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 […]
Stocks continued mostly going up last week. Gold bounced up and down… but held above $1,600. Most people would much rather have stocks than gold.
Most of the time, they are probably right. Gold pays no dividends. Nor does it invent new things or open up new markets… or do any of the other things that make stocks go up.
And now most people seem to think that there is a recovery under way… and that the authorities have everything under control. So who needs gold?
According to Kim MacQuarrie’s book The Last Days of the Incas, a sailor in the 16th century earned about 8 ounces of gold for a year’s worth of service.
How much does a merchant seaman today earn? A quick Google search reveals a wage of about $2,500 a month… or about $30,000 per year. That seems a little low, probably not including the value of health insurance and so forth.
And maybe it includes all those sailors from Indonesia and the Philippines, who must earn less than the typical American mariner. So let us say $40,000, which is about the average wage in the U.S.
Hmmm… eight times $1,600 does not take us very far. Only to about $12,800. So either MacQuarrie is wrong or sailors make a lot more today than they used to. Or the price of gold is far too low.
Sailors were probably not very well paid in the Age of Discovery. We will guess that the average wage was probably closer to an ounce of gold per month. That would be a wage of $1,600 monthly… still low by U.S. standards, but not by the standards of most of the world! By world standards, a sailor probably earns about as much in gold as he did 500 years ago.
Those are the kinds of problems and questions you run into when you’re trying to figure out whether gold is overpriced or underpriced. All we can tell is that on the evidence of the sailors’ wages, gold is probably not far from where it ought to be.
Pizarro hit the jackpot when he conquered the Incas and stole their gold. During a four-month period, March-July 1553, the conquistadores melted down 40,000 pounds of Inca jewelry, art, tableware, and religious items. Twenty percent was sent back to the king of Spain. The rest was divided among the 168 conquistadores.
It was a bloody business — killing thousands of unarmed Incas at Cajamarca, for example. But it paid well. The horsemen in the group each got 90 pounds of 22.5-carat gold plus 180 pounds of silver. If they had just put the gold in a safe place, to be dug up by a distant descendant in the 21st century, the fortune would be worth about $2 million.
Last week, gold got a little boost when it became apparent that 1) Europe still faces huge and disturbing financial challenges, 2) governments are ready, willing, and able to steal vast amounts of money from bank accounts, and 3) they are also preparing to put on capital controls to prevent you from moving your money to safety.
We maintain a small bank account in France. It is used just to make repairs and otherwise keep up our house there. The woman who handles it sent this message on Friday:
“Don’t put any more money in the account. We don’t want to get Cyprused!”
How likely is it that the French government will freeze the whole banking sector and skim 10% off accounts? Not very. France is not in that kind of a cash flow bind… yet.
But all the countries of the developed world are headed in that direction. They spend more than they receive in tax revenues. And as their debt increases, their interest payments increase too.
Of course, ultralow interest rate policies — enabled by central bank buying of government debt — keep interest payments low, for now. But low interest rates don’t stay low forever. And as Greece, Spain, Portugal and other borrowers have already discovered, Mr. Market can be a real pain in the derriere.
When he insists on higher rates of interest — fearing that he may not be repaid as promised — state budgets get shot to hell. Then, like Cyprus, the feds get desperate for money. They will go after it wherever and however they must.
Which makes saving money dangerous as well as unrewarding. First, the feds suppress interest rates so you get no return on your savings. Then, when they get in a jam, they Cyprus your savings directly.
That’s just one of the reasons we keep our eye on gold. If the 16th-century sailor had taken his annual pay and buried it under a tree in Extremadura, it might still be there. The lucky treasure hunter would find himself as rich as the sailor who buried it five centuries ago.
The nice thing about gold is that not only does it hold its value over centuries, but it is also a valuable that you can keep out of the banking system. Like jewelry or antique cars, you can keep them at home. Bury them under your own tree. Keep them in your own safe.
If the banking system freezes up or breaks down… you still have them. Pass them to your children. Give them as birthday presents. Or just lock them up and forget about them.
Gold is private money. Dollars, pounds, and euros are public money.
Dollars, pounds, and euros are given to us by governments and central banks. Gold is given to us by the gods.
The Daily Reckoning