The World of Gold, Why is It Valued?

Logically the grip of gold is absurd; economist John Milton Keynes called it “that barbarous relic”. Others have marvelled at the folly of digging holes and extracting the gold, only to dig larger, more expensive holes to burry it again. Not to mention guard it.

Of course, these views completely miss the fact that gold is the only universally accepted means of exchange. To understand its timeless appeal it is important to understand a little about this yellow metal.

Although the lust for gold can be traced back 6000 years to ancient Egypt, when gold was considered mystical; the physical incarnation of the sun god Ra’s skin. More recently, it is the versatility that recommends gold above all other metals.

Gold, like oil and other commodities is currently traded in US dollars, with the unit of measurement being the Troy ounce, equal to 31.1 grams with a minimum fineness of .999 per thousand pure (24K).

A single cubic metre of gold weighs an amazing sixteen thousand kilos.

It is so malleable it can be formed by hand, and even ancient goldsmiths could hammer gold leaf five millionths of an inch thick, (1/8 of a micron).

A single troy ounce can create a sheet roughly 10 metres square, or a length of wire FIFTY MILES long. It is such an outstanding insulator that gold plate protects the electronics of the space craft during launch, and from cosmic radiation while in space.

With an estimated total above ground supply of only 155,000 tonnes of gold, and fresh mine supply of about 2000 tonnes every year, there is not a lot to go around. Until modern times, when gold and silver were underhandedly removed from our coinage, have bankers been so loath to own it.

Legend has it that one London bullion bank would completely remove and burn its wooden floor every 20 years. This would capture the microscopic dust created as bars were moved and handled. Even today, the gold refineries will shut down to clean the soot from their chimneys to reclaim the tiny particles deposited by smoke.

Maybe gold is a barbarous relic in this age of paper transactions where debts, obligations and promises are accepted with unquestionable faith. Perhaps, in the not to distant future we will not have money at all, just secure cards with our DNA encoded against fraud or terrorists.

Looking to the future, I do not anticipate gold to be an investment. I believe, the golden age is behind us, and in the not to distant future strategic reasons will arise for all gold to be handed in voluntarily or forcibly.

Morality, Power, Gold and You…

Top to bottom. That could accurately describe activity in the rare coin and precious metals arena. Everything from plane Jane bullion to seven figure rarities are in demand.

It has been a long time coming, and there are a few acolytes that continue to be mesmerised by banks. However, any body with any sense has realised the fraud perpetrated on borrowers. A fraud that continues to be spewed forth in the form of the mantra that debt is good for the economy.

Investment legend Warren Buffet has been quoted in the news saying with typical candour:

The recession will be longer and deeper than most people think- this will not be short and shallow.

So why do the Bank of England, ECB and Fed maintain the worst is over?

To state it clearly: the so-called “credit crunch” is too much debt on over priced assets.

By issuing, even more debt our elected leaders are throwing fuel on the fire. They are using taxpayer’s money in order to protect their own jobs by perpetuating the scam.

In recent weeks, I have seen two articles intimating that owning gold is somehow immoral. One in the International Herald Tribune: suggests that gold and oil are used by terrorists, money launderers and fraudsters. This article appeared in Fortune Magazine takes a different tack highlighting that only crazy apocalyptic survivalist are the lustrous metals true fans.

Why all the negative propaganda towards owning gold?

What could make more sense that owning a universally regarded store of value used by every culture, on every continent under every circumstance?

The answer is devastatingly simple: the acceptance of paper currencies are entirely dependant upon the trust we, the end user, place in the issuer. Once a significant minority loose the trust we enter a Weimar scenario of hyper inflation.

With the price of gold bullion rising from $250 dollars in 2001, through to $1000 last month it appears that trust is failing.

So while the central banks continue to print trillions of worthless paper notes in volumes not seen since the 1970’s, they also need to undermine the attractiveness of alternatives.

At present this is being conducted through highly publicized central bank sales, and manipulation of derivative contracts.

In recent weeks rumours of a large IMF gold sale have been confirmed. The institution will sell just over 400 tonnes of the metal.

What has not been stated is where this gold came from?

