Some personal thoughts on surviving the monetary meltdown

 

Let us start by looking at the economy from 10,000 feet above: After 40 years of boozing on easy money and feasting on fantastical asset price inflations, the global monetary system is approaching catharsis, its arteries clogged and instant cardiac arrest a persistent threat. Most financial assets are expensive, and many appear to be little more than securitized promises with low probability of ever delivering payment in full. Around the globe, from Japan to the US, a policy of never-ending monetary stimulus consisting of zero interest rates and recurring rounds of ‘quantitative easing’ has been established aimed at numbing the market’s growing urge to liquidate. Via the printing press, the central banks, the lenders-of last resort, prop up banks and financial assets and simultaneously fatten the state, the borrower of last resort, which, despite excited editorials against the savage policy of ‘austerity,’ keeps going further into debt almost everywhere.

‘Muddling through’ is the name of the game today but in the end authorities will have two choices: stop printing money and allow the market to cleanse the system of its dislocations. This would involve defaults (including those of sovereigns) and some pretty nasty asset price corrections. Or, keep printing money and risk complete currency collapse. I think they should go for option one but I fear they will go for option two.

In this environment, how can people protect themselves and their property?

Disclaimer

Before I start sharing some of my own personal thoughts on this topic with you I should repeat my usual disclaimer: I provide economic analysis and opinion, food for thought. But I do not intend to give investment advice and certainly not any specific trade ideas. I provide a worldview, and an unconventional one at that. You alone remain responsible for your actions, and whatever you do, you do it at your own risk.

My three favourite assets

My three favourite assets are, in no particular order, gold, gold and gold. After that, there may be silver, and after a long gap of nothing there could be – if one really stretches the imagination – certain equities or commercial real estate.

Why gold?

We are, in my assessment, in the endgame of this, mankind’s latest and so far most ambitious, experiment with unconstrained fiat money. The present crisis is a paper money crisis. The gigantic imbalances that threaten to unravel the system momentarily are the direct consequences of years and decades of artificially cheap credit and easy money, and are simply unfathomable in a hard money system. Take away fiat money and central banks and our current problems would be inexplicable. (If you are still under the widespread but erroneous impression that the gold standard caused the Great Depression you may want to consider that the strictures of hard money were systematically disabled and the disciplinary power of a true gold standard increasingly weakened with the establishment of the Federal Reserve in 1913, and the introduction and spreading of lender-of-last resort central banking in the US financial system. In any case, we are now in the Greater Depression, and this one is entirely the responsibility of central banking and unlimited fiat money.)

Whenever paper money dies, eternal money – gold and silver – stage a comeback. We have already seen a major re-monetisation of gold over the past decade, as the metal again becomes the store of value of choice for many investors. This will continue in my view, and even accelerate.

Gold is money

A frequent allegation against gold is that its non-monetary applications are minor and do not justify the present price, and that gold doesn’t pay interest or dividends, quite the opposite, storing and insuring it incurs running expenses. Gold is an instrument with a negative cash yield.

None of these objections stand up to scrutiny. They are either wrong or irrelevant.

It is investment goods that are supposed to offer cash yields – interest income or dividends. But gold is not an investment good, it is a form of money. Gold is the oldest form of money still considered a monetary asset today, and the only truly global form of money (besides silver but silver is today still more of an industrial commodity than a financial one). Gold is – importantly – inelastic money. It cannot be created nor be destroyed by politicians and central bankers. It can, of course, be taxed and confiscated, and I come to that later.

The main alternative to gold is therefore not bonds, equities and commercial real estate but cash, i.e. state paper money. The person who ‘invests’ in gold is holding money. The cash in your wallet or under your mattress does not give you a cash return either. Neither does gold.

Sometimes I get asked, what if people suddenly stopped considering gold to be a monetary asset and a store of value? Would its price not drop steeply? – That is a fair point. But this applies to your paper money, too. In fact, it applies to paper money more so.

Every monetary asset – whether gold, paper tickets from the state, or electronic book-entries at your bank – receives its value (exchange value or purchasing power) from the trading public, and from nobody and nothing else, not from the state, nor from any non-monetary uses of the monetary asset, if it has any at all. If the public stops treating the item in question as money, or uses it less as money or only at a discount, it looses its monetary value. That is also always the case with state paper money. It is a sign of our hopelessly statist zeitgeist that many people believe that the state ‘assigns’ value to its paper money and somehow supports this value. This is not the case. The truth is that the paper tickets in your wallet have purchasing power (and thus have value beyond their paper content) for one reason and one reason only: the public accepts them as a medium of exchange, the public accepts them in exchange for goods and services. The public also determines what the exact purchasing power of those banknotes is at any moment in time and at any given place. The state does not even back its paper money with anything. If you take your paper tickets to the central bank, what do you get in return? – Change.

