Ron Paul Responds to Donald Trump Dissing Gold

Bernanke Attacks Austrian School Economics: Crazy Opinons

FT's Martin Wolf recently had lunch in Chicago with former Fed chairman Ben Bernanke, who is still on the road hustling his book, The Courage to Act: A Memoir of a Crisis and Its Aftermath.

During the lunch, Wolf asked Bernanke about critics who argue that the Fed shouldn't have intervened in the downturn, that the downturn would have been self-cleansing.The only economic school to hold this view is the Austrian School.

Wolf and Bernanke don't mention at their lunch the Austrian school by name, but that certainly is the school of thought they are discussing.

Here's the exchange:

Other critics argue, I note, that the Fed’s intervention prevented the cathartic effects of a proper depression. He teases me by responding that I have a remarkable ability to keep a straight face while recounting what he clearly considers crazy opinions.

I add that many critics still expect hyperinflation any day now. “Well, we were quite confident from the beginning there would be no inflation problem. And, of course, the greater problem has been getting inflation up to target. As for allowing the economy to go into collapse, this is the Andrew Mellon [US Treasury secretary] argument from the 1930s. And I would think that, certainly among mainstream economists, it has no credibility. A Great Depression is not going to promote innovation, growth and prosperity.”

I cannot disagree, since I also consider such arguments mad. Nevertheless, I note, we have to recognise that neither he nor the Fed expected the meltdown.

Actually, as Murray Rothbard and Robert Higgs have both pointed out, the Great Depression was not prolonged because of monetary policy but because of other government policies that did not permit the economy to self-cleanse.

Bottom line: Bernanke's distortion machine was working well in Chi-town. His "book" tour seems to be as much about dissing Austrian economics and gold, then it is about promoting his book. He fears the Austrians.

-RW

Milton Friedman on the Difference Between Hayek and Mises on Gold

Below, Milton Friedman during an interview with Lanny Ebenstein, as reported in Chicagonomics.

The Friedman dislike for the great Ludwig von Mises and gold really becomes clear in this interview:

Mises was for the gold standard. [Friedrich] Hayek went around and around the bush on that...But he was not a gold nut like von Mises was.

-RW

What Your High School Chemistry Teacher Never Taught You About Gold

By Simon Black

One of the more unfortunate developments in human civilization over the last century is the devolution of money.

In fact, the word ‘money’ has now become synonymous with those funny pieces of paper that are conjured out of thin air by unelected central bankers.

Or even more ridiculous, ‘money’ has become the electronic representation of that paper.

Think about your bank account balance; it’s not like the bank has all that paper currency sitting in its vault.

The ‘money’ in your account doesn’t even really exist. There’s just enough of a thin layer of confidence in the system (at the moment) that this is a widely accepted practice.

It seems rather strange when you think about it. Though for thousands of years, early civilizations had some pretty wild ideas about money.

There are examples from history of our ancestors using everything from animals skins, to salt, to giant stones, as their form of ‘money’.

Though I suppose these weren’t any more ridiculous than our version of money-- pieces of paper that don’t even really exist, controlled by unelected central bankers.

Of course, over the last 5,000 years, there was at least one form of money that did make sense. And it stuck. I’m talking, of course, about gold.

It’s no accident that gold has become the most consistent form of money in world history.

The metal is

VIDEO Peter Schiff Statement to Swiss Voters on Gold Referendum

In the video statement below, Peter Schiff makes a direct appeal to Swiss voters to pass the Save Our Swiss Gold initiative on November 30th. The constitutional referendum would require the Swiss National Bank to repatriate its foreign gold holdings and maintain 20% of its foreign reserves balance in gold. If passed, the franc would effectively be the only developed market currency to opt out of the ongoing “currency wars,” and could therefore become a destination for a deluge of foreign capital.




Here's  the full transcript:

Gold and the US Dollar: The Long Term Perspective

Although in recent months the US dollar has been strong and gold weak, this is a very short-term perspective. In the long run, gold far outperforms, the Federal Reserve managed dollar.

