Jim Rickards nails it again

[raja]

Re: Jim Rickards nails it again

Would you rather him say put 50% of your portfolio into gold?

To me it's a contradiction to say, "Invest in gold", then in the next breath predict that there is going to be a 90% windfall profits tax that would destroy that investment. It's like advising people to build a bomb shelter, but then pointing out that no one will survive because the world will be poisoned by fallout.

What it suggests is that Rickards knows a way to avoid the risk of a 90% windfall tax, otherwise why would he suggest buying gold. But he's not going to tell YOU what it is.

What's amazing is that all these interviewers don't ask him the obvious question, which suggests to me that they're all in on the game. To me, it has the flavor of a con . . . which is what I would expect from a man in his profession.

[verdo]

Re: Jim Rickards nails it again

What's amazing is that all these interviewers don't ask him the obvious question, which suggests to me that they're all in on the game.

haha, a little conspiratorial don't you think?

But in terms of this windfall tax thing though, I really have to turn again to what I said earlier

And in terms of what happened in 1933, it's important to remember that the confiscation option was one that actually helped solve the widespread, underlying problem (which I don't believe a windfall profits tax does at all). Since the U.S. used a gold standard at the time, they had no choice but to increase the gold supply (because the gold supply was essentially the money supply) to fight deflation. So the draconian answer actually worked to solve the underlying problem. Today though, the dollar is not backed by gold, so trying to get the gold out of Americans hands actually doesn't help solve the problem they'll be facing in any significant way

The whole point of the action FDR did wasn't to target a tiny sect of investors to make everyone feel better. Gold was money then, and anyone who had a bank account had access to gold. So this move wasn't anything like the windfall profits tax used on the oil speculators (because up to that point, no one had become rich off of gold unless they disobeyed the executive order and held on to their gold afterwards and sold it). They were facing serious deflation, and the only way to cure it was to increase the money supply. The executive order actually allowed US citizens to hold onto $100 worth of gold if im not mistaken (which today would be valued over 8k). I see how what FDR did, as draconian as it was, helped save the system. What I'm not convinced of here at all is how a windfall profits tax saves the US dollar from being rejected abroad and returns it to "number one" status in the IMS. I've asked this question several times, specifically why any foreign investor should dump their gold just because the U.S. decides to throw a windfall on it for their citizens (as if such a tax actually gets the U.S. out of the hole it dug for itself and magically returns value to the USD). If this windfall were being put in China and India, then maybe I would bat an eyelash, because their citizens are actually holding on to significant gold holdings. But U.S. citizens barely register in the market.

So until my question(s) are actually answered, I'm really still in the camp of not worrying about a windfall profits tax, and those questions are:

Why should I, as a non U.S. citizen (could be Chinese, Indonesian, Australian, Brazilian, etc), dump my gold (which is priced in US dollars) in the face of the U.S. defaulting on its dollar denominated debt obligations, just because the U.S. government implements a windfall profits tax on a population that holds almost no gold? What is it about the U.S. government implementing a windfall profits tax that makes me look at USD's as a foreigner and say, "Wow, how dumb was I to even think of dumping this paper?!? This windfall tax is even better than a gold standard, because now, the USD is a true powerhouse currency with real value, anchored by sound, non draconian monetary policy. I mean, forget the other currencies, and commodities I can hold instead, this windfall tax is the new gold standard. It's time to dump gold, pile back into USD's because now the coast is clear. Besides, once this tax goes into effect, the selling pressure of 1 - 2 % of people who own gold in the U.S. will tank the market, unlike paper USD's which couldn't possibly cause a further dip in its own value any larger than the kind I'm about to see in the gold market, due to this clear tsunami of potential selling pressure"

^ If that can be answered, then maybe I'll start to worry about how these government stooges will come after my assets

[big67]

Re: Jim Rickards nails it again

Just to clarify.