Paper monies come and go. In fact, throughout history every experiment with paper money has ended in failure, with over-issuance the predominant cause of death. Pound and dollar are the two oldest currencies around today but through most of their history they were linked to gold or silver, which restricted their issuance. Our system of hundreds of entirely unrestricted local fiat money monopolies dates back only to 1971, at least in its present form. In the 20^th century alone, almost 30 hyperinflations of paper monies were recorded.

By contrast, gold has been money for 2,500 years at least. Should you be more concerned about the public not taking your gold any longer, or your paper money?

Gold is hard, apolitical, and global money, supported by an unparalleled history and tradition. That is the asset I want to own when our assorted finance PhDs in the central banks, the bureaucrats in the Treasuries and Ministries of Finance, and our sociopathic welfare politicians have manoeuvred the system to the edge of the abyss. Which is now.

Remember, paper money is always a political tool, gold is market money and apolitical. Paper monies come and go, gold is ‘eternal’ (as far as we can tell presently).

You have to be clear in your mind why you buy gold.

At every moment in time, all your possessions – all your wealth – can be split into three categories: consumption goods, investment goods, and money. For most of your possessions the category is pretty clear: The clothes you wear and the car you drive are consumption goods; your investment funds or your equity portfolios are investments; the banknotes in your drawer are money. For some things it is not so clear: An expensive painting might be an investment but if you hang it in your living room and enjoy looking at it, it is also a long-lasting consumption good. The house you live in could be both but in most cases it is more of a long-lasting consumption good than an investment: you use it up over time, albeit slowly, and you cannot easily liquidate it. You have to live somewhere.

The wealth you are not consuming in the here and now but want to maintain for the future can thus be held in the form of money or investment goods. Money gives you (usually) no return but has other advantages, namely that it allows you to maintain your purchasing power, at least if it is proper, hard money, and simultaneously retain complete flexibility. You are not committing yourself today to any investment good (or consumption good); you remain on the sidelines to wait how things turn out. But as you hold a monetary asset – a store of value and medium of exchange of (almost) universal acceptance – you can re-enter the markets quickly and easily. Somebody will always buy the gold from you in the future (which is far from certain in the case of most of your consumption and investment goods, and also in the case of that other form of money, state paper money).

Why gold now?

It seems that this is an opportune time to be on the sidelines, to be not engaged in the markets for equities, bonds and real estate, or to at least keep one’s exposure to these markets very low, since years and decades of unprecedented money growth have inflated and gravely corrupted the prices of standard investment goods. Sadly, these prices now rely increasingly on the kindness and efforts of manipulating bureaucrats to simply sit still and avoid a painful descent.

Central bankers state – openly and unashamedly – that they now consider it part of their mandate, if not the chief part of it, to keep asset prices at elevated levels and, if possible, even boost them further. Naturally, this will require ever more aggressive money printing and eternally super-low interest rates, and certainly argues against holding much paper money. Those who like to bet on the bureaucrats may claim that it makes sense to hold the very financial assets the prices of which central bankers are manipulating. As long as the central bankers are not ashamed of running the printing presses ever faster, they will simply get their way. Well, even under the rosiest of assumptions, this argument does not support investment in bonds. It could, in principle, be an argument for equities and real estate as ‘real assets’ of a sort but even in respect to these assets I consider it unsound, as I will explain later. Be that as it may, the beauty of gold is precisely that it allows you to remain on the sidelines and keep your powder dry. By holding gold you remove your wealth to a considerable degree from the rigged game of artificially inflated and openly manipulated financial markets. You commit internal capital flight from the fiat money system, and you simultaneously bet on the further debasement of paper money. The bet is this: The central bankers are trapped. The state, the banks, the pension funds, the insurance companies, the investment funds – they all would be in a right mess – or an even deeper mess than they already are – without cheap money from the central bank. Ergo, the policy of super-cheap money will have to continue until the bitter end.

There are a few more things to say about gold but before I do this let us talk about the worst asset.

Bonds – the worst asset class in my view

Bonds are ideal assets for you if you suffer from a financial death wish. Let me put it like this: After 40 years of almost relentless and of late accelerating money production we have too much debt. When you buy bonds you buy debt, and there is a lot of it to go around. And it is not even cheap. In most cases, it is ridiculously expensive, in particular when considering that most of it will never get repaid.

This is especially true of the sovereign bonds of major governments, which are probably among the worst ‘assets’ on the planet, yet are bizarrely still considered ‘safe haven’ assets, a ridiculous concept to begin with. What are the prospects in the long run for government bonds? Remember that most sovereign states are now credit-addicts, desperately relying on low rates and cheap credit to fund their incurable spending habits, and increasingly leaning on their central banks to provide the daily fixes. If the central banks stop printing money and thus stop funding the governments, they go broke. If the central banks keep funding the governments they will have to keep printing money, and this will certainly lead to higher inflation at some point, and that point may even be soon.

As an investor you will ultimately lose money through default or through inflation, and if it is a hyperinflation there will be default at the end of the hyperinflation. For the bond investor the choice is between death by hanging and death by drowning.