(Chart via Gold-Eagle)

WOW The Insiders Act: The Account Of Swiss Gold Initiative Organization Has Been Frozen

I just wrote yesterday that the Establishment will do everything they can to stop the Swiss Gold Referendum to pass (SEE: Expect Attacks on Gold as the Swiss Gold Referendum Vote Approaches), but I didn't expect reporting this so quickly as a follow up.

Paypal has frozen the funds of an organization where donations could be made to support the campaign to get the referendum passed.

 Egon von Greyerz, who is founder of Matterhorn Asset Management out of Switzerland reports:

I have been involved in the Swiss Gold Initiative.  The Swiss National Bank is opposing this initiative.  They have admitted that it stops their ability to manipulate markets.  The campaign is going well.  The public has generously donated because of KWN and other sites.  But that came to a stop two days ago when Paypal closed the account for donations and they froze the funds that were in that account without any warning.

So unfortunately the campaign cannot receive some of those donations which were just frozen.  Paypal will not even answer the questions we are asking them, but I assume the money will be returned to the donors.  Clearly the powers that be did not want the campaign to receive this money.  We will keep on fighting for this campaign because gold will always have an advantage over worthless printed pieces of paper that governments and central banks create at will in order to manipulate markets.

Expect Attacks on Gold as the Swiss Gold Referendum Vote Approaches

So Alan Greenspan says. "Buy gold,"  (SEE:HOT Alan Greenspan Says BUY GOLD)  and the gold and silver prices come crashing down. Gold closed down today to $1199.00 per ounce a decline of $26.00(2.11%) and silver closed at $16.45 per ounce, a drop of 81 cents or 4.72%.

Is the Plunge Protection Team at work?

Former Plunge Protection member, Pippa Malmgren has publicly stated that

HOT Alan Greenspan Says BUY GOLD

Alan Greenspan: "Buy gold."

Michael Derby at WSJ reports:

The question of when officials should begin raising interest rates is “one of those questions I cannot answer,” Mr. Greenspan said.

He also said, “I don’t think it’s possible” for the Fed to end its easy-money policies in a trouble-free manner.

“We’ve never had any experience with anything like this, so I’m not going to sit here and tell you exactly how it’s going to come out,” Mr. Greenspan said. But he noted that markets often react to changes in central bank policy unpredictably and not entirely rationally. Recent episodes in which Fed officials hinted at a shift toward higher interest rates have unleashed significant volatility in markets, so there is no reason to suspect that the actual process of boosting rates would be any different, Mr. Greenspan said.

He said the Fed may not even have that much power over the timing of interest-rate increases. The problem as he sees it is an interest rate the Fed pays on the money banks park at the central bank, called reserves. Fed officials plan to use this tool as their primary lever for raising interest rates when the time comes. If bankers decide to put this money to work, creating inflation risks, the Fed may be forced to raise rates, even if the economy isn't ready for it, he warned.

“I think that real pressure is going to occur not by the initiation by the Federal Reserve, but by the markets themselves,” Mr. Greenspan he said.

Mr. Greenspan said gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments.

Greenspan has it correct, the reaction to the Federal Reserve low interest rate policy will not be controlled by the Fed. Markets will move on their own. It is not going to be pretty and with Greenspan advising buying gold, it is clear he knows that part of the market reaction is going to be soaring price inflation.

BTW: This is a very serious but subtle attack on both Ben Bernanke and Janet Yellen monetary policy.

If you are a former Fed chair and you are advising that gold be bought, you are not suggesting that monetary policy is being handled in a competent manner.

Overall. this is the most sound analysis I have seem from the former Fed chairman. Murray Rothbard was right, they only speak truth once they are out of power.


(ht  Nick Badalamenti)

David Gordon Attacked, Again

By Robert Wenzel

David Gordon's critical review of Money: How the Destruction of the Dollar Threatens the Global Economy — and What We Can Do About It, by Steve Forbes and Elizabeth Ames has sure brought out the attack hounds.

