Twenty years ago in 1989 the Austrian State Mint passed from the Treasury into the ownership of the central bank. The mint was given the freedom to produce and sell products in accordance with the demands of the modern numismatic and investment markets. One of the very first innovations introduced by the new CEO, Paul Berger, was the production of a gold bullion coin for investment purposes: the Vienna Philharmonic.

On 16th October this year a limited quantity of 6,027 Vienna Philharmonic coins, each weighing 20 ounces of fine gold, will go on sale in Europe, America and Japan.

20 ounces to commemorate 20 years!

Why the odd number? The mint decided to offer 2009 coins (the date of the 20th anniversary) in its three major markets: in Europe, in America and in Japan. Investors still remember the 15 giant coins (each of 1,000 ounces) that celebrated the fifteenth anniversary in 2004, and that entered the Guinness Book of Records as the then largest gold coin in the world. All 15 giant coins were snapped up within days, and the excitement surrounding this special issue of a 20 ounce coin promises a similar market reaction.

The new 20 ounce coin has a diameter of 74 mm and a thickness of 8.3 mm and is housed in a prestigious wooden and red velvet case. Pre-orders for this unique anniversary gold coin have already started pouring into the mint in Vienna. It promises to be a major success as indeed the past 20 years of the Austrian bullion programme have been.

The Vienna Philharmonic Story

The decision in 1989 to issue a gold bullion coin in the two weights of 1 ounce and ¼ ounce was greeted with indulgent smiles. Austria, a small central European country since the destruction of her empire in 1918 and without any gold mining industry to support, was entering the bullion market, long dominated by the Krugerrand and that time divided between the USA, Canada and Western Australia.

Berger and his team decided that music was the ideal theme for their new coin. Austria was internationally renowned for its music, but they decided against the portrayal of one of the many great composers like Mozart, Haydn or Strauss. That would make the coin appear like a commemorative edition for collectors. Instead they chose a living and world-famous musical institution: the Vienna Philharmonic Orchestra. To their delight the members of the orchestra enthusiastically endorse this choice, freely grant the use of their name. The engraver, Thomas Pesendorfer, designed a collection of instruments to represent the orchestra itself and for the other side of the coin he took the great pipe organ of the Golden Hall in Vienna where the orchestra plays at home. It is seen on television around the world every year on 1st January during the New Year’s Day Concert.

The new Austrian coin was launched in Vienna on 10th October and was an immediate success. The demand in the home market was nothing less than ferocious. In two and a half months 419,000 ounces were sold, achieving with one blow an 18% world market share for the entire year 1989! It rapidly established itself as a serious participant in the international gold market. In 1992 and again in 1995, 1996 and 2000 the Vienna Philharmonic was ranked by the World Gold Council as the top selling gold bullion coin worldwide. In 2008 the Vienna Philharmonic continued to rank No. 1 in Europe and in Japan, and with a year’s market share of 25% it came in 3rd worldwide narrowly missing 2nd place. The “indulgent smiles” have long since disappeared.

A 1/10 ounce in 1991 and a ½ ounce coin in 1994 completed the traditional family of four sizes. In 2008 a silver 1 ounce Vienna Philharmonic was added to the investment range with resounding success.

Looking back on 20 years of continual growth and success, the Vienna Philharmonic has established itself firmly as one of the four great gold bullion coins offered on the international market of today. This one-time issue of a limited number of 20 ounce gold coins is but a fitting tribute to a 20 year long success story that shows no signs of letting up in the near future.

Related posts:

1. Last of the Austrian Mint’s “Vienna Jugendstil” Series
2. Austrian Mint Issues 5 Euro Silver Coin Honoring Great Conductor
3. Gold touches 27-year high of $746.30 an ounce; silver surges nearly 3%

A commemorative gold coin has been launched by the United Arab Emirates Central Bank to mark this year’s Formula 1 Etihad Airways Abu Dhabi Grand Prix.
The coin is 65mm in diameter and weighs 313g. It bears images of the late Zayed bin Sultan Al Nahyan and president Khalifa bin Zayed Al Nahyan on the obverse.
The news feeds on this site are independently provided by Adfero Limited © and do not represent the views or opinions of the World Gold Council.

Read more….

Mark O’Byrne submits:

Gold
Gold closed trading at $1,039.80/oz In euro and GBP terms gold is trading at €699/oz and £635/oz. Support for Gold is currently seen at $1,030/oz and resistance at $1,053/oz.

Gold fell yesterday as oil prices and equities came under pressure and the dollar rose. The dollar has fallen marginally today after the People’s Bank of China said that while the dollar may remain dominant, the share of the euro and the yen should increase in its foreign exchange reserves. Diversification of China’s nearly $2.3 trillion stockpile of foreign exchange reserves is a long-standing policy that aims to avoid short-term volatility, a senior central banker said. Officials in the People’s Bank of China recently stated that they were increasing their gold reserves which currently constitute just some 2% of their entire foreign exchange reserves.