A windfall tax on gold: would this tax be applied when the gold is actually sold? what if you just do not sell it? or will it tax gold property?

and would not this tax destroy gold paper market?

thank you

[Raz]

Re: Jim Rickards nails it again

haha, a little conspiratorial don't you think? ...

The whole point of the action FDR did wasn't to target a tiny sect of investors to make everyone feel better. Gold was money then, and anyone who had a bank account had access to gold. So this move wasn't anything like the windfall profits tax used on the oil speculators (because up to that point, no one had become rich off of gold unless they disobeyed the executive order and held on to their gold afterwards and sold it). They were facing serious deflation, and the only way to cure it was to increase the money supply. The executive order actually allowed US citizens to hold onto $100 worth of gold if im not mistaken (which today would be valued over 8k). I see how what FDR did, as draconian as it was, helped save the system. ...

I think Roosevelt took up the government's gold (it was, after all, still actual coin people carried in their pockets) and revalued all of it, using the "windfall profit" to recapitalize the banks.

Interesting what J. P. Morgan told the Peco Commission twenty years earlier when asked about the banks "creating money".
Morgan replied, "Gold is money; everything else is credit."

I'm no goldbug, but before too many years the "paperbugs" are going to find out that no one's credit is unlimited - not even the United States - and that a Federal Reserve Note is only "credit".

[Polish_Silver]

Re: EJ on gold tax--congress vs fed

ej's 1st reference to a big gold tax was in 2006... but over years backed off.

not here but behind the paywall ej told us how come... his 'pals' at mtgs at the boston fed let on re an 'ideal' gold tax rate... he had a link on a fed paper on it... the sum of it is the tax on gold will never exceed the rate they think they can collect... & they think it's too high now... the incentive to cheat the tax too high. the optimal tax rate is the one that you can collect the most of. gov't wants the $$$. a 90% tax that sends the gold out of the country in car chassis ain't gonna do it. rickards is full of shit on this one... for $1K/hr.

Ej is talking to technocrats. But policy is actually determined by congress. To think public policy will be "rational" is very questionable. Those same people who want a "fair" tax on gold are the same ones who think the fed's balance sheet can be expanded infinitely, and don't think the country will ever link the currency to gold.

The policy on nuclear waste storage is driven by emotion, not reason. Likewise for excess profits tax.


Technocrats think the tax is "too high" now, but they have not convinced congress to lower it!

A big question is how much gold is in private hands vs the treasury hoard. If the private sector amount is small, there is less reason to tax it strongly.

It is interesting to discuss the situation of 1933 .

The sequence of events could have been:

1) Devalue dollar to $35/oz

2) Require gold to be exchanged for paper dollars.


Instead, sequence was reversed:

1) Require gold to be exchanged for paper dollars at $20.67

2) Devalue the dollar to $35/oz of gold .

The government wanted to grab the seigniorage, rather than leaving it to the citizens.

According to Wikipedia, the fat cats just moved the gold off shore. If that is correct, it was not a "tax on the rich".


The usual justification for the confiscation was that the government wanted to devalue the dollar. If people had been allowed to keep gold, it would have created a Gresham's law dynamic.

However, the Gresham's dynamic would have caused rising nominal prices, which was what the government wanted in the first place. Since debts were payable in paper dollars, the more Gresham, the better for debtors!

[raja]

Re: Jim Rickards nails it again

haha, a little conspiratorial don't you think?

Yes, a little . . . and justifiably so.

After all, when Rickards says, "Buy gold!" and then in the next breath says "There's going to be a 90% windafall tax," do you not think that shouts out for the interview to question Rickards about the contradiction?

So, either the interviewers are plain stupid for not asking the question -- which would argue against conspiracy -- or Rickards instructed the interviewer to not ask the question in advance. I believe the latter . . . .

The whole point of the action FDR did wasn't to target a tiny sect of investors to make everyone feel better.