First we had the failed attack of John Tamny (SEE: Forbes Attacks David Gordon), now Marc Miles steps in front of Gordon (SEE: David Gordon's Forbes Critique Fails Basic Economics).

Miles charges in his comment that:

Gordon apparently fails to appreciate is that the exchange takes place precisely because both sides value the transaction equally. Instead, the swapping of the car for money simply allows both parties to accomplish a different goal - they have changed the composition of their wealth portfolios to something they prefer. The new car owner has a car worth $25,000 and the seller now has $25,000 of new purchasing power. The $25,000 in money? Neither party wanted the cash per se, only the value it represented. As a medium of exchange with a unit of value, it merely facilitated the trade and is no longer part of the equation when the transaction is complete.

But do both sides of a transaction really consider a transaction equal? It is Miles who fails to appreciate the nature of exchange.  Murray Rothbard in 1970 clearly set the record straight in Man. Economy and State:

One...fallacy is the idea that in an exchange the two things exchanged are or should be "equal" in value...We have seen, on the contrary, that any exchange involves inequality of the values of each commodity between buyer and seller, and that it is this double inequality of values that brings about exchange.

In other words, no exchange would take place if two individuals valued two items exactly the same? Why would two people go around exchanging items that they consider of the exact same value? Do two people go around exchanging twenty dollar bills, all day, with each other because they are of the exact same value? Of course not. If there is no gain from a trade, it is not going to be done. Exchange takes place only when two people value items differently. That is, as Rothbard puts it "it is this double inequality of values that brings about exchange."

Miles goes on to charge that Gordon:

compounds this error by claiming that money is a commodity...

Gordon is wrong. Paper money is not a commodity. What intrinsic value does the piece of paper have? You can't eat it, sit on it, or drive it like other commodities. It is simply a medium of exchange, a representation of value. No more, no less. That is basic economics.

But, note well, in his attack, Miles himself indicates that money is a commodity when he writes, of paper money "like other commodities." Miles than lists the unique nature of paper money, but this does not mean that it is not a commodity, it simply means that it has unique qualities, which in fact all commodities do.

He attempts to claim that paper money is not a commodity because "You can't eat it, sit on it, or drive it." But how are any of these factors at the essence of a commodity? You don't eat steel, you don't sit on hydrofluoric acid and you don't drive wheat.

The essence of a commodity is that it is an item that can be owned and traded. Paper money may not be the best money, but it does meet this definition as does steel, hydrofluoric acid and wheat. Checking accounts, debit cards are simply methods of transferring ownership of paper money.

(Note: Even potential electronic currencies such as Bitcoin meet this definition as a commodity in that they can be owned and traded, but you certainly can't eat, sit or drive an ecurrency.)

The final attack by Miles comes in this form:

 Gordon goes on to show a further misunderstanding of the fundamental economic issues when he begins to assert that pegging the dollar price of gold is price-fixing and anti-free market. The problems with this assertion are two-fold. First, he confuses what is meant by "price". "Price-fixing" refers to pegging the value of one commodity in terms of another. In economic jargon it is fixing the "terms of trade" or barter price between goods. That's not what Forbes and Ames are talking about. They are targeting the price level.

But, as we have seen, gold and paper money are both commodities and thus government setting an exchange rate between them is indeed price fixing. (Note: The situation is different if paper money is simply a receipt for a specific amount of gold, rather than trading on its own.)

Miles compounds the problem in his attack by making the erroneous inference that gold and the price level are the same thing. Gold is a commodity, the price level is not, No one owns the price level. It is a fictional construct. Further, the targeting of the gold price is not targeting the price level. As Ludwig von Mises notes in Human Action:

There is first of all the spurious idea of the supposed neutrality of money. An outgrowth of this doctrine was the notion of a "level" of prices that rises or falls proportionately with increases or decreases in the quantity of money in circulation. It was not realized that changes in the quantity of money can never effect prices of all goods and services at the same time and to the same extent.

Bottom line: Gordon is more than miles ahead in his understanding of monetary theory.