Read more »

By Jim Willie CB, Golden Jackass

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The US Federal Reserve continues to talk about their urgent Exit Strategy. My theory is they will be doing mostly talking and almost no doing. The nations that talk the least will be hiking interest rates the most, like Australia. The United States might be dead last in hiking interest rates. The credibility of the USFed will in the process continue to be harmed much more than already, which is rock bottom. The Dollar Carry Trade and the lost Petro-Dollar advantage will work to destroy the USDollar as the global reserve currency. The USFed will have to resort to unusual means to keep the world ‘interested’ and ‘involved’ in the USDollar at all. When they lose interest and involvement, the US$ will descend into the Third World. The USDollar will then be forced to find its true value, based on its own merit.

Outsized federal deficits, widespread insolvency, absent industry, refusal to reform the financial sector, bad bank loans festering on balance sheets, Goldman Sachs still in syndicate control of the USGovt finance ministry, the costly drain of endless wars, these are the new fundamentals for the USDollar. It is certain to descend by 30% to 50% in the coming few years. The word on the street has it that with the new IMF role in establishment of a currency basket, the USDollar is isolated sufficiently for a massive devaluation. The maestros have a tough challenge though, as they must halt the move of gold to $2000 and must avert an outright USDollar collapse.

THE SOPHIE CHOICES

In the last few years, three Sophie Choices have been faced. The first was in 2005 and 2006 to cut the credit supply to the housing & mortgage finance bubble, or to support the USEconomy that was dependent on the bubble. They could not do both.They chose continuity of the bubbles and support of growth, even though sick growth. The second was in 2007 and 2008 to cut interest rates and support the housing recovery if possible, or to support the USDollar by keeping rates high. They could not do both. They chose the fatal 0% interest rate path, even though it is a colossal trap. Besides, Wall Street loves free money. They thus migrate from bond fraud to carry trades on home soil with free money. The third was in 2009, to support the USTreasury Bond with federal fiscal restraint and a withdrawn hand from monetization of debt, or to support the USDollar with an official rate hike and control of monetary growth. Remember the promise that the official 0% rate would be a temporary feature? They could not do both. They chose unspeakable hidden monetization of debt and USTBond survival, with an unpublicized plan to let the USDollar fall significantly.

My forecast was for continued funding until the system broke for choice #1 (true). My forecast was for a move to 0% rates since it aids the bank exploitation for choice #2 (true). My forecast was for continued free money, hefty monetization, and amplified credit derivative control for choice #3 (true). It is actually easy to forecast some USFed decisions, since they do whatever is best for bubbles and Wall Street, the concerns and priorities of the nation secondary. We see that in spades with defiance on USFed challenges for disclosure and audits, conducted by the unwashed plebeians.

The situation has grown complicated. The third choice continues to resurface. The underlying threat behind a hike in interest rates is the risk of credit derivative explosion. Something like $500 to $600 trillion in Interest Rate Swaps has kept the out-of-whack cost of money ultra-low for almost two decades. By means of Interest Rate Swaps, the JPMorgan wizards can use short-term dictated Fed Funds rates to control the long-term USTreasury Bond and thus mortgage rates. So a USFed official rate hike would torpedo the IRSwap complex and cause serious collateral damage like the death of JPMorgan itself. Oops! That is a factor the officialdom wishes not even to discuss. Also, much easier for the unwashed to comprehend, an official rate hike would force mortgage rates to rise.

The housing market is nowhere prepared for a recovery or even a true stability for another two years. The hidden housing inventory maintained by banks, burdened by their foreclosure portfolios, assures constant overhang of supply to pressure prices down. Banks have been compelled to make their own Sophie Choice. They can either flood the market with foreclosed homes, thus pushing down home prices by another 30%, or conceal their hidden inventory like just another off balance sheet game, thus perpetuating the housing bear market. My forecast has been for perpetuation of the hidden inventory, since it is based upon government help and false hope. The bankers expect some meaningful home loan modification, but will not receive it. They expect some stability for a housing market generally based upon vaporous historical precedent.

LILLIPUTIANS JOIN ON DOLLAR CARRY TRADE

A new factor expands the powerful forces to keep the USFed at bay, and continue in perpetuity its highly destructive 0% official rate. This story has many sides. Obviously, financial firms worldwide, even some enlightened Wall Street firms who can manage to keep their game offshore, have joined the Dollar Carry Trade enterprise. They borrow USDollars at 0% and expect the US$ exchange rate to continue its trend down. Their object investment is a strong liquid anti-US$ asset like crude oil, gold, or German long-term bonds. The requirement to profit is usage of a non-US$ asset as the investment. The story of carry trades was told in a September 23rd article entitled “New Deadly Dollar Carry Trade” by the Jackass (CLICK HERE). Well, it seems individual central banks have decided that this carry trade is too easy and profitable to pass up.They attack Gulliver (US) himself, much like the Lilliputians. The history of central participation is ripe, as the Bank of Japan and its armada of Tokyo financial firms have a long track record of borrowing their own Yen funds at 0% and investing in US stocks and USTBonds. It was profitable in the hundreds of billion$, every year.