The IMF does not own any gold, all the gold in their custody is property of the sovereign central banks who deposited it. Then there is the Italian gold sale of 400 tonnes that never was, the 1200 tonnes sold by the Swiss and lest we forget, the greatest swindle off all.

British chancellor Gordon Brown (now Prime Minister) sold almost half of total Bank of England gold reserves at an average price of $270. He announced the fact four weeks before causing the metal to free fall to an all time low of $248. Less than one quarter of recent prices.

I guess my real question is just how long the bankers can and politicians keep up this charade of a debt based monetary system? Once the gold is exhausted, what will they try next?

My guess is they will use some new anti terrorism law and confiscate all privately held gold. It happened before- it could happen again.

Don’t under estimate how much politicians want to stay on the gravy train hauled by tax payers.

The Clues, The Clues

Six years ago I was fortunate enough to be sailing around the South China Sea as part of a marine archaeological expedition in search of Manila galleons, the largest treasure ships ever to sail the oceans.

Several like-minded dealers and I were funding a search of a specific vessel that sunk in 1572 carrying 3,000,000 silver “pieces of eight” and nearly 50,000, gold Doubloons.

The significance? Possibly as much as $1 Billion, conservatively $500,000,000.

Sadly, we never found the mother lode, but the experience was priceless and worth every cent of the $250,000 it has cost me to date. ( The crew are still out there as I pen this missive) From this sum, more than $100,000 was spent on research- The Clues, The Clues.

The odds of actually locating the mother lode are far greater than locating the proverbial needle in a haystack. However, my opinion was and still is, that unless you look you will never find anything. It is better to have loved and lost, than to never have loved.

In the words of the legendary treasure hunter Mel Fisher: “Today is the Day”.

The reason that I share this with you is that today is today, tomorrow never comes. Tomorrow is a blank page that we all get to write afresh. Nobody can accurately predict what events will greet us when we awake.

On October 28th 1929 who could have thought that the next day, would forever be known as Black Tuesday and spawn a new economic expression: Depression

On Sunday October 17, 1987, who could have predicted stock markets would fall 22% before breakfast?

Returning to my adventures six years ago, a major storm blew into the South China Sea calling a premature end to our search. For the first time in 3 months, I was able to check into a hotel. I had a real bed, air conditioning and cable television: 200 channels with nothing on.

As I lay there surfing the channels I came across a French network and saw what I thought was a very strange film. It showed one of the two towers of the World Trade Center in New York on fire.

I quickly switched to CNN just in time to see a second plane strike the towers.

Who could have known?

Well, as we now know, quite a few people. The clues were there.

Tom Clancy the author had written a book, a FBI field agent had made a report, the department of defence had been practising an emergency scramble of fighters, and the CIA, well as we know from Iraq, they know nothing. According to conspiracy theorists the president and vice president were also in the loop.

Obviously, the exact date and time were elusive, but the clues pointed to a spectacular event, which simple precautions could have prevented. September 11th will forever be known as the day when the lives of every single man woman and child on this planet changed.

This is why it reminds me of today, Thursday July 26th 2007. The entire world agrees that we are experiencing the greatest period of prosperity ever. Stock markets, the most common measure of prosperity continue to rise, property prices are offensive, and unemployment is pretty much the lowest it has ever been.

We are convinced that the summer of 2007 will go down as the beginning of the end. And here is why:

“The Greatest Economic Boom Ever: Enjoy It While It Lasts” So says US treasury secretary and former Goldman Sachs banker Hank Paulson: For the full article, as published in Fortune magazine click here Click Here

$100 BILLION SUB PRIME LOSSES:Federal Reserve Chairman, and Ex Goldman Sachs Banker Ben Bernanke: Click Here

Not sure what all the fuss is about? Don’t be embarrassed, neither did I until I read this: Click Here

If history is our guide the recent turbulence in stock markets, treasury bonds, housing and credit markets is just a blip. Possibly a healthy, short-term correction.

However, if this is the case, it means that THE BIG ONE has yet to come.

Considering we have had a period of prosperity unprecedented in history, could the following crash also be unprecedented?