Robert Wenzel is Editor & Publisher at EconomicPolicyJournal.com and at Target Liberty. He is also author of The Fed Flunks: My Speech at the New York Federal Reserve Bank. Follow him on twitter:@wenzeleconomics

Poll: Latest on Swiss Gold Referendum

 A proposal to prohibit the Swiss National Bank from selling any of its gold reserves, and would require the SNB to hold at least 20% of its reserves in gold, (SEE:Swiss Gold Referendum: If This Passes It Could Change the Gold Price Overnight) has the support of only 44 percent of the public, a new survey showed.

The group behind the poll also said support was likely to diminish as a Nov. 30 vote on the measure approaches, reports Reuters.

Swiss Gold Referendum: If This Passes It Could Change the Gold Price Overnight

By Louis Cammarosano

On Novemeber 30, 2014, the Swiss will go to the polls to vote on a referundum “Save Our Swiss Gold” that, if approved, would require the Swiss National Bank (SNB) to hold 20% of its reserves in gold, repatriate any gold it holds outside its borders and cease selling any of its gold.

Will the Swiss gold initiative pass?

What are the implications for the price of gold if Save Our Swiss Gold passes?

Switzerland is a country that is almost synonymous with gold. The idea of

Russia Now, Most Likely, Has More Gold Reserves Than Switzerland.

In September, Russia continued its voracious gold buying, reports Smaulgld.

Russia, added 1.2 million ounces of gold to its reserves in September, bringing its reserves to 37 million ounces, or approximately 1.156,00 tons, placing them, most likely, ahead of Switzerland who sold 60% of its gold reserves in the mid 2000’s.

At the average September gold price of $1238 per ounce, Russia’s September gold purchase is worth approximately $1.5 Billion.

Peter Schiff: China's Boom and Lust for Gold

Highlights from the clip:

0:20 – The dollar has rallied on the false premise that the United States is the only major central bank in the world that will be ending its quantitative easing.
1:53 – The US economy is weaker than the economies of Europe and Japan. When investors realize this, they will return to gold.
2:30 – China is the world’s largest holder of US dollars. In preparation for a devaluation of the dollar, the Chinese have been moving their reserves into gold.
3:09 – The launch of the iPhone 6 highlights the difference between the US and Chinese economies.
5:02 – China’s official gold holdings are unknown, because the Chinese don’t want the world to know how much more gold they intend to buy.
6:00 – There will be support for gold at the $1200 level, because there are big buyers for the metal in emerging markets across the world, not just China.
6:32 – When confidence in the US dollar disappears, people will turn to gold. When that happens, $1200 per ounce gold will seem cheap.

Will the Swiss Take Back Their Gold?

Jeff Deist and Claudio Grass discuss the uniquely Swiss mindset behind the upcoming Swiss gold referendum, and how decentralization of political power is part of Swiss DNA; the tremendous geopolitical aftershocks that would occur if the referendum passes — including the physical repatriation of gold to Switzerland; and how the Swiss people may be waking up to the sellout of their country by the Swiss National Bank and the IMF.

Ron Paul's Investment Success Is Driving WSJ Crazy

WSJ just can't deal with the fact that Ron Paul, by buying gold and silver stocks and thus betting against the Fed, has most likely the best performing portfolio of any congressmen ever.

They are out with, amazingly, another hit piece on his successful portfolio. At one point, they suggest they don't know it is a huge success:

Many of Rep. Paul’s supporters protested, in their comments, that his portfolio has already been vindicated by its performance.

It isn’t that simple.

Congressional financial-disclosure forms report holdings only in wide dollar ranges (for example, $15,001 to $50,000). If Rep. Paul owned gold bullion, estimating his investment performance would be fairly easy. But he doesn’t; he owns gold-mining stocks instead. And since the size of each stock holding is disclosed only within a broad band of valuation, there’s no way an outside observer can derive a long-term rate of return for Rep. Paul’s portfolio (or for any other member of Congress, for that matter).

Puhleez. If anything, Ron Paul's gold stocks likely out performed gold.

