Jim Rickards nails it again

[verdo]

http://www.kitco.com/KitcoNewsVideo/...mes_Rickards_1

^great interview to watch for those questioning the current gold action

[Raz]

Re: Jim Rickards nails it again

Thanks for the hyperlink, verdo.
I like Rickards and always want to know what he's thinking.

The Fed is riding the back of a tiger; if they jump off they'll be eaten. There is no "exit".

"In the past few years, the Federal Reserve has expanded the monetary base to about 18 cents per dollar of GDP ...

...between 1929 and 2008, the quantity of base money generally fluctuated between 5 cents and 12 cents per dollar of nominal GDP. The exceptions were 1981, when Paul Volcker intentionally reduced the monetary base to less than 5 cents per dollar of nominal GDP, ending a 15-year period of escalating inflation in the process, and World War II, when the U.S. government ran massive deficits and the Fed more than doubled the monetary base. As a result, the quantity of base money rose as high as 17 cents per dollar of GDP in the early 1940’s.

How did the Fed get the ratio of monetary base to GDP back to pre-war levels of less than 10 cents per dollar of GDP (a level that has historically been consistent with Treasury bill yields still only about 2%)? Did the Fed reverse course, as Bernanke promises can be done “in 15 minutes” to avoid inflation?

No, it did not. Instead, the consumer price index shot up by 90% between 1940 and 1951, with the majority of that inflation in the back-half of the 1940’s. Stock prices churned and struggled, driving the Shiller P/E below 9 and leaving the S&P 500 index at two-thirds the level it had reached more than 20 years earlier.

Then again, none of that is relevant to Wall Street– forget that the U.S. government continues to run massive deficits and the Fed has already tripled the monetary base, on course toward 27 cents of base money per dollar of nominal GDP by the end of next year. Somehow, investors remain comfortable in the belief that perpetual deficit spending and money creation will have no consequence, because this economy is somehow different from every other one in history. If that faith proves to be unfounded, as we expect it will – not over a year or two, but during the back-half of this decade – few of the policymakers responsible for getting us to this point will be around to answer for it. That’s why kick-the-can policies are so attractive."


John P. Hussman,

December 24, 2012

[verdo]

Re: Jim Rickards nails it again

No problem! I think the best point he made was really on how unreliable it can be using technical analysis (the way you trade stocks) to trade gold, and how this whole thing about gold being in a death cross is just a smoke and mirrors game. Gold will probably be a lot more volatile now than it has been in the past, but I doubt any of these msnbc guys will call the ups and downs with any degree of accuracy

[raja]

Re: Jim Rickards nails it again

http://www.kitco.com/KitcoNewsVideo/...mes_Rickards_1

^great interview to watch for those questioning the current gold action

Rickards said in the video that there is no risk to gold. But if you read his book, or listen to him in other interviews, he predicts that the US government will inflict a 90% windfall profit tax on gold. Is that not a risk?

I questioned him about this contradiction in a personal email, and he responded that his consulting fee is $1000 an hour.

Perhaps he knows a way to avoid the 90% tax, and you can pay him $1000 to find out what that is.
I suspect his answer would be that you must sell your gold before the government institutes the 90% tax. And I guess that means you've got to hope the government does not institute a tax and make it apply to profits earned in the year that you sell. No risk?

By the way, if you're interested in buying gold, his blogsite offers a "free" gold and silver newsletter.
Regardless of your luck in avoiding the 90% windfall tax, Rickards will make his profit . . . .

[verdo]

Re: Jim Rickards nails it again

Rickards said in the video that there is no risk to gold. But if you read his book, or listen to him in other interviews, he predicts that the US government will inflict a 90% windfall profit tax on gold. Is that not a risk?

I questioned him about this contradiction in a personal email, and he responded that his consulting fee is $1000 an hour.

Perhaps he knows a way to avoid the 90% tax, and you can pay him $1000 to find out what that is.
I suspect his answer would be that you must sell your gold before the government institutes the 90% tax. And I guess that means you've got to hope the government does not institute a tax and make it apply to profits earned in the year that you sell. No risk?

By the way, if you're interested in buying gold, his blogsite offers a "free" gold and silver newsletter.
Regardless of your luck in avoiding the 90% windfall tax, Rickards will make his profit . . . .

As a Canadian, its not really something I worry about too much personally. I understand why Americans worry about it, but here in Canada, the resource sector is pretty huge, and I wouldn't be surprised that they make up a good portion of the special interests here. So I don't really see our government shooting one of their own major industries in the foot like that. On top of this, we have a fairly conservative leaning population atm, and I do see our conservatives maintaining power in the very near future, so there is even less risk of those kind of draconian taxation laws being implemented here. I believe Eric Janszen has gone over this windfall profits tax thing a few times already, and if I'm not mistaken, I dont believe he sees it as being a huge problem.

