Britannia Radio

The Daily Reckoning Weekend Edition Sunday, April 24, 2011 Buenos Aires, Argentina -------------------------------------------------------- End...The...Fed...and other solutions to a better, freer marketplace, Thoughts on silver vs. "ANY denomination of ANY paper currency," Plus, all this past week's reckonings, archived for your chocolate- fueled reading pleasure... -------------------------------------------------------- Shock Video: 123 Winners in 127 Moves – Get The Next Profit Alert on Wednesday This new presentation reveals amazing market strategy that recently cranked out gains with 97% success. This is easy. It's fast. You don't need special skills or connections. Check it out here. -------------------------------------------------------- Joel Bowman, checking in from Buenos Aires... Choppy week in the markets, wouldn't you say? Gap down one day, gap up the next. That's what you get when the tub is full of Fed-faked funny- money. Bigger waves...more tumult...less predictability. And a whole lotta motion sickness along the way. Markets are always and forever in a process of price discovery, torn between demand for lower prices from buyers on one side, and the profit motive from sellers on the other. Somewhere in the middle, the two parties will come together to exchange their goods and services. In other words, they "discover" an agreeable price at which everyone finds value. This is what the free market does naturally. Low prices invite demand...driving prices higher. High prices invite competition (supply)...driving prices lower. Obviously, therefore, you expect a bit of movement, a bit of price fluctuation as buyers and sellers jostle for position. What you don't expect is multi-hundred point daily swings in the stock markets. You don't expect gold to jump $20, $30 or more in a 24-hour period. (Remember, before FDR confiscated all the gold in the land back in 1933, an ounce of gold was only "worth" $20. More correctly, a dollar was worth 1/20th an ounce of gold. Then, in one fell swoop, the original New Dealer "revalued" the metal to $35 an ounce, thereby devaluing the dollar to 1/35th an ounce of gold.) The point is, a $20 or $30 movement in the price of gold back then would have been unthinkable (but for political strong-arming). Today, with the dollar having been beaten, bludgeoned and fisticuffed down to less than 1/1,500th an ounce of gold, twenty bucks here or there is hardly worth mentioning, such is the woeful state of the world's leading fiat money. Of course, markets don't demand fiat currencies. Free individuals don't wake up one day and say to themselves, "Gee... Wouldn't it be nice if we had an unquestionable, unaccountable, centrally controlled monopoly on counterfeiting to help debase our medium of exchange, saddle the populace with that most insidious of all taxes – inflation – and to sell our kiddies future down the drain? I know, let's create a Federal Reserve!" Such institutions don't come about "naturally." They require political pull and the gun-for-rent that is the government. They take cover behind rooking legalese, as is found in "The Federal Reserve Act of 1913," and the absurd prevarications of its "dual mandate," which is, at present, sold to the terminally credulous public under the noble- sounding, though entirely erroneous mission statement of "price stability and maximum employment." Anyone with a basic, non-Ivy League-approved understanding of economics knows this to be a ridiculous goal in the first place. For one, gold takes care of price stability itself. Has done for thousands of years. Price instability is the direct result of fiat monies and manipulation of the money supply by self-serving central banking cartels. From tulipmania to techmania, one can find, at the rotten heart of every inflationary crisis, a central banker with an equally rotten brain and/or heart. As for the "fetish of full employment," as Henry Hazlitt so eloquently explains in his classic, Economics in One Lesson: "The progress of civilization has meant the reduction of employment, not its increase. It is because we have become increasingly wealthy as a nation that we have been able virtually to eliminate child labor, to remove the necessity of work for many of the aged and to make it [financially] unnecessary for millions of women to take jobs. "The real question," continued Hazlitt, writing in 1946, "is not how many millions of jobs there will be in America ten years from now, but how much shall we produce, and what, in consequence, will be our standard of living?" The Fed is the work of Woodrow...a creature of Congress. As George F. Will, writing inThe Post, once put it, mission creep is part of the "metabolic urge" of government agencies. The Fed is no different. It is an Ouroboros running out of tail on which to feed. There's nothing free market about this beast, Fellow Reckoner...and nothing free market about the economy that stands on its sunken shoulders. Without space for competing currencies, the invisible hand is bound and cuffed, unable to feel around in the dark, to set reliable prices. Value is distorted, malinvestment promoted. In the end, you get unpredictable stock market volatility and a dollar shaved to within 1/1,500th of its life. Exactly what you'd expect, in other words. The solution? Here, a modest suggestion: End...The...Fed. Instead, allow competing banks to issue competing currencies. Allow the fundamental underpinning of an economy – it's medium of exchange – to discover its own "fair value." Witness competition weed out banks that lend imprudently and that rip off customers, to the favor of those operating with prudence and fiscal integrity. Watch institutions that choose to issue baseless, paper money go bust without federal bailout funds and those that adhere – freely, without let or hindrance – to a gold standard garner the public trust their thrift and judiciousness earns them. Wishful thinking, you say? Well, until such a time comes to pass, here's another suggestion, courtesy of our Reckoner-in-Chief, Bill Bonner: "Buy gold. Be