The
Gold Cover Clause
The Deflation Solution
A Subject You Must Understand If
You Wish To Succeed In Gold
Investments in 2003
By
James E. Sinclair, CEO & Chairman
Tan Range Exploration, www.tanrange.com
With your questions answered:
• What is the Gold Cover Clause?
• How was it and how will it be used?
• When will it be used again?
• How will affect the US Dollar when
implemented?
• How will it effect the price of
gold before and after implemented?
• How will it effect the gold investor
immediately and long-term?
In order to comprehend how gold will be utilized to reverse the present economic
down spiral we need to build our foundation of reasoning with historical facts
as well as several fundamental concepts.
The
Federal Reserve Gold Certificate Ratio
AKA
The Gold Cover Clause
Source:
Encyclopedia of Banking & Finance (9th Edition) by Charles J Woelfel
Definitions:
The ratio of the prescribed assets to the specified liabilities of Federal Reserve
banks, the actually prevailing proportion being reported in the weekly Federal
Reserve Statement. Paragraph 3 of Section 16 of the Federal Reserve Act was
amended June 12, 1945, so as to reduce the minimum reserve requirements of the
Federal Reserve banks from 40% of their Federal Reserve notes outstanding and
35% of their deposits to 25% of both their notes and deposits. Where the former
requirements, however, had permitted lawful money as an alternative to gold
certificates as the required assets for the 35% reserve against deposits and
reserves in gold certificates for the 40% against Federal Reserve notes in actual
circulation, the new requirement permitted only gold certificates or gold certificate
credits as the reserve. Ratio of gold certificates to deposits and Federal Reserve
note liabilities, combined, of the Federal Reserve banks had dipped to 41.7%
as of December 31, 1945, compared with 90% at the close of 1940. Under Section
11(c) of the Federal Reserve Act, when the gold (certificates) reserve held
against Federal Reserve notes fell below 40%, the Board of Governors of the
Federal Reserve System was to establish a graduated tax of not more than 1%
per annum upon such deficiency until the reserves fell to 32.5%; and when the
reserve fell below 32.5%, a tax at the rate of not less than 1.5% per annum,
upon each 2.5% or faction thereof that such reserve fell below 32.5% per annum,
was to be paid by the Federal Reserve bank concerned, but the bank was to add
the amount of the tax to the discount rate.
Under the June 12, 1945, amendment (59 Stat. 237), when the reserve held against
Federal Reserve notes fell below 25%, the Board of Governors of the Federal
Reserve System was to establish a graduated tax of not more than 1% upon such
deficiency until the reserves fell to 20%; and when the reserve fell below 20%,
a tax at the rate of not less than 1.5%, upon each 2.5% or fraction thereof
that the reserve fell below 20%, was to be paid by the Federal Reserve bank
concerned, but the bank was to add the amount of the tax to the discount rate.
By act of Congress approved March 3, 1965 (P.L. 89-3), this reserve requirement
contained in Section 16 of the Federal Reserve Act for the maintenance of gold
certificates of not less than 25% against Federal Reserve bank deposit liabilities
was eliminated. Ratio of gold certificates to Federal Reserve notes outstanding
and deposit liabilities, combined, had dipped to 27.5% as of December 31, 1964.
Based on the new required coverage of only Federal Reserve notes outstanding,
the ratio would have been 42.7% as of December 31, 1964.
By
the end of 1967, the ratio of gold certificates to Federal Reserve notes outstanding
was down to 27.1%. By act of Congress approved March 18, 1968 (P.L. 90-269),
the revised provision of Section 16 of the Federal Reserve Act, under which
the Federal Reserve banks were required to maintain reserves in gold certificates
of not less than 25% against Federal Reserve notes (the so-called gold cover
against the notes) was finally eliminated altogether.
JES Note:
By P.L. 90-269 on March 18th 1968 the Dollar Reserve Standard & international
political economics were founded. With this event the creation of money supply
no longer had any controls other than the will of the Governors of the Federal
Reserve System. Note the comments made by Federal Reserve Chairman Greenspan
on the over production of money concerning the results of a fiat (paper) monetary
system, in his comment on gold. Understanding the event of March 18th, 1968
in the light of the recent statement made by Chairman Greenspan concerning fiat
monetary system’s incapacity is quite important to your understanding
of what will occur in the not too far future.
Recent quote from the December 19, 2002
Chairman of the Federal Reserve
Remark on Gold
JES Note: The following statement by Chairman Greenspan
on the basic Gospel of Gold and related to the unbridled creation of money supply
that has occurred without the Gold Cover Clause in effect.