If that sounds overly dramatic then ask yourself in what scenario you win or even get your money back. Only if the present policies lead to a slow and steady return to self-sustaining growth that is inflation-free and allows the central banks to slowly and painlessly remove accommodation and deflate their overgrown balance sheets, and if the political class then grows up and gets sensible, departs from its free-spending ways, gets the fiscal house in order, and starts paring back the debt.

Yeah, and pigs might fly!

That this scenario is evidently the basis of much strategizing by professional money managers does not say much about its soundness or even remote probability. It is simply the scenario in which the financial industry comes out unscathed, with its size, reputation and income-stream intact. It is also the one scenario in which you need little money – neither paper money nor gold – but can stay fully invested in equities, bonds and real estate, as the rosy outlook of seamless crisis resolution and onwards growth forever will ultimately justify today’s lofty valuations. This is the scenario the financial industry favours and has an overwhelming desire to believe in – as do all politicians, central bankers and assorted Keynesians and other interventionists. Good luck to all of them! I fear this is wishful thinking rationalized with poor economics.

Every day that the markets are open the US government borrows an additional $4billion, roughly. For 5 years running the country’s budget deficits were considerably in excess of $1 trillion. Britain is among the world’s most highly indebted societies if you combine private and public debt, and despite all the blather in the press about ‘austerity’, the public sector keeps going more into debt. Japan has long been a bug in search of a windshield.

Bond investors may counter that it is all about the timing. Until death arrives, you collect coupons. – Well, hardly. With yields for the bonds of major bankrupt nations now in the 1 to 2 percent range, if that much, there is, in my view, little point in sitting on a gigantic powder keg and hoping the fuse is long enough. When this one blows, the fallout will be substantial.

Why are bonds not selling off?

As David Stockman has pointed out, much of the US Treasury market is not owned but rented. The big primary dealers and many hedge funds hold government bonds as trading positions funded with cheap money from the Fed. That is the true reason for the Fed’s new communications policy. Ben Bernanke now goes so far as to promise to keep rates and therefore the trading community’s funding costs near zero, not only for the near-term, but even beyond the tenure of his own chairmanship at the Fed. The goal is to make sure that these leveraged renters of Treasury debt stay engaged and help funding the state.

Then there are the big bureaucratic asset management entities that have historically always provided a reliable home for government bonds: insurance companies, pension funds, sovereign wealth funds, foreign central banks. Built-in risk-aversion and intellectual inertia are here working in support of over-valued bond markets. Here, the big investment decisions are made by committees of professional fund managers who are often in charge of obscenely large amounts of money. To beat the market and achieve superior returns is an objective located somewhere between the hugely improbable and the completely impossible. They are destined to fail, and in this position of nerve-shredding uncertainty they all cling to the same straws: 1) do what everybody else does; 2) stick to what has worked in the past; 3) stick to the industry’s assumed wisdom, such as ‘never fight the Fed’; ‘government bonds are safe assets because the government can always pay’, and so forth. The last point has no basis in theory and history, and looks increasingly like a heroic assumption today, but that is the fund manager’s line and he is sticking with it.

That government bonds are a safe investment can, of course, not be left a matter of simple opinion but has to be enshrined in the laws of the land, and the state’s rapidly expanding finance constabulary is already working on it. Via legislation and regulation, the state is busily building itself a captive investor base for its own debt.

The state regulates the banks and has long been telling them that if they want to lend their money securely they should give it to the state. Everywhere, state-imposed capital requirements for banks can best be met by buying government bonds. The advantages are obvious: Spanish banks heavily increased their exposure to ‘safe’ Spanish government bonds over the past year, from about 13 percent of their balance sheets to 31 percent. And what is safe for the banks is certainly safe for insurance companies, pension funds and other ‘socially important’ pools of saving. ‘Capital controls’ is such a nasty term. Much nicer to call it ‘regulation’, and the masses have now been sufficiently indoctrinated with the idea that the financial crisis was caused by lack of ‘regulation’ so that the state can now safely and calmly tighten the screws.

I fear that to a large degree this is even welcome by the asset management industry. In an unstable and increasingly uncertain world, being told what to buy lifts a great responsibility of one’s shoulders. Although individually many money managers complain about stifling restrictions and regulations, it is usually the case that any outsized boom industry, when faced with the end of its boom, happily embraces state involvement to avoid getting trimmed back by market forces too harshly. Rather than seeing the return of the ‘bond vigilantes’ who instilled fear and loathing in debtors in the 1970s and 1980s but who roamed the financial landscape of a different age, one in which grown-ups were still allowed to smoke in public, we will most likely be treated to the sad spectacle of timid money mangers being herded into officially sanctioned asset classes by the cocksure financial market police.

All of the above may help explain why expensive assets may keep getting more expensive but these are, in the end, mitigating factors only that will, at the most, postpone the endgame but not change it.

One popular way to rationalize investments in bonds is that they are deflation hedges. Whenever the forces of liquidation and cleansing get the upper hand, bonds do well. This may be the case in the short term but any extended period of deflationary correction must be poison for sovereign bonds in particular: tax receipts will drop, non-discretionary state spending will balloon, and credit risk will rise. The bond market’s pendulum of doom will simply swing from the risk of higher inflation to the risk of default.

