It’s easy to be negative about the U.S. economy these days. Find a glint of silver, and folks come running to point out all of the dark clouds looming about. This, of course, is what we got last week when the monthly jobs report was released from the U.S. Department of Labor (DOL). Folks pooh-poohed the number of jobs and whining that they’re not enough or that it’s less than a bunch of economists thought that it might be. But you know what? Stuff ’em.
Given how poorly states like California and Illinois have funded the pension funds for their own employees, one would think that this would stop dead in its tracks any plan to have the government assist in managing private sector funds too. The spate of recent activity, however, suggests otherwise.
The financial world is plodding along like a drunken sailor avoiding debt collectors by keeping no cash in his wallet. It’s not the kind of calm that’s going to last or end well. But the storm will have to wait until after the Olympics.What a game! We’ve never watched ice hockey closely before. But watching […]
“When they come for my gun, they will have to pry it out of my cold, dead hands,” is a common refrain I often hear from the Neo-Cons when there is a threat, credible or otherwise, that the U.S. government is going to take their firearms.And, when I hear this crazy talk, I agree with […]
Last year was quite the year for Bitcoin. We’ve seen exponential growth in Bitcoin’s exchange rate and extensive coverage in the media. Another phenomenon we have witnessed is the proliferation of alternative cryptocurrencies, five of which we’ve provided below.What all of these cryptocurrencies have in common is that they rely on a decentralized network to […]
The nonpartisan Congressional Budget Office is acting in a bipartisan way to cover up the biggest single threat to the bipartisan political alliance that is stripping America of its wealth: the United States Congress.There is no question that the following policy is bipartisan. Democrats and Republicans in Congress are completely agreed that the following information […]
Amidst all the revelations about how the American people, many of whom are absolutely convinced they live in a free society, have their telephone calls, emails, website visits, and who knows what else under surveillance by their own government, let’s not forget the massive infringements on financial privacy that have gone on for decades.Consider, for […]
Image: ShutterstockBitInstant CEO Charlie Shrem, along with alleged co-conspirator Robert Faiella, was arrested by federal authorities last week for allegedly laundering more than $1 million worth of Bitcoins. This is a tiny amount compared to the largest drug-and-terrorism money laundering case ever. Yet when British bank HSBC was found guilty in 2012 of laundering billions, […]
The exercise had an awesome name, inspired by the movies: “Quantum Dawn 2.”On July 18, scads of U.S. banks, stock exchanges and government agencies took part in a digital fire drill — a practice run in the event all of Wall Street came under massive cyberattack.This isn’t the first time banks have come under an […]
The faces of the Detroit bankruptcy are the thousands of pensioners whose promised benefits are suddenly part of the restructure negotiation. When Motown filed for Chapter 9 last July, the city had $11.5 billion in unsecured liabilities. The vast majority of this was pension and health care benefits owed to retired city employees.The images of […]
So you’ve maneuvered the Obamacare website, plugged in your top-secret information and found out how much you are forced to pay to avoid a fine.And for some of you, it turns out you qualify for a government subsidy — making the premium sound like a bargain. But signing on that line to accept the government’s […]
The Largest Company in History:“The United States Corporation of Government (USCOG)”I follow global social and commercial networks, looking for entrepreneurial opportunities.Innovation surges when industry and government models change. Buggy whips. Landline phones. Railroads. The Soviet Union. Apartheid South Africa. All marked social and commercial innovation, both bad and good.We are witnessing a new form of […]
We’d like to give the banks in Australia some credit. They’ve finally gone and done it. They have caught up with 1960s technology. They’ve figured out how to use PIN numbers.How to only use PIN numbers, that is. They’re considering scrapping signatures on credit cards to cut down on fraud. Apparently, having to verify your […]
We put in a good-citizen call to the SEC the other day.“There’s a massive scheme to manipulate stock prices,” we told the friendly agent.“I have to tell you that your call is being monitored so that we can better serve the public,” he replied.“Oh, don’t worry about that. The NSA is tapping our call anyway.”“Are […]
Bitcoins are largely considered digital currency (or “crypto currency”) so you’d expect it to be treated like currency on a retail web site. But the Internal Revenue Service might not think so.
