Swiss Parliament to discuss gold franc

Right-wing party seeks way back to gold standard

By Agnese Smith, July 8, 2011, 4:12 a.m. EDT

(http://www.marketwatch.com/Story/story/print?guid=E7C9F392-A8BA-11E0-AAD1-002128049AD6)

ZURICH (MarketWatch) — The Swiss Parliament is expected later this year to discuss the creation of a gold franc — a parallel currency to the official Swiss franc, with the fringe initiative likely triggering a broader debate about the role of the precious metal in the Alpine nation.

The initiative is part of “Healthy Currency,” a campaign sponsored by politicians from the right-wing Swiss People’s Party (SVP) — the country’s biggest — that is seeking to capitalize on popular fears about global financial turmoil and inflation to reverse the government’s current policy on gold.

“I can imagine that this will spark some sort of debate about gold and there may be some pressure to accept the parallel currency,” said Dr. Gebhard Kirchgaessner, an economics professor at St. Gallen University. “But it won’t have any real effect on the economy. It seems incredible to imagine that there are people out there willing to buy millions of these things.”

Switzerland, which in 2000 became one of the last countries to decouple its currency from gold, is not the only place to contemplate a change in the precious metal’s role amid controversy over government involvement in the economy. In March, Utah became the first state in the U.S. to legalize gold and silver coins as currency, while similar legislation was considered in Montana, Missouri, Colorado, Idaho and Indiana.

“I want Swiss people to have the freedom to choose a completely different currency,” said Thomas Jacob, the man behind the gold franc concept. ”Today’s monetary system is all backed by debt — all backed by nothing — and I want people to realize this.”

A good part of the enthusiasm for gold, which provokes strong emotion among many who invest in it, has to do with its price: the yellow metal has more than quadrupled during the last decade and now stands at more than $1,500 per ounce.

In the U.S., legislation to allow a gold currency is largely symbolic — a protest against what many consider irresponsible spending by central governments to recharge economies. But according to Jacob, the gold franc has a more practical goal: giving small investors the opportunity to safeguard their investments against global uncertainty.

Modest investors face several hurdles to investing in the precious metal, said the 50 year-old Jacob, a former pilot and currently a sales coach at Zurich Financial Services Group. Collecting coins, bullion and gold certificates typically requires professional advice and even the smallest coin costs around 100 francs. One of the new gold francs, on the other hand, with a gold content of 0.1 grams, could be purchased for just 5 francs (at current prices).

While there is evidence that investing in gold is increasingly popular in Switzerland and other countries, the idea of establishing a gold franc is not foremost on the minds most ordinary Swiss, some of whom still find the subject of gold uncomfortable given the country’s association with precious metals looted in World War II.

“I got rid of my coins a while ago,” said Esther Heusser, a social worker in Jona, Switzerland. “I just didn’t want to think about where they came from.”

The real problem

Very few have even heard of the initiative. The rising Swiss franc, which has jumped 16 percent in two years against the euro and the dollar thanks to its safe haven status, is a much wider concern.

This “is the real problem and it is clear that neither the [Swiss National Bank] nor the government have anything really meaningful against it,” St. Gallen’s Kirchgaessner said. “We might have a real crisis in a couple of years.”

Indeed, the strong franc has clipped corporate earnings of many exporters and has lead to some painful restructuring. Because of the ongoing global financial crisis, investors here and abroad are seeking a safe haven from economic uncertainty and inflation, which Switzerland’s low debt and firm economic footing provides. High gold reserves have also helped.

Jacob doesn’t think the adoption of the gold franc would increase the value of the official currency. “In fact, it would take pressure off,” he speculates.

Like the Swiss franc, gold has jumped for many of the same reasons, even though the Swiss National Bank and other central banks decided to dump the metal after two decades of underperformance against other financial instruments.

Strong demand from China has also helped push gold prices to records. Gold enthusiasts — so-called gold bugs — many of whom see stock markets as no better than gambling casinos and central banks as money printing machines — are rejoicing.

