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Crude Oil In A New Bear Market?

Article posted at The Market Oracle http://www.marketoracle.co.uk/Article59496.html
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Phase I of Apollo 11 Coin Design Competition Nears End

Just a few days remain to submit an application to enter the competition to design Apollo 11 50th Anniversary Commemorative Coins. The event invites artists to design an image that is emblematic of…

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Chalk up another tax win for ICTA

Congratulations to the Industry Council for Tangible Assets on its victory in Louisiana.

Thanks to ICTA and the Louisiana Professional Coin Dealers Association (LPCDA), a sales tax exemption returns to the state.

As of Oct. 1, 2017, precious-metals bullion sales will not be subject to the state sales tax as well as many numismatic transactions.

A previous exemption had been revoked as of April 1, 2016, during a state budget crisis.

According to ICTA, the sales tax had been raised from 4 percent to 5 percent and all exemptions revoked April 1-June 30, 2016.

At that point the state sales tax was reduced from 5 percent to 3 percent for the period July 1, 2016, to June 30, 2018.

The latest victory eliminates that tax.

“We are very pleased that the Louisiana exemption is now restored,” said ICTA executive director Kathy McFadden.

“We thank the Louisiana Professional Coin Dealers Association, lobbyist Randy K. Haynie, Louisiana representative Paul Hollis, ICTA legislative consultant and former U.S. congressman Jimmy Hayes (Washington Matters), ICTA members, and everyone who helped make this exemption a reality,” she said.

The win was not easy to achieve in the legislature, according to Rep. Stephen Dwight, lead author of the repeal bill.

“The collaborative efforts of coauthors Rep. Mark Abraham, Rep. Larry Bagley, Sen. Jean-Paul Morrell and Sen. Gary Smith convinced them,” he said.

Coin collectors and investors do not like paying sales tax on their purchases.

They take their business to tax friendly states.

Louisiana has now returned to that fold.

“We’re also grateful to the legislature for exempting all coin shows in our state and for exempting numismatic coins valued under $ 1,000 sold in our stores,” said LPCDA  president Louis Pizzolatto.

“Louisiana is now eligible to host a large national coin show such as the American Numismatic Association World’s Fair of Money,” he explained.

In the language of the new law, specifically exempted were platinum, gold, or silver bullion that is valued solely upon its precious metal content whether in coin or ingot form.

Also exempted were numismatic coins that have a sales price of no more than $ 1,000 sold in shops and numismatic coins sold at a national, statewide, or multi-parish numismatic trade show.

Obviously, a numismatic purchase for $ 1,001 would best be done at a coin show to legally avoid the sales tax.

Perhaps the American Numismatic Association and other organizations will oblige by filling up the state’s events calendar.

I hope so.

For more details and the text of the law, see the ICTA website.

Buzz blogger Dave Harper has twice won the Numismatic Literary Guild Award for Best Blog and is editor of the weekly newspaper “Numismatic News.”

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The post Chalk up another tax win for ICTA appeared first on Numismatic News.

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Sheffield Broomhall Hanover Tower Block Fails Safety Test, Cladding Removal Today

Article posted at The Market Oracle http://www.marketoracle.co.uk/Article59497.html
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The Coming Battery Bonanza

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The Coin Analyst: How Certified American Silver Eagles of the … – CoinWeek


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The Coin Analyst: How Certified American Silver Eagles of the …
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Since 1986, American Silver Eagles have been one of the most popular bullion coins in the world, but their appeal extends beyond…

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Gold & Gold Stocks Nearing a Big Move

Article posted at The Market Oracle http://www.marketoracle.co.uk/Article59488.html
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Myopic Metals and Miner Miasma

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EURGBP Is Facing Neckline Resistance

Article posted at The Market Oracle http://www.marketoracle.co.uk/Article59489.html
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Gold Slides 0.8% for First Loss in Four Sessions

Gold, silver and platinum futures closed lower in their start to the new trading week on Monday. Gold’s loss marked its first in four sessions. Gold for August delivery dropped $ 10, or 0.8%, to…

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The Coming Bitcoin Bloodbath

This article originally was published here: https://www.wealthdaily.com/articles/protect-yourself-from-the-bitcoin-fork-the-bitcoin-bloodbath-is-coming/8749

Last year, you could’ve purchased Bitcoin (BTC) for $ 600.

Today, $ 600 is laughable. At $ 2,427, the token is up by over 350%.

But now a real threat is on the horizon: The upcoming Bitcoin fork.

To many investors, the Bitcoin fork is shrouded in mystery. No one can predict the exact impact it will have on Bitcoin’s value and long-term potential.

But a few things are certain:

  1. This fork is necessary for Bitcoin to survive as a digital currency.
  2. In the short term, it will likely affect anyone in the Bitcoin network, including investors and miners.

Luckily, most investors are being proactive about wealth protection. Many Wealth Daily subscribers have written in to ask about the best way to prepare for the fork.

This article was put together to offer some solutions. Buckle up, because things are about to get a bit technical.

Important note: Even though I can do research and offer solutions, investors need to make this decision by themselves. As with all digital currency investments, volatility is expected and you should decide what protective measures to take based on your own technical skills and investment goals.

What Is the Bitcoin Fork?

In the web development world, a “fork” is when the code is replicated and modified.

A normal investor doesn’t have to know the technical details — they just need to know that a fork happens before they get an alert that there has been a software update.

There are two types of forks: a “soft” fork and a “hard” fork.

With a soft fork, a minor adjustment to the code is made, and a user can continue to use the program without complications for a short period of time.

With a hard fork, the program will not run without an update.

In the world of Bitcoin, a fork is needed to fix the token’s biggest problem: transaction speed.