Politicians — elected officials — are street smart rather than book smart.If you care about influencing government policy it helps to know how they think.Forbes contributor Nathan Lewis argues that:“Too much is done today on the oral tradition. That is, literally, what it is. In this post-Gutenberg age, we have some better alternatives.“Thus, we need […]
Bitcoin has been making headlines for months now. Extreme price fluctuations have sparked a vigorous debate: Is it a currency or a scam? Is Bitcoin viable in the long-term, or are we witnessing a bubble waiting to burst?The answers to these questions are simple: Yes, Bitcoin is a currency, but we cannot know if it […]
The Silk Road was an undercover website where you could buy or sell illegal goods — drugs mainly. I believe passports were changing hands for about $6,000, and I understand weapons were also sold, but that was ceased in response to the spate of shootings in the U.S. over the summer. The essence of the […]
The market has selected different things as money throughout history. Some of these items have served as money in isolated places for specific periods of time — for instance, cigarettes in prisoner-of-war camps. Cigarettes continue to be a currency in prisons if allowed, but if not, according to Wikipedia, “postage stamps have become a more […]
[Ed. Note: This article originally published on Jan. 24, 2013]Stocks up. Gold down. Bitcoin… waaay up.The S&P 500 busted through the 1,500 mark this morning. Stocks haven’t been this expensive since 2007… right before they got a whole lot cheaper… for a whole lot longer. Gold, meanwhile, dipped a tad. This, despite central bankers of […]
Now, this is sheer entertainment. The Chicago branch of the Federal Reserve has addressed the great monetary question of our day. A researcher has taken a detailed look at the prospects for market-based crypto-currency, with a special focus on Bitcoin. It concludes that Bitcoin is not a viable replacement for the dollar. The report includes […]
The standard version of how money came to be goes like this: First, there was barter. (A handful of nails for a pint of ale!) Then, along came various forms of money. An evolutionary derby eventually crowned gold and silver as the supreme money. And finally, credit (or debt) was born. This is the apex […]
2013 represents another turning point in the demise of the American Empire. If you view it in economic (rather than ethical or moral) terms, the high water mark of Empire was probably in the late 1990s.But the Internet bubble and bust marked an important turning point. It coincided with the birth of the euro, a […]
It was a wild ride last week in the world of the Deep Web, that section of the Internet that requires special tools to access. The feds took down the site called Silk Road and claim to have arrested its founder and administrator. The news streams were filled with lurid tales of derring-do in this […]
My community in the Deep South prides itself on friendship, community feeling, and an overall happy spirit. So it was a bit strange for all of this to be utterly smashed and obliterated in the course of a few calamitous weeks in which friend turned against friend, colleagues became antagonists and enemies, and families were […]
A new assessment of state pension obligations suggests the problem is even worse than it already appears.How much worse?EMPTY COOKIE JAR: Pension liabilities are worse than many states’ official figures indicate.Using a more conservative method of accounting for financial gains in the marketplace, there is a $4.1 trillion gap between assets and liabilities — known […]
I dreamed I saw Bernard von NotHaus, alive as you or me.Said I, “But Bernard, you’ve been jailed two years.”“I never was,” said he.Bernard has been the called the Rosa Parks of the alternative money movement. More than 10 years ago, he had this idea that he would make his own money — not the […]
Less than 1% of the world’s gold is mined in India. The rest comes from somewhere else. Still, India can’t get enough. It is the largest consumer of gold in the world, buying nearly a third of production in recent years. Some estimates say that 10% of all gold is held in India.
Indians save roughly 30% of their income, as opposed Americans, who save 5%. Plus, Indians are getting richer all the time. Once a very poor country, the rich and middle classes now outnumber the poor in this nation of 1.2 billion. The country has the sixth-largest economy in the world.
If people are left alone, high gold demand going forward is a lock.
Yet India’s policymakers are disturbed. Yellow metal purchases have widened the country’s current account deficit to 5.4% of GDP.
The Reserve Bank of India (RBI) has produced a report indicating “a need to moderate gold import, as the insatiable appetite for the yellow metal could jeopardize economic stability,” reports BullionStreet.com.
So the Indian government and its central bank are trying to get people to buy other financial products. “There is a need for banks to introduce new gold-backed financial products that may reduce or postpone the demand for gold imports,” the RBI report said.
