From: Gary N. <gn...@bi...> - 2003-08-25 15:21:50
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AN INVITATION TO SUBSCRIBE TO "THE GOLD WARS" Gary North [First, please print out this letter. Click the PRINT button now. Second, take 60 seconds to create a new e-mail folder, "Gold Wars." Then file this letter in it . . . plus all of the others to follow, should you decide to subscribe. Third, let me persuade you to subscribe. . . .] This is my invitation for to you to subscribe to THE GOLD WARS, my free e-mail newsletter. Before you decide, you need to know what I intend to do with the newsletter. THE GOLD WARS has three primary goals: (1) clarify the free market/Austrian perspective on gold as money; (2) demonstrate that the Establishment's war on gold is in fact a war on individual liberty; (3) let you make some money. The question is: Which form of money? Dollars or gold? A NEW GOLD CYCLE We are at the beginning of a new gold cycle. Take a look at this chart. It traces the recent rise of gold's price in several currencies. http://www.the-privateer.com/chart/g-multi.html Hardly anyone in the financial world recognizes this new cycle today. The public is not interested. Here is where the profit opportunity is: the leverage potential of getting into a narrow, ignored market, and then selling back into it when the general investing public discovers it and a mania develops. You want to be a Johnny-Come-Early. You want to sell to Johnny-Come-lately. You are in a select group: self-selected. The average American has no clue about gold, and will not get the message until it's too late. They will be like Albert Einstein's clueless Aunt Rosa. According to Dr. Norbert Einstein, Albert's cousin and a banker, who told me this story 25 years ago, their Aunt Rosa was caught in the post-World War I inflation, just like everyone else in Germany. Like most Germans, she did not understand monetary theory. She did not understand that the German central bank was inflation's cause: money creation. She dutifully held marks as they depreciated to a million per dollar and then much lower. Finally, she caught on. She figured out that she had to get rid of marks. But by that time, nobody was selling hard goods at a price she could afford. It was too late. Finally, an opportunity appeared: bedpans. She could buy a pile of used bedpans. She did. This was in late 1923. Not long after this, the German central bank abandoned the old mark, brought out a new mark, and stopped printing money. A depression began. Prices of hard goods fell. There, figuratively speaking, was Aunt Rosa, sitting on top of a pile of used bedpans. The typical American is still in the stock market, either directly or through his pension fund. Like the Germans in 1922, Americans still trust the system. They still believe that Alan Greenspan or someone in charge in Washington is going to kiss the stock market and make it well. They are paying no attention to gold. They regard gold the investment equivalent of used bedpans. (Lenin once said that under full Communism, gold would be used for urinals -- the sexist!) I beg to differ. I am begging you to differ, too. CARD-CARRYING GOLD BUGS I am among a remnant of a remnant: a card-carrying gold bug. I was taught by the master: Dr. Hans Sennholz, the dean of American gold bugs -- at least of those still alive. I have been an active participant in the gold wars ever since the summer of 1962, when I heard a lecture by Sennholz on Gresham's law: "Bad money drives out good money." (This famous law is mis-stated. The accurate version is this: "Money that is artificially overvalued by the government drives out of circulation money that is artificially undervalued by the government." It's an application to money of the unbreakable economic law of price controls.) Sennholz told us that silver dollars were about to disappear from circulation, and that a boom in gold would eventually follow, for the same reason: a policy of monetary inflation by the Federal Reserve System. I began buying silver coins in July of 1963, one month after the U.S. government ceased issuing silver certificates, which were redeemable in silver coins. Beginning in July, I bought silver coins at a local bank. By the end of the summer, I had something like $1,500 face value -- in today's money, $9,000. It was everything I had earned that summer. (I had the best job I ever had: I got paid $500 a month to sit and read the works of Hayek, Mises, Rothbard, and Ropke, and I was given free room and board by my boss and future father-in-law, who got me that job.) By September, Gresham's law was in full force. Turnpikes in the East Coast were running out of coins for change. Turnpike representatives were sent out on Sundays to buy coins from churches, who got coins from children in collection plates. In 1964, silver coins were replaced by the clad coins of today. I knew then that