happy." Cheers, Joel Bowman for The Daily Reckoning -------------------------------------------------------- Congress Won't Admit This, The President Won't Talk About It... America could be standing on the verge of a severe economic stumble. Worse than 2007. Why? Find out all the details – and get SIX unique ways to protect yourself – right here. -------------------------------------------------------- ALSO THIS WEEK in The Daily Reckoning... The Story of Timothy Bancroft By Chris Mayer Gaithersburg, Maryland Let me tell you the story of Timothy Bancroft. It's a good one, and if you haven't heard it, I think you'll like it. Bancroft was a smart and shrewd investor. He dodged the Panic of 1857, which he said was due to "easy money policies" and "overconfident speculation in the railroads and farmlands of the Western states." How to Keep Your Silver Safe By Matt Insley Baltimore, Maryland Today I want to give you a street-smart playbook on how to buy and sell physical silver. This is the real stuff, for those of you who like to sleep at night knowing you've got the shiny metal in your possession. Without further ado, I give you the top 4 ways to hold your physical silver... Is There Any Hope for Shipping? By Chris Mayer Gaithersburg, Maryland "Many shall be restored that now are fallen and many shall fall that now are in honor." This quotation from the Roman poet Horace is spot on in describing the ebb and flow of markets. No wonder it appears as an introduction to Security Analysis, that investing classic by Ben Graham and David Dodd. In short, the wheels of finance never stop turning and no asset stays on the top, or the bottom, of the heap forever. The latter is certainly a cheerful message for the beleaguered shipping industry. The "Other" White Rock By Chris Mayer Gaithersburg, Maryland The silver market has been on a tear, no doubt about it. The price of this shiny white rock has soared 50% in 2011, alone. There's good reason for this huge move (Hint: His name is Ben Bernanke). But I want to tell you about a different white rock – one that's also quite precious. Where to Find the "Anti-Dollar" (Hint: It's Not Gold) By Rob Marstrand Buenos Aires, Argentina There's a currency I think of as the "anti-dollar" that continues to appreciate against the US dollar. Unlike gold, the "anti dollar" can be used to maximize other investments. I'll reveal this currency in a moment. But first, why would you want an "anti-dollar" in the first place? Expatriate Your Wallet By Terry Coxon If everything you own is held in your own name in your own country, then you are not merely exposed, you are vulnerable absolutely, to whatever decisions the government might make about how you should behave and who gets the wealth you've earned. Tomorrow's new government measure, which might land out of the blue, could be a law that affects everyone, or it could be a rule devised to deal with people like you. Or, it could be an administrative action aimed at you alone. In any case, with all your assets at home, you'd find out how the lobster feels when his trap is being hauled out of the water. Nothing he can do about it. The only way to protect yourself against the risk of being boiled in a government pot is to keep some of your assets in another country. -------------------------------------------------------- The Next Goldcorp? Since inception, Mining giant Goldcorp has returned a whopping profit to shareholders. Now one small company 40 miles away from Goldcorp's historic Dome Mine has made a massive gold discovery... And it could make this tiny $1.73 stock soar! Click here for the details... -------------------------------------------------------- The Weekly Endnote: Last week in this space, when an ounce of silver could be had for the relative "bargain" price of $40, we quizzed our Fellow Reckoners on what they thought about the white metal's near future. Here's what a few of you had to say: Norman reckons... On the various (often strange) observations on the vigor of silver's continuing rise (apparent rather than intrinsic), one has to wonder when traditional economic rationale must give way to the REALITY that all governments throughout the world are racing to the end game on un- backed paper currencies...that of zero value for ANY denomination of ANY paper currency! In "normal" times...commodities of whatever nature are priced essentially by their availability (or lack of). Terms such as "BUBBLE"..."BULL MARKET"...etc. have no place in depicting the current silver "phenomenon"...as precious metals prices merely reflect increasing contempt for hyper-inflated paper currencies! The apparent value rise for precious metals (or anything else with intrinsic value) will continue as far up as un-backed paper currencies can go down...specifically...when such currencies are not accepted for any trade...anywhere! Len reckons... As long as interest rates on bank deposits are negative regarding inflation, then precious metal prices will rise. It doesn't matter if its physical metals or good metal stocks. Because of Internet websites, the truth about the world's fiat currencies and the ever-debasing of savings will continue to cause the rise of prices in gold and silver. And finally this, from A. Reader... In all my years of investing I've always eschewed commodities, other than an occasional commodity-based stock. However, now I'm almost 50% in commodity-based stocks and gold and silver. And some days I wonder whether I should have more! I, for one, am not concerned about a "bubble", at least not for the foreseeable future. Thanks to all those who wrote in. This week's little group research project: What's your favorite "ex-dollar" asset and why. It could be a foreign currency, precious metal, overseas land, whatever. Your theoretical investment ought to offer maximum protection against declines in the world's "reserve" currency and maximum fitful nights of rest for your fellow reckoners. Email us below with your suggestion... And, as always, have a great weekend. Happy Easter, Joel Bowman Managing Editor The Daily Reckoning