"Although the gold standard could hardly be portrayed as having produced
a period of price tranquility, it was the case that the price level in 1929
was not much different, on net, from what it had been in 1800. But, in the two
decades following the abandonment of the gold standard in 1933, the consumer
price index in the United States nearly doubled. And, in the four decades after
that, prices quintupled. Monetary policy, unleashed from the constraint of domestic
gold convertibility, has allowed a persistent over issuance of money. As recently
as a decade ago, central bankers, having witnessed more than a half-century
of chronic inflation, appeared to confirm that a fiat currency was inherently
subject to excess."
JES note: The next four statements by the Chairman refers
to what I believe is the preparation to invoke all of the means that were used
in the Roosevelt years to fight deflation and a preemptive measure should inflationary
figures fall below the zero level.
"Moreover, a major objective of the recent heightened level of scrutiny
is to ensure that any latent deflationary pressures are appropriately addressed
well before they become a problem.
“Although the US economy has largely escaped any deflation since World
War II, there are some well-founded reasons to presume that deflation is more
of a threat to economic growth than is inflation."
"The expansion of the monetary base can proceed even if overnight rates
are driven to their zero lower bound."
"Clearly, it would be desirable to avoid deflation. But if deflation were
to develop, options for aggressive monetary policy responses are available."
JES note:
I firmly believe that you can now expect a rise in the price of gold without
significant interruption unless it runs too hard, too fast. Devaluation of the
dollar in terms of gold was one of the tools used in the 1930 to fight deflation.
Since that is the nature of gold to run hard price-wise, you can expect gold
to be turned back at certain levels as it was last week at $354.50. It will
be turned back again at $372. However I am now convinced that we will see a
price in the area over $400 in the not too distant future as the Federal Reserve
acts to offset incipient deflation by significant additional expansion of monetary
aggregates and the attendant effect on the dollar.
Gold
will be called back into the system via a modernized version of the Gold Cover
Clause somewhere, but no later than the time at which the USDX (dollar measure)
trades in the middle .70s. This will then be necessary to then prevent the dollar
from experiencing a free-fall in the form I have suggested above. In my opinion
introduction of a modernized Gold Cover Clause – Reserve Ratio will work
some time after it is introduced to restructure dollar confidence. Since the
need exists now to expand the monetary aggregates, a Gold Cover Clause will
not immediately find its way into the system.
I now believe that with this plan in hand, the cyclical bottom due in the general
equities market by June of 2004 has a reasonable chance of occurring.
Nobel
Comments on the Noble Metal
Robert Mundell 1999 Nobel Prize Winner For Economics
On The Role of Gold In Monetary Application
The Gold Cover Clause Background and History
Nixon
and Ford
§ 1968: Sterilized “gold cover”
on Fed liabilities
§ Foreign Banks cash in dollars for
gold
§ 1971: Nixon repudiated U.S. gold
obligation
§ Wage and price controls
§ “WIN”: Whip Inflation
Now!
“In April 1934, after a year of flexible exchange rates, the United States
went back to gold after a devaluation of the dollar. This decreased the gold
value of the dollar by 40.94 percent, raising the official price of gold 69.33
percent to $35 an ounce. How history would have been changed had President Herbert
Hoover devalued the dollar, three years earlier!
France held onto its gold parity until 1936, when it devalued the franc. Two
other far-reaching events occurred in that year. One was the publication of
Keynes' General Theory; the other signing of the Tripartite Accord among the
United States, Britain and France. One ushered in a new theory of policy management
for a closed economy; the other, a precursor of the Bretton Woods agreement,
established some rules for exchange rate management in the new international
monetary system.
The contradiction between the two could hardly be more ironic. At a time when
Keynesian policies of national economic management were becoming increasingly
accepted by economists, the world economy had adopted a new fixed exchange rate
system that was incompatible with those policies.
In
the new arrangements, which were ratified at Bretton Woods in 1944, countries
were required to establish parities fixed in gold and maintain fixed exchange
rates to one another. The new system, however, differed greatly from the old
gold standard. For one thing, the role of the United States in the system was
asymmetric. A special clause allowed any country the option of fixing the price
of gold instead of keeping the exchange rates of other members fixed. Because
the dollar was the only currency tied to gold it was the only country in a position
to exercise the gold option. There thus came into being the asymmetrical arrangements
in which the United States fixed the price of gold whereas other countries fixed
their currencies to the dollar. Another difference of the new system from the
old was that not even the United States was on anything that could be called
a full gold standard. The dollar was no longer in the old sense "anchored"
to gold; it was rather that the world price level, and therefore the real price
of gold, was heavily influenced by the United States. Gold had become a passenger
in the system.