All the staff at Signature Rarities work under my direct supervision. It is not there job to tell you what the risk is to your financial future. That is up to you to calculate using your own personal benchmarks.

Our work at Signature Rarities is not to convince you to put all your money into “old coins.” Our job is to locate for you what represents a tangible asset of last resort. A safety net for you and you family.

Rare Gold Coins Out Perform Bullion by as Much As 3-1.

Wholesale rare coin prices show collectors that purchased numismatic gold coins have received a return far in excess of their bullion content, but rarity is the key for investors.

Westcliff, Essex (PRWEB) December 31, 2006 — Over the past 5 years purchasers of gold bullion have seen the price of the yellow metal more than double from $320 to $630 per Troy Ounce (31.1 grams), peaking as high as $740.

Over the same period a mint state $10 Indian Head gold coin (1907-1933), containing half the weight in gold (15 Grams) has rocketed from $650 to $3,000. More remarkable is a smaller denomination in the same series. The $5 Indian Head, has only 7 grams gold, but in only 2 years the wholesale price has moved from $1300, to an astounding $4,000.

Stuart Allen managing director of Signature Rarities Ltd, (www.signaturerarities.co.uk) one of only a handful of European dealers specializing in certified pre 1933 US gold and silver remarked:
“As good as the rises in the price of gold, informed collectors have long known the benefits of possessing coins. The key is rarity, not the metal”

Allen classifies a rare coin as one with less than 100 known to exist. As an asset, he recommends collectors concentrate on certified coins. These are examples that have been independently authenticated and assigned a universally accepted grade. Measured on the Sheldon scale between 1 (worn smooth) and 70 (flawless) only coins attaining a grade of 60 or more are classified as Mint State (MS).

Allen continues: “Coin collecting is more than stashing some old pocket change in a tin for the grandchildren. I consider purchasers as temporary custodians of a relic that is a direct link to the past. Nobody knows what that future may hold for prices, but one thing is in no doubt; as long as money exists it will be desired and collected.”

A recent study conducted by Dr Robert Brown, Chief investment officer at GE Capital, and published on the Journal of Financial Planners web site (www.fpa.org) found rare coins to be more than 40% below there 62 year trend line. Furthermore the report calculated rare coin collectors received a mean return of 10.46 per annum, compared to a compound return of 7.44% from the S & P 500 stock market index.

With record amounts of money in circulation, and more being printed everyday, Allen predicts collectors will continue their quest for quality coins. “The U.S dollar is near record lows of almost 2-1, against the British pound. Collectors this side of the pond have an amazing advantage in purchasing power”.

Norman Martin, CEO of Superior Rare Coinage, Inc () located in Freehold New Jersey concurs: “competition is fierce, European buyers have ambitious strategies, and a lot of material we send over there will be gone for generations, some may never find its way home”.

2007 looks ready to kick off with a new record price paid for a coin. On January 2nd the auction of the finest of 5 known 1913 Liberty Head design 5 cent “Nickel” takes place in Orlando, Florida. In 1996 another example of the 1913 nickel became the first coin to breach the million dollar barrier.

Pre auction estimates suggest the final hammer price could reach $5 Million, and could even break the record for highest price ever paid for a coin. Could this “monster” be destined to find a new home this side of the Atlantic? Allen laughs then replies: “that’s only £2.5 million sterling, just on the exchange rate it’s a worthwhile play”.

Monetary Reform. Why We MUST Take Control Again.

“Let me issue and control a nation’s money and I care not who writes the laws.”

Mayer Amschel Rothschild (1744-1812), founder of the House of Rothschild.

8 Trillion, nine hundred and eighty six Billion, four hundred and two Million, 570 Thousand, 107 Dollars, and 59 Cents.

Debt of the United States government, owed to private bankers, as of 30th August 2007.

US National debt increases about 1.5 Billion per day click here for the latest figure.

THREE TRILLION more than the $5.95 Trillion owed in 2002 when the United States came within 6 days of defaulting.

READ BBC NEWS- June 24th 2002

“The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand,…….

…..the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to [against] their interests.”
The Rothschild brothers of London writing to associates in New York, 1863

To repay NINE TRILLION dollars at $1,000,000 per day it will take 190,000 years.

