- foorex2day

Debtors v. Savers II - FOA Retro House Mix

Gold holds its value

<div align="justify">On a recent trip to Sydney I visited the Reserve Bank of Australia's <a href="http://www.rba.gov.au/Museum/index_static.html">Museum of Australian Currency Notes</a>. From the displays comes the following interesting information about prices in "the 1900's":<br /><br />6 shillings a week for meat<br />16 shillings a week for groceries<br />25 shillings a week for rent<br />£250 for a Model T Ford<br />House equal to 10 times annual earnings<br />During war years average weekly earnings were £3<br /><br />Given that there are 20 shillings in a pound and a pound is equal to a sovereign, which is equal to 0.2354 ounces, we can convert those prices at say AUD 1400 ounce into today's money:<br /><br />$99 a week for meat<br />$264 a week for groceries<br />$412 a week for rent<br />$82,500 for a Model T Ford<br />$514,800 for a house<br /><br />Of course this is a bit imprecise given the prices are as at "1900's" and wages are as at "war years", but it is a reasonable holding of value and certainly more than if one had just held on to paper money for a hundred years. See also <a href="http://goldchat.blogspot.com/2009/03/1966-50c-piece.html">this post</a> on the same theme regarding the 1966 50c coin.</div>

On a recent trip to Sydney I visited the Reserve Bank of Australia's Museum of Australian Currency Notes . From the displays comes the f...

Debtors vs Creditors

<div align="justify">Those interested in this issue, which I have covered in <a href="http://goldchat.blogspot.com/2010/06/gold-and-clash-of-civilisations-by-andy.html">this</a> and <a href="http://goldchat.blogspot.com/2009/09/protecting-yourself-from-world-war-iii.html">this</a> post, will find FOFOA's <a href="http://fofoa.blogspot.com/2010/07/debtors-and-savers.html">latest post</a> useful.<br /><br />FOFOA agrees with Marx that "the history of all hitherto existing society is the history of class struggle" but says that he got the classes wrong:<br /><br /><em>The two classes are not the Labour and the Capital, the rich and the poor, the proletariat and the bourgeoisie, or the workers and the elite. The two classes are the Debtors and the Savers. "The soft money camp" and "the hard money camp". History reveals the story of these two groups, over and over and over again. Always one is in power, and always the other one desires the power.</em><br /><br />What is the relevance of this to gold? FOFOA argues that:<br /><br /><em>... when the soft money guys are in power the transfer of wealth happens slowly and gradually, and wealth flows from the Savers to the Debtors. But when "soft money" collapses - and it ALWAYS collapses - there is a very RAPID transfer of wealth in the other direction, from the Debtors back to the Savers.<br /><br />... By selling your debt-financed paper savings and buying physical gold today you are making the conscious CHOICE to join the camp of the true Savers.</em></div>

Those interested in this issue, which I have covered in this and this post, will find FOFOA's latest post useful. FOFOA agrees with M...