Transaction speed can be increased through the implementation of bigger “blocks” to the existing blockchain. This requires modifying the code.

Some people are of the opinion that a Bitcoin fork won’t happen. But, from a web development angle, it seems inevitable.

After all, nothing can survive our rapidly evolving technology landscape without modifications.

And, even if a fork doesn’t happen, it’s important to be prepared.

Whether it’s a soft fork or a hard fork, Bitcoin will likely lose value.

So, Will It Be a Hard or Soft Fork for Bitcoin?

Currently, Bitcoin is maintained by a staff of 100. Out of that 100, 25 individuals are committed to web development and code maintenance.

Those web developers are split down the middle about whether to do a soft fork or a hard fork.

Half of the staff favors a soft fork called SegWit.

The other half wants the hard fork, which will increase block size dramatically and massively speed up transaction speeds. They refer to this version of Bitcoin’s code as Bitcoin Ultimate.

Bitcoin’s transaction speed is one of the major issues that stands between the currency and world domination. In fact, if it doesn’t overcome the transaction speed issues, it may not survive as a digital currency.

So, a fork — whether soft or hard — is inevitable.

Now, let’s move forward to protection.

Protection From the Bitcoin Fork

A similar fork happened to Ethereum in its early years.

Ethereum’s core team decided to fork the code in order to restore funds that were lost in a hack to investors. As a result, we now have Ethereum (ETH) and Ethereum classic (ETC).

Many investors who already had money in Ethereum saw it split into two currencies. Their initial investment now existed in codes.

For Bitcoin, things are a bit more complicated. Investors hold Bitcoin in a variety of wallets and exchanges. Those wallets and exchanges will have rules in place regarding the fork.

For instance, Coinbase has already come forward and said that it will only recognize Bitcoin Classic (the original code) after the fork.

Other exchanges like Ledger or TREZOR say that they will recognize both codes.

Some investors have chosen to remove the exchanges altogether and transfer their BTC into offline wallets. This way, their money will exist in both codes, and they will be able to sell the version of Bitcoin that they deem the loser.

Bitcoin’s Value After the Fork

We will likely see a fairly dramatic dip in Bitcoin’s value after the fork.

There will now be two tokens, and one will rise in value in the eyes of investors (just like Ethereum over Ethereum Classic).

Investors will likely respond in one of three ways:

  1. Sell. Some investors may choose to sell before the fork, unwilling to take the risk if a more dangerous hard fork is attempted and Bitcoin’s value drops dramatically.
  2. Hold Offline. Others will simply move their money into offline wallets so that they can make the decision on whether to buy or sell rather than the exchange.
  3. Hold in Exchanges. Others, most with less technical experience, will leave their money in exchanges and hope for the best.

What path you decide to take is an individual choice, but it’s important to stay educated before the fork so that you can choose the best path for you and your investments.

This article originally was published here: https://www.wealthdaily.com/articles/protect-yourself-from-the-bitcoin-fork-the-bitcoin-bloodbath-is-coming/8749

The Coming Bitcoin Bloodbath originally appeared in Wealth Daily. Fortune Favors the Bold


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Increased Choice in UK Credit Impaired Subprime Mortgages

Article posted at The Market Oracle http://www.marketoracle.co.uk/Article59490.html
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Ozark Riverways Quarters for Missouri in Three-Coin Set

Today, June 26, the United States Mint started selling a three-coin set of Ozark Riverways quarters for $ 9.95. The coins recognize the national park in southern Missouri. It is the first national…

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Profit as Millennials Redefine the Travel Industry

This article originally was published here: https://www.wealthdaily.com/articles/profit-as-millennials-redefine-the-travel-industry/8751

In the most general sense, investment works because of demographics.

Populations grow, incomes increase, and more people with more money buy more stuff. Great companies will do more than their share of selling stuff to people. Great companies will also control costs and boost productivity better than their competitors. And great companies will adapt to change faster than their competitors.

That’s why IBM has thrived while Hewlett-Packard has floundered. It’s why Netflix is a household name and Blockbuster is effectively gone. Great companies not only survive, they thrive. And part of the reason is that they understand their customers. They “get” demographics.

So, as investors, we need to do the same thing. We need to keep an eye on demographic trends, because these are the customers of the future. And that means we’d better be watching the millennial generation. 

The millennial generation is the future of the American workforce. They are the future of Starbucks and Netflix and Apple, as well as companies that don’t even exist yet. The millennials will become a powerful economic force. They are the biggest generation yet. They became the largest part of the U.S. workforce in 2015, and they will be inheriting $ 30 trillion from their boomer parents.

Millennials are only just starting to have kids and buy homes. Their emergence is the demographic and investment trend of the next 20 years or more. And they like to travel.

The Millennials Are Changing Travel 

In the U.S., Boston Consulting Group says millennials are far more interested in travel than older generations, and by a 23% margin, no less.

Even the UN is quick to point out that millennials make up about 20% of all international travelers. That’s around 200 million millennial explorers — or, in monetary terms, $ 180 billion a year!

According to American Express Business Insights, millennials are the fastest-growing age segment when it comes to the amount of cash they’ll spend on such expeditions. And they’re doing it differently than other generations, too. A study by Phocuswright, a travel market research firm, gave some interesting statistics and insights:

  • More than 70% of millennials took at least one leisure trip in 2013
  • Many take four or five trips a year
  • 66% of millennials think travel is an incredibly important part of their lives
  • 71% of millennials took short jaunts of three nights or less
  • Millennials are twice as likely as older travelers to take trips of 14 or more days

This is why we recommended an airline to The Wealth Advisory readers in May.