Sennholz was probably correct about gold, too. I began buying gold coins -- U.S. double eagles -- from Burt Blumert of Camino Coin Company, whenever I had any money. I was in grad school, and I had little money at first, until I won a pair of national scholarships and started teaching Western Civilization at the university. Blumert has been laboring in the trenches for a long time. In a recent report on www.lewrockwell.com, he made an important point: the talking heads aren't talking about gold's rally this time. No surprise to me that the talking heads aren't covering gold. In my last essay on the mysterious yellow metal, I discussed the different types of rallies. There's the "Blow-Off" rally, where the price increases are accompanied by media coverage. The higher the price, the more prominent the coverage. I have lived through several Blow-off rallies where gold's story finally winds up in headlines on the front page. I described the other type of rally as the "Unnoticed Rally." In that instance the price goes higher WITHOUT media focus, or, often, without any kind of focus. The past months have brought us a classic "Unnoticed Rally." When the talking heads discuss the drop of the US dollar, for example, their "take" is either: "It really doesn't matter" or "A cheaper US dollar is good for our exports." Am I alone, or do you hear the same garbage I do? It's not just Blumert who is still at it. Sennholz writes one of the most cogent e-mail letters out there. In his March letter, he wrote the following. You would be hard-pressed to get the story of the gold wars any clearer in just a few words. Please don't skip over these paragraphs. Your economic future depends on your clear understanding of the gold wars. (To the hard corps, I recommend clicking on the link and reading the entire essay . . . twice.) Throughout the ages governments have had a love-hate relationship with gold. Most of the time they sought to amass it in their treasuries and monopolize its use. They claimed and brutally enforced a monopoly of the mint. At other times governments waged war on gold, seeking to ban it under penalty of fine, imprisonment, or even death. During the French Revolution hundreds of businessmen died on the guillotine because they had dared to calculate prices in gold or ask for gold. In the United States of 1933 to 1975, it was a crime punishable by fine and imprisonment to own standard gold coins. At the present, the U.S. government, while clinging to a sizable hoard buried in Fort Knox, seeks to disparage it and make little of it as an unimportant metal. We are living in an age in which all governments, regardless of the system of political and economic organization, whether interventionistic, socialistic, democratic or dictatorial, are occupying an economic command post. Most of them work through central banks issuing legal-tender notes and through government mints manufacturing coins. In 1971 they all suspended gold payments and made the most important and most stable currency, the U.S. dollar, take the place of gold. The world has been on a dollar standard ever since. For the federal government the dollar standard has been a magical guide to cheerful spending and soaring debt. It released the Federal Reserve System from the shackles of gold and set it free to finance federal deficits no matter how large. In 1971 the federal government deficit amounted to $23.033 billion and the federal debt stood at $409.5 billion. By now, the 2003-2004 federal budget calls for expenditures in excess of $2.1 trillion and a debt of some $7 trillion. Since 1971 the American dollar has lost almost 70 percent of its purchasing power and is losing more every day. It makes it difficult to project future debts and deficits, but it is likely that the dollar standard will disintegrate if foreign investors should ever lose their confidence in the U.S. dollar. . . . For most of a generation the almighty dollar has been a great object of confidence and trust throughout the world. It brought honor, friends, influence, and possession to the United States. As a symbol of power and prestige it answered all things. Although we do not know what the future has in store for us, we are fearful that the age of the world dollar standard may some day draw to a close. Huge federal government deficits and chronic Federal Reserve inflation may destroy it. The deficits force the Fed to generate ever more money and credit which in turn weaken and erode the dollar's trustworthiness in the eyes of the world. Its present weakness toward many other currencies, such as the euro, the Swiss franc, and the British pound, is an early symptom of the erosion. No other currency, national or international, can conceivably take the place of the American dollar. They all suffer seriously from the same ideological malady: they are the creation of political concern and authority. Whatever we may