognized special value to collectors of rare and unusual coins"?  His Executive Order did, after all, call for the confiscation of "all gold coins."   What would a "just" price be for "numismatic" gold coins?  To administrate the grading and pricing of each individual coin would present a monumental task.  Study the wording here.  Also exempted from the surrender requirement were not the "owners" of rare gold coins, nor the "holders" of them, nor persons who "possessed" them, nor even "investors.”  On the contrary, the order specifically focused on an individual's motives for having rare gold coins, exempting just one classification:  "Collectors."

A clear distinction was made between the "collector" and the "investor.”  A collector's primary interest in rare coins is enjoyment, for historical, aesthetic or cultural reasons.  An investor's interest in rare coins is financial, to make a profit.  Roosevelt clearly intended to exclude only the collector.  As a result of FDR's decree, most of the gold was now in the hands of the government, which increased their holdings from $4 billion to $7 billion and foisted "paper money" on the citizens in exchange.

This was a sad day for freedom in .  Whatever happened to the laws laid down by our founding fathers?  As they stated in the Constitution of The United States of America, Art.1 Sec. 8 and 10:  "THE CONGRESS SHALL HAVE THE POWER...TO COIN MONEY, REGULATE THE VALUE THEREOF, AND OF FOREIGN COIN, AND FIX THE STANDARD OF WEIGHTS AND MEASURES...NO STATE SHALL MAKE ANYTHING BUT GOLD AND SILVER COIN AS A TENDER IN PAYMENTS OF DEBTS."

You're the target because you're where the money is.  By stripping our money of a gold backing, we created the seeds of inflation.  The government was free to create money at will without restraint.  Politicians quickly learned how to "buy votes" with borrowed money - called deficit spending these days.  The unavoidable result was massive government debt.  We are now facing a debt crisis; one you could argue was caused ultimately by the confiscation of gold.  And it is aimed at us!

According to respected newsletter writer, Dr. Gary North:  "The accelerating debt crisis is aimed at four identifiable targets:  (1) the successful professional, (2) the upper middle class investor, (3) the retired person who was productive enough in his working years to escape becoming dependent on Social Security, (4) holders of US, government debt.  These people will be called on by the government to make 'necessary sacrifices' to save the system from bankruptcy.  And when I say 'called on,' I mean compelled by law."

In providing a defensive strategy, North astutely points out that:  "The economy is now trapped between the deflationary pressures of defaulting institutions that have been guaranteed by the federal government, or institutions that cannot be allowed to fail, even though there are no legal guarantees (such as the insurance industry), and inflationary pressures created by the need for liquidity.  It's a case of the looming implosion of collapsing liquidity vs. the need for an explosion of fiat money to avoid the implosion's bankrupting effects."

"The American investor needs to get some of his money off shore, or at least into financial instruments denominated in assets other than dollars."

The decade of the 1990's has seen stocks bask in the spotlight and gold fall out of favor.  Good!  This has presented us with a golden opportunity to buy "real money" at discount prices.  Check out the downside on gold and compare it to the downside on stocks.  Much has been written on the subject of “buy low and sell high”, and this is a "contrarian's" market if I ever saw one.  It's funny, but it really is much easier to sell someone gold at $700 an ounce than at $300.  Human nature makes it difficult for us to stand alone against the crowd and be contrary.  

What Should You Do?  

Allow for a reasonable portion of your dollar assets to be held domestically in numismatic gold coins.  Since gold is above all an insurance policy, doesn't it make sense to keep your "policy" in a form that is unlikely to be canceled or recalled?  That's why owning gold in a numismatic form makes sense!

In rising gold markets certified (PCGS or NGC) numismatic coins offer considerable profit potential.  They also ensure your status as a "collector" and since the legislation of 1933 and 1984 separate the "collector" of gold coins from the "hoarder" of bullion, they offer the double advantage of profit and protection from a future gold confiscation.

Start salting away a "variety" of pre-1933 gold coins ($20, $10, $5 denominations, etc.) so you can establish a "collector" status in your holdings.  In this marketplace you need expert advice.  Miles Franklin can help you in this regard.   Every employee at Miles Franklin has at least a decade of experience in the precious metals business.  We are pros – no rookies here.

It also makes sense to shelter dollars off shore.  The Swiss franc is the world's only true gold-backed currency.  After you have sheltered dollars in physical gold it makes sense to own Swiss francs.

Swiss annuities are an excellent alternative.  Call Miles Franklin, at 1-800-822-8080 and we will arrange for you to receive free information on Swiss annuities.  We have written “generic” reports and we will be happy to mail them to you.  We can suggest offshore financial experts who will work with you in these areas.

The opinions contained in this report represent solely the views of Miles Franklin, Ltd.  The information contained herein is derived from sources Miles Franklin believes to be reliable, but there is no assurance that such information is complete or correct.

Readers should be aware that the purchase of gold, coins, or Swiss francs involves many risks, including the risks arising from limited liquidity, and the risk that gold, coins or Swiss francs will decline in value at certain times.  There is no assurance that a purchaser will be able to sell gold, coins or Swiss francs for the same amount originally paid.  A purchaser could lose money upon sale of gold, coins or Swiss francs.

[1] This is the “real” number as calculated by Frank Veneroso
[2] Veneroso’s calculations and analysis can be found in the Library at the Matisse Table, 4/16/01 at www.lemetropolecafe.com
[3] If you are an investor and have not yet read Howe’s complaint, you owe it to yourself to check it out.  It beautifully outlines the gold price suppression scheme since 1995, and contains potentially market-shattering information.  When the evidence and allegations go mainstream the potential effects on gold and other world markets could be incredible.  The full text of the lawsuit is available at GATA’s Website wwwlgata.org
[4] The naysayers who predicted Reg Howe’s Complaint in  Boston Federal Court would be laughed out of the courthouse were all proved wrong on November 5th.  The judge has taken the charges under advisement and will issue a ruling in the weeks or months to come.  The case is still alive and well.  If ANY part of Reg’s Complaint is allowed to go to discovery, the Heavens will shake.
[5] Dow Theory Letters, PO Box 1759, La Jolla, CA 92038  www.dowtheoryletters.com
[6] Here I disagree with Russell.  When gold “was money” a one-ounce double eagle was equal to a week’s wages.  If gold were money now, there is no doubt that a single one ounce coin would be worth at least $1000, and probably much more, so you could easily carry a $1000 worth of gold around in your pocket.  It is likely that a one-tenth ounce gold coin would replace today's’ $100 bill.
[7] Gold Confiscation, Why It Can Happen Again, written by Blanchard & Co
[8] In The Great Reckoning, James Dale Davidson and Lord William Rees-Moog,