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Gold Is Money

from Wealth Cycles:

Despite the tradition of stock pushers and mainstream media to deride gold as an investment, the American public persists in holding gold in high esteem, according to an April Gallup poll. According to Gallup, Americans believe gold is a better long-term investment (28% of those polled) than real estate (20%), stocks (19%), savings accounts or Certificates of Deposit (19%), or bonds (8%). This faith in gold persists despite the public statements of investment gurus such as Berkshire Hathaway CEO Warren Buffett or economists such as Federal Reserve Chairman Ben Bernanke that scorn gold on the basis that “it doesn’t produce anything” or does not yield a return.

What gold does do is provide a store of value that offers hope for future prosperity to those who otherwise despair of watching the value of their paper currency erode with each new round of central bank printing, for those who once burned fear the fire of the stock markets, and for those who see the bond markets for the debt-burdened sinking pyramid that they are. Real estate? Despite a slight warming in some parts of the country, with banks continuing to slowly dole out foreclosures and short sales for fear of swamping the market, with governments continuing to buy up bad mortgages, it’s far from certain that real estate has yet found a bottom; in some parts of the world (Canada, Australia) looming real estate crashes have still to play themselves out. But here’s the most important thing to understand about gold—it is not merely another investment vehicle. In fact, gold is and has been for all of human history, money.

Read More @ WealthCycles.com

12 comments to Gold Is Money

  • Frank Zak

    Below is an important article for you to understand how the Fed
    operates. Note, when they make money for use, they get interest
    on it they keep as profit. When the Fed prints only to buy USA debt,
    such as QE 2, they buy bonds and such, which make interest. Their
    portfolio is about 2 1/2 trillion dollars now. They pay back
    the Treasury this money.

    Fed Turns Over $77 Billion in Profits to the Treasury
    By BINYAMIN APPELBAUM
    Published: January 10, 2012

    WASHINGTON — The Federal Reserve said on Tuesday that it contributed $76.9 billion in profits to the Treasury Department last year, slightly less than its record 2010 transfer but much more than in any other previous year.

    The Fed is required by law to turn over its profits to the Treasury each year, a highly lucrative byproduct of the central bank’s continuing campaign to stimulate economic growth.

    Almost 97 percent of the Fed’s income was generated by interest payments on its investment portfolio, including $2.5 trillion in Treasury securities and mortgage-backed securities, which it has amassed in an effort to decrease borrowing costs for businesses and consumers by reducing long-term interest rates.

    Through those purchases, the central bank has become the largest single investor in federal debt and securities issued by the government-owned mortgage finance companies Fannie Mae and Freddie Mac. As a consequence, most of the money flowing into the Fed’s coffers comes from taxpayers.

    But Fed officials note that this cycle — payments flowing from Treasury to the Fed and then back to the Treasury — still saves money for taxpayers because those interest payments otherwise would be made to other investors.

    “It’s interest that the Treasury didn’t have to pay to the Chinese,” the Fed’s chairman, Ben S. Bernanke, half-jokingly told Congress last year.

    The scale of the transfers grew rapidly after the financial crisis.

    The Fed made an average annual contribution to the Treasury Department of $23 billion during the five years preceding the crisis. In the years since 2007, the Fed’s average contribution has more than doubled to $54 billion.

    The Fed transferred $79.3 billion in 2010. Its investment portfolio grew again in 2011, approaching $3 trillion, but profits fell modestly as the Fed reduced some more lucrative holdings, like its support for the insurance company American International Group, and expanded its holdings of low-yield government debt.

    Notwithstanding its conservative investment portfolio, the central bank remains highly profitable because of its unique business model. Rather than paying for funding, it simply creates the money that it needs at no cost. The return on its investments, as a result, almost all flows directly to the bottom line.

    Still, the model is not foolproof. The Fed could decide to undermine its own profitability if it concluded that the pace of inflation was increasing. Fed officials have said that they would respond to inflationary pressures through a combination of selling assets and raising short-term interest rates, which would have the effect of undercutting the value of those assets just as they were being sold. The Fed also could conclude that it needed to pay higher interest rates to banks that keep reserves on deposit with the central bank, to discourage withdrawals of that money.

    In addition to the money sent to the Treasury, the Fed spent $4.5 billion on its own operations, including its expanded role as a regulator of the largest financial companies. The 2010 law overhauling financial regulations also requires the Fed to provide funding for two new agencies, the Consumer Financial Protection Bureau and the Office of Financial Research. The bill totaled $282 million last year. Other federal financial regulators are financed by the industries that they oversee. Both systems are intended to shelter regulators from political pressure.

    The results reported Tuesday are preliminary. The 12 regional banks that compose the Federal Reserve system will publish final financial results in a few months. If there is a change in estimated profits, the Fed will adjust the amounts that it pays to the Treasury this year. The contributions are made weekly.

  • Frank Zak

    There is always one question I have had.

    Who owns USA gold reserves ? The USA
    citizens, or the private companies that
    own the Fed ?

    In 1933 they seemed to give it to the
    banks that own the Fed.

    The Fed in New York has major gold reserves
    beneath it. (private corporation)

    But, Fort Knox and West Point are government
    owned.

    So, who owns USA gold reserves and will it be
    subordinated if the USA goes bankrupt ?

    Like M F Global.

  • GOLD!

    Financial DNA: $650 Trillion Manipulation?$650 trillion is written $650,000,000,000,000 and that amounts to more than 10 times the entire world’s annual output! https://www.yammer.com/atca

  • Frank Zak

    Who owns the USA gold reserves ?