think of gold, it always looms in the background, beckoning to be used as money, as it has been since the dawn of civilization. http://www.sennholz.com/gold.html GOLD BUG INSECTICIDE In academia, the war against gold is universal. The academic economists join forces with sociologists and political scientists in their policy of spraying gold bugs. The Keynesians, the monetarists, and the supply-siders are agreed: a full gold coin standard without fractional reserve central banking is both unthinkable and undesirable. Keynesians despise the gold standard. Keynes dismissed gold as "a barbarous relic." Milton Friedman merely berates gold as a monetary tool. He has always opposed government controls on gold ownership, as with any other commodity, but he has also always opposed gold as the basis of the money supply. Some supply-siders officially accept a government-run gold standard, but they oppose a pure gold coin standard in which governments do not buy, sell, or control the price of gold. The economists oppose the gold standard because they don't believe that the free market, created by private contract law, is trustworthy in one area: monetary policy. They all trust the State to regulate money -- all except a handful of Austrian School economists, of which Sennholz is one. (He is one of only four Americans who earned his Ph.D. under Ludwig von Mises, the most famous of the Austrian School economists, and the dean after 1914.) I, in contrast, don't believe in the gold standard because I don't believe that any civil government is trustworthy in setting monetary policy. I am not in favor of any gold standard run by a government. This is because I understand the fundamental lesson of monetary history: governments always steal the public's money before they debase it. The lone exception was Byzantium, from 325 to its conquest by the Ottoman Turks in 1453. That was the only government-built yellow brick road that did not lead to Debasement City. Whenever governments set up a gold standard, this invariably leads to future confiscation. A government encourages the public to deposit gold coins in fractional reserve banks. The bankers say, "Don't pay us to store your gold. That's an absolutely free service. Why, we'll even pay interest on your gold, but you can get it back at any time." In short, it's something (interest payments) for nothing (risk-free storage). This is the bankers' #1 lie, and whenever a major war breaks out, governments then confiscate the public's gold, either directly or through the central bank. It happens every time. There are no exceptions in modern history. The government allows the banks to suspend gold redemption -- always. That is, it allows the violation of contract. This is because the government wants no threat to its wartime policies of mass inflation, which help fund the war effort. The public's ability to withdraw gold from banks is the biggest of all such threats. Gold convertibility ends, by law. This happened in 1861-65 in North and South. It happened during World War I in every nation. Full gold coin convertibility was restored only by Great Britain and the United States after the war, but Great Britain reneged in 1931, and the U.S. followed suit in 1933. A government-guaranteed gold standard is an official guarantee of future confiscation. For more details, click here: http://www.lewrockwell.com/north/north177.html MAKING MONEY WITH GOLD Gold is not money today, except among central bankers, who settle their accounts in gold and dollars. So, in order to "make money with gold," most people assume that they must buy gold (a non-monetary commodity) with true money (fiat money issued by the government's central bank), hold this commodity, and sell it back for real money, pay taxes on the profit, and then buy something else. I think you can make money this way -- a lot of money. Here is my opinion: the way to make the most money with this money ==> gold ==> money strategy is with in North American gold mining shares. That is believed by few people, and most of those few who believe it are unconventional establishment investors in unconventional establishment markets. Then there are the gold bugs. They believe that you exchange today's money (dollars) for future money (gold coins). You will never convert back to paper money, so you will not suffer a "taxable event." You will spend your gold coins into circulation. People will sell things to you in exchange for gold coins. The gold bug says "buy and hold." The gold investor says "buy and hold for a while." Blumert is a gold bug. Here is how he explains the gold bug's approach to gold. Hold your gold, sell ONLY when you need the dollars. When, for instance, you are buying a house, helping the kids, paying for your brain surgery. Never sell gold to use the dollars for another investment UNLESS it's a business venture you know something about (preferably YOUR