Joe Withrow, Author at Zenconomics

Calls for Repatriation Signify Changing Perceptions of Gold

by Justin Spittler, Hard Assets Alliance Analyst :

Last month, we urged readers to not lose sight of what makes gold special. Major market participants sure haven’t. In fact, Switzerland just held a public vote over whether to increase its gold holdings to 20% of total foreign reserves.

The referendum was voted down on November 30 and it wasn’t even close, which is hardly surprising considering the widespread smear campaign spearheaded by the federal government and central bank. Still, the fact that conversation reached a nationwide vote is encouraging. It’s just one of many examples of how prevailing attitudes toward gold are evolving.

Bird in Hand

Investors that look beyond the sensational headlines realize that not everyone has given up on gold. Poland, Venezuela, Ecuador, and Mexico are among the growing list of countries that have repatriated their gold reserves or have taken steps to do so. The movement has recently gained traction in crisis-stricken Europe.

Last year, Germany shocked the financial world when it requested that 300 metric tons of gold be transferred from Lower Manhattan to Frankfurt. The New York Federal Reserve offered excuse after excuse before ultimately saying the Bundesbank could have its gold back. It would just take seven years.

The Fed said it would need until 2020 to complete the delivery because they first needed to melt down gold bars. In other words, Germany’s gold was probably no longer in the Fed’s vaults. The leading theory among investment circles is Germany’s gold stash has been hypothecated, or leased out, to Wall Street banks for derivatives trading.

In any case, the Bundesbank agreed to a protracted delivery schedule. Eighteen months later, however, the Germans gave up on their repatriation efforts after receiving only 5 tons. Oddly enough, German officials maintain that country’s gold in good hands and sees “absolutely no reason” to not trust the Americans. Not every country shares this unflinching faith.

Last month, the Netherlands reported that it had transferred 122.5 metrics tons of gold from New York to Amsterdam, though it didn’t deliver the news until after the bullion had already made its way home. Dutch officials said the bullion was repatriated in order to inspire public confidence, which is interesting considering how Holland referred to its gold in Manhattan as “absolutely safe” two years ago.

France, Belgium, and most recently Austria have also conveyed interest in bringing foreign-held gold reserves home. With the global currency war heating back up and instability edging higher, precious metals investors will want to watch this trend closely.

Putting Trust to the Test

Germany’s failed attempt to repatriate 300 metric tons of gold from New York raises serious concerns over gold held outside a country’s border. In the coming years, trust between sovereign nations—even longtime allies—could be put to the test should more and more nations wish to hold their bullion within arm’s reach.

Few people monitor the actions of central banks as closely as precious metals investors. Usually, the focus is on monetary policy and gold accumulation trends, but repatriation efforts can’t be overlooked. Transporting metric tons of gold across the globe is a highly complex process. When a country makes that decision, you better believe they’ve thought about the matter long and hard.

The chorus of rational actors demanding that their gold be brought home is growing louder. Should a custodian in New York, London, or other global financial hub prove unable to return bullion to its rightful owner in a timely fashion, investors will have even more reason to mistrust the global fiat money scheme.

Article originally posted in the December issue of Smart Metals Investor at HardAssetsAlliance.com.

Ditch the Resolution, Embrace the Intention

by Bruce Steven Dolin, PsyD – ICPA:

Whether or not we make New Year’s resolutions, we think about them. We tend to tell ourselves that after the holidays are over we are going to get into better shape, eat better and commit to this or that course of action. We make resolutions, or we think about what we would resolve to do, if only we didn’t doubt that resolutions are effective.

On the other hand, we could leave the self-defeating resolution thing aside and instead consider crafting a New Year’s intention. For example, we could set the intention of dedicating our efforts this coming year to the benefit of our children. By consciously setting such an intention, we raise every other action to a higher level and infuse them with spirit.