During the 8 years of the Bush administration, the United States has borrowed more money (mostly from foreigners, many of them hostile nations: Iran, Russia, China, Venezuela, etc) than all the money borrowed by every US president combined from George Washington to Bill Clinton.

It took the United States 354 years to create the first Trillion Dollars. It has taken just 300 days to create the last trillion dollars. Lets put a Trillion (1 with 12 zeros trailing it) into perspective. To earn one trillion dollars you would need to make one dollar every second 24 hours per day, seven days per week, 356 days a year and it would take you 31,456 years.

It may come as surprise to many that the government has created less than 3% of all the money in the British economy. The remaining 97% is debt that carries an interest charge. Every single coin and bank note created carries an interest charge. This charge increases the sum of money the economy owes by an amount that is greater than the total of money that exists.

That is so important it deserves repeating:

This charge increases the sum of money the economy owes by an amount that is greater than the total of money that exists.

Standard and Poor’s the credit rating agency tracks corporate bond issues from around the world. For 20 consecutive months those issues designated “speculative” or Junk has grown. Junk bonds now account for almost half of all issues- 1,582 rated “investment grade” versus 1,571 issues receiving Junk Status.

Among the blue chips Included in this count are Ford Motor Company, which has total liabilities of $121 billion of bonds designated Junk. From which $57 Billion is due for repayment over the next five years.

Official US Government debt is $9 Trillion. Can this debt ever be re-paid? Of course, it can! By printing more money.

Further more as of April 2007 Euro-zone M3 money supply (the amount of new cash printed and pumped into the economy) is running at 10.3 %, its highest level since 1983. In the past six months, the E.C.B has also sold nearly 250 ton’s of gold into a rising market.

Essentially the Euro is the world’s first sovereign currency devoid of its own sovereign; it isn’t backed by a sovereign government or entity. Since the Euro launched citizens have lost 10% of their purchasing power.

The bottom line is that the E.C.B cannot print money fast enough.

In a paper published in 2004 by the British national statistics office it is possible to calculate that when Britain went off the gold standard in 1931 a 2004 British pound has 1.78% the purchasing power of that 1931 pound.

Where as from 1550 through 1931 the Pound Sterling depreciated by only 30%. During that 500 years most of the real depreciation can be explained by increased silver and gold production.

Even more overwhelming is the fact that in the decades prior to World War 1, the British pound sterling was equivalent to 1.5 Kg of sterling silver (90% pure). Today one-pound sterling is equivalent to about 5 grams of sterling silver.

After nearly two decades of actively trading rare coins and precious metals, never has there been a more urgent need to diversify your assets.

Buying gold and silver is a hedge against all that is wrong with our current system. It may not collapse, it may continue through our lifetimes, but without monetary reform, the inequalities of the world will only become greater.

Beginning in Mexico 1995, then the Asian currency contagion of 1997, the Russian default in 1998, Brazil in 1999, the tech bubble in 2000, the outright fraud of the Enron years, followed by the February dive in world Markets, and another 6 per cent drop in China on May 30th, we could be witnessing the tremors of a world monetary collapse. The after shocks may last decades.

On Monday October 19th 1987 investors across the globe awoke to find the stock market’s had dropped more than 20 per cent, equivalent to about $500 Billion. On February 27th 2007, investors awoke to find the market had dropped 8.9 per cent. Equivalent to $600 Billion, which barley raised an eye brow.

Is it mere coincidence that bankers and fund managers are spending ludicrous amounts of money on fine art and other proven stores of wealth? or do they know something that you do not?

And one last quote

Signature Rarities specialize in creating precious metal and numismatic portfolios completely independent of any government or private agency. By adding an allocation of rare coins and precious metals to your portfolio you can decrease risk and at the same time increase return.

For more information please feel free to email me. Send Mail

Sincerely,
Stuart Allen
Managing Director.

PS: The United States used the “trading with the enemy act” to confiscate their citizens gold. Possibly the greatest fraud ever committed.Read: The Golden Rule.

