Cause for outrage: what bankers and traders have done to "the people"

"When floodwaters cover our homes, we expect that FEMA workers with emergency checks and blankets will find us. There is no moral or substantive difference between a hundred-year flood and the near-destruction of the global financial system by speculators immune from consequence. But if you and your spouse both lose your jobs and assets because of an unprecedented economic cataclysm having nothing to do with you, you quickly discover that your society expects you and your children to live malnourished on the streets indefinitely. "

- From "The Sharp, Sudden Decline of America's Middle Class" by Jeff Tietz, Rolling Stone magazine. The article details the harrowing experience of recession victims, many of whom have done "all the right things" and never been unemployed before.

Inequality is starkly worse in the USA than in other "developed" countries, as shown in the graph below (source):

 

 

That uses data from 2010, but according to the official Census it's getting worse:

 

"The Gini Index for the United States in the 2011 ACS (0.475) was significantly higher than in the 2010 ACS (0.469). This increase suggests more income inequality across the country."

Why buy gold?

Gold is a condensed way to hold your wealth.

Currently the most popular US gold coin, the American Gold Eagle, retails for around $1,800. A recent Federal Reserve survey says that the median US family had a net worth of $126,400 in 2007. Today, that would buy 70 gold eagles and some change. Everything you have, in two handfuls: two 4-inch-long rolls, weighing 43 ounces each.

Actually, less: the same Fed survey shows the average family net worth was down to $77,300 in 2010. That's 41 gold eagles and change; or, a handful of coins 4.63 inches long and weighing less than 50 ounces. It doesn't rust or rot, and although the value will vary, it'll never be worthless.

But there you are, gold in hand, standing in the street. You can't eat or wear the stuff, it won't cover your heads or cook your food. It doesn't earn interest, and unlike farm animals, it doesn't breed. And it doesn't protect you and your loved ones. Your 50-ounce stash against a 40-ounce, fully-loaded 1911 Colt 45? You'd be lucky to walk away empty-handed.

It preserves wealth, but not necessarily for you. Three years ago in central Britain, a man with a metal detector discovered a hoard of well over a thousand intricately-worked gold items. Together they weigh some 6.3 kilos - worth a third of a million dollars in scrap value (but over $5 million because of their history and artistry). The magnificent Anglo-Saxon treasure dates from the 7th or 8th century.

The key point is, whoever buried it didn't come back.

Gold doesn't ensure your survival if society breaks down altogether, but it can help protect you from the wipeout that happens when paper money becomes worthless. However, remember how the hungry Esau sold his inheritance to his brother Jacob in exchange for a bowl of stew: it's not enough to have gold, you need someone to sell it to, and at a fair price.

So ignore the apocalyptic prophets; gold is for troubled times, not for utter disaster, and it's not the only thing you should have. As Eric Sprott said recently, "most ... experts say that you should have 5% or 10% of your money in gold".

The question is, how to hold it.

Via a broker? MF Global held gold in a client account (effectively, as trustee) for investor Gerald Celente, yet the holding was seized by the firm's creditors when it collapsed in 2011.

Via a depository? Congressman Ron Paul has tried to get the Federal Reserve to open its vaults to auditors to find out how much is actually there; we're still waiting, and Germany is getting worried about its holding in the US. It is even rumoured that China has "lost" 80 tons from its own national treasury. Attractive stuff, is gold.

How else? An August 2012 article in Investors Chronicle looks at other ways: gold funds, gold bars, coins. Even then, you need to be confident that the fund holds 100% of its stock, 24/7 - you'll recall that fractional reserve banking began among gold dealers who took advantage of the fact that their customers usually didn't all want access to their metal at the same time. And it's worth noting that some outright physical fraud is now going on: tungsten has the same density and is far cheaper, so selling a gold-wrapped bar of tungsten represents a fat profit for criminals.

In these times of weakened trust, perhaps you could accumulate some gold coins from a reputable dealer, and keep them safe somehow - and don't tell those who don't need to know.

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Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Where are the rich investing?

Last week I visited a successful Midlands brokerage. The boss was looking where to invest tens of millions of pounds for a client.

Stocks, bonds, real estate, commodities?

No: cash.

He'd found somewhere that offered 3.6%. Security of capital, and protection against our current moderate inflation.

How many individuals and corporations around the world are doing much the same? Are they waiting for the optimistic losers to slug it out, before stepping in and buying up when everything gets cheaper?
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Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Why buy gold?

See new post, here.

Political Correctness: a straw in the wind

I deal with primary age children who are excluded from mainstream school. They have a variety of problems and we do the best we can to straighten them out. Without humour, we'd go under.

Currently we have a student social worker who comes in weekly for the experience. I told her the old joke, "How many kids with ADHD does it take to change a lightbulb? Ans.: Hey, let's go out and ride our bikes!"

Her mouth gave a small upward twitch and she said, "That shouldn't be funny."

Humour is anarchic and often contains a germ of truth. So it is the first target of the cold forces of repression.

I have been warned.

News for the confused

Bradley Wiggins is to be made Archbishop of Canterbury.

A translation of Guillaume de Machaut's "Un Po Apres Le Temps d'Autonne"

A little after autumn time

When those who cultivate the vine

Pick their grapes and fill the tun

And with work that’s lightly done

Each man offers to his fellow

Pears and grapes and peaches mellow

When in the soil the corn-seeds grow

And the leaf falls from the bough

By Nature’s or the wind’s design

In thirteen hundred forty-nine

On the ninth day of November

I was closed up in my chamber.

Had the sky been bright and clear

I should have gone to take the air

But the mountains and the meadows

Were hid in fog and deepest shadows

So I was taken by the gloom

Thinking in my lonely room

How all men everywhere are governed

By cronies meeting in the tavern

How truth and justice in the land

Are dead, slain by the hand

Of greed, who over them holds reign

As if she were a sovereign queen

How the rulers rob the ruled

Sack, plunder and assault the world

Crushing them in their distress

Merciless and pitiless

Great mischief seems it to my mind

When vice and power are combined

 

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(Translation by blog author, 03 November 2012. Copyright.)

 

Original text:

Un po apres le temps d’autonne

Que chascuns vandange et entonne

Qui a vingnes a vandangier

Et qu’on a a petit dangier

Pesches moust poires et roisins

dont on presente a ses voisins

Que li blez en la terre germe

Et que la fueille chiet dou cherme

Par nature ou dou vent qui vente

L’an mil trois cens nuef et quarante

Le novisme jour de novembre

M’en aloie par mi ma chambre

Et se li airs fust clers et purs

Je fusse ailleurs mais si obscurs

Estoit que montaignes et plains

Estoient de bruines pleins.

Si que la merencolioie

Tous seuls en ma chambre et pensoie

Comment par conseil de taverne

Li mondes par tout se gouverne

Comment justice et verite

Sont mortes par l’iniquite

D’avarice qui en maint regne

Com dame souvereinne regne

Com li signeur leur subgiez pillent

Roubent raembent et essillent

et mettent a destruction

Sans pitie ne compation

Si que grans meschies ce me samble

Est de vice et pooir ensamble.

From Le Jugement du roy de Navarre  by Guillaume de Machaut (d. 1377)