Gold versus other ‘real assets’ (equities and real estate)

It is often argued that equities and real estate are also good inflation hedges, and I know many people who prefer them to gold. I see the rationale but disagree with the conclusion. Gold may no longer be cheap because what I explain here has been a powerful force behind gold for a decade. But I would argue that equities and real estate are in general much more overvalued as the current financial infrastructure is designed to channel new money into financial assets and real estate but not into gold, and our financial infrastructure has been operating on these principles for decades. How many people do you know who not only own gold but bought it on loan from their bank? Now ask yourself the same question with respect to real estate. –  Gold is the great ‘under-owned’ asset. Its share in global portfolios is miniscule. It plays hardly any role in institutional asset management.

It is true that during deflationary phases when the inflationary impetus from central banks slackens a bit and the urge of the markets to liquidate comes to the fore again, gold often sells off in sympathy with equities. But I believe that any risk of a more extended period of deflationary correction poses a much bigger problem for equities, and by extension real estate, than for gold.

Additionally, ask yourself how equities and real estate will fare in an inflationary crisis or a currency catastrophe. Which companies will make money, pay dividends or even survive? Which tenants, whether residential or commercial, will keep paying the rent? I am not saying that all these equities and all the real estate will become worthless – far from me to forecast a ‘Mad Max’-style end of civilisation. It is indeed to be expected that certain equities and select pieces of real estate will turn out to be decent instruments for carrying wealth through the valley of tears, and for coming out at the other end with one’s prosperity intact. But which ones? It strikes me that the variance of outcomes is much greater in these hugely heterogeneous, highly inflated and widely held sectors than anything that can come from holding the eternal money and homogenous commodity gold. If you consider any major economic crisis, whether inflationary or deflationary, gold beats equities and real estate in my book. (Equities and real estate are superior to bonds and paper money, however, and this is why I listed them above as potential holdings.)

Additionally, there is one aspect of real estate investing that is, in my opinion, frequently overlooked or underappreciated, and that is this one: Your property is like a marriage agreement with the local taxman, as my friend Tristan Geschex keeps reminding me. The War On Wealth is intensifying, as are the fiscal problems of most states. Both go hand in hand. Real estate is low-hanging fruit for the state, and taxation on it will most certainly increase. What market value and rent-income your property will manage to sustain through the vagaries of the crisis will most probably be subjected to confiscatory taxation from a bankrupt state. The ownership of gold could potentially also be restricted or heavily taxed. This is certainly a risk. But as I said, gold is still the under-owned asset, and there is still a chance that you can find arrangements for your gold holdings that lessen the tax implications. When the winds of change alter the political landscape in your country of residence and bring the War On Wealth to a cinema near you, you may still – if you are quick and lucky – pack your things, take your gold and move somewhere else (as long as they let you), maybe even obtain a different citizenship (as long as they let you), but owning property means having nailed your wealth to the ground and having signed up for whatever the local purveyors of snake-oil (politicians) manage to sell your fellow voters.

Paper money versus gold

Under what scenario would paper money beat gold, i.e. would the paper-money-price of gold drop sharply? – The answer is clear, in my view: If the central banks stopped the printing press and stopped depressing interest rates artificially and fully accepted the consequences for other asset classes and the economy. If the central banks decided to defend the value of their paper money and credibly assigned a greater importance to this objective than to the now dominant ones, which are sustaining a mirage of solvency of banks and states, funding the governments, propping up asset prices, and creating short-term growth spurts.

The big gold bull market of the 1970s ended harshly in 1980, when then Fed-chairman Paul Volcker stopped the printing press, let interest rates shoot up, and looked on as the economy slipped into recession. The paper dollar enjoyed a revival and the gold price tanked.

My view is that this is exceedingly unlikely to happen today. The global financial system is considerably more leveraged than it was 32 years ago, and presently much more dependent on never-ending cheap money from the central bank. In 1980, the total debt of the US government was less than $1 trillion, today the annual budget deficits are bigger than that. The fallout from an end to free money would be huge, and most politicians would deem the consequences inacceptable. Today, there are also no other strategies available that could cushion the impact. In the early 1980s, then-president Reagan countered hard money with an easy fiscal policy, and simply let the budget deficit balloon throughout his tenure. Today, the bond market would be quickly in trouble without support from the central bank, and the government would soon face its very own Greece-moment.

But even if this were indeed to happen, I think that gold would still do better than equities and real estate, and certainly bonds, which would suffer hugely from rapidly rising default risk. The deflationary correction is also a huge threat to the over-stretched banking system, which means you may not want to hold your paper money in form of bank deposits. Again, gold seems to be a decent self-defence asset, even in this scenario.