Gotta Love LUV

Out of all the airlines in the country — well, out of the handful of airlines in the country — you might ask, “Why Southwest?” One of the reasons is that in the recent backlash against poor customer service, it’s been one of the only to come out shining. Pretty much only Southwest and JetBlue aren’t getting ripped apart on social media for the way they overbook flights and treat customers.

In the past five years, since Southwest started offering its Wanna Get Away discount pricing, the company has grown revenues by 20%. That’s impressive by itself, especially considering the company did that while offering fares far lower than major airlines like Delta, American, and United.

But when you look at the profits the company generated over that half-decade, you’ll really see how well management excelled. Net income grew from $ 421 million in 2012 to a whopping $ 2.244 billion last year. That’s a 433% growth in profit over five years, all while offering fares that undercut the competition.

So, how’d they do that? Simple answer: They cut costs drastically. Gross profit margins (what’s left of revenues after paying for the cost of your product) increased from around 50% to 70% between 2012 and 2016. And they did it better than anyone else. Over the same period, United cut costs by about 35%. American cut them by about 20%. And Delta cut expenses by about 30%. But Southwest reduced its costs by a whopping 40%.

Airlines are a huge beneficiary of low oil prices. Roughly half of an airline’s costs are fuel-related. But you’ll notice that ticket prices have been pretty stable as oil prices have fallen. Those savings go right to the bottom line. 

Some of that money Southwest saved got pumped back into advertising. The other airlines were content to rest on their laurels. Management there was thinking that people don’t have a choice and have to buy whatever tickets they sell. But Southwest proved them wrong by targeting millennials with creative advertising campaigns and slogans. And now it’s getting a lot of millennial business.

Southwest started out as a Texas airline that only flew travelers to three airports within the state. Today, less than 50 years after its first flight, it’s the largest low-cost carrier in the world. And it’s got aspirations to beat American, United, and Delta at their own game.

As Southwest continues to expand its coverage and keeps hitting millennials with targeted campaigns, the stock price is going to keep on climbing. Wealth Advisory members bought at $ 57.09, and it’s trading around $ 62 now. But I’ve got an $ 85 12-month target on the stock, so there’s still plenty of upside.

Until next time,

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Briton Ryle

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An 18-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He also contributes a weekly column to the Wealth Daily e-letter. To learn more about Briton, click here.

This article originally was published here: https://www.wealthdaily.com/articles/profit-as-millennials-redefine-the-travel-industry/8751

Profit as Millennials Redefine the Travel Industry originally appeared in Wealth Daily. Fortune Favors the Bold


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The Coin Analyst: How Certified American Silver Eagles of the 2010s Have Fared in the Marketplace – CoinWeek


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The Coin Analyst: How Certified American Silver Eagles of the 2010s Have Fared in the Marketplace
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Nobody can predict future market conditions for American Silver Eagles, and no information contained in this article should be construed as patent investment advice. However, it's safe to say that ASEs, while beautiful coins to collect, are not poised

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Gold Back With A Vengeance As Bitcoin Bubble Bursts

We are officially in the first innings of a 2017 gold rush, as gold demand threatens to outstrip supply for the first time in decades—but it’s not going to be costly underground mining that brings in the profits …

And many will be turning to Canada… where the government is now welcoming open pit mining in the “land of gold”… Nova Scotia.

Pressed for novel solutions, geologists in places like Canada are now working to pull gold from football field-sized open gold pits rather than seeking the yellow metal in more cumbersome and expensive underground operations.

As every investor knows, gold remains the pre-eminent and time-tested safehaven asset for hedging against macroeconomic upheavals.

One explorer, right in the center of Nova Scotia’s gold rush is a small-cap company sitting on a potential $560 million in gold.

A little-known company called Osprey Gold ( TSX:OS.V; OTC:OSSPF) has moved into the largest historic gold producing area in Nova Scotia–armed with unprecedented new technology that gives it cheaper access to gold in open pits. Across the street, Atlantic Gold Corp. turned its similar project into a $250-million gold mine, and now Osprey is gearing up to pursue the same success.

Enter … The Nova Scotia Gold Rush

While everyone was moving out West to San Fran in 1848…The “little known Nova Scotia gold rush” was minting millionaires on the East coast.

Canada is the world’s 5th largest gold producer, and Nova Scotia is a classic high-yield brown field gold province. And it’s home to some of the highest-grade gold fields in the country. Here, grades as high as 14g/tonne are not uncommon.

So well-endowed is Nova Scotia that it has supported three major gold rushes that churned out about a million ounces of the metal in the process.

Nova Scotia’s mines have been closed since World War II due to disruptions by the war and things never got going again… until now.

new discovery has opened up a wealth of opportunity, and you can expect to hear about a new Nova Scotia gold rush soon.

It’s hardly surprising that miners… with new technology… are rushing back in to scoop up the easy pickings. The first companies to take advantage of this technology are almost guaranteed of fat returns.

Companies like Atlantic Gold Corp (TSX:AGB), which is working on the rich Moose River Consolidated project, is one. Atlantic is currently expanding known regions and finding disseminated zones of mineralization. Not only that, their first pour is scheduled for September this year.

And…

Osprey Gold (TSX:OS.V; OTC:OSSPF) is starting down the same track. Osprey has now moved into the largest historic gold production area in Nova Scotia–Goldenville.

Goldenville

A gold miner’s dream.

A place so legendary and rich in gold that it has churned out more gold than any other historic mine in Nova Scotia.

Here are five key reasons why you should keep an eye on this junior gold explorer.

Reason #1: Ideal Location

Osprey’s gold assets are located in a prime geological area.

In fact, Goldenville, Osprey’s most highly-prized asset, is Nova Scotia’s most prolific gold camp. The property produced 212,300 oz of gold between 1862 to 1942. As recent as 2005, Acadian drilling found 109,676 tonnes grading at 10.76g/tonne and another 533,799 inferred tonnes grading at 14.26 g/tonne.

