My name is Shawn Ozbun, and our goal is to keep you up to date with what’s going on in the world of Gold and Silver by providing you with current news and precious metals pricing.
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Welcome to the vault cast, thanks for listening in and I appreciate you all of you. Today we are going to talk about states seeking to drop the dollar and we are going to talk a little bit about the currency war, and then finally Silver coins are one of the hottest trends in 2013.
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Now lets get into today's precious metals pricing!
Gold - $1611.35 Up $1.29
Silver - $29.96 Up $.15
Platinum - $1681 Up $6.00
Palladium - $753.01 Down $2.11
States Seek to Drop Dollar For Own Currency
At least a dozen states have introduced legislation to implement or at least study the concept of creating an emergency currency to serve as a medium of exchange should there be a breakdown of the federal government's currency or their ability to distribute it to the states. Could this work? Some examples:
— Texas, which receives 1/3 of state revenue from the federal government and has many dependent retirees, is considering a "Self Sufficiency Act" to keep goods and services flowing.
— Virginia is authorizing a commission to study the use of gold and silver currency.
— Utah has already authorized the use of gold and silver money.
— Wyoming is considering an alternative currency in the event the US dollar becomes useless.
— Other states have included in their disaster preparedness plans various forms of replacements for federal money in the event of a political or economic meltdown.
There are serious legal and/or constitutional issues involved in making one's own money. The Constitution originally only authorized states to create gold and silver coins as money (maybe because the Revolution was financed with what became worthless, un-backed, paper "continentals").
Article I, Section 10, says, "No State shall ... emit Bills of Credit ...." (paper intended to circulate as money but not redeemable in gold and silver). Another part of the same Article reads, "No State shall ... make any Thing but gold and silver Coin a Tender in Payment of Debts ..." We soon began to print gold-backed dollars to augment our gold and silver coins. Legal tender laws later allowed unredeemable paper to circulate as money. The first dollar notes were printed in 1792 but by 1862 we switched to fiat dollars to finance the Civil War. Since then, the U.S. has returned to gold-based money several times only to abandon it in favor of paper notes during every major war.
At today's price the U.S. owns about 2 cents of gold for every dollar in circulation. This, some states feel, leaves us very vulnerable to a precipitous drop in the value of our paper money. Ignoring abstract currency reserve considerations and other assets contributing to U.S.' solvency this implies no real-world floor of support for the dollar until it reaches a devaluation of 1/50 its current buying power ($100 for a loaf of bread).
So in the event of a global loss of faith in dollars, a back-up system makes sense. But with all of these limits on state and private issuance of money, how are they getting away with these emergency acts? Most of the state measures set up "studies" or "commissions" or "emergency plans," so no unlawful issuance of money will actually take place until the emergency kicks in.
Utah's law limits the use of gold and silver as currency to federally minted coins but importantly they can be exchanged at their intrinsic value rather than their face value. They plan to follow up with a law allowing foreign coins to be treated similarly, possibly paving the way for acceptance of coins minted by other states?
As Ron Paul famously pointed out in the 2012 debates, you could buy a gallon of gas for one silver dime ($4.00 then, now worth $5.00 apiece at bullion price). In Britain, pound coins are used for many larger purchases. It's not that impractical to trade in metal money especially when the paper alternative offers no way to know from day to determine its worth. My Argentine friends tell stories of how shopkeepers would add zeros to the numbers on the money with felt tip pens to keep up with government proclamations.
The threat of severe inflation or hyperinflation is real and in the opinion of many prestigious economists inevitable. If a state's seismologist gave a warning of a 50%-60% likelihood of an imminent earthquake or tsunami the state would be remiss (and liable) if they failed to create emergency preparations. It appears that the Constitution trumps some of the later Tender Acts. Read More...
Why Buying Silver Coins is One of the Hottest Trends of 2013
So far in 2013, buying silver coins has been one of investors' favorite ways to profit from a climb in the white metal's price.
The demand for physical silver from small investors in the form of coins is really remarkable. A record 7.5 million ounces of silver coins were sold in January.
In mid-January, the U.S. Mint was forced to announce that it was forced to suspend sales of the 1-ounce American Eagle silver bullion coins because, after just two weeks, it was sold out of its entire inventory.
Silver bullion coin sales were strong going into the close of last year as investors became concerned over the state of the U.S. economy with Congress debating the fiscal cliff and the debt ceiling.
UBS noted, "With the U.S. Mint reporting notable sales volumes last November - when the U.S. held elections - and again this month when U.S. fiscal issues are at the forefront, it is easy to infer that some element of the 'fear trade' may be at play."
UBS was skeptical of the fear trade, but added "Nevertheless, it is important to keep an eye on U.S. coin sales in the coming months to see if volumes remain elevated as the debt ceiling showdown plays out."
Famous investor Jim Rogers is also a fan of buying silver coins.
"You can't get [silver coins]. They sell out," Rogers, who owns a rare 2013 silver coin, said on Yahoo! Finance's"The Daily Ticker" earlier this month. "Several mints have run out of coins because everybody's worried about the future of the world." Read More...
How gold will benefit from a currency war
Efforts by countries such as Japan to boost growth with massive stimulus programs -- which in turn have devalued their currencies, an aid to exports -- can benefit prices for gold. These have started to alter the precious metal’s relationship with the foreign-exchange market and expand its role as a safe-haven asset.
“We are now moving irrevocably to a time when gold will measure currencies, not currencies measure gold,” said Julian Phillips, a South Africa-based contributor and founder at GoldForecaster.com.
“We are about enter a phase in the gold price where it will rise against all currencies,” said Phillips. “The loss of the Swiss franc USDCHF +0.04% and the Japanese yen USDJPY +0.61% as ‘safe-haven’ currencies, as [the countries] forced their currencies to weaken, has made us all realize national currencies are the same animal in different guises.”
Gold’s bull run began more than a decade ago, with ultra-easy monetary policies by central banks a key reason for the rally.
In February 2001, gold futures GCJ3 -1.46% traded at around $260 an ounce on the Comex division of the New York Mercantile Exchange. Gold closed at $1,635.50 on Thursday — a nearly six-month low, but also more than six times higher than 12 years ago.
“The methodical debasement of fiat currency, via super-accommodative monetary stimulus, is an ongoing trend that has hugely contributed to the 12-year rally in gold,” said Peter Grant, chief market analyst at USAGold.
“Whether this has already degenerated into a currency war or not, it is a trend that seems likely to continue for some time to come,” he said. “And that is ultimately a positive for gold.”
War now or later
So what’s a currency war and are we in one?
A currency war refers to a competitive currency devaluation by countries trying to ease strength in their currencies. Read More...
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[Disclaimer] Shawn Ozbun is not a licensed financial adviser, there is risk associated with all investment including gold and silver. You should seek advise from a licensed financial expert before making a purchase.