“Buying gold has been the best method for shorting the government,” wrote Shayne McGuire late last year. McGuire, who has predicted that gold could soar to $10,000 an ounce, manages the $500 million GBO Gold Fund for Teacher Retirement System of Texas.

“I strongly believe that present financial conditions are about to transform the investment strategies of the world’s largest investment funds in a way that will cause gold to surge substantially higher,” McGuire wrote in an essay on the metal.

Large reserves

Switzerland still holds a large amount of the precious metal. The alpine country of 7.7 million residents holds 1,040 tons worth about $46 billion, almost as much as China, according to World Gold Council figures. It ranks seventh in its league table, with the US at the top.

In terms of gold reserves per person, it stands at just over $6,000, number one by nearly twice the amount of the next largest hoarder, Lebanon (over $3,000) and nearly six times as much as the US ($1,000), according to The Economist newspaper.

But this is not enough according to the “Healthy Currency” movement.

The SVP, which also wants to limit the autonomy of the Swiss National Bank after it posted big losses trying to tamp down the franc, plans to start collecting signatures for a ballot initiative in mid August, according to Jacob. The party is demanding that the central bank stop any further bank sales, repatriate Swiss gold reserves held abroad, and not allow the proportion of its gold to fall below 20% of its total assets. The campaign is also calling for the country’s withdrawal from the IMF.

Jacob, who claims to have no affiliation with the SVP other than the currency initiative, admits that the success of his gold franc campaign is linked to the amount of publicity the Healthy Currency initiative manages to muster at the end of the summer. “It would definitely put the parallel currency on the agenda,” he said.

And it will be no easy feat. The passage of the legislation will require an amendment to the Swiss constitution and the country is not particularly well known for a reckless pace of change. If rejected, a popular vote — where ordinary Swiss people have their say — is planned, probably in mid 2012, according to Jacob.

If approved, licensed financial institutions can then issue the coins, using their official logo on one side with the other, an easily recognizable Swiss gold franc emblem, Jacob said. The initiative foresees strict regulation by the government to ensure gold content and authenticity.

Even if popularized, the gold coins are unlikely to be in use for commercial reasons as the volatility of gold prices make this unpractical.

Headed for a ‘Gold Standard System' by 2014 - Ian Gordon

80 Years on from the Great Depression, Ian Gordon reckons financial cycles suggest we are due for another collapse, but this time even worse. Gold and gold stocks may provide protection. Gold Report interview.

Author: Zig Lambo

Posted: Wednesday , 25 May 2011

KENWOOD, CA (THE GOLD REPORT) -

The Gold Report: Good morning Ian. Thanks for taking the time to bring us up to date with your current thoughts about the economic situation and on specific companies you think our readers might be interested in learning about today. When you spoke with The Gold Report in January, you expressed your thoughts on where things were headed. Can you give us an idea of what you think people should do with their financial investments now in order to protect their assets? What changes do you see, and what do you think now in light of what's happened since January?

Ian Gordon: I think things are actually getting worse. Basically, the currencies of the world are under fire right now. I'm not sure that the euro will even survive this year. All it will take will be one country, like Greece, to leave it, and then the whole thing will probably collapse like a house of cards. Of course, the U.S. dollar, as the reserve currency, has been under fire, as well. So, I think things are coming to a head here, which is something we anticipated in our own work because it's based on the Long (Kondratiev) Wave Theory.

In 2011, we see parallels to 1931 because we're 80 years beyond that time. We believe 20-year cycles are important anniversaries, and this is just four twenties. In 1931, the whole world monetary system effectively collapsed. We've been long anticipating a collapse in the current world monetary system based on the collapse of 1931. However, we see that the current collapse is going to have far more significant and devastating implications than the collapse between 1931 and 1933 simply because it's the collapse of the paper-money system now. Essentially, paper money is credit money. When paper money fails, credit fails. Effectively, the economy will fail on credit.

TGR: So, given what could be a major upheaval in the way the global economic cycle works, if this all comes to pass, what sort of system will we end up with? Are we going back to the gold standard or something similar to it? How is this going to happen, how long is it going to take and what are the implications for investors?