And, Goldenville happens to be in the same stratigraphy as Atlantic Gold Corp’s rich Moose River deposits. Osprey’s approach is similar to Atlantic’s in that it seeks to define open-pittable deposits in the gold fields. Atlantic Gold Corp’s share price has risen over 113 percent since January, and now it’s worth about $245 million, creating enormous investor returns.

If you missed out on the Atlantic Gold Corp. wave, Osprey could offer the next best chance to enjoy super-sized returns.

Not only is this the BEST location…but it’s “right across the street” with infrastructure already in place.

Goldenville Infrastructure and Claim Blocks

This is a secure political jurisdiction with great infrastructure that allows the company to do cheap exploration. Canada is exactly this: If you can produce gold in Canada and sell it in U.S. dollars it’s a huge advantage due to the strength of the U.S. dollar.

Reason #2: New Technology + Open Pit Mine

Gold miners in Nova Scotia have traditionally tracked high-grade veins in underground operations. But geologists have recently developed a technology that allows miners to assess mineralization of host rocks through which gold veins run. For the first time in the history of the gold industry in Canada, it’s now possible to mine gold in open pits rather than underground mines. This comes with obvious advantages:

1. Lower production costs,

2. Reduced risks,

3. Improved ability to scale.

The Goldenville property has the potential to benefit from these advantages. It consists of a structurally controlled slate belt with vein hosted disseminated mineralization. Up to 46 sequenced vein packages have already been identified.

This is unlike any other place in the world because rocks from nearly every age of earth are exposed. From 1.5 billion years… to today. And in one simple strip… you can find this Nova Scotia gold.

Goldenville Geology and Mineralization

Two drill holes sunk in 1997 about 3km to the west of the Osprey property returned 1.33g/tonne of ore held in veins and slate host rocks at a depth between 54.2 meters and 74.4 meters.

Reason #3: Excellent Growth Runways

One of the major criteria that successful investors use to identify potential winning investments is a sound business model and a fair valuation.

And that’s precisely the reason why Osprey Gold (TSX:OS.V; OTC:OSSPF)  offers such an attractive value proposition.

The company already has a clear path to owning at least four gold assets in Nova Scotia: Goldenville, Lower Seal Harbour, Gold Lake and Miller Lake projects.

The company’s assets hold 447,000 ounces of gold uncapped.

That’s at least 447,000 ounces of gold by Osprey!

So basically we are talking about a $10.3-million market cap company sitting on $560 million worth of gold!

That’s a potential 75x increase in value for Early-in investors!

Orex Exploration (OX: TSX-V) another listed junior, recently merged with Anaconda. It also owned a single similar asset in Nova Scotia. This asset is at only a slightly advanced development stage than Osprey’s assets, yet the company was valued at $11.1 million. That’s 1.5X higher valuation than Osprey currently.

Whichever way you slice it, Osprey Gold seems like a solid investment with very good potential for strong returns.

Reason # 4: Mining Legends With Hand-On Experience

There is a highly competent team behind Osprey Gold (TSX:OS.V; OTC:OSSPF)  driving this vehicle, which is a huge plus in the highly competitive gold industry.

Adrian Fleming, Chairman and Director–has accumulated more than 35 years in the mining industry. He was the president of Underworld Resources of the White Gold Project. Underworld was recently acquired by Kinross Gold for $139 million. He also played a big role in major discoveries, including Hope Bay and Porgera.

Cooper Quinn, President and Director– former Senior Geologist with Underworld Resources, Mr. Quinn has worked extensively at several exploration and development companies in North America, Europe, South Pacific Islands and Greenland.

Jeffrey R. Wilson– has 20 years of experience in mining exploration and investment industries. Current president and CEO of Precipitate Gold Corp. Has raised seed capital of more than $50 million through his vast wealth of contacts in the industry. Mr. Wilson has been involved in several successful and profitable buy-outs by major mining companies.

Another director, Greg Beischer, is also the President and CEO of another successful project generator, Millrock Resources, and he’s been involved in mining and exploration for three decades.

So Osprey has a great team at the helm, with team players that know how to grow a company from ground to bar!

Reason # 5: The Gold Bug Bites Again

With geopolitical tensions across the world on the increase, investors have resorted to putting their money into safe-haven assets to guard themselves against possible currency devaluations.

Most notably, there has been a dramatic increase in cryptocurrency investment, with Ethereum up 4,500 percent year-to-date.

But with cryptocurrencies being notoriously volatile, falling up to 96 percent in one day, attention is returning to gold, and fast!

The gold bug has bitten again!

That means GROWING demand for gold for years to come.

Gold exports for all major producers except the Middle Kingdom fell in 2016 for the first time since 2008.

Gold supply is already in the first stages of a cyclical downturn, meaning supply is bound to grow even tighter in the coming years.

Old mines that use outdated mining technologies are no longer profitable for a lot of miners, forcing them to fold up operations in droves.

Gold belts such as Nova Scotia where new techniques such as open-pit mining are now possible will realize significant cost savings and higher margins than their older counterparts. You can bet that this is where many miners will be swarming over the next few years.

Companies like Osprey Gold that have already secured the richest mining areas stand a good chance of enjoying the best returns for years to come.

Major Announcement Coming Soon

Osprey recently located and acquired a package of digitized historical data for all its four major assets. The data includes ground geophysical surveys, diamond drill logs, and surface geochemical data. This includes data that was previously not in the public domain.

The latest Resource Estimate Update by the company showed a 60 percent increase in inferred resources at the Goldville project.