Why did FDR confiscate gold? "The order was rationalized on the grounds that hard times had caused "hoarding" of gold, stalling economic growth and making the depression worse." (wiki)
In other words, the People wanted to save (hoard) money because of uncertain economic times, and they preferred gold to fiat because they didn't trust the government's money. FDR wanted people to use fiat, so he simply made it "painful" -- i.e., illegal -- to hold gold. By forcing them to use fiat, the People would not hoard it, because it's stupid to use a depreciating asset as a store of value.
FDR might have saved the system, but he threw savers and those on fixed incomes under the bus.

When the dollar tanks, and people turn to gold rather than fiat, the government will do the same thing, using a 90% windfall tax or something like it to make it "painful" to hold gold. So, the government may "save the system", but they will throw gold holders, savers, and those on fixed incomes under the bus.

What I'm not convinced of here at all is how a windfall profits tax saves the US dollar from being rejected abroad and returns it to "number one" status in the IMS.

Only rational, unselfish behavior on the part of politicians can save the dollar. Are you expecting that? I'm not.

I've asked this question several times, specifically why any foreign investor should dump their gold just because the U.S. decides to throw a windfall on it for their citizens (as if such a tax actually gets the U.S. out of the hole it dug for itself and magically returns value to the USD). If this windfall were being put in China and India, then maybe I would bat an eyelash, because their citizens are actually holding on to significant gold holdings. But U.S. citizens barely register in the market.

The global economy is linked, and all countries use fiat. Why would you expect any of them not to follow the US in attempting to push down gold?

So until my question(s) are actually answered, I'm really still in the camp of not worrying about a windfall profits tax

A windfall profits tax is not a certainty, but it is a possibility.
Just don't put all your eggs in one basket . . . .

A personal note: I am mostly retired, and I don't want to end up as a greeter in WalMart when I'm 80. So I am trying figure out how to save my ass(ets). I frequent iTulip because I can sometimes get my ideas challenged, with the result that my views may be refined and improved.
I would REALLY like it if there was no government suppression of gold in the future . . . but I think it's a possible scenario worth serious discussion.

[Polish_Silver]

Re: Jim Rickards nails it again

I think nations will act quite differently towards gold.

[verdo]

Re: Jim Rickards nails it again

Why did FDR confiscate gold? "The order was rationalized on the grounds that hard times had caused "hoarding" of gold, stalling economic growth and making the depression worse." (wiki)
In other words, the People wanted to save (hoard) money because of uncertain economic times, and they preferred gold to fiat because they didn't trust the government's money. FDR wanted people to use fiat, so he simply made it "painful" -- i.e., illegal -- to hold gold. By forcing them to use fiat, the People would not hoard it, because it's stupid to use a depreciating asset as a store of value.
FDR might have saved the system, but he threw savers and those on fixed incomes under the bus.

When the dollar tanks, and people turn to gold rather than fiat, the government will do the same thing, using a 90% windfall tax or something like it to make it "painful" to hold gold. So, the government may "save the system", but they will throw gold holders, savers, and those on fixed incomes under the bus.

I get that, but it wasn't like today where you only have a tiny percent of the population owning gold. If only a tiny few were pulling gold in the early 1930's, it wouldn't have been an issue. But in those times, anyone could exchange their dollars for gold at the bank, so theoretically, didn't just about everyone have quick access to gold? My point is that gold back then was like real estate today, in the sense that it was something that the masses had more or less, and they could get at it any moment they wanted to, because by law it was theirs to take. Skapegoats tend to be in the minority

Only rational, unselfish behavior on the part of politicians can save the dollar. Are you expecting that? I'm not.