IG: I'm pretty sure that we will go back to a gold standard system. Paper-money systems have never survived throughout history. Generally, they've been set around a one-country experiment. And when those have failed, as in France after John Law's paper-money scheme failed in 1720 or the Assignat failed in about 1798, there was tremendous upheaval. And, following these failures, the country resumed gold as the backing for its currency. So, I think we have to go back to something like that because, in essence, gold enforces discipline on governments. We've seen a complete lack of discipline in the paper-money system that's been ongoing since the 1931 collapse of the world monetary system. Paper-money printing has just gotten out of control; and now, parallel to the paper-money printing is the debt. They go hand in hand.

We've built massive debt worldwide, which, in total, is probably well in excess of $100 trillion. In the U.S. alone, the total debt is something like $57 trillion. So, that debt is starting to be wrung out of the world's economies and everybody is facing a pretty frightening depression.

As investors, we have to protect ourselves as best we can. We've long been advocating positions in gold and gold stocks. In fact, we've been 100% positioned in both of those-physical and gold stocks-since 2000 because our cycle told us that that's where we should put our assets. So, that's what we've done. I think investors have to do that and they have to be out of the general stock market because, eventually, the stock market has to reflect the realities of the economy. The current U.S. stock market has been propped up by quantitative easing (QE) with massive amounts of money injected into the banking system. That banking system is not putting that money back into the economy because consumers are completely tapped out; they can't borrow any more money. So, much of the money the Federal Reserve is putting into the banks is being used for speculation.

TGR: Can we pursue the mechanics of this a bit further before we get into more-specific investing ideas? Given the internationalization of the world economy and money being just electronic numbers on computer systems, how does the world get back on some sort of a hard-money standard without years of turmoil?

IG: When the global monetary system started to collapse in 1931, it began with the failure of the Austrian Creditanstalt Bank in Europe. Everyone was trying to bail out this large bank. The Fed was trying to bail it out, the Bank of England was trying to bail it out and JP Morgan also was in there trying to bail it out. They all knew the implications of the failure of this one bank would cause the bankruptcy of Austria and the failure of many other banks plagued with rotten paper money on their books. So, when this bank collapsed in May 1931, it was the beginning of the end of the world monetary system. A bankrupted Austria was forced out of the gold exchange standard system and was soon followed by Germany. Great Britain was forced out of the monetary system in September 1931, which effectively brought down the entire world monetary system. A new monetary system didn't evolve until 1944 when the Bretton Woods system was signed into law. It was a long hiatus. The parallels with the current evolving monetary system collapse are pretty plain to see.

After 1931, America was pretty self-sufficient, had all the oil and food it needed and became very isolationist. Great Britain traded within its then-empire. World trade collapsed following 1931 and 2011 may well be a repeat of that tragic year, with the collapse of the euro and the unraveling of the entire global monetary system. It could be a long hiatus before a new system is developed. It goes back to that 20-year anniversary cycle I mentioned. The pure gold standard system that had evolved initially in Great Britain in 1821 collapsed in 1914 because the combatants in World War I couldn't remain on a gold standard system and print the money they needed to fight the war. So, I would say that we will likely return to a gold standard in 2014-100 years after the gold standard collapsed in 1914.

TGR: So, you're saying investors have a two- to three-year window to position themselves and their investments to profit from what's going to happen when this is all turns around.

IG: Right.

TGR: We've had all this volatility in the metals prices over the past year and some substantial gains. How is this affecting companies in the mining business?

IG: For the main part, I've positioned myself in either new producing companies or companies that have gold assets in the ground. I'm principally more disposed to investing in gold than I am in silver. I think these assets are going to be extremely valuable. I met with one of my website subscribers just yesterday and said it's quite possible that there won't be enough physical gold available on the market to supply the demand. We produce only 80 million ounces (Moz.) of gold a year from existing mines. I think, eventually, the demand for gold will become so extreme that the producers won't want to be paid in paper money because the paper system is collapsing. So, gold may well be taken out of the market, that's why it is important to get the physical bullion now rather than later. Of course, gold company stocks that produce physical gold are going to be extremely valuable, as well.