If our intention is to dedicate all that we do to the health, happiness and well-being of our kids, then our attempts to stop smoking, get to the yoga studio or reduce procrastinating all subtly go to serve something that transcends ourselves. Ironically, when we are consciously playing on the team of our families, and by extension our communities and our world, we may be more likely to make healthy and effective choices for ourselves.

Resolutions tend to be exacting and rigid—an ironclad vision of our perfected selves. But we are not perfect, and all our attempts to be perfect inevitably fail, reinforcing low self-esteem. Striving for improvement, even by small increments, leads to real growth over time. Perfectionism dooms us to failure by setting the bar at a superhuman level.

Yoga literally means “to bind”—harnessing body, mind and spirit to a singular focus or intention. Consciously dedicating our lives to the benefit of something, even something as broadly defined as “our children,” can arguably turn parenting itself into yoga. The core concept of Privilege of Parenting is that conscious parenting is, in and of itself, a path to happiness and enlightenment. Doing what is already on our plates, but with mindfulness and a dedication to something higher, liberates as it invites balance, strength and courage…of body, mind and spirit. Setting intention in this way potentially benefits children, but also greatly benefits the parent who sets the intention—allowing an alignment of personal energy with forces greater than the wants and needs of the ego-self alone.

Parenting is very challenging, and expecting to be a perfect parent is an ill-conceived notion. Losing our tempers less, being a little more patient, spending a bit more time listening to our kids…these are directions, not resolutions. But by dedicating to the good of others our mere attempts to grow, as parents or as beings aside from the care of children, we create a New Year’s intention that lends heart and spirit even to our abject failures and terribly human fiascoes and regressions.

We can set one intention, a few intentions or many. We can keep our intentions in mind on a daily basis, or come back to them a year from now. But there’s surely room for one conscious breath at this pulsing moment, breathing in love and breathing out fear and desire as we silently harness the energy of our heart-minds and our gut-minds in a direction of loving kindness for our “children,” biological, adopted, animal, vegetable, mineral… and even ethereal, archetypal and purely energistic.

So, let’s set a New Year’s intention. Let’s make this coming year, with all our strivings and struggles, all our victories and defeats, consciously stand to benefit all our collective children.

Article originally posted at ICPA.org.

Capitalism and Creditism and Corporatism, Oh My!

submitted by jwithrow.

Journal of a Wayward Philosopher
Capitalism and Creditism and Corporatism, Oh My!

December 26, 2014
Hot Springs, VA

The S&P opened at $2,084 today. Gold is flat around $1,198 per ounce. Oil is still checking in at $56 per barrel. Bitcoin is at $326 per BTC, and the 10-year Treasury rate opened at 2.24% today.

All is quiet in the markets this holiday season. We may look back on this time period in a few years and say that we were presented with a tremendous opportunity to buy beaten down energy and commodity stocks during the tax-loss selling season of 2014. We probably will say that we had a great opportunity to accumulate some gold throughout 2014 as well. Just be sure to follow your asset allocation model if you decide to capitalize on these opportunities.

Yesterday we examined our current economic circumstances and realized that we were employing capitalism but we had no capital! Today we must ask the question: How can you have capitalism without any capital?

The obvious answer is you can’t. It’s like making potato soup without potatoes – try as you might it just won’t work.

So if we don’t have capitalism then what do we have? My answer is that we have some weird blend of creditism and corporatism. Governments have colluded with large corporate interests, especially in the commercial banking sector, to rig the economy in their favor.

Though we could go back further, let’s start our story (from the American perspective) at the end of World War II. Prior to the war governments didn’t think they could do everything they wanted due to financial constraints. That didn’t stop them from doing half of what they wanted to do but it forced them to make a choice. Did they want guns (warfare) or butter (welfare)?

The U.S. came out of WWII looking like gold… literally. The U.S. economy was the least damaged by the war which ravaged Europe and it came out holding the world’s largest stash of gold reserves. This relative economic strength gave U.S. politicians the wrong idea: they started to think they might not need to make any choices. Then President Lyndon Johnson came along and he wasn’t shy about it – guns and butter it will be!