Was a new system created at Bretton Woods? From the early planning it seemed
that this would be the case. The British and American plans both contained provisions
for a world currency: John Maynard Keynes had his "bancor," and Harry
Dexter White had his "unitas." But these forward-looking ideas were
soon buried. No doubt the Americans came to believe that a world currency would
clip the wings of the dollar. There was not therefore a Bretton Woods "system"
but rather a Bretton Woods "order" outlining the charter of a system
that already existed.
World War II brought a repetition of the monetary imbalances of World War I.
The devaluation of the dollar and gathering war clouds in Europe made the dollar
a safe haven and the recipient of gold to pay for war goods. The United States
sterilized the gold imports and imposed price controls. It was therefore able
to run deficits without going off gold. Because gold was still "overvalued"
in this era of "dollar shortage," interest rates remained incredibly
low. By 1945, the public debt had soared to 125 percent of GDP.
At the end of the war, the U.S. price level doubled as a result of the end of
price control, the unleashing of pent-up demand and the expansionary monetary
policies of the Federal Reserve System that continued to support the bond market.
The postwar inflation halved the real value of the public debt, increased tax
revenues as a result of "bracket creep" in the steeply-progressive
income tax system (which rose to 92.5 percent), halved the real value of gold
and eliminated its overvaluation. After further inflation during the Korean
War and the onset of steady "secular" inflation, gold became undervalued.
Meanwhile, Germany and Japan, in the aftermath of their paper-money inflations,
under the auspices of the U.S. occupation authorities, had currency reforms
in which 10 units of old money were exchanged for 1 unit of new currency; both
reforms took place in 1948, with the exchange rate for Germany set at DM 4.2
= $1, and for Japan at ¥360 = $1. The exchange rates later proved to undervalue
German and Japanese labor and the two economies performed spectacularly in the
post-war period, fulfilling their destiny of overtaking Britain and France as
the second and third largest economies in the world.
Until the 1960's, U.S. macroeconomic policy was based more on closed-economy
principles than on the requirements of an international monetary system. Monetary
and fiscal policy was directed at the needs of internal balance and the balance
of payments was all but ignored. In 1949 the United States had peaked at over
700 million ounces of gold, more than 75 percent of the world's monetary gold.
Gold losses began soon after, but the effect of these sales on the money supply
was sterilized by equivalent purchases of government bonds by the Federal Reserve
System. The gold losses were at first looked upon as a healthy redistribution
of the world's gold reserves but toward the late 1950's they were recognized
as dangerous.
The Federal Reserve System was required to keep a 25 percent (reduced from 40
percent in 1945) gold cover behind its currency and deposit liabilities. If
gold reserves fell below this level, interest rates would have to be raised.
If the fall in gold reserves reached the level of required reserves, the United
States would be forced to take account of its balance- of- payments constraint
like any other country. The problem of the appropriate mix for monetary and
fiscal policy came to the foreground during the administration of President
John F. Kennedy, who took office in 1961.
At this time I played a part in the story. Newly arrived in the Research Department
at the International Monetary Fund (IMF) in the fall of 1961, I was asked to
look into the theoretical aspects of the monetary-fiscal policy mix. The main
problem in this post-Sputnik era was sluggish growth and subpar employment in
the United States in contrast to Europe and Japan (precisely the reverse of
the situation today), and a now worrisome balance of payments deficit. Three
schools of thought had emerged. Keynesians, led by Leon Keyserling, the first
Chairman of the Council of Economic Advisers, pushed for easy money and an increase
in government spending. The Chamber of Commerce argued for fiscal constraint
and tighter money. The Council of Economic Advisers, following the Samuelson-Tobin
"neo-classical synthesis," advocated low interest rates to spur growth
and a budget surplus to siphon off excess liquidity and prevent inflation.
In my analysis, I showed that none of the above policies would work, and would
lead the economy away from equilibrium. The correct policy mix was to lower
taxes to spur employment, and tighten monetary policy to protect the balance
of payments. My paper was circulated by the IMF to its members in November 1961
and published in IMF Staff Papers in March 1962.