How to own gold

Personally, I believe one should hold gold in physical form (bars and coins), not through ETFs, derivatives or gold accounts. If one wants to have it held within the banking system (not ideal but there could be reasons for it), one should insist on having it in allocated form, that is, clearly allocated to one’s name and identified by serial numbers. Or, have the gold delivered and keep it in a safety deposit at a bank. Alternatively, there are now a number of specialised asset managers or gold dealers around that offer storage facilities as well.

I think the risk of gold confiscation is small in most countries at present but things may change. The risk of taxation on gold or restrictions on gold ownership is somewhat higher. The safest places to hold gold are probably Switzerland (still) and Singapore at present but if you live in the wrong place or have the wrong passport, having your gold there may not protect you from the long arm of your government when it begins to show interest in your gold. It is no surprise that people who really care about their wealth, which are often people who are very wealthy, now consider changing residency and even changing citizenship as an important component of their estate planning. The last time the US government confiscated private gold, in April 1933, it only grabbed what was held within the territory of the United States, and many people probably kept their gold by simply burying it in the backyard. Believe me, the next time private property will be confiscated, the process will not be handled so amateurishly.

In any case, these are just my opinions. As I said, food for thought….

In the meantime, the debasement of paper money continues.

http://detlevschlichter.com/2012/11/some-personal-thoughts-on-surviving-the-monetary-meltdown/

Read more: http://www.foxbusiness.com/news/2012/11/15/soros-adds-to-gold-miner-etf-positions-raises-gld-stake/#ixzz2CuWWNN4D

Billionaire investor George Soros, who as recently as late 2011 said gold was an asset bubble, now appears quite bullish on the yellow metal and the companies that extract it from the earth. During the third quarter, Soros Fund Management LLC added to its investment in the SPDR Gold Shares (GLD), the second-largest ETF in the world by assets.
The firm raised its interest in GLD to 1.3 million shares from 884,400 shares, according to an SEC filing. Even at 1.3 million shares. Soros Fund Management owns a small percentage of GLD's shares outstanding, which stood at 443.2 million as of November 14.
The filing also indicates Soros Fund Management has boosted its holdings of ETFs that own shares of gold miners. An August SEC filing showed the firm held 1 million shares of the Market Vectors Gold Miners ETF (GDX) and nearly 2.4 million shares of the Market Vectors Junior Gold Miners ETF (GDXJ).
The November filing indicates Soros has more than doubled his GDX stake to 2.32 million shares and now holds a sizable chunk of call options on the ETF as well. The firm's position in GDXJ has not changed, according to the filing.
Since mid-August, GLD has jumped 6.6 percent while GDXJ has soared 5.7 percent. GDX has risen 3.3 percent over the same time. Barrick Gold (ABX), Goldcorp (GG) and Newmont Mining (NEM) combine for a third of GDX's weight.
Soros also slightly added to his position in the SPDR S&P Metals and Mining ETF (XME). The firm owned 350,000 shares of XME as of the August filing, but the more recent November filing indicates that stake has risen to 353,400 shares and the firm also owns call options on that ETF.
XME does hold some gold miners, but the fund is heavily allocated to coal and steel names such as Peabody Energy (BTU) and Nucor (NUE). Soros also holds a stake in the Materials Select Sector SPDR (XLB) as well as call options on that position.


Read more: http://www.foxbusiness.com/news/2012/11/15/soros-adds-to-gold-miner-etf-positions-raises-gld-stake/#ixzz2CuWWNN4D

Billionaire investor George Soros, who as recently as late 2011 said gold was an asset bubble, now appears quite bullish on the yellow metal and the companies that extract it from the earth. During the third quarter, Soros Fund Management LLC added to its investment in the SPDR Gold Shares (GLD), the second-largest ETF in the world by assets.
The firm raised its interest in GLD to 1.3 million shares from 884,400 shares, according to an SEC filing. Even at 1.3 million shares. Soros Fund Management owns a small percentage of GLD's shares outstanding, which stood at 443.2 million as of November 14.
The filing also indicates Soros Fund Management has boosted its holdings of ETFs that own shares of gold miners. An August SEC filing showed the firm held 1 million shares of the Market Vectors Gold Miners ETF (GDX) and nearly 2.4 million shares of the Market Vectors Junior Gold Miners ETF (GDXJ).
The November filing indicates Soros has more than doubled his GDX stake to 2.32 million shares and now holds a sizable chunk of call options on the ETF as well. The firm's position in GDXJ has not changed, according to the filing.
Since mid-August, GLD has jumped 6.6 percent while GDXJ has soared 5.7 percent. GDX has risen 3.3 percent over the same time. Barrick Gold (ABX), Goldcorp (GG) and Newmont Mining (NEM) combine for a third of GDX's weight.
Soros also slightly added to his position in the SPDR S&P Metals and Mining ETF (XME). The firm owned 350,000 shares of XME as of the August filing, but the more recent November filing indicates that stake has risen to 353,400 shares and the firm also owns call options on that ETF.
XME does hold some gold miners, but the fund is heavily allocated to coal and steel names such as Peabody Energy (BTU) and Nucor (NUE). Soros also holds a stake in the Materials Select Sector SPDR (XLB) as well as call options on that position.