Also, keep in mind that he at least makes known the risks to owning gold. A lot of the PM ultra bulls and dealers wont even bother telling you that the risk of draconian taxation of profits is there. No one in this sphere is going to give away all their information for free. Eric doesn't either. But what they do give away openly should be enough for most people

[Polish_Silver]

EJ on gold tax

EJ has not emphasized a gold tax as a problem.

However, he tends to be over optimistic about the rationality of policy makers.

Currently, gold is a collectable, and has the highest tax rate of anything.


EJ seems to think policy makers are accountable, which is different from being fair or consistent.

Well, they are accountable to popular sentiment.

I can remember the "windfall profits tax" on oil companies.

Oil companies are not people, but gold bugs aren't either.


Sheeple have obediently bought bonds, stocks, houses, and lost their shirt every time.

And these gold bugs, the butt of jokes for so many years, are sitting on a fortune.

How do you think politicians, the general public, and FIREM interests will feel about that?

Any different than they did in 1933?

[davidstvz]

Re: EJ on gold tax

90% windfall tax unless you use the gains on real-estate.

[verdo]

Re: EJ on gold tax

If they did go ahead with a tax like that, wouldn't that just create a black market in gold, taking a chunk of the market out of the government's control? Also, if they moved in this way to attack gold, wouldn't that make the whole situation with the dollar worse abroad? People seeing the U.S. government targeting gold through confiscation or draconian taxation would be a red flag to USD holders abroad that the dollar supremacy is truly over. I mean right now, they ignore gold and denounce it as much as possible for a reason. If bernanke came out tomorrow saying gold was money, and the USD has been loosing value against it for 12 years now, what would that do to the USD value in the exchange market? I think by the time that they even considered doing moves like this, the dollar would already be on death row

I'm also thinking about the time we will be living in when it would be best to sell gold. We will likely have some sort of new system where gold plays some role. It may be that the US redeems its dollar denominated debt in gold as EJ says. In this situation, to me it makes more sense for the US government to buy the gold from people at a fair price, because instead of being shunned by central banks, gold will be embraced. And since the US will probably be at a point where their gold holdings are being diminished, they will likely want to hold onto as much of the gold as possible within the US. So they may ban gold exports, and do things which will promote gold imports, and increase their own central banks gold holdings by encouraging citizens to sell to them, and not foreigners. Allowing a black market to form just keeps more of it out of their hands.

[doom&gloom]

Re: EJ on gold tax

a 90% tax would clearly create a black market, and that is exactly where my gold would go if such an even occurred.

[raja]

Re: EJ on gold tax

90% windfall tax unless you use the gains on real-estate.

Would you please elaborate on that . . . .

[raja]

Re: Jim Rickards nails it again

As a Canadian, its not really something I worry about too much personally. I understand why Americans worry about it, but here in Canada, the resource sector is pretty huge, and I wouldn't be surprised that they make up a good portion of the special interests here. So I don't really see our government shooting one of their own major industries in the foot like that. On top of this, we have a fairly conservative leaning population atm, and I do see our conservatives maintaining power in the very near future, so there is even less risk of those kind of draconian taxation laws being implemented here. I believe Eric Janszen has gone over this windfall profits tax thing a few times already, and if I'm not mistaken, I dont believe he sees it as being a huge problem.

Also, keep in mind that he at least makes known the risks to owning gold. A lot of the PM ultra bulls and dealers wont even bother telling you that the risk of draconian taxation of profits is there. No one in this sphere is going to give away all their information for free. Eric doesn't either. But what they do give away openly should be enough for most people

Be wary of those giving advice.
Altruism is rare; talking one's book is not.

Ask yourself who would gain by talking down gold's risks?
When I ask that question, the answer I get is . . . someone who is sitting on a pile of gold and hopes that the value of that gold will increase as more and more people jump on board.
It makes no difference in the bottom line whether optimism is based on hope or artifice.
Rickards predicts the windfall tax, but never answers the question of how to deal with it (as far as I know).

[raja]

Re: EJ on gold tax

EJ has not emphasized a gold tax as a problem.
However, he tends to be over optimistic about the rationality of policy makers.
Currently, gold is a collectable, and has the highest tax rate of anything.

EJ seems to think policy makers are accountable, which is different from being fair or consistent.
Well, they are accountable to popular sentiment.
I can remember the "windfall profits tax" on oil companies.
Oil companies are not people, but gold bugs aren't either.

Sheeple have obediently bought bonds, stocks, houses, and lost their shirt every time.
And these gold bugs, the butt of jokes for so many years, are sitting on a fortune.
How do you think politicians, the general public, and FIREM interests will feel about that?
Any different than they did in 1933?

Polish_Silver, you are right . . . EJ is wrong.

Politicians are accountable to getting elected.
EJ understands that when he predicts that politicians will engage in uncontrolled spending and drive us into POOM. Why doesn't he see that about the windfall tax?

[raja]

Re: EJ on gold tax

If they did go ahead with a tax like that, wouldn't that just create a black market in gold, taking a chunk of the market out of the government's control?

The government will look at it like this: yes, there will be a black market, but most people will pay the tax out of fear. So the tax collected will exceed the tax that would be gained if the windfall tax was not enacted, even if some revenue was lost due to black market trading.