Osprey has continued assessing and acquiring drill cores from other companies that have explored the Goldenville resource, and is currently assessing other opportunities as well. The company plans to kick off the first drill program at Goldenville during the third-quarter and provide an updated resource estimate for the entire body of works during the fourth quarter of the current year, or the first quarter of 2018.

The company’s unique prospecting approach means that not only are its gold resources likely to increase over the coming months, but it’s also likely to find NEW opportunities to buffer the single asset risk. Don’t be surprised if the company’s management announces another acquisition on the cheap before long. After all, this is a team of expert negotiators and anything is the cards with these guys.

Remember … with the company currently valued so cheaply, any significant progress or new discoveries could possibly drive sizable price action for Osprey shares.

The Market Oracle

Can Nebraska succeed with its medal?

The good news is Nebraska is celebrating its 150th anniversary of statehood with a medal.

The bad news is the price points seem steep for average collectors.

There are three compositions and three prices.

All are high.

A one-ounce silver version is $ 150.

For silver with a gold finish on it, the cost rises to $ 250.

For bronze, the Nebraska 150 Foundation offers a set of five bronze medals, all of the same design, for $ 100.

Would-be buyers are then advised to add 10 percent of the total for tax and handling.

You would think the tax and handling charge could be covered by the already high prices.

I feel bad writing this.

The heyday of state medals is past.

I remember active interest in medals when I was a kid.

It would be nice to see a revival.

It is about due.

It would be nice to see Nebraska lead this revival.

But right now I am a skeptic.

The artwork is very appropriate for the state.

The obverse has a stylized ear of corn as the main design device.

The legends are “Nebraska” across the top and a nifty arrangement of “Statehood, 1867-2017, 150 at the bottom.

This is good art.

The reverse shows Chimney Rock, the Platte River, Sandhill cranes and a sprig of native grass.

It is elegant and appropriate.

It says “Great State of Nebraska Sesquicentennial” across the top and “The 150th Anniversary of Statehood” across the bottom.

“Nebraska 150” and “1867-2017” complete the verbiage on the reverse.

The medals are struck in proof quality by the Northwest Territorial Mint.

Order address is The Nebraska 150 Foundation, 215 Centennial Mall South, Suite 514, Lincoln, NE 68508.

Medals can also be ordered online.

I hope sales of the medal will make other states envious enough to strike their own.

However, if Nebraska wants coin collectors from the other 49 states to join in, there needs to be a sales option for a single bronze.

I know it might not raise huge sums of money, but national collector participation might make native Nebraskans more eager to buy the medals too.

 

Buzz – Numismatic News

Interview with Ferdinand Lips (Silberinfo)

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Hedgers Net Short the Euro, US Market Rotates; 2 Horsemen Set to Ride?

Article posted at The Market Oracle http://www.marketoracle.co.uk/Article59473.html
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The Gold Standard: Generator Protector Of Jobs

The abandonment of the gold standard in 1971 is closely tied to the massive unemployment the industrialized world has suffered in recent years; Mexico, even with a lower level of industrialization than the developed countries, has also lost jobs due to the closing of industries; in recent years, the creation of new jobs in productive activities has been anemic at best.

The world’s financial press, in which leading economists and analysts publish their work, never examines the relationship between the abandonment of the gold standard and unemployment, de-industrialization, and the huge chronic export deficits of the Western world powers. Might it be due to ignorance? We are reluctant to think so, given that the articles appearing in the world’s leading financial publications are written by quite intelligent analysts. Rather, in our opinion, it is an act of self-censorship to avoid incurring the displeasure of the important financial and geopolitical interests that are behind the financial press.

In this article we discuss the relationship between loss of the gold standard and the present financial chaos, which is accompanied by severe “structural imbalances” between the historically dominant industrial powers and their new rivals in Asia.

World trade before 1971

From the end of World War II through the 1960s, all well-governed nations in the world sought to maintain a constant balance between their exports and imports. They all wanted to maintain a situation where they exported more than they imported, so that they could accumulate growing Treasury reserves of gold, or in its defect dollars, which, under the terms of the United States (US) promise in the Bretton Woods Agreements of 1944, could be redeemed by any Central Bank that requested gold in exchange for its dollars.

To be precise, we cannot fail to mention one exception. The exception to the rule was none other than the US. All well-governed countries sought to export more than they imported, except the US.

The US was not overly concerned with maintaining a balance between exports and imports, because – according to Bretton Woods – the US could pay its export deficits by the simple expedient of sending more dollars to pay its creditors. As the sole source of dollars, the US had a clear advantage over the rest of the world; they could pay their debts in (redeemable) dollars that they themselves printed.

Economists of the day warned of the danger of this practice, which resulted in a constant loss of American gold. From over 20,000 tons at the end of World War II, US gold reserves dropped year by year as certain countries, notably France, insisted on redeeming their dollars for gold at a rate of 35 dollars per ounce of gold. France incurred intense displeasure in Washington and New York due to its demands for gold in exchange for dollars; some analysts attribute the unrest in France in the spring of 1968 to covert operations by the US intelligence services, in a show of America’s disapproval of the behavior of France, led at the time by General Charles de Gaulle.

The US did nothing to slow the loss of gold. In the early months of 1971, Henry Hazlitt, a solid classical economist, predicted that the dollar would have to be devalued; he said it would be necessary to increase the number of dollars that would be needed to obtain an ounce of gold from the United States Treasury. Only months after his warning, the dam burst, and in August 1971 the US was forced to devalue its currency, because the amount of gold in its reserves had fallen to a dangerous level. (Today, many doubt that the US has the 8,000 tons of gold it claims to have in its vaults at Fort Knox and the US Military Academy at West Point, N.Y.)