Well if that's the case, why didn't they throw a windfall profits tax on gold during 1979 -1980 when it looked like the dollars days were numbered? It's not like gold had not been vilified that whole time, particularly when Nixon closed the gold window and made note of those evil speculators. Instead, they went with a rational solution that actually solved the problem, which was simply raising interest rates, which made the USD actually attractive again, and put themselves back on top. The Reagan/Volcker era was all about king dollar, and they made moves that made the dollar more attractive to the world. Why did they not throw a windfall on gold then? My reasoning behind it is that they simply did not have to, because another solution presented itself that not only solved the problem, but kept them in power. A windfall profits tax would have made people who stayed out of the gold bull run happy, but of all the solutions they could have used, a windfall tax on gold was one that was least likely (in the face of all other options) that would actually cure the dollar's sickness

Just as in the late 70's, I see this new dollar problem as one that has a very straightforward solution. It does not require a windfall profits tax because it doesn't solve the problem, which isn't the 1- 2% of americans holding on to their gold. The straightforward solution is to revalue gold to a price that allows the US government to repay its dollar denominated debt in gold. This allows them to not go into default, which would turn the whole country upside down and cause whoever was in power to loose his/her power. This also reassures investors world-wide that the U.S. is actually serious about solving the problem, and isn't just looking for skapegoats to distract people. I don't think international investors are dumb enough today to believe that the 1 -2% of Americans holding on to gold is why the US dollar is collapsing before their eyes. So my argument here is that if rational behavior on the part of politicians saved the dollar from dying the first time, that same behavior can do it a second time

The global economy is linked, and all countries use fiat. Why would you expect any of them not to follow the US in attempting to push down gold?

Are you arguing here that when all this happens, the whole world is going to issue a windfall profits tax on one asset, gold, to theoretically hold on to power that is slipping away? If so, I disagree with that for a few reasons.

First one is that there isn't even a global precedence for something like that happening, as far as I know. You're talking about every country here just going lock step with what the U.S. dictates, which would be a globally-enforced, windfall profits tax targetting a single asset, gold. If this were Bretton Woods, where the U.S. held all the cards then maybe I could see it. Today though, I don't see that happening because other countries (large ones too), have their own interests that don't require a windfall profits tax being used at all to solve the problem. You're right about the global economy being linked and that all countries use fiat, but not every country looks at gold through the same lenses that the U.S. does. China uses fiat too, but are they acting like the US is today by denouncing gold at every turn? Not only are they not doing that, but they are doing exactly the opposite.

If or when the dollar collapses, what would a windfall profits tax on gold do for the Chinese? Well it certainly wouldn't solve the inflation problem, just as the windfall profit tax on oil in 1980 did not solve the oil problem (the price ended up coming down due to slowed economic activity in industrial countries, energy conservation, and the whole bursting of the commodities bubble due to interests rates that exceeded inflation rates). It was the Chinese government who shepparded the people into buying and owning gold to begin with. Inflation is incredibly destabilizing for the Chinese government, and for them, in the face of a dollar collapse, would much rather develop a solution that actually saves their own currency and keeps their people from rioting. That solution is to embrace gold (which isn't a U-turn from their current treatment of gold. It's more like a natural progression), and have some sort of pseudo-gold standard. The yuan, unlike the dollar, does not have the reputation that would imply a flight to quality. So if a windfall profits tax on gold in China were implemented, it's not like the people would all of a sudden start hugging the yuan when they have dozens of other commodities to take shelter in. The Chinese like gold, the US does not. The only reason they don't use it more now is because the system is muddling through. But in the event of a collapse I believe the Chinese government will choose the path of least resistance (ie. the solution that reduces the likelihood of massive urban center rioting). They aren't doing everything they can to get more gold in the hands of every Chinese citizen, just so the government can vilify them for doing exactly what they wanted at some future date


So to answer your question, I would expect countries to follow what is in their own best interests, and not necessarily the interests of the U.S., especially if that country isn't a true ally of the U.S. itself. What you're arguing is that China, as an example...a country that has bought record amounts of gold year over year is going to be one of the ones to help the U.S. get out of the problem that they started by destroying the value of hard currency they worked years to accumulate, in the event that the U.S. failed to get its act together. Keeping in mind too that at this stage in the game, the U.S. would have already screwed the Chinese over by destroying the value of the trillions in dollar denominated assets that they hold as a reserve. So after screwing the Chinese over once, the Chinese are going to help the U.S. screw them over again by destroying the value of yet another important section of not only their balance sheet, but all of their own citizens who bought gold on their advice? I really don't see that happening, not only in the case of China, but to every country today that is trying to acquire gold hand over fist. Just as the whole world, in the face of an oil crisis, did not follow the U.S. line of enacting a windfall profit tax on oil in 1980, I don't see the whole world, in the face of a dollar crisis, enacting a windfall profit tax on gold.