It gradually came to be realized that the policies of the Kennedy administration
were not working: the wrong policy mix had produced increasingly disequilibrating
effects: a steel strike, a stock market crash, and stagnation. At the end of
1962, Kennedy announced a reversal of the policy mix, with tax cuts to spur
the economy and interest rates to protect the balance of payments. Legislative
delays meant that the tax cut had to wait until the summer of 1964 but its anticipation
positioned the economy for the great expansion of the 1960's.
The adoption of my policy mix helped the United States to achieve rapid growth
with stability. It was not intended to and could not solve the basic problem
of the international monetary system, which stemmed from the undervaluation
of gold. Nevertheless the problem of the U.S. balance- of- payments was intricately
tied up with the problem of the system. With very little excess gold coming
into the stocks of central banks from the private market, and the US dollar
the only alternative component of reserves, the U.S. deficit was the principal
means by which the rest of the world was supplied with additional reserves.
If the United States failed to correct its balance of payments deficit, it would
no longer be able to maintain gold convertibility; on the other hand, if it
corrected its deficit, the rest of the world would run short of reserves and
bring on slower growth or, worse, deflation. The last scenario hinted at a repetition
of the problem of the interwar period.
Two basic solutions were consistent with preserving the system. One solution
was to raise the price of gold. The founding fathers of the IMF had put a provision
in the IMF Articles of Agreement for dealing with a gold scarcity or surplus:
a change in the par values of all currencies, which would have changed the price
of gold in terms of all currencies and left exchange rates unchanged. In the
1968 election campaign, candidate Richard M. Nixon chose Arthur Burns as his
emissary on a secret mission to sound out European opinion on an increase in
the price of gold. It turned out to be favorable and Burns recommended prompt
action immediately after the election. Nothing, however, came of it.
The other option was to create a substitute for gold. This course was in fact
adopted. In the late summer of 1967, international agreement was reached on
an amendment to the IMF articles to allow the creation of Special Drawing Rights
(SDRs), gold-guaranteed bookkeeping reserves made available through the IMF,
with a unit value equal to one gold dollar, or 1/35 of an ounce. Somewhat less
than SDR 10 billion were allocated to member countries in 1970, 1971 and 1972,
but they proved to be inadequate—too little and too late--to meet the
main problems of the system.
On August 15, 1971, confronted by requests for conversion of dollars into gold
by the United Kingdom and other countries, President Nixon took the dollar off
gold, closing the "gold window" at which dollars were exchanged for
gold with foreign central banks. The other countries now took their currencies
off the dollar and a period of floating began.
But floating made the embryonic plans just forming for European monetary integration
more difficult, and in December 1971, at a meeting at the Smithsonian Institution
in Washington, D. C., finance ministers agreed on a restoration of the fixed
exchange rate system without gold convertibility. A few exchange rates were
changed and the official dollar price of gold was raised but the act was almost
purely nominal since the United States was no longer committed to buying or
selling gold.
The world thus moved onto a pure dollar standard, in which the major countries
fixed their currencies to the dollar without a reciprocal obligation with respect
to gold convertibility on the part of the United States. But U.S. monetary policy
was too expansionary in the following years and, after another ineffective devaluation
of the dollar, the system was allowed to break up into generalized floating
in the spring of 1973. Thus ended the dollar standard.
What lessons can be learned from the second third of the century? One is that
the policy mix has to suit the system. Another is that a gold-based international
system cannot survive if war-related inflation makes gold undervalued and the
authorities are unwilling to adjust the gold price and create a sufficient quantity
of gold substitutes. A third lesson is that the superpower cannot be disciplined
by the requirements of convertibility or any other international commitment
if it is at the expense of vital political objectives at home; the tail cannot
wag the dog. A fourth lesson is that a fixed exchange rate system can work only
if there is mutual agreement on the common rate of inflation. Europe was willing
to swallow the fact that the dollar was not freely convertible into gold in
the 1960's, but when U.S. monetary policy became incompatible with price stability
in the rest of the world (and in particular Europe), the costs of the fixed-
exchange- rate system were perceived to exceed its benefits.
A final lesson is that political events, and in particular the Vietnam War soured
relations between the Atlantic partners and created a tension in the 1960's
that can only be compared with the pall cast over the international system by
disputes over reparations in the 1920's. Fixed- exchange- rate systems work
better among friends than rivals or enemies.”
http://www.robertmundell.net/NobelLecture/nobel4.asp
JES note: My only disagreement with the above is that
in practice the Dollar Reserve Standard reemerged along with the strong dollar
in 1983. The Dollar Standard and Global Markets became the marching orders for
all economies led by the Cheerleaders of the International Monetary Fund and
World Bank. It is this post-Chairman Volker’s period that I believe
was the topic in Greenspan’s remark that we may have come full cycle.