The Debtors and the Savers

Unfair coin ban for SMSFs

<div style="text-align: justify;">The <a href="http://www.supersystemreview.gov.au/content/downloads/self_managed_solutions/self_managed_super_solutions.pdf">Cooper Super System Review</a> has been looking at the issue of collectables held in SMSFs and has a preliminary recommendation that:</div><div style="text-align: justify;"><br /></div><i><div style="text-align: justify;"><span class="Apple-style-span" style="font-style: normal; "><i>a) the acquisition of collectables and personal use assets by SMSF trustees be prohibited;</i></span></div><div style="text-align: justify;"><span class="Apple-style-span" style="font-style: normal; "><i>b) SMSFs that own collectables or personal use assets be provided a transitional period,</i></span></div><div style="text-align: justify;"><span class="Apple-style-span" style="font-style: normal; "><i>up to 30 June 2020, in which to dispose of those assets; and</i></span></div><div style="text-align: justify;"><span class="Apple-style-span" style="font-style: normal; "><i>c) APRA‐regulated funds be exempted from these changes.</i></span></div></i><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Their examples include paintings, jewellery, antiques, stamp collections, wine, exotic cars, golf club memberships, race horses and boats. The list is based on and makes reference to the <a href="http://www.ato.gov.au/individuals/content.asp?doc=/content/36555.htm&page=1#P10_750">ATO's definition</a> of ‘collectables’ and ‘personal use assets’ and this definition includes “coins or medallions”.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The inclusion of coins, stamps and medallions and the requirement they be sold within 10 years has caused great concern within the numismatic community. It is the view of coin dealers that the market cannot absorb disposal of the volume of numismatic product held in SMSF over 10 years, resulting in a negative impact on market prices.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Now it is possible for a SMSF to “sell” their collection to the individual(s) who benefit from the SMSF, thereby avoiding any impact in the market. However this assumes that such individuals have the cash to pay their SMSF. In addition, the book sale would result in tax consequences for the SMSF.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I would note at this point that those who hold bullion coins through their SMSF should not have anything to worry about. The super review's reliance on the ATO's definitions for tax purposes means that bullion should be excluded due to the very clear difference the ATO makes between bullion and collectables for GST purposes in <a href="http://law.ato.gov.au/atolaw/view.htm?docid=GST/GSTR200310/NAT/ATO/00001">this ruling</a>. I cannot see the super review going against this because it would result in the super treatment conflicting and disagreeing with the ATO's arguments around bullion/collectables, opening up all sorts of issues for the ATO. The primary problem would be that individual bullion items under $500 would not attract capital gains tax! I can't see the ATO letting that happen.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">So on what basis has the super review determined that collectables are not a suitable investment? Initially they say that they believe “that there are certain types of assets that should not be regarded as investments that build retirement savings”.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Now this is contradicted by the fact that their recommendation excludes APRA regulated funds. If collectables were not good enough for SMSF to “build retirement savings” then logically they should also not be good enough for APRA regulated funds. The fact that they make this illogical statement indicates to me they are clutching at justifications for their position.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Later in their document they give the real reason: “The principal concern is that the cumulative regulatory and compliance complexities outweigh the potential benefits of allowing such a liberal investment menu to a sector that is not directly prudentially regulated.”</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Now what this is really saying is that they suspect people are abusing the system but it is too much trouble to enforce compliance with the rules so lets just punish everyone and ban it all outright. But what really gets to me is that they are making this ban retrospective. They could have recommended disallowing <i>further</i> investment in collectables rather than forcing the liquidation of existing collections. There is no justice in retrospective law.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The fact is that it is bureaucrats who drafted the detailed legislation that allowed the loophole but instead of admitting their mistake and living with it, they want to perform a <a href="http://en.wikipedia.org/wiki/Nineteen_Eighty-Four">1984 Orwellian</a> expunging of collectable from SMSFs so they can pretend the whole thing never happened.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">And the result? Forced sales that will depress prices and thus the value of those SMSFs. So much for helping people “build retirement savings”, Mr Cooper.</div>

The Cooper Super System Review has been looking at the issue of collectables held in SMSFs and has a preliminary recommendation that: a) th...

Timing Is Everything

AIG Precious Metal Manipulator?

<div align="justify">Further to this <a href="http://www.zerohedge.com/article/was-aig-addition-being-riskiest-company-world-also-precious-metals-manipulator">Zero Hedge post</a> note the following from CPM Group's Mr Christian:<br /><br /><a href="http://www.cpmgroup.com/free_library1/HEDGING/Bullion_Banking_Explained_February_2000.pdf">Bullion Banking Explained</a> (dated Feb 2000):<br /><br /><em>Many banks use factor loadings of 5 to 10 for their gold and silver, meaning that they will loan or sell 5 to 10 times as much metal as they have either purchased or committed to buy. One dealer we know uses a leverage factor of 40. (Long Term Capital Management had a leverage factor of 100 when it nearly collapsed in 1998.)</em><br /><br />So CPM Group knew of a 40:1 precious metals leveraged firm in 2000, who were they? Mr Christian tells us in his <a href="http://www.netcastdaily.com/broadcast/fsn2010-0410-1.mp3">April 10 2010 interview</a> with Jim Puplava of Financial Sense at the 44 minute mark:<br /><br /><em>AIG was not a bank, was not a commercial bank, and under the US laws non-commercial banks don't come under the law, the guidance of the office of the controller of the currency. AIG used a leverage factor of 40, so if people gave them a million ounces of gold to hold for them, they could lend out 40. I mean, I have friends who are metals traders who were looking for job years ago and, you know, they went to AIG and AIG said “we use a leverage factor of 40” and the trader is a seasoned guy and he's worked at major banks and investment banks, he said “I can't operate at that level of leverage its just too risky more me” and AIG trading said “well this is what we do”, right, so there is a loophole in our regulatory system, its doesn't really have anything to do with gold and silver per se but it allows non-banks to participate in banking activities in a way that skirts banking regulations that are designed to promote stability in the banking system.</em><br /><br />Interesting that in 2000 CPM Group could publicly talk about “one dealer we know” having 40:1 leverage and it was not considered an issue (although he didn’t publicly mention is was via a "loophole") – sign of those times I suppose. Question is, has anything changed?</div>

Further to this Zero Hedge post note the following from CPM Group's Mr Christian: Bullion Banking Explained (dated Feb 2000): Many ban...