business). And then we have those dramatic instances when you are forced to liquidate your gold. For example, you're thirsty, I'm the only one with water, and it's going to cost you a gold coin per bucket. Or, the LAST TRAIN is leaving the station and the price for a ticket is a gold coin. I trust this message is clear. Blumert is clear, but most people who buy gold because "it's the latest thing" aren't clear. AFTER 9-11 When I saw the Federal Reserve's response to 9-11 -- massive monetary inflation to inject "liquidity" into the economy -- I knew that the gold war was about to enter a new phase. I knew that gold would soon take the offensive against the dollar. I suspected that the price of gold would move up against the dollar and all other fiat currencies. The vulnerability of all governments to terrorism was now visible. When people buy gold they are "shorting the government." The fall of gold's price against the dollar from 1980 to 2001 had been relentless. Investors believed in the U.S. government. But I had sensed, beginning in January, 2000, that this faith was about to crater, beginning with the NASDAQ. In February, 2000, I warned my REMNANT REVIEW newsletter subscribers to get out of all tech stocks. In March, I begged them again that the tech sector was way overvalued. This warning arrived in the week that the NASDAQ peaked at 5040. I predicted the recession of 2001 in November, 2000. Now this: a successful terrorist attack on the U.S., followed by massive expansion of money by the Federal Reserve. The State had only one response: get Greenspan to create money. It took no persuading. This indicated to me that the State had gone on the defensive. Meanwhile, China had become the fastest growing economy on earth. Older Chinese remember the great inflation under Chiang Kai-shek, in which the struggling middle class was wiped out. Mao's Communists were aided by this collapse of money. Gold has never lost supporters in China. As they grow richer, a small portion of their wealth will go into gold. But I did not predict what has happened this year: the Chinese government's legalization of a free market in gold. I made a decision in September, 2001. I called America's premier specialist in North American gold mining shares, Sam Parks. I have known Sam for over 25 years. He takes new clients only if they are willing to invest $10,000, which few people are willing to commit in this, the tail end of gold's defensive war. I asked him if he would begin writing a column for REMNANT REVIEW on which mining shares to invest in. As a favor to me, he did. Those REMNANT REVIEW subscribers who did what he recommended are up a minimum of 100% on their money, and maybe 200%. He called them perfectly, and our timing was equally good. I phoned Parks in February, 2003, to do an interview on gold and gold mining shares. I audiotaped it. He then revised it for written publication. We chatted again after the Iraq war and the fall in gold's price. He revised it again in early May. When he did, gold was at $340. I had to update it to $350 two days after he submitted it. Gold was at $370 within a week. I released the interview on Friday, May 16 -- 29 years and one day after the initial issue of REMNANT REVIEW went out. I sent it to e-mail REMNANT REVIEW subscribers. I'm now going to let you read it. If you want to know what has happened to the North American gold mining market, why the leverage on this investment is spectacular, and what is likely to happen next, Parks can tell you better than anyone I know. I am making the interview available to anyone who will subscribe to a series of reports I am writing (or wrote 30 years ago) called THE GOLD WARS. Beginning today, you can sign up for a series of reports sent automatically, free of charge. This will take you through the economics of gold, the politics of gold, and the investment potential of gold in its various forms. The biggest potential for the money ==> gold ==> money strategy is Park's strategy. So, I will start with the interview. To subscribe to THE GOLD WARS, click on the link (keep reading), and then click SEND. 1. You will receive a "Subscription Confirmation -- Take Action!" e-mail within 60 seconds. 2. After your e-mail program sends out your request letter to my system, wait 60 seconds, and then click SEND/RECV. This will retrieve my "Subscription Confirmation --Take Action!" message from your mail box at your internet service provider. 3. Read my message. Then click on the confirmation link, and 60 seconds later, Parks' interview will be in the mail box of your internet service provider. 4. Click SEND/RECV to retrieve it. Each issue will have this return address: The Gold Wars. So, if you want the Parks interview as the first installment in a my series of free reports on THE GOLD WARS, click here, and then click SEND: mailto:gol...@kb... Or just send an e-mail to: gol...@kb... |