Enter Germany, Austria, Spain, Belgium, and Canada! There is Latin America too!These nations are all issuing debt in US$ denomination and converting to their local currencies. That is more Dollar Carry Trade, folks! It might be in disguise somewhat, but not to those who understand the entire carry trade phenomenon, the gravy train, the trap it creates. Many financial analysts were totally unaware of the Yen Carry Trade that persisted for over a decade. It hides like an acidic river under the fiat financial sector edifices. The broadening of the government practice to issue US$-based bonds will make very difficult any reversal of the 0% policy. In fact, my forecast is that if and when the USFed raises rates, the USDollar will cease to exist and a USTreasury Bond default will occur.  The backside to foreign issuance of ‘THEIR DEBT’ in US$ denomination is soon to show itself. Some foreign nations likeJapan have announced they will finance ‘US DEBT’ in their local denomination, the Yen currency in the Japanese case. The US candle burns on both ends.

Germany and Austria led governments and companies in Europe to sell $21.7 billion of bonds in US$-based bonds in September to take advantage of the reduced cost of exchanging the proceeds back into Euros. The list included Spain and Belgium in the attraction of a wider range of investors. For Europeans the cost of funds remains advantageous due to the cross-currency basis. Landwirtschaftliche Rentenbank (German agriculture) issued $2.25 billion in US$-based bonds, and another US$ issuance was made by Export Development Canada. The cost of exchanging USDollar floating rate payments into the single European currency as measured by the three-year Euro basis swap is in the neighborhood of 25 basis points below the Euro Interbank Offered Rate, known as Euribor. The important point is that debt is cheaper to issue in US$ terms, even after conversion to the Euro in swaps.

William Pesek penned an article with a catchy title “Hedge Funds ATM Moves FromTokyo to Washington” that further publicizes the new Dollar Carry Trade. A more complete analysis of the Dollar Carry Trade, combined with the commercial threat from lost Petro-Dollar advantages, are covered in the October Gold Report for the Hat Trick Letter. Pesek describes a central point shared by my analysis, the handoff from the Yen Carry Trade. The USDollar will be kept down for both valid fundamental reasons and speculative trade forces. He warns about a trade war further adding burden to the USDollar. He concluded, “The dollar carry trade says nothing good about confidence in the US economy. It is also a reminder that the side effects of this crisis may be setting us up for a bigger one.” All his points are precise, powerful, and poignant. He is a fine analyst. See the Bloomberg article (CLICK HERE).

Enrico Orlandini hails from Peru. He (actual name Eric Bartoli) apparently enjoys the opportunity to hide, especially from investors like a couple Hat Trick Letter subscribers whose money he absconded with. It is not for me to say he strives to become a fraud king like Wall Street elite. But he does issue some occasional great quotes, firm analysis, and newsworthy items. He recently provided this gem from his backyard.Latin American governments are issuing US$-based debt and converting to local currency bonds. Apparently, the nations in South America intend to hold the converted bonds as investments. They are running an active carry trade, whereas the Europeans passed off the risk to the credit derivative market. Orlandini wrote, “Many Latin countries are issuing US dollar denominated bonds and converting those bonds into local currencies, betting the dollar will devalue considerably. Many Latin nations did the opposite back in the late 1980s and early 1990s when the Peruvian, Bolivian, and Ecuadorian currencies collapsed when they made fortunes. I view the new Latin carry trade as very dangerous, since most Latin economies are on the decline and the Latin propensity to print fiat currency is legend. Furthermore success is dependent on finding a good yielding investment, and those are hard to come by right now. Carry trade in other parts of the world simply convert dollar into local currencies, or local AAA bonds, and let nature take its course. The object of the bond emissions in Latin America is for investment, and will not be as easy as everyone thinks. So far Peru, Venezuela, and Brazil are going down this path.”

IMPOSSIBLE EXIT STRATEGY

If the USFed decides in any newfound awakened wisdom to halt the free money parade, it would remove the channel from US speculators operating on domestic soil, but it would cause possible banking system failures in the OTHER NATIONS participating in the Dollar Carry Trade. A policy reversal with rate hike would torpedo the under-structure of Austria, Spain, and Belgium, with serious damage also done to Germany. One can observe more political and systemic pressure for the USFed to merely talk about an Exit Strategy like babbling fools, as spokesman for the failed global central bank franchise system. They cannot hike from 0% and make an exit. In fact, they have painted themselves in the corner, as many analysts have described for two years, with my addition that a Trap Door is being cut by foreign creditors, made worse by the wooden rot on the floorboards from chronic inflation. The Untied States will fall perilously through the trap door into the Third World. In my description of Third World characteristics last week, some important items were omitted. Add puppet leaders, rigged elections, compromised Congress, subservient high court, and the breakdown of law.