When I met up with Dr. Paul last May, I was simply stunned by his knowledge about the stocks he owned. I know a lot of gold stock investors, who simply load up on gold stocks, not knowing much about what is going on at the companies.Not Dr. Paul. He understood the philosophies of the management of the companies whose stocks he owned and why the companies employed the strategies they did.

Warren Buffett always talks about concentrating investments in areas you understand, rather than diversification. WSJ never calls Buffett's philosophy weird. Yet, when WSJ discusses, Dr. Paul's investment concentration, they headline the story: How Weird Is Ron Paul’s Portfolio?

WSJ begrudgingly did have to admit that the strategy is a success:

There isn’t much doubt that Rep. Paul’s portfolio has outperformed the U.S. stock market as a whole. Ten years ago, the NYSE Arca Gold BUGS Index, a basket of stocks in mining companies, was at $65; this week, it’s at $522. That’s roughly a 23% average annual return; over the past decade, by contrast, the Standard & Poor’s 500-stock index, counting dividends, has returned some 2.9% annually.

Yet, they go on to say:

Rep. Paul’s supporters admire him for the consistency of his political views. But if the future happens to unfold in ways he doesn’t expect, then his hot investment portfolio is likely to go cold in a hurry.

Huh! Ron Paul is the number one expert in Congress on how central banks destroy the value of the currency they control. The Federal Reserve is no different. As WSJ writes about the future possibly being different, Ben Bernanke is assuring that Ron Paul's portfolio will have huge gains into the future. The Fed is printing BIG. Over the last six months the money supply (M2) has increased at an annual rate of 14%.  Yet, nowhere in the WSJ piece is their mention of the Fed's responsibility for the success of Congressman Paul's portfolio or any explanation of how gold goes up as the Fed destroys the value of the dollar. Some analysis.

It's Okay for Mitt Romney and Jon Huntsman to Prepare for Disaster, But Not Ron Paul

So says, Modeled Behavior's Adam Ozimek.

It should be noted that when Ozimek discusses Ron Paul's "crazy beliefs about the probability of economic collapse." He is talking about Ron Paul's investments in gold stocks and gold itself. Yet, Ozimek, along with others who have brought up the topic, never, ever mention that Dr. Paul's portfolio has skyrocketed because of his investment in gold and gold related stocks. And that he is likely the most successful investor in the history of Congress.

But somehow this is not okay, according to Ozimek, but Romney and Huntsman have the green light to stockpile two years worth of dried food:

If Romney and Huntsman are actually prepping, what does it tell them about them? Should this be considered a “crazy belief” of theirs as Paul’s prepping is for him? I don’t think so. Their preparations don’t tell us much about how probable they actually think a disaster is, but rather reflect them adhering to a tradition.

Though Ozimek then contradicts himself and  appears to think that if Romney and Huntsman are storing food it is crazy, but it still is okay, becasue, and this is crazy, if others hold the same crazy idea, it is okay.

And at the very least religious beliefs are so widespread that I don’t think they all have the same correlation with other crazy beliefs as, say, believing an society destroying economic collapse is coming soon.

Screw analysis, screw theoretical understanding of the economy, according to Ozimek, it's all about how many others agree with your crazy idea.

Crazy man, crazy.

China Bans Gold Exchanges

Here's another indication that the price inflation in China is much greater than the official reports of around 4.0%.

Gold exchanges in China outside of two in Shanghai have been banned, according to a statement from the the People's Bank of China, the Ministry of Public Security and other regulators. This is a clear sign of panic among government officials. Chinese people were protecting themselves against the inflation by buying gold.

Until this order, gold exchanges operated throughout China.

"No local authority, institution or individual is allowed to set up gold exchanges," said the notice dated December 20.

The statement also said that the Shanghai Gold Exchange and the Shanghai Futures Exchange are enough to meet domestic investor demand for spot gold and futures trading.

The PBOC said it would lead a team to insure that gold exchanges will be closed, banks will stop providing clearing services to them; and some people will be put under police investigation for possible irregularities at exchanges.