Read more: http://www.foxbusiness.com/news/2012/11/15/soros-adds-to-gold-miner-etf-positions-raises-gld-stake/#ixzz2CuWWNN4D

http://www.silverdoctors.com/u-s-mint-racks-up-another-400000-silver-eagle-sales-over-the-weekend/

Submitted by SD Contributor SRSrocco:
The US Mint’s frantic silver sales pace continued over the weekend, as the Mint reported 430,000 ounces of silver sales over the weekend on Monday.  Perhaps more importantly, the US Mint Silver eagle to US Gold eagle sales ratio continues to exceed 50 to 1, a pace that is simply unsustainable with a current mine ratio of 9 to 1.

Friday was the last day the U.S. Mint updated its figures.  At last count there were 2,014,000 Silver Eagle sales for October.  They just released the new total:
OCT = 2,449,000 Silver Eagles

2012 Silver Sales Totals
(in ounces / number of coins)

Month	One ( oz. / #coins )
January	6,107,000 6,107,000
February	1,490,000 1,490,000
March	2,542,000 2,542,000
April	1,520,000 1,520,000
May	2,875,000 2,875,000
June	2,858,000 2,858,000
July	2,278,000 2,278,000
August	2,870,000 2,870,000
September	3,255,000 3,255,000
October	2,449,000 2,449,000
Total	28,244,000 28,244,000

I would imagine if we keep up this pace we will see a total of 33-35 million Silver Eagle Sales for 2012.  Even though this may be lower than 2011… if the price of silver runs over $50 an ounce within the next 6 months, the U.S. Mint may not be able to keep up with demand.
3 THINGS I LOOK FORWARD TO:
1) price of silver north of $50…. (for starters)
2) The U.S. Mint unable to keep up with future massive silver investment demand
3) the article I plan on writing about LOUSY PRECIOUS METAL ANALYSTS (Nadler, Schmidt & Christian) when the top 2 things occur.
*Update by The Doc:
US Mint silver eagle sales continues to run at nearly a 55 to 1 clip to US Gold eagle sales at 2.5 million ounces of silver vs. 43,500 oz of gold:

2012 Gold Sales Totals
(in ounces / number of coins)

Month	One ( oz. / #coins )	Half ( oz. / #coins )	Quarter ( oz. / #coins )	Tenth ( oz. / #coins )	Total ( oz. / #coins )
January	84,500 84,500	24,500 49,000	9,500 38,000	8,500 85,000	127,000 256,500
February	20,000 20,000	0 0	500 2,000	500 5,000	21,000 27,000
March	57,500 57,500	1,000 2,000	0 0	4,000 40,000	62,500 99,500
April	19,000 19,000	0 0	500 2,000	500 5,000	20,000 26,000
May	49,000 49,000	1,500 3,000	1,000 4,000	1,500 15,000	53,000 71,000
June	55,000 55,000	1,000 2,000	1,500 6,000	2,500 25,000	60,000 88,000
July	28,500 28,500	0 0	500 2,000	1,500 15,000	30,500 45,500
August	34,000 34,000	1,500 3,000	1,000 4,000	2,500 25,000	39,000 66,000
September	63,000 63,000	1,000 2,000	1,000 4,000	3,500 35,000	68,500 104,000
October	41,500 41,500	0 0	500 2,000	1,500 15,000	43,500 58,500
Total	452,000 452,000	30,500 61,000	16,000 64,000	26,500 265,000	525,000 842,000

SD Bullion customers are not surprisingly even more silver focused, with SD Bullion silver to gold sales ratios currently near 200 to 1!

Home / Blogs Romania Wants Return of 93.4 tons as Gold Repatriation Ratchets

Romania Wants Return of 93.4 tons as Gold Repatriation Ratchets

 

 Romania wants its gold treasure back from Russia, a recent Bullion Street article says. It’s another signal of the accelerating trend of countries to repatriate their gold—and another indication that the tide is turning toward gold and silver.

Two railway carloads, or 93.4 tons of gold, were transferred to Russia as German troops began to threaten the region during World War I.  According to the article, “All the governments of Romania since World War I, regardless of their political colour, have tried unsuccessfully to negotiate a return of the gold.”
Of course, this is not the first time the Romanian people, or people of any region for that matter, have found their monetary metals tempting to foreign powers. Invaders sent by Roman Emperor Trajan found gold and silver in great quantities in the Western Carpathians, which run through what is now modern-day Romania. Resulting from this conquest, Trajan brought back to Rome over 165 tons of gold and 330 tons of silver.
It is interesting that considering this history independent auditors say Germany has stored its gold abroad since the Cold War in case of Soviet invasion. Additionally, the auditor’s report says the German gold stored in London has fallen "below 500 tons" due to recent sales and repatriation. Considering German gold stocks have remained the same, the sale of physical gold must have been offset by an acquisition of paper promising to pay gold from the Federal Reserve Bank or other entities needing a physical supply of gold.
One event that may have triggered a large-scale demand for physical delivery of gold was the repatriation of the 211 tons, or 17,000 standard 400-ounce bars, of Venezuelan gold.