Your Rare Coin Retirement

State pensions are nothing short of a glorified Ponzi (Pyramid) scheme. The “insurance” we all pay is just another tax that ends up in the same pot as all the other taxes. Obligations paid to those lucky enough to be retired are paid from current tax revenues.

A recent study conducted by Deutsch Bank estimated that in the year 2050 there will be 75 pensioners for every 100 workers in Europe. This makes the possibility of a comfortable retirement based upon contributions made during our working lives increasingly remote.

Private pensions are not much better off.

While liabilities to current retirees grow, the assets behind the schemes have shrunk. In 1997 the top 100 companies in the British stock market (FTSE 100) had pension schemes funded by 132% of obligations.

Following a tax raid, rule changes, stock market underperformance and an ageing population this has fallen to about 70% funded today.

According to the Pension Protection Fund, an organisation that insures UK pensions against collapses, during August 2007 pension funds saw their aggregate pension’s surplus melt from a £51 Billion surplus, to just under £27 Billion. At the same time 73% of defined benefit, pensions are under funded.

In the USA General Motors has 1 active employee for every 2.5 retirees in the company scheme.

The annual fixed cost of paying their pension obligations to 420, 000 ex- employees is destroying the company. Just providing heath care insurance costs G.M $10 Billion per year.

Once ranked as the world’s largest company G.M is no longer in the business of making a profit for shareholders. They are in the business of making a profit to pay their pension liabilities.

The combined pension liabilities of Germany’s DAX 30 companies are an amazing 31% of their combined market capitalisation.

The Pensions Sicherungs- Verein, is an association that insures corporate pensions against insolvency set up by the German government in May 2006. The fund is already being sued by members for the way it has handled a 2 Billion Euro payout to 170,000 workers whose pensions have collapsed.

In the Netherlands, one of Europe’s best state pension schemes, the liabilities of the AEX 25 equals 26% of market capitalisation.

So what can you do?

For a start, make yourself responsible for your own future. If your government or private pension does pay out, consider it a bonus. When this has been discounted, you will have a clearer picture of the problems you face and what needs to be accomplished.

And here is the premise of our report: 12 silver, gold and rare coins costing between £50 and £2,000 with a median price for all twelve of about £300 per coin.

we all know the saying that the only thing guaranteed in life is death in taxes, but if you had set aside 10% of your gross income in 1972 ($1,300), it would have bought you almost 1 Kilogram of pure, 24 karat gold.

Adjusted for inflation, you would need $10,315 to have the same purchasing power of $1300 in 1972.

In other words, if you had kept your $1300 in cash you could buy the equivalent for $126 of goods and services today. At today’s spot price of $650 per troy ounce (31.1 grams) your 1 Kilo of gold would be worth $21,000.

In the stock market S & P 500 Index (gross of tax, and dividends reinvested) it would be $18,000.

In a bank account before tax it would be $3700.

In the PCGS 3000 rare coin index it would be $72,000.

For more information on the possibilities of a Rare Coin Retirement please email your advisor, or if you do not have a contact simply click here. Send Mail

Don’t delay, everyday, week or year you wait you loose.

The Clues, The Clues

Six years ago I was fortunate enough to be sailing around the South China Sea as part of a marine archaeological expedition in search of Manila galleons, the largest treasure ships ever to sail the oceans.

Several like-minded dealers and I were funding a search of a specific vessel that sunk in 1572 carrying 3,000,000 silver “pieces of eight” and nearly 50,000, gold Doubloons.

The significance? Possibly as much as $1 Billion, conservatively $500,000,000.

Sadly, we never found the mother lode, but the experience was priceless and worth every cent of the $250,000 it has cost me to date. ( The crew are still out there as I pen this missive) From this sum, more than $100,000 was spent on research- The Clues, The Clues.

The odds of actually locating the mother lode are far greater than locating the proverbial needle in a haystack. However, my opinion was and still is, that unless you look you will never find anything. It is better to have loved and lost, than to never have loved.

In the words of the legendary treasure hunter Mel Fisher: “Today is the Day”.

The reason that I share this with you is that today is today, tomorrow never comes. Tomorrow is a blank page that we all get to write afresh. Nobody can accurately predict what events will greet us when we awake.