So we got the Vietnam War and the Great Society together! And gold steadily flowed out of the U.S. Treasury until President Nixon pulled the switch-a-roo in 1971 and closed the gold window. All of a sudden the international monetary system became elastic. With no more gold restraint, dollars and yen and pounds started to pile up as central banks and commercial banks discovered they could conjure money into existence largely at will. But this was a different kind of money than the gold-backed variety – it was credit-based.

This credit-based money was extremely popular and the money supply grew 50-fold between World War II and 2008. Everyone got used to a constantly expanding money supply and now both the economy and asset prices are dependent upon it. It is the expansion of credit, not real capital, that supports all of the federal spending programs, all of the wars in the Middle East, the mass imports from China and Vietnam, the new housing developments and shopping malls in Middle America, the massive car lots across the country, most of the skyscrapers dotting the city skies, and current real estate and stock market valuations.

Here’s a fun example: do you know how much debt is still owed on the tax-funded Meadowlands Sports Complex in New Jersey? I’ll tell you: more than $100 million is still owed on the facility. Oh, and I am talking about the old Meadowlands Stadium that was closed and demolished in 2009 to make way for a new $1.6 billion facility now known as MetLife Stadium. New Jersey taxpayers are still on the hook for $100 million on a sports complex that no longer exists! New Jersey built the stadium, used the stadium, and demolished the stadium but never bothered to pay for it.

Such nonsense can only occur in a world of ever-expanding credit-based funny money.

This applies to the massive bank bailouts and banker bonuses that one side of the fictitious aisle rails against just as it applies to the massive welfare programs that the other side of the false political-divide takes issue with. None of it exists without perpetual credit expansion; none of it exists without creditism and corporatism.

Capitalism would have nothing to do with any of it.

It is important to understand that we have only seen one side of the credit cycle within the current monetary system. Credit has been expanding constantly for more than forty years now. But if we look around our world we can clearly see that nothing expands forever. Waves rise then fall. Trees grow then mature. Balloons inflate then pop.

One day credit will have to contract; it is inevitable. What happens when that day comes? Ludwig von Mises, the late Austrian School economist, offered some insight:

“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.”

Was he right? Time will tell.

More to come,

Joe Withrow
Wayward Philosopher

For more of Joe’s thoughts on the “Great Reset” and the fiat monetary system please read “The Individual is Rising” which is available at http://www.theindividualisrising.com/. The book is also available on Amazon in both paperback and Kindle editions.

Capitalism Without the Capital

submitted by jwithrow.

Journal of a Wayward Philosopher
Capitalism Without the Capital

December 25, 2014
Hot Springs, VA

Merry Christmas!

The markets are closed today in honor of this wonderful holiday so we have no updates for you in this entry. Check back in with us tomorrow for market updates. We do have an important entry for you today, however. It’s not nearly as important as spending time with your family on Christmas Day but, since you are here nonetheless, we will carry on.

Earlier this month we watched as the U.S. national debt came up behind $18 trillion, whipped into the passing lane without signaling, and sped off into the distance. Where is the national debt going in such a rush? I’m not sure, but I’d wager it’s someplace not worth going to.

As the national debt raced past we noted that total credit market debt has ballooned up to 330% of GDP with considerable help from the Fed’s efforts to pump in $4.3 trillion worth of hot air.

The television analysts accept it all as normal but we must ask the question: How in the world did we get to this point?

Much of the apparent prosperity we have enjoyed over the last several years has been borrowed from the future. The world’s three major central banks – The Federal Reserve, the European Central Bank, and the Bank of Japan – have each been engaged in an outrageous financial experiment; they have been creating massive amounts of currency out of thin air to purchase government debt by the boat-load.