What Henry Hazlitt never imagined was that instead of devaluing the currency – the recommendation of Paul Samuelson, Nobel Prize Winner in Economics, published the week before August 15, 1971 – President Nixon took the advice of Milton Friedman and declared that from that time forward the US would no longer redeem dollars held by the world’s central banks at any price. The US unilaterally violated the terms of Bretton Woods. In effect, it was actually financial bankruptcy.

Since then, all world trade – or most of it, as the euro, the pound sterling, and to a lesser extent the yen all compete with the dollar – is conducted using dollars that are nothing more than fiat money, fake money. Because all the world’s other currencies were bound to gold through the dollar, the immediate consequence was that simultaneously they also became fiat money, fake money with no backing.

Consequences of abandoning the gold standard

The consequences of that fateful day have overthrown all order and harmony in economic relations among the nations of the world, while facilitating and expediting the global expansion of credit because part of the dollars exported by the US ended up in the reserves of Central Banks around the world.

Countries began to accumulate dollars as the expansion of credit in the US advanced inexorably, now free of the restraint formerly imposed by Bretton Woods. The rest of the world was forced to accumulate dollars in reserves, because having insufficient dollar reserves, or having reserves that did not grow, or worse, having falling reserves, was a clear sign for monetary speculators to attack a country’s currency and destroy it with devaluation.

As the loss of gold ceased to be a limiting factor, the last restrictions on the expansion of credit were stripped away. A heavy flow of dollars to all parts of the world spurred the expansion of global credit, which did not stop until 2007. The international banking elite always strive to obtain greater profits and to that end always seek to expand credit. Starting in 1971, freed of the restraint of being required to pay international accounts in gold, or with dollars redeemable for gold, the constant unfettered creation of credit and still more credit ensued. It was boom time in the US.

The US, which paid the rest of the world with its own irredeemable dollars of no intrinsic value, lauded the adoption of “free trade” and “globalization”. The US could buy whatever it wanted, anywhere in the world, in any quantity, and at any price. Starting in the 1990s, its export deficits became alarming, but nothing was done to reduce them; on the contrary, they grew year by year.

Mexico, following the US example, joined NAFTA – the North American Free Trade Association. Down with import tariffs! Free trade with the world! The new vision offered the enthralling, seductive picture of a globalized world without borders, where everyone could buy and sell where they liked, with no limits. The 90’s were years of unbridled optimism for globalization!

Free Trade is unquestionably beneficial for humanity at large. It is good to be able to buy goods where they are cheapest; some countries enjoy conditions that favor them in production of certain things; each country should produce those things in which it has an advantage over other countries. Thus, the whole world can benefit from the good things each country has to offer. It is an appealing and sound doctrine, but… there is a crucial catch: the doctrine of Free Trade was conceived for a world where the sole means of payment was gold. When the doctrines of “Free Trade” and the “Comparative Advantages of Nations” were developed, the economists of the day could not imagine a world that did not use gold, but instead relied on a fiat money that could be created at will by a single country.

The “globalization” of the 1980s and 1990s and to date is based on the ideas of “Free Trade”. However, in the absence of the gold standard that existed when the doctrine was conceived, “globalization” had completely destructive results, which have caused the de-industrialization of the West and the rise to power of Asia.

In the decades prior to 2007 a massive fleet of cargo ships was created, which sailed for the US and Europe – the West in general, Mexico included – bearing all kinds of inexpensive, quality products made in Asia. The flood was so great that local factories in the Western World were forced to move to Asia, to employ cheaper labor and continue to sell their products in the West.

My readers will know how many industries, large and small, have ceased to exist in the US and the West in general, because Chinese competition killed them. They will know as well how hard it is to find a product that can be produced at a profit in the developed countries. It is very difficult to find a niche for any product to be manufactured locally. The flight of factories to Asia to take advantage of lower wages caused unemployment where local factories were closed. For the same reason job creation is slow or non-existent.

A taxi driver in Barcelona told us: “Spain is a service economy. Industry is no longer our foundation. If tourists stop coming, we’ll die.” By the same token, it has been said of Greece: “It produces olive oil and tourism, and nothing more.” The US, industrial colossus of the post-war world, has been de-industrialized. Now, what are developed countries to do to create jobs?

Diagnosis of the evils of de-industrialization and unemployment

These evils appeared because gold was eliminated as a) a constraint on the expansion of credit and the creation of money, and b) the only form of payment of international debt.

Under the gold standard all players in international trade knew that it was only possible to sell to a country that sold something else in turn. It was not possible to buy from a country that did not buy in turn. Trade was naturally balanced by this restriction. The “structural imbalances” so commonplace today were unheard of.

For example, in 1900, Mexico could export coffee to Germany because Germany, in turn, exported machinery to Mexico. Germany could buy coffee from Mexico because Mexico, in turn, bought machinery from Germany. Each transaction was denominated in gold, and as a result there was a balance based on an economic reality. Because there was balance in world commercial relationships, a relatively small amount of gold sufficed to adjust the international balance. The world financial center which acted as a “Global Clearing House” was London. A few hundred tons of gold were sufficient to meet the needs of that Clearing House. For further reading on the function of London as a clearing centre for world commerce, see “Real Bills” and associated articles by Antal E. Fekete at www.professorfekete.com

Another example: In 1930, the US could sell very little to China, because the Chinese were poor and lacked purchasing power. Because the US sold very little to China, at the same time it could buy very little from China. Although prices of Chinese products were very low, the US could not buy much from China, because China did not buy from the US – China was poor and could not afford American products. Thus, trade between China and the US was balanced by the need to pay the balance of their transactions in gold. Balance was imperative. There was no chance of “structural imbalance”.

Under Free Trade with the gold standard, the great majority of transactions did not require movement of gold to complete the exchange. The goods exchanged paid for each other. Only small remainders had to be paid in gold. Consequently, international trade was limited by the volume of mutual purchases between parties; for example, Chinese silk paid for imports of American machinery, and vice-versa.