The current relentless banking credit crisis will have a second phase. It is kicking into gear right now. Its basis is both the US domestic portfolio losses from mortgages and commercial loans, and the global revolt against the USDollar. The property decline is entering a second arena in the commercials, whose values have dropped by 35% to 40% from peak. Refinance is impossible for commercial mortgages, since Loan/Value ratios went too high with valuation declines. The gradual phase out of the US$ for global crude oil sales assures the next chamber of the banking credit crisis gone global. The financial trade war will soon include far more than just China pitted against the Untied States. It will go global and isolate the pariah. The USFed will be hamstrung unable to hike interest rates. The US has refused to bring any remedy or restructure or prosecution, next be isolated and punished. Those who believe the US banking sector has found firm stable footing again are morons, and are deserving of a strong Darwinist sweep to remove them from the picture financially. Natural selection is rough!

The new Dollar Carry Trade has invited comparisons to Japan. In almost no respect does the Untied States have an advantage over Japan in this dangerous carry trade game. This new version of carry trade will be devastating to the Untied States, while it only subjected Japan to a state of stagnation for over a decade. Given the extreme credit dependence, and global reserve currency soon to be lost, the Untied States is highly vulnerable. That vulnerable state is amplified by the lack of awareness, even arrogance, of an insolvent nation, one that embraces fraud and defies creditors by aggravated financial assault known as monetized debt. The emergence of China as an Asian industrial fledgling power enabled Japan to exit its constipation phase, to follow its lead. The United States will have to face a terminal enema administered by creditor doctors, with complete bowel eruptions and perhaps disembowlment. The patient will die a horrible death. Favorable comparisons to Japan might constitute the most absurd of analytic arguments, with almost no factual basis. The only advantage of the US over Japan is the height of its people. But the Americans manage often to add 100 extra pounds to the taller frames, and sport new problems in obesity and diabetes.

THE ‘BEIJING PUT’ AT WORK IN GOLD

China has begun to show its patterned behavior. They buy gold precisely at weak technical points, thus maximizing accumulation at optimal price. They buy gradually, thus permitting the market to bring more supply at prices as they ratchet higher. The Chinese Govt has become entrenched in an accumulation program of gold, expected to become a part of whatever new global reserve currency evolves.But as they buy in quantity, the price goes up in direct response, frustrating their intention to collect as much as possible, before any collapse of the USDollar. The Chinese are reportedly amplifying their purchases at points of weakness, dictated by technical analysis. In effect, the Chinese could be using a reverse strategy from technical analysis methods, dictated by chart patterns, by pressuring the bid harder with more purchases when the technical indicators say they should be selling. They would thus position themselves opposite to the USGovt, which routinely smacks gold down prior to USTreasury auctions, or when the USDollar threatens to break below support. They would also position themselves opposite to professional traders, who tend to follow the technicals and USGovt official control banter. The Chinese will continue to obstruct the gold interventions, as the US-UK fascist tagteam loses control.

Another Chinese market factor will work to put more money in gold investors hands. Their A-shares for mining firms have jumped 150% to 200% in recent months. So investors in certain stocks can redeem some profits to accumulate the real thing, gold bars. Qin Weihuan is a researcher at China Gold Assn. He told China Daily,“In the past, gold prices dropped back after it hit over $1000 per ounce. But I believe this time the price has really breached the $1000 ceiling and will stay at these levels for some time.” Qin believe gold has entered a new ‘Era’ as inflation fears and uncertainly over the world financial system will prompt investors to look for safe havens in bullion. China will soon take full control of the gold market, and render the global monetary crisis centered upon the USDollar ballistic.

THE COMPLETED PICTURE OF E.T.F. GOLD FRAUD

Fraudulent games have expanded in the gold market. In the last few months, much publicity has come (except to mainstream media) of how the COMEX can legally use Street Tracks GLD shares from their Exchange Traded Fund to satisfy short futures contracts in need of a buyer. Instead of rolling over the short contract, they ‘close it out’ by placing a GLD share in offset. So the corrupt pyramid of short gold futures contracts has been co-mingled with GLD shares from the ETFund. Challenges will soon come. The COMEX players and controllers do not locate and purchase gold bullion in order to satisfy the short contracts. They essentially infect the GLD shares instead. So would the real gold depository of the Street Tracks GLD fund please stand up???