Remember, debt is nothing more than a promise to pay for present spending with future earnings. These central banks, in collusion with their respective government, are really engaged in a scheme to transfer massive amounts of wealth from the public in the future to themselves in the present. There will be serious consequences to this madness.

It is important to realize that none of this chicanery has anything to do with capitalism… there’s no capital even in sight! The money created by the central banks of the world may act much like real capital, but it is just a clever impersonator.

Capital, according to the Ludwig von Mises Institute, is defined as the goods that were produced by previous stages of production but do not directly satisfy consumer’s needs. In short, capital is real savings and real resources.

Capital formation is actually quite simple – just save more than you consume and you will have capital.

We are currently doing the opposite – we are consuming way more than we produce. That’s how you end up with debt piled to the ceiling. This is true on the macro level (governments, multi-national corporations, etc.) and it is true on the micro level (individuals, local communities). The credit-based money and the massive debt have driven capital into hiding… we suspect for fear of being called a greedy capitalist.

And that, in a nutshell, is the answer to our question: we got to this point by embracing central banking and fiat money thus abandoning capitalism and its sound monetary system.

Sound Money once kept debt and the central planners at bay.

What was the secret?

Sound Money was like your grumpy friend that just won’t ever agree to do anything. You ask him to go to the movies and he says nope. You ask him to go to the ball game and he says he’ll watch it on T.V. You ask him to go to the bar and he says he has beer in the fridge at home already. Eventually you learn there’s nothing you can talk him into doing so you stop trying. That’s why governments and central banks hated Sound Money; it would never agree to any of their best laid plans.

You see, Sound Money could not be infinitely printed by governments or central banks. Originally, before governments got into the money business, money could not be printed at all; it had to be dug out of the ground and then minted into a coin. Later, governments took it upon themselves to stockpile gold in a vault and create paper currencies 100% backed by the gold. Always one to offer something it doesn’t have at a price it cannot sustain, Government reduced the gold backing of its currency over time and then, in 1971, it cut ties to gold altogether. That was the requiem for Sound Money and ever since then there has been absolutely no limits on the amount of currency central banks can create. Which means there has also been absolutely no limit on how much debt governments can rack up.

So here we are.

But just because there have been no limits to all of this economic madness in the short run does not mean there will never again be any limits. History shows that market forces cannot be perpetually suppressed and distorted – eventually the market will win out. The Day of Reckoning will come.

Until the morrow,

Joe Withrow
Wayward Philosopher

Raising Children in the Modern World

submitted by jwithrow.

Journal of a Wayward Philosopher
Raising Children in the Modern World

December 17, 2014
Hot Springs, VA

The S&P opened at $1,972 today. Gold is back down to $1,198 per ounce. Oil is down to $56 per barrel. Bitcoin is down to $322 per BTC, and the 10-year Treasury rate opened at 2.08% today.

Both oil and the 10-year rate are closing out 2014 at price levels much lower than most analysts anticipated which sets up for an interesting 2015. Will crude prices remain at current levels and put the squeeze on the U.S. Shale revolution? Will interest rates remain low and complicit in enabling the Treasury to service the $18 trillion national debt without much fuss? We shall see.

As for the S&P, it has been 6 and a half years since it experienced a correction of 10% or more. But markets cannot go in one direction forever – that 10% correction is coming. I have seen some predictions of a major 10%-plus correction sometime in the spring of 2015. It may be more like 50% if the correction is coupled with the fiat monetary crisis that is on the horizon but I think we may still be a few years away from that one. Instead, it is more likely that a major stock market correction will spur the Fed into QE4. Either way, it is advisable to be very vigilant if you have money in the equity markets.

Shifting gears, I have been thinking quite a bit about child-rearing given the arrival of Maddie Lynn eight weeks ago. I have come to the conclusion that our culture today has become much too rigid and regimented when it comes to raising children in our fast-paced modern world.