The gold standard imposed order and harmony. If President Nixon had not “closed the gold window” in 1971, the world would be radically different today. China would have taken a century or more to reach its present level. China could not buy much from the US, because it was poor; therefore, China could not sell much to the US.

All this changed radically with the abolition of the gold standard.

Everything changed because the United States, having removed gold from the world monetary system, could “pay” everything in dollars, and without the gold standard as a limiting institution, it could print dollars ad libitum – without limit. Thus, in the 1970s the United States started to buy huge amounts of high quality products from Japan, while the Japanese boasted: “Japan sells; Japan does not buy.” A situation that was impossible under the gold standard became perfectly possible under the fiat dollar standard. The Japanese became gigantic producers, their country an island transformed into a factory. Japan accumulated vast reserves of dollars sent from the US in exchange for Japanese products. This in turn triggered the de-industrialization of the US.

Take for example the US manufacturers of T.V. Some of the famous US factories that built TV receivers by the millions were “Philco”, “Admiral”, “Zenith”, and “Motorola”. The Japanese had better and cheaper products, and since the abandonment of the gold standard allowed Japan to sell without buying in turn, and allowed the US to buy without selling in turn, the result was that all the huge factories producing these TV’s in the US were closed down. That’s how “going off gold” closed down US industry.

Unlimited purchases from Japan flowed to the US and the world, because they were paid in dollars, which could be created in unlimited quantities. The balance the gold standard had imposed disappeared and imbalance took its place.

After 1971, the US embarked on a protracted, large-scale expansion of credit. As the nation was de-industrialized and high-paying jobs in industry disappeared, a lack of disposable income for the population was replaced with easy and cheap credit, to conceal the stagnation in per capita income. Consumer credit drove imports from Asia and furthered de-industrialization even more. The great expansion of American credit was made possible because the gold standard, which restrained the expansion of credit by the banking system, had been abandoned. It is no coincidence that some analysts have observed that in real terms, American workers have had no real increase in their income since 1970.

All mainstream economists consider the elimination of the gold standard perfectly acceptable. They still do not see, or do not want to see, that the “Law of Unforeseen Consequences” is at work: the enormous advantage the US gained by being able to pay unlimited amounts in irredeemable dollars has become the fatal cause of the industrial destruction of the US – and of the West in general. A Mexican saying applies: en el pecado llevas la penitencia – “sin brings with it its own punishment”.

The current malaise: financial crisis, industrial crisis, crisis of unemployment

Today the situation is far worse. China, with a population of 1.3 billion, has become a formidable power. No one can compete with China in price. China sells vast quantities of goods to the rest of the world, without the rest of the world having any chance of selling similar quantities to China, and China can do so, because today trade deficits are “paid” not in gold, but in dollars or euros or pounds sterling or yen, which will never be scarce: they are created at will by the USA, the European Central Bank, the Bank of England, or the Bank of Japan.

A fearful monster has been created as a consequence of the elimination of the gold standard, which imposed a limit: “You can only sell to those who sell to you; you can only buy from those who buy from you.” This limit no longer applies; everything is disarray, inequality, imbalance; “structural imbalance” prevails because we no longer have the gold standard.

The credit expansion boom has ended, and in its place we have a global financial crisis. Today the problem of “structural imbalance” and the de-industrialization and unemployment it has produced in formerly industrialized countries acquires greater relevance with every passing day. What is to be done with the masses of jobless men and women? No one knows the answer, because the answer is not acceptable to the thinkers of today: the correction of “structural imbalances” and re-industrialization, in other words the creation of new jobs, lies in restoring the gold standard worldwide.

The “globalization” so highly praised by the financial press in recent years, has become the worst imaginable nightmare. It is no longer possible to support the unemployed with government handouts. The Sovereign State is close to bankruptcy. Thus, nature takes its revenge on those who dared violate its laws by seeking to impose false money on the world.

Richard Nixon’s elimination of the gold standard has proven to be the US’s best possible strategic gift to China and the rest of Asia. Today, China has a colossal industrial base that might have taken centuries to build, while the US is to a great extent devoid of factories and incapable of reclaiming its former glory. How tragic a fate for the US! 

International and National Commerce

The word “commerce” is defined in the Concise Oxford English Dictionary as “Exchange of merchandise or services, esp. on a large scale [ French or from Latin COM (mercium from merx mercis merchandise)]

Note that the “exchange of merchandise or services” cannot include as a complement to that exchange a fictitious payment with fiat money, which is neither merchandise nor a service, but rather a paper note or digital entry denoting a debt payable in nothing. In the case of the dollar, the debt is a debt of the Federal Reserve and registered accordingly on its balance sheet. A debt cannot be settled by tendering a debt instrument (which is payable in nothing in any case) and in effect, Balance of Payments debts have not, by any means, been settled in international commerce since 1971.

The non-settlement of international balance of payments debts has produced the accumulation of huge fictitious dollar reserves on the part of exporting countries, since 1971. The same holds for fictitious payments of export deficit debts with euros, pounds, yen or any other present-day currency. See the following graph:

Gold, up until the Bretton Woods Agreements of 1944, figured as the complement to the international exchange of merchandise or services and did settle outstanding balance of payments deficits, because it was a merchandise or commodity used as money.

According to the Bretton Woods Agreements, the fiduciary dollar was accepted as being as good as gold, with trust on the part of Central Banks upon the ability to redeem the dollar into gold. From 1944 up until 1971 then, these fiduciary dollars were held in Central Bank reserves as a credit call upon US gold; the final payment had not been effected and was delayed as a credit granted to the US until the dollars held in reserves were to be cashed in for gold at some future date.