On October 28th 1929 who could have thought that the next day, would forever be known as Black Tuesday and spawn a new economic expression: Depression

On Sunday October 17, 1987, who could have predicted stock markets would fall 22% before breakfast?

Returning to my adventures six years ago, a major storm blew into the South China Sea calling a premature end to our search. For the first time in 3 months, I was able to check into a hotel. I had a real bed, air conditioning and cable television: 200 channels with nothing on.

As I lay there surfing the channels I came across a French network and saw what I thought was a very strange film. It showed one of the two towers of the World Trade Center in New York on fire.

I quickly switched to CNN just in time to see a second plane strike the towers.

Who could have known?

Well, as we now know, quite a few people. The clues were there.

Tom Clancy the author had written a book, a FBI field agent had made a report, the department of defence had been practising an emergency scramble of fighters, and the CIA, well as we know from Iraq, they know nothing. According to conspiracy theorists the president and vice president were also in the loop.

Obviously, the exact date and time were elusive, but the clues pointed to a spectacular event, which simple precautions could have prevented. September 11th will forever be known as the day when the lives of every single man woman and child on this planet changed.

This is why it reminds me of today, Thursday July 26th 2007. The entire world agrees that we are experiencing the greatest period of prosperity ever. Stock markets, the most common measure of prosperity continue to rise, property prices are offensive, and unemployment is pretty much the lowest it has ever been.

We are convinced that the summer of 2007 will go down as the beginning of the end. And here is why:

“The Greatest Economic Boom Ever: Enjoy It While It Lasts” So says US treasury secretary and former Goldman Sachs banker Hank Paulson: For the full article, as published in Fortune magazine click here Click Here

$100 BILLION SUB PRIME LOSSES:Federal Reserve Chairman, and Ex Goldman Sachs Banker Ben Bernanke: Click Here

Not sure what all the fuss is about? Don’t be embarrassed, neither did I until I read this: Click Here

If history is our guide the recent turbulence in stock markets, treasury bonds, housing and credit markets is just a blip. Possibly a healthy, short-term correction.

However, if this is the case, it means that THE BIG ONE has yet to come.

Considering we have had a period of prosperity unprecedented in history, could the following crash also be unprecedented?

All the staff at Signature Rarities work under my direct supervision. It is not there job to tell you what the risk is to your financial future. That is up to you to calculate using your own personal benchmarks.

Our work at Signature Rarities is not to convince you to put all your money into “old coins.” Our job is to locate for you what represents a tangible asset of last resort. A safety net for you and you family.

The Connection Between Coins and Inflation.

Investors understand that whenever inflation is let out of its cage, hard assets can be used to tame it.

In extreme cases, holders of paper will fight to purchase literally any asset that they can lay their hands upon. I remember the story my grandmother told me when young. She was born in Hamburg, and grew up their. As a child, she was sent to the store with a wicker basket full of money. she was robbed, and the money was tipped on the floor and the basket stolen.

Another story she told us, was when she went to the market to find all food stuffs gone, and the shelves virtually empty. The only thing that she was able to purchase where cardboard collars; (Remember the days when shirts had detachable collars?) Concerned that her parents would be furious she delayed going home, but when she finally arrived, they were not angry, but happy. They were happy that she had managed to get something, anything, for the worthless paper.

Although very extreme, these examples highlight how money can become worthless, and any asset, anything that can be traded is preferable to cash.

Consider the example of the nearly 18 percent inflation between 1976 and 1980, when gold shot from $185 to $850 an ounce…which was a 360 percent increase.

During that time, collectibles such as investment rare coins went absolutely stratospheric, pushing the rare coin index (CU 3000) up an amazing 1000 percent. Back then, Investors were as preoccupied with tangibles and collectibles as they have been with stocks in the 90’s.

Like the late 70′s, inflation is creeping up now, too. According to a recent USA article, published on the front page of the Money Section, it say’s…“If you own bank cds or money market mutual funds, you could be losing money, after inflation, for the first time in seven years.”