School days have gotten longer, homework loads have increased tremendously, grades are now emphasized heavily, standardized testing has been implemented and enforced across the board, the number of adult-organized activities for kids have exploded and, as a result, childhood stress, worry, and fear have increased dramatically.

Studies conducted by Jean M. Twenge at San Diego State University suggest that youth anxiety and depression have been trending higher rather sharply over the last fifty years. Perhaps more troubling, Twenge’s research suggests a shift in motivation amongst kids from intrinsic to extrinsic values; kids now tend to be more motivated by popularity and money than self-acceptance, moral character, and community.

The reason for this shift is rather clear to me: American childhood is now more about meeting adult expectations and less about personal growth and development. Observe the parents at a youth sporting event and see if this statement isn’t true. Now the parents mean well, don’t get me wrong. But too often they think their child’s future depends exclusively upon performance in school, performance in athletics, performance in extra-curricular activities, or some other external measurement of performance so these things are all pushed on kids to the point where their own interests and talents are subordinated.

Studies by Peter Gray show that childhood free time has been declining steadily since the 1950’s including a decrease in free play as well as time spent talking to others at home. Meanwhile, time spent on homework has increased 145%.

The government school system equates more homework with more learning. In reality, homework serves only to replace students’ individual interests with the Department of Education’s mandated curriculum. At best students memorize the mandated curriculum long enough to pass the standardized test and then they let it go. At worst they think the curriculum is useful and they retain it at the expense of pursuing their own passion. The truth is memorization is not learning; it is a waste of time and energy.

Real learning can only occur when the individual has an interest in the topic and is free to explore that topic in his or her own way. Children need to be free to make mistakes, analyze those mistakes, and then attempt to correct the mistakes. Instead, the current model of education teaches children that they will be judged and punished if they make a mistake so students learn to fear mistakes above all else. This mentality has the potential to set them up for a very restricted adulthood in which they shy away from opportunities for fear of making a mistake.

Ultimately we need to ask ourselves what is truly important for our children. This will be different for each family and that should be embraced, not ridiculed. There is no reason to think everyone must adopt the same parenting style or that every child must receive the same education. In fact, a free society requires diversity and the sharing of unique ideas in order to thrive.

So what’s really important for our children?

Good grades and getting into a good college? This looks like an outdated model to me – it is exclusively designed to produce good employees. But we are moving away from a ‘jobs’ based economy and the availability of traditional full time employment with comprehensive benefit packages will continue to diminish over the coming years and decades.

Becoming a superior athlete? My observations suggest that youth athletics are much more important to the adults – school employees, coaches, parents – than they are to the kids. Too often youth sports are a chore rather than a joy.

Participating in as many extra-curricular activities as possible? Again, these are often more important to the adults than the kids. Children should certainly be free to participate in whatever groups or activities interest them but too often they are pushed in the adult’s favored direction instead of their own.

I am convinced that a childhood free to grow and develop in a unique way is the most important gift parents can give their children. I think children need more guidance and less teaching; they should be encouraged to discover and pursue their own passions and interests without the pressure of forceful expectations. Pair this method with sound financial education and an IBC insurance policy that has been capitalized for 18 years and I think you have the makings of a creative, self-driven adult capable of thriving in a rapidly changing world.

Of course these are just this philosopher’s humble opinions.

More to come,

Joe Withrow
Wayward Philosopher

For more of Joe’s thoughts on the “Great Reset” and the Infinite Banking Concept please read “The Individual is Rising” which is available at http://www.theindividualisrising.com/. The book is also available on Amazon in both paperback and Kindle editions.

Debt as Far as the Eye Can See

submitted by jwithrow.

Journal of a Wayward Philosopher
Debt as Far as the Eye Can See

December 9, 2014
Hot Springs, VA

The S&P opened at $2,056 today. Gold is up around $1,218. Oil is still floating around $64 per barrel. Bitcoin is down to $347 per BTC, and the 10-year Treasury rate is 2.21% today.