I also don't believe that the affinity for a windfall profits tax is even as strong as you and a few others may believe it to be. The U.S. government during 2007 - 2008 once again faced pressure as they did in 1980 to impose a windfall profits tax on oil. I believe nine bills were presented to Congress in this 2007 - 2008 period when gas was skyrocketing. All failed. In case you're curious, those bills were the following: HR 1500, HR 2372, HR 5800, HR 6000, S.1238, S.2761, S.2782, S.2991, and S.3044. If you use govtrack.us, you can search for each bill and see what they were all about. Just make sure when you do the search, you add to the filter that you want to see bills passed during the 110th United States Congress, which will put you in the 2007 - 2008 period

A windfall profits tax is not a certainty, but it is a possibility.
Just don't put all your eggs in one basket . . . .

A personal note: I am mostly retired, and I don't want to end up as a greeter in WalMart when I'm 80. So I am trying figure out how to save my ass(ets). I frequent iTulip because I can sometimes get my ideas challenged, with the result that my views may be refined and improved.
I would REALLY like it if there was no government suppression of gold in the future . . . but I think it's a possible scenario worth serious discussion.

Well I certainly agree. I'm not a fortune teller, and I never like speaking in absolutes. So I wont say that a windfall profits tax can't happen. But it's not something that I feel is worth worry about. My belief is that if they did a windfall profits tax in the U.S., they may end up having to reverse that decision because I don't really see too many people forking over their gold for chicken feed. Actually, I would be curious on how itulipers would react in this situation, which is why I may make a poll on this. Something along the lines of, "If a windfall profits tax on gold were enacted in the face of a dollar crisis, would you A) Sell it and take that massive loss or B) Simply hold on to the gold and sell it only if you really needed the money at some future date. Personally, I would take B.

[Polish_Silver]

verdo on gold and dollar

Very interesting post, Verdo.

Skapegoats tend to be in the minority.

--that makes it politically easier to tax them.

But . .

Well if that's the case, why didn't they throw a windfall profits tax on gold during 1979 -1980 when it looked like the dollars days were numbered?

---Excellent point.

The straightforward solution is to revalue gold to a price that allows the US government to repay its dollar denominated debt in gold.

EJ has confirmed and denied this idea. Do you think it will be 1:1 revaluation, or 10:1 ?

The degree of devaluation is very large in the 1:1 case

But in the event of a collapse I believe the Chinese government will choose the path of least resistance (ie. the solution that reduces the likelihood of massive urban center rioting). They aren't doing everything they can to get more gold in the hands of every Chinese citizen, just so the government can vilify them for doing exactly what they wanted at some future date

How much gold are chinese citizens buying?

I agree with your reasoning. The windfall profits tax was not imposed on gold in 1980, or on oil in 2007. But the degree of panic was not so high in those years as it was in 1932 or 1972 (oil).

There was lots of other insanity in the 1970's, like price controls.

[shiny!]

Re: Jim Rickards nails it again

Well if that's the case, why didn't they throw a windfall profits tax on gold during 1979 -1980 when it looked like the dollars days were numbered?

Indeed an excellent point. I hope you're right.

Chinese government will choose the path of least resistance (ie. the solution that reduces the likelihood of massive urban center rioting). They aren't doing everything they can to get more gold in the hands of every Chinese citizen, just so the government can vilify them for doing exactly what they wanted at some future date

My first thought when I heard that the Chinese gov't was encouraging Chinese citizens to buy gold was that someday China will confiscate it all, paying for it with fiat money. Free gold for the government.

[aaron]

Re: EJ on gold tax

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?