“We’ve held 99 tons of gold at the Bank of England since 1980. I agree with bringing that home,” President Hugo Chavez said, “It’s a healthy decision.”

The obvious danger to having others hold your valuables is that they can simply deny your right to audit or access what they store for you. German lawmakers were turned away from viewing the 1,500 tons of German gold reportedly held at the New York branch of the privately held Federal Reserve Bank (Fed). This fact may have played a part in the recent German federal court ruling that mandates repatriation of 50 tons of the gold per annum. For more, see Germany Brings it Home – Gold Repatriation as Stocks Scare.
One reason Russia has refused to cooperate with Romania’s demand for its gold is assumed to be Romania’s cooperation with the U.S. missile “shield.” According to the Huffington Post, in 2011, U.S. Secretary of State Hillary Clinton signed the agreement with Romanian Foreign Minister Teodor Baconschi and said the United States expected to deploy interceptor missiles at a Romanian air force base in approximately four years.
Mr. Eugen Anca at the time of the following quote ran the European arm of the Institute for Foreign Economic Relations (VNIIVS), a governmental agency of the Russian Federation’s Ministry of Economic Development and Commerce. He comments on the Romanian “gold treasure”

The Treasure is privately owned. Specifically, it is the private property of the National Bank of Romania (BNR)! At least this is how it was defined and certified by Victor Antonescu himself, the minister for finances in 1916, who signed the Protocol with Kremlin. This document is public and it can be found by any interested reader in the Foreign Ministry Archive, fund 71/1914, E2, Part I, vol. 183, pages 50 – 53. And there are certified copies of this document held by the Ministry for Finances, BNR, the French and British embassies, and Kremlin.

For this reason the Russians wanted a private corporation to exchange the BNR’s gold with a private Romanian entity that could secure assistance in developing Siberian natural resources as a win-win situation that could offer an new option to offset the 300 million (274 tons of gold) owed Russia per the 1947 Paris peace treaty previously satisfied via confiscation of the BNR gold stored in Russia. This is crucial, the “Romanian gold” is not even owned by Romania, it is owned by a private bank acting as the central bank of Romania. Sounds familiar as Americans handed their gold over to the Federal Reserve in 1934, not their state or federal Treasuries.
One lesson here for international players is that “if you can’t hold it, you don’t own it!” According to Edel Tully, precious metals strategist at UBS, “There is a growing preference among many different communities in the gold market to have their physical gold at home.”
Over the years the Russians have returned to Romania 17 railroad car loads of archives and documents, including as many as 39,320 Romanian art works were returned in 1956, including paintings, drawings, engravings, icons, tapestry works, religious objects, gold coins, medals and the Pietroasele treasure (below).

https://wealthcycles.com/blog/2012/10/23/romania-wants-return-of-934-tons-as-gold-repatriation-ratchets-up

 

The Germans Are Coming for Their Gold

A German federal court has said that country’s central bank should conduct annual audits and physically inspect its gold reserves worldwide, including gold in the custody of the Federal Reserve Bank of New York. In addition to the FRBNY, Bundesbank gold is stored in London, Paris and Frankfurt.

(Read more: Republicans Eye Return to Gold Standard)

For decades, the Bundesbank has relied on written confirmation of its gold holdings in London, Paris and New York. According to the report from the German audit court, the last time Bundesbank officials physically inspected the central banks gold holdings was, well, never.

(It should be stated that the folks at FT Alphaville quote a report saying an inspection took place in 1979/1980.)  

Interestingly enough, the Bundesbank is apparently quite happy with taking the word of other central bankers about the existence, location and size of its gold reserves. It put out the word that it disagrees with the Audit Court, which only has advisory power and cannot force the Bundesbank to follow its recommendations, about the need for inspections. Nonetheless, the Bundesbank is actually going to follow the recommendation that it verify the gold stocks. It also has plans to ship some 150 tons of gold back to Germany for a more “thorough examination.”

The Bundesbank is, of course, quite right in its opinion of the value of the examinations. In reality, it does not matter one bit whether the Federal Reserve Bank of New York actually has the German central bank’s gold or whether the gold is pure. As long as the Fed says it is there, it is as good as there for all practical purposes to which it might be put. It can be sold, leased out, used as collateral, employed to extinguish liabilities and counted as bank capital just the same whether it exists or not.

(Read more: Why Some Call Return to Gold Standard ‘Ludicrous’)

The actual presence of the gold wouldn’t make a lick of difference unless, say, Germany’s central bank decided it wanted to start using the gold for some practical, non-monetary purpose like making watches.

But there’s long been a paranoia about central bank and government gold reserves. (Read more: GOP Appeased Me on Gold Standard: Rep. Ron Paul)

The gold of the United States government, which officials say is held in the United States Bullion Depository in Fort Knox, has been rumored—probably since the Depository’s founding in 1937—to have been looted and replaced with gold-painted tungsten, for instance. The government treats this as nonsense—which it most likely is—but nonetheless it does conduct regularly scheduled audits of the gold in Fort Knox, including doing purity tests on a small sample of the gold.