In the last couple weeks, the London CME officials have had a terrible time avoiding a default. Some large players want the gold from their long futures contracts, in gold bullion from physical delivery. The Bank of England and one other unidentified central bank from the European Union have tried desperately to supply the delivery demand. In the process, they have provided and handed over more than a little ancient substandard gold bars. The London CME officials even offered a 25% dividend bonus if the gold contracts were satisfied in cash, rather than gold delivery in physical form. This entire incident centered on very high volume for gold also, not a trifling amount. Sounds like gold is worth $1300 per ounce to me!

This story grows worse, and again involves the Street Tracks GLD fund. Likely accounting fraud accompanies other efforts to confiscate their GLD backing of deposits held in gold.

The counter-parties in deep trouble are JPMorgan and Deutsche Bank, each heavily short gold and unable to produce it in the face of delivery demands. Central banks are probably aiding the plunder of private gold accounts. All integrity is at risk of being lost. Simultaneous irregularities have taken place during the LBMA ‘gold delivery incidents’ and official Gold Bar Lists maintained by the Street Tracks GLD exchange traded fund. Evidence points to the GLD gold bullion inventory taken to satisfy the London demand for gold delivery. Independent audits have begun in earnest by large private interests (mostly Arabs). Word came today the JPMorgan is accepting gold bullion in order to establish margin foundation for commodity futures trading accounts. They are indeed desperate, since a margin failure for clients would produce to JPM the gold.

So one might conclude that GLD shares are corrupted by virtue of satisfying the COMEX gold futures short contracts. So one might conclude that GLD deposits of gold as backing for the fund are corrupted by virtue of selling their gold bullion to the Gold Cartel in satisfaction of futures contract delivery demands. That seems to undermine the entire GLD fund, and to expose it as an Exchange Traded FRAUD.Fraud in physical gold deposit management is not the sole province of the Untied States and the Untied Kingdom. An Asian Depository has found ‘Good Delivery’ gold bricks to be gutted and filled with tungsten, another heavy metal. See Rob Kirby’s article entitled “Central Banking: A Blight on Humanity” (CLICK HERE) and also “Blight on Humanity Addendum” (CLICK HERE). What great financial forensic analysis work!

GET OUT OF THE ‘GLD’ AND ‘SLV’ FUNDS, WHICH ARE IN ALL LIKELIHOOD DEEP FRAUDS THAT HOLD SHRINKING BULLION IN DEPOSITS. In time the GLD might be exposed as having little or no gold, and certainty inadequate amounts to back their fund for legitimacy. In time, my forecast is that the GLD fund will eventually sell at a 25% discount to the gold spot price, due to suspicion of fraud in its gold deposit management. Later, my forecast is that the GLD fund will eventually sell at a 50% discount when the investor lawsuits pile up and formal challenges are lodged. The weapon to pry open the vaults will be discovery and ordered independent audits with teeth. The final chapter of the GLD in my view will be its liquidation, with extreme discounts paid to angry investors. Their laziness and stupidity will be worthy of a footnote in history. The managers of the GLD fund and that for the SLV silver fund, are both main members in the Gold Cartel. JPMorgan is custodian to the GLD fund. Barclays manages the SLV fund. Those who believe the tactics and activity behind the curtains are different are indescribably naïve. They too deserve a meat cleaver outing with Sir Darwin on personal wealth.

THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.

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The Daily Reckoning

The central banks of the world are changing tune. Since 1989, the banks have been net sellers of gold reserves, meaning that as a group they have sold more than they have taken in. This is an important point because the large gold sales of central banks tend toward lowering the spot price of gold. The news emerging from a September 2009 GMFS report is that central banks as a whole are once again becoming net buyers, and their purchases have the potential to put upward pressure on the price of gold in the public markets.

According to GFMS, “this represents a remarkable change of direction for a market that has been used to absorbing substantial volumes of gold sold by central banks over the last decade.”

Central bank gold sales may have been initially enlisted in an effort to support the dollar as the world’s reserve currency, especially since 1971 when the US de-linked the dollar from gold. The changing trend may be related to recent renewed interest in the SDR, which has been getting a lot of attention in media as a potential replacement reserve currency. Or, it could reflect an anticipation of a continued increase in the value of gold over time.

Either way, this is an important trend to watch. Central banks are significant players in the gold market and can affect the value of your personal gold holdings.

The full story is available from Jesse’s Cafe Americain which has more details on the official central bank purchases and several insightful charts.

Gold May Have More Price Support now Than at any Time Since 1989 originally appeared in the Daily Reckoning. The Daily Reckoning, a FREE daily e-letter, offers a “uniquely refreshing” perspective on the global economy, investing, and today’s markets.

More articles from The Daily Reckoning….