The Gold Cover Clause Reserve Ratio
The Final Solution
First: To understand the key ingredient in this presentation,
the reinstatement of a modernized Gold Cover Clause, you must comprehend what
in fact the dollar is. To understand this I suggest that you need to think of
the dollar in its essential role as the common share of the United States of
America. Just as common shares of corporations fluctuate in the market place,
so do currencies, and the common shares of countries. Much like a quarterly
or annual report, the reported Budget Deficit portrays the quality of economic
management of this country. The Trade Surplus or Deficit is akin to the earnings
report of the corporation, the USA. The level of the discount rate is the dividend
rate of the common shares of the USA.
Second: We can track the establishment of the Instant Gratification
Economy in the late 60’s to its birth in the Nixon Administration. That
unfortunate birth took place with the reduction of the requirements of the Gold
Cover Clause from 5% to 0%. The function of the Gold Cover is to assure that
the size of the money supply does not exceed a given amount of gold cover.
The sterilization of the Gold Cover Clause handed the control of the supply
of money in the USA over to quasi-political special interest control. It was
this act that gave birth to the paper economy of the USA, thereby founding the
ensuing three generation Instant Gratification Economy funded by the over production
of dollars, now, IMO, confirmed by Chairman Greenspan’s own words. Why
has the present Chairman of the Federal Reserve System made this distinction
so positive to the function of gold in a monetary system?
Items that control act as alarms. Gold was a control and an alarm that rang
through its price. Currency parities were alarms in terms of market fluctuations
to or away from parity rates. Nixon's sterilization of the Gold Cover Clause
accelerated the world economy on a course to a condition devoid of an alarm
system. Today's body economic is much like the human body with the disease whereby
the body loses its ability to feel pain, thus inadvertently placing itself in
harm’s way. We now live in an "Alarmless Casino Society" within
the "Instant Gratification Economy", now in the throes of its own
demise. That is why the markets have become pure casinos in which a daily crisis sounds
no alarm.
An interesting question one might ask oneself is: What post-Nixon Governor of
the Federal Reserve has failed to prime the money pump in the USA during the
last two years of an incumbent president's term in order to grease the wheels
of the economy and equity markets, facilitating the incumbent's re-election?
Third: Gold has one primary role in its relation to a currency.
That role is not convertibility. Convertibility dealt with gold's role in controlling
Trade Balances. The source of the problem is not trade balances; it is the freedom
to create violent changes in the supply of money. Gold has only one monetary
function; it acts as a control. Gold could control the very item that stands
at the foundation of today's nemesis, the errors in human judgment resulting
in mismanagement of the money supply. It is a glaring contradiction for an economic
society, built on the ability of free markets to effect economic distribution,
to trust a group of 'quasi-political special interest people with titles' with
the management of our economy via the expansion or contraction of the money
supply, primarily. Communism and socialism are supposedly dead, the USA is in
the process of paying a high price for it is a socialist principle to allow
the titled few to manage the economy as has been the case since the reduction
of the Gold Cover Clause to Zero.
Fourth: To determine how a group of people with the ability
to act will perform in a market crisis, we need only examine their reasoning
and action in a previous situation. The recent extreme decline in US equities
have been blamed in part on the Imperialistic Attitude of CEOs acting in some
cases above and beyond the law. In order to attempt to create a return of confidence
in the paper assets, the common shares of US corporations, new laws have been
passed for mandating corporate management's ethical behavior. This is what is
called a Legislated Enforced Ethic. Therefore, one can conclude, that in an
economic crisis the minds of those empowered to act will gravitate towards a
solution that includes the utilization of legislated enforced ethics, especially
if the means are already legislated and in the system.
Fifth: Definition -- A spiral is a grouping
of cause and effect that work to accelerate each other towards an event which
then empowers the spiral itself.
There exists a clear downward spiral of events, each affecting the other with
no evidence that this cycle will end. A downward spiral in markets is not much
different from a downward spiral in the human experience. In that sense, a downward
spiral such as depression requires intervention in order to reverse it. Psychotropic
drugs, as an intervention, are often prescribed in order to provide an intervening
window that can prevent the depression down spiral from going to its predictable
end. Should the patient grasp that opportunity provided by the intervention,
taking a more positive look at their circumstances, real progress may occur
in their lives. Similarly, to reverse a downward economic spiral of today's
proportion, great intervention is necessary to affect a long-term recovery.