    Great question for Sean to ask some
    expert. How about David Walker ?

    The inside source was reported here saying
    there is only 10% of the gold left in Fort
    Knox. (even gave pallet counts)

    Did they lease out the other 90% ?

    Also, I have seen figures on the amount of money
    the Fed makes for printing currency for use.
    This figure was about 400 billion a year.
    (money is debt)

    This is where the private owners of the Fed
    make their profit and do not reimburse
    the Treasury.

    I.E. If the USA printed our own money, we wouldn’t
    have to pay it to the owners of the Fed (Rothschilds, etc).

    This would eliminate 400 billion a year off our national
    debt. his is what Ron Paul wants to do.

  • Frank Zak

    Correction, I used 1933 date, the date they confiscated gold.
    I should have said 1913, when Fed was created. They
    seemed to allocate the gold to the Fed branches then.

    The question is , who owns the gold and is it subordinated
    if the USA goes bankrupt ?

    Since the Fed uses new money that is worthless to buy
    QE 2, mortgage bonds, AIG, etc. It seems they could simply write it
    off with no loss if they wish. All it would do is add
    extra money to the system (inflation).

  • Frank Zak

    http://mises.org/Community/forums/t/20344.aspx?PageIndex=3

    (it should be noted in my above posts the Fed’s profit it pays
    back the Treasury are not profits for the Treasury, because the Treasury
    paid this interest to the Fed in first place.)

    From posts on subject;
    The Fed requires that a member bank buy an amount equal to 6% of the member bank’s own “capital stock and surplus.”

    Take the capital stock amount (from the member bank’s balance sheet) and multiply that by 6%, and you will have how much the member bank needs to contribute to the Fed. This contribution to the Fed is both a minimum and a maximum.

    Take the contribution amount and divide it by $100 per share, and this is the amount of Fed shares the member bank must buy.

    For every $100 share the member bank owns, the Fed has to pay a $6.00 dividend.

    The Treasury is in perpetual debt to itself – with bankers taking a tiny cut each time around.

    - Everytime the Treasury issues a security that the FED buys, the Treasury gets to spend the new money
    - The Treasury also gets most of the interest money it gave to the FED back.
    - But the Treasury still owes that interest nonetheless
    - This requires the Treasury to either create more money (through the FED) or tax people more in order to pay The FED (and essentially itself) the interest on the Security – money for which hasn’t even been created yet.
    - Because of that it requires that new money is constantly created to pay the interest on the previous loan.

    So thats how the Treasury benefits.

    - The banks benefit because they take a tiny cut each year ($6 for every $100 share)
    - If they risk too much in Fractional Reserve Lending the FED will bail them out
    - The new money that is created by the Treasury (essentially) allows banks to further create money as Fraction Reserve Banking takes its course

    I think I may be starting to get it here. However, wouldn’t this eventually be NOT in either of their best-interest if the currency starts to inflate?

  • Yoyo

    Frank…
    It’s simple; The Fed creates money at interest EVEN THOUGH we have the right/responsibility via the Constitution (thru Congress) to coin our own money in silver and gold, period.
    All the other financial shenanigans from the world’s central banks are just meant to obfuscate the simple point that…
    OUR DEBT TO THE PRIVATELY OWNED FED IS A BULL$H!T DEBT!!
    The Fed does not create the interest via printing or digitizing, therefore it is a debt that has to be paid back via the existing money supply…therefore…wait for it…
    …IT CAN NEVER BE REPAID! IT IS DESIGNED TO FAIL!!
    That way, we all continually owe more as they tax us to death and collect all of the valuable assets, i.e. land, commodities, etc.
    BTW, we (the good citizens of the USA) would like to thank the Fed (Rothschilds/Rockafellers, etc) for giving us back a portion of our own money, from the ‘profits’ of the Fed. How generous of them!

  • Ed_B

    Frank… we know what the Fed says that it is doing, how much they made in interest, etc. but without a thorough and independent audit of the Fed, we will never know for sure what they are actually doing. Same goes for the US gold hoard in Ft. Knox. No audit for 50+ years? Give me a break!

  • Ed_B

    Some people say that gold is merely a commodity. This is patent nonsense and is obvious from the fact that banks store any gold they have in their vaults. See any piles of lumber, bushels of wheat or corn, or barrels of oil in there. No, of course not, for they really are just commodities. Gold IS money! If gold were not money, there would be no reason for various governments and banks to collude with each other to depress the price of gold… and they do.

    “Just ask the blue collar savers who have been squirreling cash away for a rainy day.”

    Regardless of collar color, very few people are actually saving any money these days. Thanks to the Fed’s interest rate policies and the considerable amount of inflation that they are creating via excessive money printing, why should we? Money saved is money destroyed by inflation. If we save money in a CD or money market, we lose about 10x more money to inflation than we earn in interest and then that piddling amount of interest as taxed, making it worth even less than not much. No, it is FAR better to spend that money ASAP or convert it into REAL money, aka gold and silver, or things with intrinsic value, such as productive land, a thriving business, equipment, machinery, food, etc.

  • Glitter1

    Actually (these are) the words of Rothschild, which he wrote some 200 years ago, “The few who understand the system, will either be so interested in its profits, or so dependent on its favors that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantages…will bear its burden without complaint, and perhaps without suspecting that the system is inimical (harmful) to their best interests.”After the 2008-2009 collapse it was learned that 14 Trillion Dollars had been transfered from the US System to Banks in Europe and 200 Million had been transfered from Leman,just prior to it’s collapse, to a bank in Tel Aviv. How come you never heard or read about it!Can you say Rothschilds.

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