October 22, 2009

The U.S. Treasury and the Federal Reserve unveiled a set of curbs and rules for executive compensation at U.S. banks that mark a watershed moment for government intervention in the private sector. 

The Fed is proposing that it more aggressively regulate compensation practices at U.S. American banks under its control. The central bank "is working to ensure that compensation packages appropriately tie rewards to longer-term performance and do not create undue risk for the firm or the financial system," Fed Chairman Ben Bernanke said Thursday. 

The policies would become part of the supervisory process, the Fed said, noting large, complex organizations would face special "horizontal" reviews that compare one bank's pay practices with those of its peers.

Read more….

The Daily Reckoning

“Who goes borrowing, goes sorrowing.”

– Ben Franklin

Today’s reckoning is going to be short. We’re on the road again…this time to Ireland where our Family office is headquartered.

The quote above comes from one of America’s founding fathers. But it was recalled to us neither by America’s president, nor America’s secretary of the Treasury, nor by America’s top banker. Instead, the Telegraph in London reported it from the mouth of Cheng Siwei, a “top member of the Communist hierarchy.”

The Telegraph reports:

“Cheng Siwei, former vice-chairman of the Standing Committee…said Beijing was dismayed by the Fed’s recourse to “credit easing”.

“We hope there will be a change in monetary policy as soon as they have positive growth again,” he said at the Ambrosetti Workshop, a policy gathering on Lake Como.

“If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies,” he said.

China’s reserves are more than – $2 trillion, the world’s largest.

“Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets,” he added.

The Chinese now have the wind at their backs. Having done the stupidest things a nation can do – for a period of about half a century – the Chinese are getting smart. They’re discovering the wisdom Americans have forgotten.

“A penny saved is a penny earned,” is another of Franklin’s quips. In China it is practically the national motto. The Chinese save 25% to 40% of their income.

And now, with their $2 trillion in national savings, they’re going on a buying spree. But unlike Americans in the Bubble Epoque, the Chinese aren’t buying cheap consumer goods. They’re buying real assets…raw materials…and key supplies of essential resources, such as rare metals.

Ultimately, gold is money…it’s a way to store wealth over the long term.

Just ask Terry Herbert. The man spent his time with a metal detector, looking for treasure in England’s green and golden fields. He’d been looking for years, but when he finally found something important it “brought tears to my eyes,” he says.

What Mr. Herbert found was perhaps the greatest discovery of buried treasure in English history – 1,500 different artifacts of gold and silver…dagger hilts, crosses, helmet cheek pieces and other items of war booty from the Anglo-Saxon period, about 1,400 years ago.

Had Mr. Herbert stumbled upon some IOUs from a Saxon chieftain, it would have been a remarkable discovery. Its historical value might have been inestimable. But what he found weighed in at 11 pounds of gold. In addition to the value to museums and historians, it has monetary value. Even if you melted it down, erasing all trace of its history and provenance, it would still be worth about $160,000 at today’s price – probably about as much as it was when the Saxons stole it.

Gold’s “price has been remarkably similar for centuries at a time,” wrote Roy W. Jastram in his 1977 book, The Golden Constant. “Its purchasing power in the middle of the twentieth century was very nearly the same as in the midst of the seventeenth century.”

Gold outlives paper money, empires, governments…all of us and all our institutions.

The Chinese have metal detectors too. And they know there’s not much real value behind the dollar.

“The dollar is finished,” says historian Niall Ferguson. The Chinese are dumping it, he says.

Ferguson speaks for the popular intelligentsia. His ideas reflect those of fund managers, hedge fund operators, bankers, politicians and speculators. They’re all convinced that the dollar is doomed.

The Financial Times elaborates:

“The financial crisis vividly taught investors the importance of tail risk, a massive one-off event that can crush the value of portfolios. As the dust settles, fear of another ‘tail’ to sting portfolios is uppermost in the minds of many investors and money managers.”

Oh, Mr. Market…where’s thy sting? It’s inflation, they believe.

It’s the risk “that the huge liquidity injections being made by central banks could spark a surge in either inflation and/or long-term interest rates beyond 2012,” continues the FT.

“Inflation is the single biggest topic for discussion among our clients,” says a private banker.

What’s remarkable about inflation is that there is so little of it. It makes us think this story may have a twist.

Until tomorrow,

Bill Bonner
The Daily Reckoning

The Golden Road Out of Financial Crisis originally appeared in the Daily Reckoning. The Daily Reckoning, a FREE daily e-letter, offers a “uniquely refreshing” perspective on the global economy, investing, and today’s markets.

More articles from The Daily Reckoning….