Because the real owners of gold are the ones who pay to keep them in office. You are right that most people do not own gold. Most people do not own MBS, CDS, & Treasuries either.

If gold goes to 10K, then the FED and Treasury are no longer insolvent. This is the end, end game. Everything else is status quo with high inflation.

Apple stock has gone from $10 bucks to $500 bucks. Gold will have gone from $1500 hundred to what? $10K? Big deal. The market is tiny.

Nobody cares about gold. They will not demand gold speculators pay. They will demand the oil companies pay for the expensive gas we are forced to buy and the _______ that makes their iPads expensive. People will be happy with high gold prices. They will sell the remainder of their scrap gold for food.

Foreigners will be blamed for everything bad. It is as it has always been. And, in reality, it will look like foreigners are dumping our dollars and treasuries and blaming America for everything. It will be an easy sell.

[aaron]

Re: Jim Rickards nails it again

Indeed an excellent point. I hope you're right.

My first thought when I heard that the Chinese gov't was encouraging Chinese citizens to buy gold was that someday China will confiscate it all, paying for it with fiat money. Free gold for the government.

The Chinese government is not that powerful. Chinese people love gold. They do not "spend" it. It is a savings vehicle and protection against government.

A nation's wealth includes the citizens' wealth. If, for example, you need to import a lot of food to feed the masses, the people with the wealth (gold) will import food and sell it for a profit. Gold leaves, food comes in. The government can sit back and let things flow.

I find it interesting that the U.S. stores its gold with the military. It was also military soldiers that went into the WTC to grab the gold there after the event. While the government might not talk about gold at all, it sure seems to have a strong interest in it, including encouraging people to buy U.S. gold coins. The American Gold Eagle is one of the world's most popular coins, for example.
There were also stories about Iraqi and the U.S. seizing it (if it were useless, why put it into the news).

Iraq had 500 tons of gold in the past and have just a few tons now. Where did all that go?

Central banks everywhere were selling gold on the open market before up until 8 years ago. Where did all that gold go?

I have my doubts that the U.S. only has 8000 tons of gold, considering some important parts of the government (military) deem it to be important.

[raja]

Re: Jim Rickards nails it again

I get that, but it wasn't like today where you only have a tiny percent of the population owning gold. If only a tiny few were pulling gold in the early 1930's, it wouldn't have been an issue. . . . Skapegoats tend to be in the minority

When the dollar starts to tank, gold is going up. It will go up because of demand . . . at that time lots of people -- and more to the point, lots of dollars -- will be pouring into gold. Then it will be an issue. Gold owners will still be a minority, however, but a significant minority.

Well if that's the case, why didn't they throw a windfall profits tax on gold during 1979 -1980 when it looked like the dollars days were numbered?

Gold's rapid rise in 1979-1980 occurred over a period of 5 months. Volcker then started raising interest rates dramatically, and gold fell equally as rapidly. Confiscation or windfall tax wasn't needed; enemy gold was dealt with another way. However, that way cannot be used now. Can you imagine what would happen to US interest payments on its debt if rates rose to 20% -- that would really be the end.

The straightforward solution is to revalue gold to a price that allows the US government to repay its dollar denominated debt in gold. This allows them to not go into default, which would turn the whole country upside down and cause whoever was in power to loose his/her power.

There's not enough gold to pay the debt. Revaluing gold would be the same as devaluing the dollar -- would you like to see the value of the dollar drop 90% (or whatever it would drop to in devaluation)?

Are you arguing here that when all this happens, the whole world is going to issue a windfall profits tax on one asset, gold, to theoretically hold on to power that is slipping away?

Yes.

First one is that there isn't even a global precedence for something like that happening, as far as I know.

There's never been a global economy before. And, the world has never been on a fiat world reserve currency. It's a brave new world.

You're talking about every country here just going lock step with what the U.S. dictates, which would be a globally-enforced, windfall profits tax targetting a single asset, gold.