As it turned out, the “fiducia” or “trust” was misplaced, for in 1971 the US reneged on the Bretton Woods Agreements of 1944, “closed the gold window” and stiffed the creditor countries. No final settlement of international commerce debts took place in 1971, nor has any taken place since thenthe truth of this statement is obscured by the mistaken idea that tendering a fiat currency in payment of an international debt constitutes settlement of that debt.

Once that false idea – that fiat money can settle a debt – is accepted as valid, then the problem of the enormous “imbalances” in world trade becomes an insoluble enigma. The best and brightest of today’s accredited economists attempt in vain to find a solution to a problem that cannot be solved except by the renewed use of gold as the international medium of commerce.

Regarding national commerce, the same reasoning applies. In reality, no one engaging in commerce in any country in the world today is actually paying for purchases, that is to say, there is no any actual settlement of any debt. All individuals, corporations and government entities are merely shuffling debts (payable in nothing) between themselves, in the form of either paper bills or digital banking money, whether in dollars or any other currency in the world.

For internal national commerce the smaller value of the silver coin was convenient for day-to-day transactions at the popular level and did constitute settlement of debt when tendered in payment, for silver is a merchandise or commodity which, like gold, can participate in commercial exchange.

Today, China and the other great Asian exporters have belatedly realized that the dollars they received as “payment” for their mass exports are nothing more than digits in American computers. If the Chinese do not cooperate, the bankers in New York can erase those digits in half an hour, and leave China with no reserves. For this reason, the Chinese and Asians in general are buying gold, and will continue to buy it indefinitely: computers cannot erase gold reserves.

The awful truth about China is that the Chinese acquired their formidable industrial power in the short span of thirty years at a tremendous cost: for thirty years they worked for nothing. China has $2.5 Trillion of reserves; China does not have any use for these reserves, they have no intrinsic value and China does not know how to get rid of them in exchange for something tangible of value; these reserves are nothing more than digits in computers in the Western world. Net, net, net: China worked for thirty years to provide the world with a vast quantity of merchandise, in return for: nothing! Thirty years of slavery, to build an industrial empire!

Mexico: forced to use the protectionist “Band-Aid”

Mexico has its oil, perhaps more than we are told. Let’s hope so! Our economy is less complex, less sophisticated, than the US’s. According to a Mexican Treasury study carried out in 2007, 85% of Mexicans have no bank accounts – a good sign that they can get by on paper money and are not getting into trouble with credit card debt. The Mexican economy, as we see it, is like a broad, low pyramid. It is more stable than the American “skyscraper” economy, a highly complex economy. Mexico is better equipped to survive the present crisis than the USA.

In today’s great world financial crisis of false money, we are likely to see countries around the world resort to protectionism: the leaders will be the same countries that so recently sang the praises of “globalization”. In this probable case, Mexico will have to do the same. It is a far from ideal scenario, but it is imperative for lack of the gold standard. Protectionism limits productive efficiency in any country because it limits the market for its protected products to its own national market. A limited market hampers efficiency. The supply of goods available to the population will be more limited and probably of lower quality at higher prices. (Protectionism will have similar effects in the US.)

Mexico will have to restrict imports in the near future. Otherwise, we will suffer serial currency devaluations. Protectionism is not the best policy, but Mexico will probably be forced to resort to it, for lack of the gold standard, which would be the best means of creating jobs in the US, in the rest of the “developed” world and here.

The effective cure

If Mexico aspires to anything more, we shall have to wait for the restoration of the gold standard worldwide. In the meantime, neither demagogy nor Socialism will solve our problems. Only the gold standard can do that.

For our industrial capacity to gain access to international markets – and for Mexicans to gain access to products from international markets – it will be necessary to restore the gold standard. Bilateral trade agreements are not optimum. The optimum is to have the world as a market, where payment for exports is balanced by imports and residual balances are paid in gold. Payment in gold of export deficits and collection in gold of export surpluses is sine qua non. Under the gold standard, Mexico would achieve sustainable prosperity and full employment for our admirable workforce.

Products from China and Asia in general, which today undermine our industrial capacity and create unemployment because we cannot compete with the extremely low wages of the Asian countries, would cease to be a problem under the gold standard; if the Asian countries, which today invade our markets, do not buy similar quantities of Mexican products – which today they do not – they would not be able to export their products to Mexico. The gold standard would fairly balance exports with imports; it would prevent the strategic destruction of our industry and protect us naturally, without the need for protectionist barriers.

The same therapy Mexico needs – the restoration of the gold standard – is what the world requires to regain economic health and sustainable prosperity.

Under a restored gold standard, Americans will not be able to purchase goods from China, unless China purchases American goods with a similar value. If the Chinese find nothing of value to purchase in the US, then Americans will be unable to purchase Chinese goods. It’s as simple as that! To continue selling to the West, China will have to open wide its doors to imports!

If Americans find they simply cannot purchase Chinese goods, Americans will manufacture those goods themselves. Industries and new jobs will spring up like mushrooms immediately, to satisfy American demand. International balance will be restored, unemployment will disappear.

Protectionism is not a cure, it is a Band-Aid. Mexico will not achieve the prosperity of which it is capable through protectionism nor by resorting to Socialist measures that crush the creative spirit of the individual. Nor can we succumb to renouncing our nationality and accepting absorption by the US, imitating all the (very costly) measures the current US administration imposes on its citizens. The ideal combination for Mexico includes a moderate dose of nationalism, a government that does not incur deficits, the institution of a monetized one-ounce silver coin, the “Libertad”, to stimulate and protect savings, and eventual participation in a new global gold standard, in which our nation can find the opportunity to fulfill its destiny.

“The gold standard is the generator and protector of jobs.”

24hGold.com


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