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Praxeology explains us why Uncle Sam is broken

  • 24 Ottobre 2018
  • by Blogger

Historical data cannot produce much information about the facts of reality without a theory that “stands on its own feet” and is not derived from the data. Gazing at the data cannot assist an analyst in establishing causes in the world of economics. All that gazing will do is to help describe things. To ascertain the underlying causes one requires an explanation that can be made by a logically worked out theory. The role of historical data in all this is just to illustrate things but not to serve as proof. One example that Mises liked to use in his class to demonstrate the difference between two fundamental ways of approaching human behavior was in looking at Grand Central Station behavior during rush hour. The “objective” or “truly scientific” behaviorist, he pointed out, would observe the empirical events: e.g., people rushing back and forth, aimlessly at certain predictable times of day. And that is all he would know. But the true student of human action would start from the fact that all human behavior is purposive, and he would see the purpose is to get from home to the train to work in the morning, the opposite at night, etc. It is obvious which one would discover and know more about human behavior, and therefore which one would be the genuine “scientist”. That man pursues purposeful actions implies that causes in the world of economics emanate from human beings and not from outside factors.

Hedging against financial tailwinds

  • 21 Ottobre 2018
  • by Blogger

The nineteenth century was the first stage of an international sting operation. As in the case of every con game, the con man must create a sense of trust on the part of his mark. Whether it is a Ponzi scheme or a more traditional scam, if the targeted sucker distrusts the con artist, he won’t surrender his money. For the con game to work, the con man must create an illusion of reliability. In short, he must present himself, economically speaking, as if he were “as good as gold.”

The era of limited government led to enormous economic expansion. It also led to the mass production of high-tech weapons. Governments had to get their hands on these weapons in order to defeat other governments. There were few Third World nations in 1885 that could afford fifteen minutes of ammo for a Maxim machine gun. The big governments, in the words of nineteenth-century New York City politician George Washington Plunkett, “seen their opportunities and took them.” The age of modern empires began in earnest.

To regain freedom we have to join forces

  • 17 Ottobre 2018
  • by Blogger

When two giants shake their hands, we can be sure that something big is happening. In our case, the most important tools that free markets brought to us can join forces to demolish once and for all central planning and fractional reserve banking. Economic laws are a priori, thus cannot be violated. Yes, they can be temporarly circumvented, but there is a price to pay. Add today's price is very high given the fact that central bankers are flying blind and run the most dangerous monetary experiment never seen before in monetary history. Market are dynamics while central planning is static, and as we can see economic laws are presenting the bill. There are errors that need to be cleaned. Chapter 11s to be filed. But, most of all, there is freedom to be regained. Therefore, let's explore all the ways that can bring us to that final goal and let's appreciate again what means thriving by means of market forces. A second industrial revolution is coming, and if you don't care about economics, the latter will deal with you.

Francesco SImoncelli

How free market defenders can spread freedom

  • 12 Ottobre 2018
  • by Blogger

The public remains unfamiliar with gold coins, and this is not likely to change, short of an international economic catastrophe. We who are defenders of the free market must do what we can to educate people, especially ourselves, to understand the case for freedom and individual responsibility. This involves understanding the case for voluntary contracts. As part of this educational effort, we should make the case for honest money, which is the case against fractional reserve banking. But this task has barely begun, and the rise in debt is now becoming exponential. There will be a series of debt crises long before voters force the politicians to return to a full gold coin standard. That return would involve a return to freedom.

Francesco Simoncelli

How to return to a gold based currency

  • 09 Ottobre 2018
  • by Blogger

It is conceivable that individuals will someday return to a full gold coin standard, but only in response to a breakdown in the monetary units of international trade. The cost of such a transition would be horrendous. Hardly anyone knows where to buy gold coins. There are not enough coin stores to handle demand for two or three billion adults to sell debt or equity (to whom?) and buy gold.

A tiger by the tail: central banks cartel demise

  • 06 Ottobre 2018
  • by Blogger

There is no conceivable way to establish a full gold coin standard that doesn’t involve either massive deflation or else a huge hike in the price of gold as the price of de-monetizing debt. A rise in the price of gold that didn't also mandate the return to the public of all of the stolen gold would validate the central banks’ ownership of most of the world’s gold, which is the opposite of the traditional free market economist’s case for gold: individual consumer sovereignty.

This means three things: (1) the level of debt will increase, (2) the central banks’ monetization of debt will increase, and (3) monetary inflation will increase.

Fiat currencies are not eternal, but gold it is

  • 02 Ottobre 2018
  • by Blogger

There is only one way back to a full gold coin standard without fractional reserve banking that would not be massively deflationary, thereby destroying men’s confidence in the free market. That non-deflationary transition would involve the central banks’ raising the price of gold while simultaneously selling off its debt. The currency-denominated value of the nation’s monetary base would remain the same.

Gold is still cheap and price inflation is rearing its ugly head

  • 29 Settembre 2018
  • by Blogger

Gold has gotten a bad rap.

Long seen as the investment choice of the cranky and the fearful, the metal yields nothing; as Warren Buffett has said, it just “looks at you.”

This year has been especially lackluster for gold. Its price has slumped 8%, to about $1,200 an ounce, and is off more than 35% from its high of $1,900 in 2011. Adding insult to injury, Vanguard will soon rechristen the largest gold-oriented U.S. mutual fund and shift its focus away from the metal.

But this out-of-favor asset class now deserves a place in investment portfolios.

Compared with stocks and other financial assets, gold looks inexpensive. More important, inflation is starting to pick up in the U.S. and in much of the world as central banks shrink their enormous balance sheets. And gold has represented a good defense against inflation eroding the value of a stock or bond portfolio. Over time, it has held its value against the dollar. Gold was $20.67 an ounce 100 years ago and that bought a good men’s suit. At $1,200 an ounce, the same is true today.

At the end of a credit cycle what counts is gold

  • 24 Settembre 2018
  • by Blogger

There have been many negative developments in the ten years following the Lehman crisis. Logically, you would expect the authorities would have been rethinking monetary and fiscal policies to ensure that the errors that led up to the Lehman crisis are not repeated. You would be wrong, both for the current credit cycle and for the next. The problem is one of not knowing who is responsible. And this is an economic theory matter.

Modern economists insist that the state should have primacy over free markets. They argue that free markets have shown a track record of periodic booms and slumps, which can only be alleviated by the state. This belief has evolved from the Keynesians’ original proposition that the state should run a balanced budget over the business cycle, instead of all the time. The original idea was to increase spending by running budget deficits to create money during the slump in the hope of recouping government finances later when the recovery generates surplus tax revenues. The classic economic theory was replaced by a state theory of economic planning.

Price inflation incoming

  • 22 Settembre 2018
  • by Blogger

The following news is none other than the inevitable consequence of fiat money expansionary policies. In fact, if price inflation has been temporarily tamed, in addition to the fact that it has largely remained confined to the financial sector in recent years, it has also been thanks to low-cost goods from China. It should also be remembered that the stock market boom hasn't made the majority of the population rich in spite of what some scoundrels traders impose as truth. In fact, as we read from the following report the wealth of the average family in the US has not gone anywhere despite the huge boom in equities. There is a severe problem with central banks’ fiat money: It affects income and wealth distribution, and it does so in a non-merit-based, anti-free market way. To understand this, we have to consider that if and when the quantity of money increases in an economy, the prices of different goods will be affected at different points in time and to a different degree. In other words: A rise in the quantity of money changes — and necessarily so — peoples' relative income and wealth position.

 

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