Also, if they moved in this way to attack gold, wouldn't that make the whole situation with the dollar worse abroad? People seeing the U.S. government targeting gold through confiscation or draconian taxation would be a red flag to USD holders abroad that the dollar supremacy is truly over. I mean right now, they ignore gold and denounce it as much as possible for a reason. If bernanke came out tomorrow saying gold was money, and the USD has been loosing value against it for 12 years now, what would that do to the USD value in the exchange market? I think by the time that they even considered doing moves like this, the dollar would already be on death row

The windfall tax would only be enacted as a result of the dollar already tanking . . . so the threat of the dollar's reputation being sullied is an empty one.

I'm also thinking about the time we will be living in when it would be best to sell gold. We will likely have some sort of new system where gold plays some role. It may be that the US redeems its dollar denominated debt in gold as EJ says.

Why would the US pay it's debt with gold, when it doesn't have to repay it's debt at all? Remember how Nixon closed the gold window. Just say "no". At the point that the dollar tanks, there's going to have to be a global reset anyway.

In this situation, to me it makes more sense for the US government to buy the gold from people at a fair price, because instead of being shunned by central banks, gold will be embraced.

A fair price? You mean like when FDR confiscated gold for $22 and ounce, then devalued the dollar to $35 an ounce.

And since the US will probably be at a point where their gold holdings are being diminished, they will likely want to hold onto as much of the gold as possible within the US. So they may ban gold exports, and do things which will promote gold imports,

I agree with that.

and increase their own central banks gold holdings by encouraging citizens to sell to them, and not foreigners.

Gold will not be allowed to leave the country . . . something that has occurred before.
So citizens selling to foreigners won't be a choice.

Here's what you can count on . . . the politicians will do whatever appeases the majority so they can get reelected.
Most people will not own gold, or own very little. Historically, "evil speculators", have been the scapegoats. A windfall tax on gold will be popular.

If there is a windfall tax on gold, what do you think that will do to gold sales in the US, especially of gold exportation is banned? Nobody will want gold, and the price will plummet. So the government has killed two birds with one stone: 1) More tax revenue, 2) Gold does not compete with whatever form of fiat they choose.

[verdo]

Re: EJ on gold tax

Why would the US pay it's debt with gold, when it doesn't have to repay it's debt at all? Remember how Nixon closed the gold window. Just say "no". At the point that the dollar tanks, there's going to have to be a global reset anyway.

If there is a windfall tax on gold, what do you think that will do to gold sales in the US, especially of gold exportation is banned? Nobody will want gold, and the price will plummet. So the government has killed two birds with one stone: 1) More tax revenue, 2) Gold does not compete with whatever form of fiat they choose.

why would the gold price plummet though? What does a windfall profits tax do to the confidence of foreign investors holding USD outside of the US? I'm just imagining myself as an outside investor atm. If the US dollar is dying at this point, and im trying to get rid of as much of it as possible, would Obama enacting a windfall tax make me want to start holding dollars again, or would it just make me sell dollars faster? A tax like this does nothing imo for reinforcing foreign investor confidence in the dollar (in some respects, it can be argued that it would add fuel to the fire), and since most dollars are held outside of the US, they definitely have to care quite a bit about what they choose to do here. If 70% of the worlds gold were held by US citizens, then I would say that what happens to gold in the US matters quite a bit, and a tax like this could tank the market. But you yourself said (and i agree) that most people in the US do not own gold. So why should foreign investors worry about the tiny few in the US who would be scared into selling, when they would only make a tiny blip in the market, and they are staring at an even bigger problem, which is the US choosing to default? If I can hold gold and other currencies or hard assets, how does a windfall profits tax really make me, as a foreign investor, look at the US and breath a sigh of relief? If they choose not to pay their debt, then they simply default. I would imagine that the chaos caused by the masses after the whole country defaulted would be much worse than the bitterness people would have if gold bugs got their way

What makes a little more sense to me is that the US redeems its foreign owned debt in gold (revaluing it to a price high enough to make that possible), because it saves the dollar, keeps them on top, and prevents full on revolts in the states that would come from a default. What does a windfall profits tax do? Doesn't increase foreign investor confidence in the country, and the passing of draconian taxation laws only makes foreigners more timid to even look at the US, let alone throw their investment cash in. So basically, the problem they are supposed to be fighting still exists, and all they get in return is a bit of profit from the very few people in the US who owns gold in the first place. I'm not saying a windfall cant happen, but it seems rather stupid to do it. I can see how a windfall profit tax would solve the sheeple revenge problem, but not how it would fix the dollar problem. No politician would get re-elected for allowing the U.S. to simply default. Re-opening the gold window however is a sign of action and innovative thinking that will keep the US from being totally side swiped in the new world monetary system

[NCR85]

Re: Jim Rickards nails it again

Is instating a 90% windfall tax on gold any more practicable than, say, outlawing hard drugs? It seems to me that it would just push gold trading into a black market.