The Daily Reckoning

The finance ministers of the Eurozone met yesterday and they’ve tried to stem the euro’s (EUR) rise… But they’ll need more than words to get the job done! And so we begin a new day…

Front and center this morning, the currencies – which had given background overnight to the dollar – are back in rally mode, and are taking liberties with the dollar once more. For most of the night, that was not the case, though. The dollar had rallied back and sent the euro, for instance, to the 1.48 handle, after the single unit spent yesterday at 1.49 and change… There seemed to be a move to the dollar, but that didn’t last long, and the currencies are once again rallying versus the dollar this morning, and the euro has pushed to 1.4970 as I write.

Daily noise, eh? Yes, you have to wade through it most days, and keep your eyes fixed on the horizon…

OK, I mentioned above that the finance ministers of the Eurozone met yesterday, and tried to stem the dollar’s decline by backing the US administration’s stated preference for a strong dollar… Of course we all know that the US administration’s stated preference for a strong dollar is a bunch of horse dookie! So… What was it that the Eurozone FMs were backing? A false statement by the US? Now, that’s something to hang your hat on, eh? The dolts just continue to mount daily don’t they?

But, you can’t be too hard on the beaver (Eurozone FMs) for they have to sound like they don’t want their euro to get too strong, for if they really said what they wanted to say, the euro would be back to 1.60 with a bullet in a heartbeat! So… In the end, I don’t think currency traders were swayed by the Eurozone FMs, at least not for too long!

Yesterday, I talked about Canada and the Bank of Canada (BOC) and how I thought that the BOC would remove their statement about interest rates remaining on hold until the second half of 2010… I had a few readers question me on this, saying that Canada’s economy is in no shape to withstand a rate hike… OK… Hear me out on this… I’m not saying that the BOC will hike rates now, or even in 2009… But, if Canadian energy prices of oil, natural gas, and coal continue to get stronger, I’m afraid the BOC will have to entertain thoughts of raising rates to fight inflation… But not now… So… I hope you get what I’m saying here.

So… The US fiscal deficit for 2009 was $1.42 trillion… Remember how I used to take the previous administration to the woodshed for posting $450 billion fiscal deficits? How did we go from $450 billion to $1.42 trillion (if that’s really the number)? Well… That’s not a question to really answer, folks, we all know how we got here… But now that we’re here, what happens next?

I came across this when putting the two monthly newsletters together on Sunday; I think it would be appropriate to share it with you here…

Peter Bernholz (Professor Economics in Basel) studied the world’s 12 most important periods of hyperinflation and discovered that the tipping point occurs when deficits amounted to 40% of the expenditures.

For the United States we have arrived at exactly that point. The deficit of $1.5 trillion amounts to 41.7% of the $3.6 trillion in expenses.

You see, that Peter Bernholz rounds some numbers, but for those of you keeping score at home, the real point is that the US deficits are greater than 40% of expenditures… And you know me, I truly believe in this history repeating itself.

The point I’m trying to make here is that according to Mr. Bernholz, we can soon expect a bout of hyperinflation! OH BOY! Where do I sign up for that? Not only do we have a falling dollar causing us to lose purchasing power, but what purchasing power we have left is going to be eaten away with inflation! Like I said, OH BOY! Gee Willikers, that sounds like the cat’s meow! NOT!

So… Here we go again, with me getting on the soapbox and telling you that the only way to protect yourself from a falling dollar and hyperinflation is to diversify with non-dollar currencies and precious metals.

OK… I get emails all the time from readers that say, “OK Chuck, you tell us to diversify, but you don’t tell us what to buy”… Well… To the untrained eye, that would be true… But to long time readers they know better… So, keep reading, and it will hit you right between the eyes one day, and you’ll slap your forehead and say, “I could have had a V-8”!

The boys and girls over at Citigroup have written a letter to their clients telling them “the dollar is weakening because foreign central banks are diversifying their reserves and US investors are buying high-yielding emerging market assets.” They went on to say, “The Australian and Canadian dollars are likely to rise to parity against the US currency.”

So, there’s one more on the roster that believe Aussie dollars (AUD) and loonies (CAD) will go to parity against the dollar… The loonie isn’t exactly the same stretch of a forecast as the Aussie dollar, as loonies are almost 97-cents right now, with Aussie dollars trading near 93-cents…

Doesn’t that make sense given the talk we just had about hyperinflation? What currencies are going to help protect you against hyperinflation? The commodity currencies! Aussie, kiwi (NZD), Canada, Norway (NOK), Brazil (BRL) and you can even throw in the S. African rand (ZAR), for those who like Mr. Toad’s wild ride!

The folks at Citigroup also had this to say about the euro, which I found to be quite interesting… “The euro will extend gains against the US dollar and the British pound, and may reach parity against the UK currency in 6 to 12 months.”

I would think that for the euro to reach parity with the pound, it would involve the pound falling quite a bit from current levels… And that makes sense to me… Did you see the report the other day from the UK where they reported bad bank debt to be twice the forecast amount? YIKES!