In other news, U.S. national debt has now eclipsed $18 trillion. That’s: $18,000,000,000,000.00. Debt to GDP is now around 99%. To put this in perspective, U.S. national debt stood at $398 billion back in 1971 – 34% of GDP – when Tricky Dick put the “Out to Lunch” sign up in front of the international gold window.

Even more startling, total credit market debt now checks in at 330% of GDP. Mr. Market has been trying to wind down the credit market bubble for some time now, but the Federal Reserve has been fighting tooth and nail against him. The Fed’s weapon of choice: funny money! The Fed has purchased more than $4.3 trillion worth of bonds since 2008 in an effort to prop up asset prices and strangle interest rates.

Where did the Fed get this $4.3 trillion? As we pointed out in last week’s journal entry, the Fed got this $4.3 trillion from the same place it always gets money… it conjured every dime of it from thin air!

Still, the economists pretend like this is all normal. Some of them say that the Fed should have bought fewer bonds; $4.3 trillion worth was too much. Other economists say the Fed didn’t buy enough! So they write their articles and conduct their interviews and everyone sleeps sound at night. I can’t help but wonder – do they think this can go on forever? Do they think the Fed can reverse course whenever they darn well please? Do they think at all?

I don’t know if mainstream U.S. finance really is arrogant enough to think there are no consequences to all of this financial chicanery or if they are just playing a big sleight-of-hand game, but the world seems to slowly be waking up to the fiat monetary system that has allowed debt to pile up faster than 5:00 Beltway traffic.

Though the Swiss Gold Referendum didn’t pass last month, it does suggest a change in the financial wind. The initiative would have prevented the Swiss National Bank from selling any of Switzerland’s gold reserves and it would have required a 20% gold backing to the Swiss Franc. The fact that this initiative made it to a vote indicates a growing apprehensiveness towards the international monetary system.

This apprehensiveness is not limited to Switzerland. Germany, France, Belgium, and the Netherlands have each expressed interest in repatriating their gold reserves held in foreign central banks. Additionally, both China and Russia have been buying gold hand over fist. The Russian Central Bank bought nearly 20 tons of gold in October alone. We don’t know exactly how much gold China has been buying – they haven’t reported their full reserve numbers in several years. China and Russia aren’t alone; global gold demand now eats up more supply than miners can produce at current prices.

2013 was a record setting year for precious metals purchases from the U.S. Mint and 2014 sales are on pace to surpass that record. The U.S. Mint sold 3,426,000 ounces of silver in November alone. Perth Mint sold 851,836 ounces of silver in November. India imported 169 million ounces of silver through the first ten months of 2014. The precious metals are clearly being viewed as a life-boat in a sea of rising debt.

In addition to the precious metal rush, several major U.S. financial firms have been using depressed interest rates to gobble up real assets recently as well. The Blackstone Group has been buying domestic real estate like it was last call and Berkshire Hathaway acquired Burlington Northern Santa Fe Corp (BNSF) – a railroad company. Shrewd analysts suggest Berkshire’s purchase of BNSF was a hard asset play to mitigate expected inflation; railroads are nothing but hard assets hauling other hard assets around the country.

Are all of the precious metal purchases and hard asset acquisitions just a coincidence?

Maybe deficits really aren’t that big of a deal. Maybe the Fed really can navigate through the uncharted waters of debt and derivatives. Maybe the fiat monetary system really has supplanted Mr. Market’s choice for good. Maybe financial asset prices really can go to the moon and never come back down.

But I wouldn’t bet on it.

More to come,

Joe Withrow
Wayward Philosopher

For more of Joe’s thoughts on the “Great Reset” please read “The Individual is Rising” which is available at http://www.theindividualisrising.com/. The book is also available on Amazon in both paperback and Kindle editions.

Image Source: WilliamBanzai7 – Zero Hedge