Gold and Silver

With the recent drop in the price of Gold and Silver, I wanted to put my views on these precious metals down in writing.

I am basically Austrian in my approach to Economics. I wish Murray Rothbard and Hayek were still alive. However, while I agree that when governments are debasing paper currencies in order to run huge debts and deficits, hard assets such as Gold and Silver should provide protection to the ordinary citizen, unfortunately, Gold and Silver are traded assets and their prices can be bid up to extremes. 

Consequently, the ordinary person cannot buy Gold or Silver blindly with the expectation that their prices will always go up. As we have seen over the last year, Gold and Silver prices can also come down sharply.

As with buying any asset, getting the timing right is key, but also incredibly difficult.

I am inclined to believe that predictions of much higher Gold and Silver prices, due to ultra-loose monetary policies, will eventually be proven to be correct, but how long this will take is very difficult to foresee.

In the meantime, the recent pull back in prices may provide us all with an opportunity to add small quantities of Gold and Silver - perhaps one or two coins per month - to our portfolios, with the aim of price averaging over the next year.

The Inflation Monster: How Monetary Policy Threatens Savings

This is a very good article on the effects of inflation in Der Spiegel - but in English - which you can read by clicking here.

I particularly liked the introduction. The article begins :

'Germany's central bank, the Bundesbank, has established a museum devoted to money next to its headquarters in Frankfurt. It includes displays of Brutus coins from the Roman era to commemorate the murder of Julius Caesar, as well as a 14th-century Chinese kuan banknote. There is one central message that the country's monetary watchdogs seek to convey with the exhibit: Only stable money is good money. And confidence is needed in order to create that good money.

The confidence of visitors, however, is seriously shaken in the museum shop, just before the exit, where, for €8.95 ($11.65) they can buy a quarter of a million euros, shredded into tiny pieces and sealed into plastic. It's meant as a gag gift, but the sight of this stack of colourful bits of currency could lead some to arrive at a simple and disturbing conclusion: A banknote is essentially nothing more than a piece of printed paper.'

Brilliant if depressing article on France by Charles Gave of Gavekal.com

Charles Gave has written a brilliant article on the French economy,
France is on the Brink of a Secondary Depression which you can read here.

His concluding sentences are: 'Until quite recently, my working assumption was that a full-blown French debt crisis would occur between 2014 and 2017. In light of the extraordinary malfeasance of the current government I have changed my mind and believe that France is now extremely near to that abyss. Fasten your seat belt in Europe—the world’s last truly Communist country is about to implode.'

Along the same lines, see this article entitled 'France's Explosive Picket Lines' plus short video by France 24.

Nomination for most idiotic suggestion of the week. See  this article  by David Kemper, chairman and CEO of Commerce Bancshares in Bloomberg Businessweek.

The following is a translation of this article by Reinhard Göweil first published on 11/1/2013 in Die Wiener Zeitung. 

Hässliche Isolation - Ugly Isolation

British Chancellor of the Exchequer, George Osborne, is demanding that the European Union changes. Now he is right about that, although he means something very different. The EU must change but in order to do so it will be necessary for the British Chancellor to leave the room. The internal political weakness of the government of Prime Minister David Cameron is only surpassed by their chutzpah in European affairs. For months, the United Kingdom has been blocking everything in Brussels that it possibly can.

The Government in London has significant problems with Tory MPs who have apparently adopted the Republican Tea Party movement in America as their model. They want to leave the EU: Cameron dares not strongly oppose them.

In the end, the noises against Europe were becoming more and more unpleasant - until two days ago. First of all, British businessses warned of the economic damage that an exit from the EU could cause. Then the American government piped up. They didn't consider a 'Brexit' to be a good idea and said so loud and clear.

The Chancellor is now engaged in damage limitation. He has told the EU that non-Euro countries must be allowed to keep the same rights as countries that use the Euro currency.

The message from London is - we may not be on the inside, but we still want a say in everything.

So US President Barack Obama's administration came out and warned the British against leaving the EU, but where is the clear European reaction to George Osborne?

It would have been nice if European Commission President Jose Manuel Barroso or European Council President Herman Van Rompuy had shown similar guts and finally told the Brits what might be gained from their obstruction: absolutely nothing.

If Great Britain doesn't like the path that the EU has taken, then they haven't understood the European concept. No-one in the Eurozone is happy about giving money to Greece - but it is a question of keeping the Eurozone together. 

The British will have to learn that their Empire is in the past and that 'Rule Britannia' is just a song.

Whether a weak politician like Cameron is up to that job is doubtful. However, it is possible that Scotland will soon split from the UK. This part of the Island is definitely happy in the EU.....