This paranoia is not entirely irrational, for one reason. As I mentioned above, for almost all imaginable operational purposes, the actual existence of the gold in Fort Knox or in the vault beneath the FRBNY’s Liberty Street headquarters is irrelevant. The bookkeeping is what really matters here. So long as the Fed says Bundesbank owns X tons of gold, the Bundesbank can act as if it did own the gold—even if the gold had somehow been swallowed into a gold-eating galactic worm hole. But the irrelevance of the facticity of the gold does quite easily lend itself to thinking: if the gold being there doesn’t matter, why would it be there?

(Read more: The Gold Standard and the Myth of Price Stability)

I’m sure the Bundesbank officials understand this quite well, even though the German Audit Court does not. There is nothing to be gained by inspecting the gold. If it is all there and pure, there is no difference from an undiscovered absence. But if the gold isn’t there, well, calamity could follow as trust in the central bank gold depositories evaporated instantly. 

In any event, it looks like Bundesbank officials will soon be visiting the Fed’s vault, which is located 80 feet below street level and 50 feet below sea level. The vault is accessible only by elevators controlled by an operator in a remote location. I’ve been told by a source that the elevator operator is actually not in New York City at all, although I can’t confirm this and the Fed won’t discuss this sort of thing.

Down in the vault there are 122 compartments assigned to depositing countries and international organizations. Smaller gold depositing countries get shelves in shared library compartments.

The compartments do not have labels reading “Germany’s gold” and so on. They are instead numbered, and only a few people at the Fed know what numbers correspond to which country. The Fed says it does this to protect the privacy of the depositors. But this also makes actual inspection less reliable. There’s no way for Germany to know that the gold it is being shown is Germany’s, as opposed to some other depositor’s. In an extreme case—which I have no reason to believe is true—miscreants at the Fed could just show everyone who came to visit the same pile of gold.

This is related to another mystery about gold reserves: why do they persist?

The central banks of the world's established economic powers do not actually do anything with their gold, apart from rare and occasional sales of gold limited by the Washington Agreement to no more than 400 tons per year. 

Some central banks lend out their gold to speculators and gold miners (who borrow the gold to finance mines—basically, a risk-free hedged loan since the borrowed gold can be repaid with newly mined gold, regardless of what happens to the price of gold on the market), which can be a somewhat profitable activity—especially when the alternative is just letting it sit around doing nothing but fluctuating in value with the market price. But, as far as we know, this isn’t something the Bundesbank or the Fed does.

When Congressman Ron Paul recently asked Fed chair Ben Bernanke about the rationale for central banks holding gold, Bernanke said it was the result of “long term tradition.” But that’s not really a satisfactory answer. The lack of a satisfactory answer actually contributes to the suspicion that the gold isn’t really there at all. If there’s no purpose for it, why would it be there?

So is the German Audit Court nuts? Not necessarily. For one thing, there probably is some value to putting to rest suspicions that the public is being deceived about central bank gold reserves—although I doubt an audit will really do very much in this regard. For another, there’s always the off-chance that someone has embezzled the gold, enriching himself unjustly. Might as well check if the gold is really there.

The Fed wouldn’t comment on the record about how it will handle a German request to inspect the gold. A source says they would likely work out a deal with the Germans permitting some sort of inspection.

But I like to imagine that the Fed officials would bring the Germans to the door of the a compartment labeled, say, No. 322, and then pose the question: “Are you absolutely sure you want to see what’s in here?”

- by CNBC Senior Editor John Carney

http://www.cnbc.com/id/49540593

 

Bundesbank Refuses Gold Control

22.10.2012

The Bundesbank, has refused to allow the German members of parliament Philipp Mißfelder and Marco Wanderwitz to view the German gold reserves stored in Paris and London. Reason: The central banks in Paris and London do not have suitable rooms for visits.

The German federal bank, the Bundesbank, has refused to allow the German members of parliament Philipp Mißfelder and Marco Wanderwitz to view the German gold reserves stored in Paris and London. As reported by the newspaper Bild-Zeitung (Monday edition, Germany's largest newspaper), Carl-Ludwig, a member of the Bundesbank’s Executive Board, wrote a letter to the two deputies saying that the central banks in Paris and London do not have suitable rooms for visits. Large portions of the German gold reserves (a total of 3,400 tons worth more than € 150 billion) are kept abroad, and only a fraction is held by the Bundesbank in Frankfurt.

Philipp Mißfelder, foreign affairs spokesman of the CDU/CSU coalition, wanted also to inspect the German gold reserves at the Federal Reserve Bank in New York in February - but didn't succeed. Now he wanted to do the same in London and Paris. This is related to intense criticism by accounting experts and the German Federal Audit Office concerning the storage of Germany’s gold reserves abroad.

http://www.mmnews.de/index.php/english-news/11126-bundesbank-refuses-gold-control