Countries would not be following the US dictate. They would be acting for the same reason the US is acting -- to preserve their power.

not every country looks at gold through the same lenses that the U.S. does. China uses fiat too, but are they acting like the US is today by denouncing gold at every turn? Not only are they not doing that, but they are doing exactly the opposite.

Governments want to have gold for international transactions; they just don't want the citizens to have gold. The Chinese government is the same. It considers the People's gold to be the government's gold, and will take it just like FDR did.

If or when the dollar collapses, what would a windfall profits tax on gold do for the Chinese?

Keep the citizens using fiat.
It doesn't solve inflation . . . governments like inflation -- it's free money for them because they get to tax imaginary inflation profits.

So if a windfall profits tax on gold in China were implemented, it's not like the people would all of a sudden start hugging the yuan when they have dozens of other commodities to take shelter in.

Commodities are an unworkable store of value for the average citizen.

They aren't doing everything they can to get more gold in the hands of every Chinese citizen, just so the government can vilify them for doing exactly what they wanted at some future date

Why not? When the citizens turn the gold over to the government, they will be serving the glorious Motherland.

The U.S. government during 2007 - 2008 once again faced pressure as they did in 1980 to impose a windfall profits tax on oil. I believe nine bills were presented to Congress in this 2007 - 2008 period when gas was skyrocketing. All failed.

Oil is different. It's not a competitor currency to government fiat.
But it's the same in that the government is scapegoating there, too.

Something along the lines of, "If a windfall profits tax on gold were enacted in the face of a dollar crisis, would you A) Sell it and take that massive loss or B) Simply hold on to the gold and sell it only if you really needed the money at some future date. Personally, I would take B.

Well, that's part of the gamble, isn't it? Hold the gold long enough and someday the government will repeal the tax. But keep in mind that with FDR's ban on gold ownership, it took about 30 years to repeal the law.
By selling anytime before repeal, it's a massive loss with either choice A or B.

[raja]

Re: EJ on gold tax

Because the real owners of gold are the ones who pay to keep them in office. You are right that most people do not own gold. Most people do not own MBS, CDS, & Treasuries either.

That is changing, and will change dramatically in the future.
In 1980, I knew nothing about the economy, had about $15,000 in savings, and I bought gold. I did it because people were talking about it, and it seemed like a good idea.
It will be like stock buying in the 1920s . . . .

The big gold owners of today will be tipped off in advance about any windfall tax by their politician fluffers, so they will not be hurt.

If gold goes to 10K, then the FED and Treasury are no longer insolvent. This is the end, end game. Everything else is status quo with high inflation.

If gold goes to 10K, the Fed and Treasury along with the politicians may no longer have jobs, because the dollar will be trashed and they will be judged guilty for destroying the economy.

Nobody cares about gold. They will not demand gold speculators pay.

FDR cared about gold. Volcker sees gold as "the enemy". Do you think it will be different this time?

Foreigners will be blamed for everything bad. It is as it has always been. And, in reality, it will look like foreigners are dumping our dollars and treasuries and blaming America for everything. It will be an easy sell.

Most people understand the US government is spending trillions of dollars and that the deficit is growing because it is spending more than it takes in. They also understand that inflation is caused by government "printing" money to pay for its out-of-control spending. It will be a hard sell to blame inflation on the Chinese.

[raja]

Re: EJ on gold tax

To me, the chances of a windfall profits tax being put in is like 40%, as opposed to the 60% chance of it not coming in. My thought on it is that if government wanted to take advantage of the price spike in gold, they would set a reasonable tax that would get them revenue, while at the same time not forcing gold into a black market. I was going to make a poll later to ask people what their response would be if a windfall profits tax were implemented. For myself, I couldn't imagine allowing the government to sheer me like that, so I probably would hold on to it unless I desperately needed the money. How about you?

I agree, money is a motivator for the government, but not the main motivator this case.

The windfall tax would serves two purposes: 1) Bring in money, 2) Crush gold as a competing currency.
The latter is the main reason for the tax . . . because the government can always print as much money as they want