Sixth: Who says that the US dollar, once it closes below 104
on the USDX index, cannot at some time in its 21-month future window of Bear
possibilities put on a NASDAQ-type decline? We live in a Casino market world
affecting all markets, played by tranches of money larger than that of the central
bank individually or collectively.
Nobody in the established investment community expected the NASDAQ to do what
it did. Nobody in the established investment community expects the US dollar
to do what it will do. The heart of the Down Spiral is the US dollar. To stop
the Down Spiral, should it get totally out of hand, before a collapse of the
$72 trillion dollar mountain of sewage, unfunded, specific obligation paper,
called derivatives, the dollar will have to be rescued long-term by some act
to resuscitate faith in that paper asset, the US Dollar.
Seventh: The Present Economic Spiral, which will cause a significant
rise in the gold price and a significant further drop in the US dollar, is;
In the Environment of an expanding US Budget Deficit we are experiencing an
expanding US Trade Deficit, which impacts an expanding US Current Account Deficit
which now at 5% of US Gross Domestic Product produces significant currency adjustments
in the US dollar.
As a result of a new decline in the dollar below the first low of 104 as measured
by the USDX index, non-US holders of US Government Securities will begin to
reduce their purchases. The shift in momentum of purchasing reverses the previous
up trend in this market, which will result in a surprise increase in interest
rates in the environment of weak business conditions internationally. This results
in a further drop in general equities from any recovery level or from the present
levels, as we have always seen that declining US equity prices are accompanied
by further declines in the US Dollar. Therefore a further drop in the US Dollar
occurs. And therefore the down spiral marches on and on. This economic spiral
will continue to push gold higher and the dollar lower. Each time it impacts
upon itself, the factors in the Down Economic Spiral further impact the holders
of US Treasury instrument, producing the 5th Element of a Long-term Bull Market
in Gold by creating the most unexpected Long Term Bear market in US Treasury
instruments due cyclically and fundamentally, as explained above, to occur.
Historically US interest rates are not made by the Federal Reserve. Rather,
US interest rates are a product of the market level of US Treasury instruments.
That is a key concept to keep in mind.
Eighth: As part of the conditioning that has taken place during
the experience of the three-generation "Instant Gratification Economy",
the majority of market participants, even those akin to gold, believe that governments
are more powerful than markets. This is a fallacy about to be proven wrong.
Markets are the most powerful economic forces in a world awash in paper money.
Markets force monetary policy, not the other way around.
The Tools to Prevent a Deflationary Melt-down
War is Now Declared on “Deflation”
And the Fourth General in the CONFLICT
Is
Chairman of the Federal Reserve,
Economic General Alan Greenspan
The Tools Are:
1/ A devaluation of the dollar in terms of gold by allowing
an appreciation in gold’s price without significant opposition by central
banks.
2/ Reinstitution of a modernized Gold Cover Clause in which
the gold holding of the USA will be rationalized to the then existing market
price for gold. The holding of Gold for the purpose of this new Federal Reserve
Ratio will be considered as the percentage required for the then outstanding
liabilities.
To expand monetary aggregates, the price of gold must rise or the US Federal
Reserve, on behalf of the Treasury, would be required to buy gold. A firm gold
market then becomes the friend of the Fed and not the enemy of the dollar.
The necessary aura of gold acting as a control would bring greater confidence
to the US dollar at the devalued price in terms of the gold price and work toward
the appreciation of the dollar versus other currencies.
3/ Adjustment of the Tax Code with a focus on those areas that
historically support investment in business activity, which is a most Republican
approach to tax codes. Expansion of tax benefits for business investment.
4/ Expansion of monetary aggregates to any level required should
inflation figures go to net negative basis with significant expansion ahead
of that event in an attempt to prevent deflation.
5/ Fulfillment of all presently financed government projects.
6/ The potential of a War
What all this means to the Gold Investor
• This bull market in gold is generational and not cyclical
in nature. It will span a much longer time than any advisor so far has suggested.
It may well exist for the next 30 years.
• There is no need to be concerned that a missed sell point
for a trader under $400 gold is a lost opportunity. In fact gold will continually
make higher lows and higher highs into the predictable future.
• Gold producer hedgers who refuse or cannot reverse their
hedge positions are in serious trouble.
• Gold shares have a bright long-term future.
• The value of properties in promising gold fields will increase
significantly.
• Exploration for new gold properties will increase significantly.