TGR: Obviously, you're quite selective about which companies you decide to invest your own money in and suggest that other people do the same with their money. What criteria do you use in selecting companies for your portfolios?

IG: First, I have to meet with management before I ever put my money into a company. I realize that a lot of investors can't do that, but they can certainly talk to management. On the junior side, management is usually very disposed to talking with perspective shareholders. It's just a matter of picking up the phone and asking the president of a company why it is a good investment, and then listening to the answers. I have to feel confident that a company's management will be able to produce what they say they're going to produce on behalf of the shareholders.

Another criterion that I use is geopolitical risk. I want to invest only in companies that I am confident are in politically secure jurisdictions. I have been bitten in the past by investing in companies in countries that I thought were politically secure, which became insecure. In Ecuador, the rules changed and mining almost ceased to function in that country. So, I particularly like companies that have assets in Canada, which I think is a very safe jurisdiction. Many of the companies that I've selected for my own portfolio have assets in Canada. I also like Mexico.

I think the U.S. is ok, but I'm a bit worried about what might happen when the whole system starts to collapse. After 9/11, I remember when an unnamed Federal Reserve spokesman said in an interview that it looked at many ways to avert a panic. One of the things he mentioned was buying gold mines. If the U.S. doesn't have the gold it purports to have, it could well be that the country could nationalize gold companies. I do have investments in companies that are exploring for gold in the U.S., but not a lot. I particularly like companies in Canada.

TGR: There was a little fear recently about the possibility that the New Democratic Party (NDP) may be coming back into power in British Columbia. Its administration had a devastating effect a generation ago, when it caused the whole BC mining industry to retrench. I guess that's probably not going to happen at this point; but if something like that was to happen, would that possibly have a negative effect at least on BC?

IG: Well, it might. If the NDP does win in British Columbia, I think it probably learned from past experience. Under recent governments, there's been a tremendous amount of exploration and a lot of companies going into production in the Province. It's going to be very hard to shut those down because they're all permitted under present mining laws. So, if the NDP was to win in BC, it's not something that I would be in favor of because I live in the Province and know what negative effect it had on the region's mining not long ago. I think most of the companies in BC now are sufficiently advanced in terms of their exploration, and some have gone into production. So, all the permitting is in place and it's going to be very difficult to rescind it.


TGR: Did you have any last thoughts about the future of the economy you'd like to share?

IG: Unfortunately, I'm very pessimistic about the economy. If paper money, which is credit money, collapses, then, essentially, credit collapses and the economy grinds to a halt. Quite a scary scenario could evolve from a collapse in the paper-money system. We almost had a major credit failure in 2008. What happens if credit does that again? Everything stops-trucking stops, the movement of goods stops and it becomes a very difficult time for everyone. I think people have to prepare for the worst.

TGR: We've certainly gotten used to a system that is automated and electronic. People press buttons and expect results. If things start falling apart as you predict, we could see some real turmoil-financial and possibly even physical.

IG: Investors need to keep those possibilities in mind and protect their assets as best as they can. I'm a little reluctant to admit it, but one of the things I keep on hand is a one-year supply of food. It's a relatively inexpensive way of protecting your food source. If the system falls apart, as it could, you won't be able to run down to the store and get what you want when you need it.

TGR: Thank you very much, Ian, for your valuable insights and recommendations.

IG: Thank you very much.

A globally renowned economic forecaster, author and speaker, Ian Gordonis founder and chairman of the Longwave Group, comprising two companies-Longwave Analytics and Longwave Strategies. The former specializes in Ian's ongoing study and analysis of the Longwave Principle originally expounded by Nikolai Kondratiev. With Longwave Strategies, Ian assists select precious metal companies in financings. Educated in England, Ian graduated from the Royal Military Academy, Sandhurst. After a few years serving as a platoon commander in a Scottish regiment, Ian moved to Canada in 1967 and entered the University of Manitoba's History Department. Taking that step has had a profound impact because, during this period, he began to study the historical trends that ultimately provided the foundation for his Long Wave theory. Ian has been publishing his Long Wave Analyst website since 1998. Eric Sprott, chairman, CEO and portfolio manager at Sprott Asset Management, describes Ian as "a rare breed in the investment-advisor arena." He notes that Ian's forecasts "have taken on a life force of their own and if you care to listen, Ian will tell you how it will all end."