Not that an inflationary setting is a necessary prerequisite for investment rare coins to prosper, but inflation-countering is one of the many powerful reasons why hard assets should be an essential part of any portfolio.

Think of it this way: however high gold rises, solely in response to rising inflation, investment rare coins will rise that much higher.

Stability, Security and Profit can be added to you investment portfolio through diversification with Investment Rare Coins.

Northern “Wreck” A Numismatic View of Banking…

Until January 2007, executives of Northern Rock were paid performance bonuses based upon a simple formula:

For every 1% rise in profits, they would receive 5% of salary as a bonus, up to a maximum of 100% of salary. For this reason, every opportunity was used to it full extreme to create profits. As is sometimes in the world of high fiancé this was not enough.

To further ensure “performance” in January 2007 executives voted them selves a bonus increase. from 5 to 10% of salary for every one 1% of profit- up to a maximum of 200% of salary. Great work if you can find it. But exactly what do bankers do that they deserve to earn so much more than the average person? And is their work important enough to warrant such extravagance?

THE OLD LADY OF THREADNEEDLE STREET.

It is widely accepted that banking as we think of it today, began during the fourteenth century in Medici’s Florence. In Britain, the first bank was Coutts and Co founded in 1690, followed by world’s first “central bank”, under charter from King William III in 1694.

The events leading to the founding of the Bank of England occurred some 50 years earlier under King Charles I.

In 1640, King Charles faced raising and paying an army to invade and pacify Scotland.

He swiftly prepared to fund his campaign by seizing the gold held in the Tower of London. As events unfolded, the proposed war against Scotland petered out and eventually the gold returned.

Two years later, in 1642 the Great Civil War did break out between King and Parliament. Nervous citizens, fearing another seizure- from either side- removed their gold and sought another secure depository.

GOLD SMITHS- THE FIRST BANKERS

A natural option was an arrangement with London’s gold smiths, who had their own, private methods of storage. The gold smiths issued receipts to depositors, which rapidly became a freely circulating currency.

Very soon, the gold smith’s noticed that very few, if any, people returned to take possession of there gold, so the next step was taken. This was to issue additional notes to borrowers, in return for an interest charge.

This practice of producing twice the amount of money than deposits held became enshrined as standard banking with the founding of the Bank of England 52 years later

THE BANK OF ENGLAND

In 1694, King William the Third was facing a war against the French. Before he could seize the gold, a cabal of six London gold smiths offered the king a loan.

In return, the goldsmiths received royal charter to establish the first “Joint Stock Company” called the Bank of England. The world’s first central bank: Privately owned, responsible only to the stockholders, known as the Court of Directors.

In addition to the Million-pound loan to the king, the company was allowed to issue the public the same amount in paper- with an interest charge.

during the 300 years since, this original 2 million pounds has grown to a figure beyond comprehension.

In August 2007 total private debt in the UK broke 100% of GDP reaching an incredible 1.35 Trillion pounds, surpassing GDP at only £1.33 Trillion. Adding public and corporate debt, this figure surpasses £2 Trillion of public and private.

Approximately half total US Debt of $9 trillion, but America has 5 times the population and an economy that is almost 7 times the size.

THE NORTHERN WRECK Northern rock is one of dozens, perhaps hundreds, maybe even thousands of banks that took this simple deception of creating money from nothing to unimaginable levels.

Total deposits made by customers of Northern Rock are about £25 Billion Pounds. Their loan book is in the region of £105 Billion. More than four times deposits.

The question now is what will be the new business model?

The US Federal Reserve Bails out the Stock Market- AGAIN-…..

With a 25 Basis cut in interest rates the Fed has made it clear that their priorities lie in bailing out speculators, not protecting savers.

This most recent cut is on top of the 50 basis point slash they made in September. To add insult to injury within 24 hours Fed chairman Ben Bernanke stating “the Fed believed in a tight monetary policy”, he then injected a whopping $41 Billion into the market.

Just how dumb does he think investors are?

If you believe the statistics inflation in the Euro zone is running at 2.6%. This is 30% higher than the official 2% target. In the UK the government claims inflation of 2.3% against the target of 2%.