Oh Brother, Now The Wall Street Journal Attacks Ron Paul

I am not making this up.WSJ is reporting on Ron Pauls "extreme" portfolio:

Republican presidential candidate Rep. Ron Paul marches to his own drummer in politics – and in his investment portfolio, too.

Here at Total Return, we’ve looked at hundreds of the annual financial-disclosure forms in which the members of Congress reveal their assets and trades – and we’ve never seen a more unorthodox portfolio than Ron Paul’s.

Then they put this in which has nothing, zero to do with Ron Paul:

(In fact, The Wall Street Journal revealed problematic trading in Congress more than a year and a half before the “60 Minutes” episode that recently raised a ruckus over the same topic, but that’s another matter.)

Here's more from WSJ on Dr. Paul's "extremism":

But Ron Paul’s portfolio isn’t merely different. It’s shockingly different...

Then we get this idiotic comment which clues you in the the article is a total hit job:

Rep. Paul appears to be a strict buy-and-hold investor who rarely trades; he has held many of his mining stocks since at least 2002. But, as gold and silver prices have fallen sharply since September, precious-metals equities have also taken a pounding, with many dropping 20% or more. That exposes the risk in making a big bet on one narrow sector.

Could a WSJ writer possibly be clueless to the fact that, even with this pullback in the gold price, gold has more than quadrupled since 2002! Is there any mention of this and how successful an investor Dr. Paul is? No. The only thing that is mentioned is the recent pullback, of which there have been many through out the years.

Here's more of the absurd hit on Dr. Paul, from WSJ:

At our request, William Bernstein, an investment manager at Efficient Portfolio Advisors in Eastford, Conn., reviewed Rep. Paul’s portfolio as set out in the annual disclosure statement. Mr. Bernstein says he has never seen such an extreme bet on economic catastrophe. ”This portfolio is a half-step away from a cellar-full of canned goods and nine-millimeter rounds,” he says.

There are many possible doomsday scenarios for the U.S. economy and financial markets, explains Mr. Bernstein, and Rep. Paul’s portfolio protects against only one of them: unexpected inflation accompanied by a collapse in the value of the dollar. If deflation (to name one other possibility) occurs instead, “this portfolio is at great risk” because of its lack of bonds and high exposure to gold.

The signal is clearly out to get Ron Paul, if the WSJ runs an absurd article like this on probably the most successful investor in Congress.

Note: Although Bernstein's firm appears to be Efficient Frontier Advisors, WSJ appears to incorrectly identify the firm as Efficient Portfolio Advisors.

A Report From Hong Kong on the Developing Crisis in China

Joe Nelson, a graduate student at NYU's Leonard N. Stern School of Business, emails:

Nice work! It’s great to see EPJ, Mises.org and Austrians of all stripes are now too big to ignore even by those in the most rarified of ivory towers [such as Paul Krugman]....

-Joe

P.S. I was in Hong Kong, Shenzhen and Macau a little over a week ago. While I was in Hong Kong I had dinner with a gold trader at a very large bank in HK. We got to talking about China, the ghost cities, empty airports and bridges to nowhere. I asked about what his view given he was much closer to the action than I am. He told me, point blank, that while there is a real functioning economy in China, there is a tremendous amount of hot air and we’re about to find out how much. His sentiment pretty much echoed that of everyone else I spoke with and the business papers and TV stations are swimming in stories about the impending collapse.

If any of your readers are interested in moving to Hong Kong (and it is an absolutely amazing place; NYC looks like a town full of pikers in comparison), they may get a break on real estate prices as a result of the Chinese collapse. For kicks, I popped in on a few brokers and was told the mainlanders have been the primary bidders in the SARs of southern China and as a result property in Hong Kong has been bid to the moon. That’s easing and was evident even during my trip. A year from now, there could be some real bargains.

Update: Joe adds about gold in Hong Kong:

I forgot to add one thing EPJ readers might like. Physical gold in HK can be bought for as little as 0.25% over spot. I'm sure some EPJ readers have seen Simon Black's reports about how cheap gold is in HK. I'm pleased to confirm his report.