Article published courtesy of The Gold Report - www.theaureport.com

http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=127849&sn=Detail&pid=110649

Now Zimbabwe talks of a gold standard while warning of U.S. dollar devaluation

Zimbabwe's Central Bank governor has gone on record as warning about the fall in value of the U.S. dollar while suggesting that his country should move towards a gold backing for its own currency.

Author: Lawrence Williams
Posted: Monday , 16 May 2011

LONDON -

The southern African state of Zimbabwe, where President Robert Mugabe's dogmatic pursuit of white controlled farms, and now the mining industry, coupled perhaps with a serious degree of ineptitude and corruption, brought the country's economy to its knees, is now doubting the future value of the U.S. dollar - a currency which it has relied upon to end its disastrous hyperinflationary episode.

According to New Zimbabwe.com - a U.K.-based Zimbabwe news portal - the Reserve Bank of Zimbabwe's Governor, Gideon Gono, is reported as saying:

"There is a need for us to begin thinking seriously and urgently about introducing a gold-backed Zimbabwe currency that will not only be stable but internationally acceptable," Gono said in an interview with state media. "We need to rethink our gold-mining strategy, our gold-liberalisation and marketing strategies as a country. The world needs to and will most certainly move to a gold standard and Zimbabwe must lead the way."

Gono reportedly said the inflationary effects of United States' deficit financing of its budget were likely to impact other countries, leading to resistance of the greenback as a base currency.

"The events of the 2008 global financial crisis demand a new approach to self-reliance and a stable mineral-backed currency, and to me gold has proven over the years that it is a stable and most desired precious metal," Gono said. "Zimbabwe is sitting on trillions worth of gold reserves and it is time we start thinking outside the box, for our survival and prosperity."

When a country like Zimbabwe, which has experienced one of the worst hyperinflationary episodes ever with multi-billion Zimbabwe dollar notes being virtually worthless (the country even printed a 100 trillion dollar note at its inflationary peak), starts casting doubts on U.S. dollar inflation, perhaps we should start to worry a little, although one has to say Gono's financial credentials are shaky, to say the least. He presided over an inflationary period when at one time Zimbabwean inflation was said to be running at over a billion percent a month!

But he may have a point. Zimbabwe does have excellent gold reserves, although the country has seen its annual production decimated due to its financial policies and, at one time, withholding payment to its gold mines which have to sell to the Central Bank. As a consequence Zimbabwe's gold production dropped over a period of years to a low of 4 tonnes in 2008. At peak the country's gold output neared 30 tonnes. Since 2008, a relaxation on gold sales allowing mines to sell at global market prices has led to a revival, but still remains at less than half peak production levels.

Gono and Mugabe's money printing policy in Zimbabwe is the prime cause of the country's descent into the world's second worst ever hyperinflationary episode, so he has a strong personal knowledge of what can happen to a currency if the Central Bank keeps on churning out more and more paper money. Maybe he recognises in Ben Bernanke a man after his own heart!

Source: http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=127101&sn=Detail