With the meeting of the Bank of England and the European Central Bank on Thursday this week will they follow the Fed and help the speculators at the expense of savers?

Our guess is yes.

With the Euro trading at 1.45 to the US$, (within 50 basis points of the all time high of the defunct Deutsche Mark) the ECB has a choice; destroy the economy or un-leash inflation.

Whichever way they move, the taxpayer losses.

In reality, inflation is much higher than the official figure. You know it is and THEY know it is. Compare your daily expenses to the prices you paid just six months ago.

What does this mean for you?

It means the central banks are more interested in keeping the gravy train running than halting inflation.

To date the central banks have bailed out the speculators to the tune of 100’s of billions (Euro, Dollars, Pounds- you choose which because IT DOES NOT MATTER- it is just inflationary paper) than protecting their citizens- you and I- against inflation that THEY cause by printing money.

In fact, the biggest threat to our futures and our families’ futures is not a falling stock market (economy) it is rising inflation.

The current crisis is being called SUB PRIME CREDIT CRUNCH. Simply put this describes loans made by the banks to those least able to repay: Humourlessly called NINJAS, an acronym for: No Income, No Job or Assets.

What has not been widely reported is the fact that the current “Crunch” is on loans made 2-3 years ago.

These loans were made by commision only brokers at very low “teaser” rates, which generally last 1 or 2 years before being adjusted to standard interest rates.

It is when they are adjusted that the defaults begin.

As a result we can safely say that current defaults are on loans made during 2005- since then banks have continued to lend at a staggering £100 billion ($200 billion E150 Billion) per quarter!

Every quarter, through 2005, through 2006 and up to the summer of 2007. Just a little arithmetic indicates we are at the tip of the iceberg.

The economic cycle today is characterized by rising inflation unstable interest rates, high energy and commodity prices, high trade deficits and stock markets that continue to set records.

In the mid to late 70’s many of these same events occurred which lead to a flight to quality assets that hold their value, while inflation raged for almost 20 years- from the 1970′s through to the early 1990′s.

With its latest rate cut the Fed has declared its intention to support speculators and hold off a recession.

However, a typical recession only lasts about 12-18 months.

INFLATION CAN LAST DECADES.

As we REPORTED IN AUGUST the last time inflation was let loose rare coins as measured by the PCGS 3000 index soared 1000%.

The current crisis has the potential to cause far more pain than anything previously thrust upon us.

According to some estimates, AAA mortgages are trading at a 20% discount- 80 cents on the dollar.

BBB mortgages (sub prime) are selling at an 80% discount, that is to say 20 cents on the dollar, which could still be too much. With Citi Group writing down more than 10 billion we have to wonder how much of this toxic sludge the pension funds hold.

And when they do mark to market (put a price to the sludge) what will be the effect on our retirement funds?

In the seven weeks since the northern rock implosion, this bank has borrowed almost £23 billion ($46 billion) from the UK taxpayer.

Remember this tiny bank had deposits of only £24 Billion (about 10% the size of Citibank’s $700 Billion in deposits).

To date the bail out works out as £300 per man woman and child in the UK, and all to keep afloat a bank that has a market capitalization of £700 million. (give or take a few million, after all- “it is only paper”).

This means not only has the bank blown every penny of its depositors money, there is no end in sight to what the tax payer must pay and could end up costing upwards of £30 Billion pound sterling or $62 Billion dollars, or E43 Billion euros.

Who really cares?

It is just paper, as long as the printing press doesn’t run out of ink the total is unlimited.

When (not IF) this happens within the Euro zone how will citizens of the major economies feel using their taxes to bail out the spend thrifts- who have binged on credit at the expense of the frugal?

The question is do you have faith in the bankers and politicians to put your interest before their annual bonus or re-election prospects?

We think not.

It is for this reason that I would like to say how proud I am of our clients. They have shown foresight, and courage to step away from the crowd and take action. This is sadly lacking in many. Some have listened to us and have yet to take action others have been brave enough to take a step into a market they know little about.

He that last laughs last, laughs longest.

So IF YOU HAVE GOLD, SILVER AND RARE COINS have a giggle, because if you dont own them the only other option is to cry.