You know… The Asian currencies – which never really participated in the first bout of dollar weakness – are still stuck in the mud… Well, they are being manipulated to be stuck in the mud, for the most part… But, something’s got to give here sooner or later. Why do I say that? Well, as I’ve told you for months now, the Chinese economy was the first to exit their slowdown/recession… Shoot Rudy, even Japan is showing signs of economic growth! And then we have India going strong too… And of course you have the “kind of Asian countries” of Australia and New Zealand… Where we already know that Australia has raised rates and New Zealand would love to raise rates… So, this region is leading the world out of the recession… Hmmm… I thought only the US economy was allowed to do that! Uh-Oh… Looks like we have a shift in how the world works!

Hey! Even Big Ben Bernanke sees the Asian countries as leading the world out of the global recession! Big Ben said… “Asia appears to be leading the global economic recovery.” Hmmm… See, even a blind squirrel can find an acorn! HA!

I had to laugh when I read this headline this morning… “Yen rises as Fujii repeats reluctance to stem currency’s rise”… I laugh because the last time Japan’s new finance minister talked about not intervening to stop the yen’s rise, he back-pedaled and said that traders mistook him to say that he was not going to intervene… So this on again/off again love affair with Fujii and intervention, just makes me laugh! I would think that after getting burned on Fujii comments a couple of weeks ago, that Traders would not get too lathered up when he talks about not intervening.

OK… Here in the US while we are still a sovereign nation, the Fed Reserve, is doing some testing of reverse repos as a means of drawing the excess liquidity/stimulus out of the markets… I don’t think we have to put too much into these tests right now. But it will be a method that the Fed uses at some point in the future… The IMF is against removing any stimulus now… So, that may carry some weight.

Gold prices rose yesterday for the first time in a couple of days, pushing back above $1,060… I would think that until we know for sure that the Fed is removing stimulus, that gold would remain well bid… When we do know that stimulus is being removed… Gold might take a step or two back… But then we’ll have to wait-n-see what happens with inflation.

I read where ETF holdings of gold are sluggish… Well, that certainly makes sense to me! With what we’re seeing these days from our government pushing us toward who-knows-what, physical gold is the thing people want right now… And you can’t get physical gold out of an ETF! So… All those people that have long said that the ETF was just as good as holding gold either in your buried coffee cans in the back yard, or in pooled accounts, are wrong, when it comes to physical gold demands.

And I don’t know about you, but I filled my gas tank the other day, and the price of gas has really shot up recently, eh? And a quick look at oil prices tells it all… Oil prices have risen to $79, while trading at $69 just a month ago! Is oil the proxy for rising inflation?

OK… To recap… The dollar rebounded a bit overnight, but has given back to a currency rally this morning. Citigroup believes Aussie and Canadian dollars will reach parity to the US dollar. The Bank of Canada meets today. Our fiscal deficit reached 40% of our expenditures, which historically is a harbinger to hyperinflation, and gold is back above $1,060 this morning…

US Hyperinflation? originally appeared in the Daily Reckoning. The Daily Reckoning, a FREE daily e-letter, offers a “uniquely refreshing” perspective on the global economy, investing, and today’s markets.

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1p ET Sunday, October 18, 2009

Dear Friend of GATA and Gold (and Silver):

In reply to Thunder Road Report editor Paul Mylchreest’s new study of the gold market (http://www.gata.org/node/7906), which concluded that the market is either terribly short real metal or is laundering fantastic amounts of improperly obtained gold, perhaps the fabled “Yamashita’s gold” of Japanese plunder from World War II, our friend B.B. writes:

“Given that the silver market has similar characteristics to the gold market in terms of lopsided shorting and daily trading charts that are often nearly identical, should we conclude that there is also a huge stash of ‘Yamashita’s silver’? Also, since it has been reported that a recent call for delivery of a significant tonnage of gold resulted in some bizarre shenanigans to cover the delivery, does it not seem likely that maybe the ‘Yamashita’s gold’ story is being trotted out to replace the threadbare story of the sale of International Monetary Fund gold?”

Actually, the “Yamashita’s gold” story has been around as long as the threat of IMF gold sales, and even in the paranoid atmosphere of the gold universe it may be a little hard to believe that this story has been underwritten by increasingly desperate central banks.

The evidence is that even if some hoard of plundered gold was secretly seized from the Japanese military at the end of the war, it already has been liquidated one way or another and has left official hands. Otherwise the gold price would not have quadrupled in 10 years, and Western central banks would still be selling gold in large amounts with public flourishes and not just threatening over and over to sell gold that the IMF probably doesn’t have. Further, those central banks would not have resorted so irresponsibly to derivatives, swaps, and other mechanisms of fractional reserve gold banking for price suppression. They’d just be dumping gold all over the place in pursuit of their greatest desire: to make it worthless.

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