美國猶他州正式確立金銀幣為法定貨幣

2011/04/01 22:42

據報導稱，美國猶他州參眾兩院已經通過金銀幣法案，正式確立金銀幣為該州的法定貨幣。 鹽湖城的商店很快就將開始接受水牛金幣和雄鷹金幣。
猶他州州長上週簽署這項新法案，成為該州稅典的一部分，確立聯邦發行的金銀幣為該州法定貨幣。 該州州議會的委員會也受命研究“ 其他形式法定貨幣”的可能性。
報導指出，此舉對美聯儲(Fed)有點諷刺，因為保守派人士憂心美聯儲向市場注入數以萬億美元，已經永久性地令美元價值縮水。 猶他州是美國保守派茶黨的大本營之一，在反對美聯儲主席伯南克(Ben Bernanke)方面，也居於領導地位。
保守遊說團體美國原則項目(American Principles Project)政策總監Jeff Bell表示，“他們一直都是災星。自從本伯南克入主美聯儲以來，一直致力於抵禦通縮，並將利率壓低到極限水平。”
保守派智庫美國企業研究所(American Enterprise Institute)的前美聯儲官員Vincent Reinhart表示，“目前美聯儲面臨著很大的公憤，政客們在努力疏導​​這種憤怒，不過他們不是始終能做到前後一致。 ”
當然，猶他州的行動並非是孤獨的，已經有其他幾個州正在考慮是否也通過這一法案，讓金銀復本位回歸。
美國聯邦發行的金銀幣，本來就已經是法定貨幣，但實際上並沒有人真正把它們當成貨幣或硬幣來使用，而將之視為投資工具或財產。 面額50美元金幣，目前市值約為1400美元，但就純貨幣的交換價值而言，它仍然只值50美元。

因此，這項新法律的真正意義，在於它讓金銀幣從此在猶他州成為“通貨”而非“資產”，因此當交易轉手時，就可以免除稅收。 不過，仍要繳納聯邦稅。
帶頭促成猶他州州議會通過這項新法的律師Larry Hilton也表示，並不認為大家會真的用金銀幣去一般商店買東西。 但他稱，去除交換這些硬幣時的稅負，將讓這些硬幣等同於紙幣，則銀行就可能創設以金銀幣為擔保的賬戶。

Gold Investments Market Update (2011/05/12)

Thu, May 12 2011, 13:48 GMT by Mark O'Byrne - GoldCore

Gold and silver’s recovery in recent days proved to be temporary and further falls were seen yesterday (sharply in silver) prior to a tentative recovery overnight and then more falls again this morning. The euro has stabilized after recent sharp falls and euro gold at €1,050/oz remains comfortably above €1,000/oz after a period of correction and consolidation. Euro gold looks like it is set to break above record highs of €1,072/oz (12/28/10) and target €1,100/oz as the European debt crisis deepens.

Cross Currency Rates at 1030 (London AM Fix)

The massive disconnect between the COMEX spot and futures prices and the physical market continues with leveraged, powerful players on Wall Street (primarily hedge funds and Wall Street banks) able to effect short term sell offs in the paper market despite the very strong supply, demand fundamentals in the physical bullion market.

Euro Gold – 1 Year (Daily)

Simplistic assertions that gold and silver are asset bubbles and that silver’s bubble has burst continue.

Those who have been wrongly calling gold and silver bubbles in recent years fail to realize that gold and silver are no ordinary assets, indeed many contend that they are not assets at all, rather they are money. The precious metals were demonetized in the second half of the 20th century as unbacked paper currencies (fiat money) became accepted globally.

USD Gold – 1 Year (Daily)

Those continuing to call gold a bubble do not understand monetary economics and the growing trend towards the gradual remonetisation of gold. This is due to the unstable nature of the global financial system and markets and growing concerns about all fiat currencies including the international reserve currency, the U.S. dollar and major reserve currencies such as the British pound, the Japanese yen and the euro.

Ultra loose monetary policies and global currency debasement renders confident assertions of gold and silver being bubbles simplistic and naïve.

Indeed, with growing calls for a return to the Gold Standard, the latest from billionaire media magnate Steve Forbes (see news), gold looks set to at least rise to its 1980 adjusted high of $2,400/oz.

Forbes said in an interview that “people know that something is wrong with the dollar."

“What seems astonishing today could become conventional wisdom in a short period of time,” Forbes said. He concluded that "you cannot trash your money without repercussions.”

He thus echoes long term gold standard advocate Representative Ron Paul and the recent advocation of a return to some form of Gold Standard by World Bank President Robert Zoellick.

A return to a Gold Standard would likely see gold revalued to thousands of dollars per ounce.

(http://www.fxstreet.com/fundamental/analysis-reports/gold-investments-market-update/2011/05/12/)