The central banking wonks are thinking that if the Indian public can be made aware of financial paper instruments such as gold accumulation plans, gold pensions, and gold-linked accounts, it will drop its obsession with the barbarous relic.
A leading Indian trade body said country’s gold imports could fall to just 550 tonnes next year, little more than half of the peak of 967 tonnes in 2011.
Well, good luck with that. The people of India have cultural, historical, and traditional reasons to buy gold. They consider it the most valuable asset there is. Indians want to own gold like Americans want to own houses.
Ganesh Rathnam related a story that explains India’s gold obsession. When his father, a pediatric surgeon, wanted to buy land to build a new clinic, he mortgaged his wife’s jewelry to raise the purchase money. “Similarly, millions of people in India have capitalized their businesses or farms, or secured their basic necessities after severe business reversals, by pledging their gold jewelry,” he writes.
Last year, 60 Minutes ran a segment, “India’s Love Affair With Gold.” Correspondent Byron Pitts was stunned that the Indian people consider gold purchases as savings. Indians do not believe that they are spending when they buy gold, but, instead, that they are putting their money in a savings account. Oftentimes, a savings account that is worn around the neck or wrist.
There are 22 official languages in India, so there are 22 ways to say gold. And nothing says gold in India like a wedding. Half the country’s gold purchases are for wedding jewelry. It is said in India, “If there is no gold, there will be no wedding.” Gold must be widely owned, because there are 10 million weddings a year. Some are extravagant affairs that last for days on end.
Parents start accumulating gold for their daughter’s wedding day as soon as she is born. This gold represents some financial security that the bride brings to the union. It also gives the bride some economic status in the relationship. And while it provides security, gold is hardly ever sold, but instead passed on for generations. But it can be mortgaged if needed.
Gold is a symbol of purity and is considered sacred, but also signals prosperity. Jewelry does the talking and gold speaks loud and clear. Not for vanity’s sake, however, as gold is considered honorable. You can’t have a family without gold. The yellow metal is a way of life.
A gold analyst told Pitts that it’s impossible to explain to an Indian that gold might go down in price. Indian society has been around a few thousand years. People learn a thing or two in that time. First, save money for the unexpected. Second, don’t trust banks. And third, don’t trust the government’s paper money. They’re not interested in mutual funds and other financial products.
Even the poorest people in India buy gold, saving a little each week to buy a gram at a time.
“Gold has a rich tradition in the Hindu epics, the Ramayana and the Mahabharata,” writes Rathnam. “It was associated with the pomp and splendor of the gods and kings who appear in these mythological stories.”
He explains that silver coins were widely used in India during the reign of the Mauryas circa 250 B.C., and the first gold coins were issued widely during the Gupta dynasty around A.D. 250. India has been a collection of kingdoms and fiefdoms often at odds. Gold was easily hidden, “enabling ordinary citizens to avoid being looted by marauding armies,” Rathnam writes. The kings changed, as did the coins, and thus gold became the preferred medium of exchange and store of wealth.
After India’s foreign reserves were decimated by its war with China, the government instituted the Gold Control Act of 1962, which forbade private ownership of gold bullion and forced all bullion to be turned into jewelry.
In the 1970s, tax rates reached 95%, and the Indian currency, the rupee, plunged in value. Indians took to not only hiding assets from the taxman, but also trying to survive inflation. Gold and real estate were the chosen vehicles. Rathnam also points out that bank deposit insurance in India is the equivalent of just over $2,000, making bank deposits a risky asset.
But finance minister Chidambaram Palaniappan doesn’t care about tradition or prudence. He sees gold purchases as consumption that has contributed $64 billion to the country’s widening current account deficit.
While the average Indian loves gold, the country’s bureaucrats do not. The numbers tell the story. The Indian government owns only 360 metric tons, while private gold holdings are estimated to be 15,000 metric tons. It is, indeed, the people’s money.
An Indian gold expert told 60 Minutes’ Pitts, “If India sneezes, the gold industry will catch a cold.”
The government is trying to make it sneeze, but the people are wise. Thousands of years of tradition will likely keep the gold market healthy, no matter how much the politicians hate it.