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Thursday, September 16, 2010

Tea Party and Economics

I apologize for the lack of posts this week - we're in crunch time with the PM shop, and the firearms training biz is going "off the hook" - busy!

A couple of thoughts about the news that I've seen:

Tea Party Candidates:  Wow, quite the butt kicking with the last elections, huh?  What I find so funny (not 'ha ha' but stunning) is how the Republican power structure is blowing these people off.

I'm honestly not surprised.  I don't give a damned what anyone says, the Republicans are just like the Democrats - they just have a different group of Special Interests.  They proved that fact the last time they were in power.

What has got them worried is that these Tea Party candidates seem to be pretty adamant that, "Times, they are a-changin'."  If they get elected, they're serious about changing how things are done.

Of course, some of them will be drawn to the old political practices of payoffs and the absolutely disgusting practice of LEGALLY profiting from insider information.  But some will stick to their beliefs.  We justt have to hope that enough of them do so.

Maybe THIS is the "fundamental change" that Obama was talking about...

Uncertainty still reigns supreme:  Gold and silver prices have been soaring.  Gold has gone up some $50 odd dollars in the last 30 days and about $120 over the last 60 days.

I can't find the article right now, it's somewhere near the beginning of his posts (Harvey Organ) in September, but I saw something about silver deliveries.  Basically, it was saying that all of the big dogs that trade in physical silver put NOTHING up for delivery.  This supposedly is something that has never happened before.

They're out of physical silver?  That seems like a bit of a stretch, but at a minimum, it's an indication of scarcity.

This guy does all kinds of analysis with the amount of contracts issued versus physical gold and silver that's available, and the math doesn't work.  More contracts than PMs in vaults.

If nothing else, get your PMs in your hands, NOT in paper contracts.

Poverty Spike:  Wow.  It's hit the highest levels in over 50 years.  More people than ever on some sort of government program.

What's going to happen when/if the "safety net" rips?

It seems like even the Dems are recognizing that government can't do it all.  They need to let the private sector do its thing, and let the economy grow "organically" and not via stimulus, which is nothing more than a hit of heroin to a junkie.

It looks like they are actually considering extending (perhaps permanently) the Bush tax cuts, AND doing away with the insane 1099 form requirements.  Even though a Senate bill was shot down a couple of days ago, it is still alive, and has a chance of being repealed.

On the 1099 issue, someone in the administration came out and said that the burden on business was not commensurate with the money that would be gained by the government.

Not that THAT has ever slowed down the pols.

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suek said...

Interesting article. I don't know the significance, but it might be right up there with Waxman's desire for a hearing when Catepillar etc announced the effects of the HCB on their future earnings...

Chief Instructor said...

Sue, I had just forwarded that link to a couple of friends. It cracks me up how panic-y the feds are getting over gold and silver.

People simply do not trust fiat currency.

My guess would be that if the 1099 fiasco is reversed (which I think it will be), they will leave in the requirement for PMs. The vast majority of the "problem" will have been fixed - most businesses won't be overly burdened - but they'll still be able to track PM ownership.

suek said...

>>...they'll still be able to track PM ownership.>>

To what end? We've discussed the possibility of the government calling in all the gold (and silver?) but why? It made sense for FDR because the dollar was backed by gold, and therefore more gold was needed in order to increase the paper money supply. But that's no longer true - we have fiat money, with no backing. There is actually no relationship between gold and dollars. So...what's the point? The likelihood of going back onto a gold standard is what...between 0 and -0??

suek said...

And an oh yeah...

Saw an interesting article yesterday on the increase of capital taxes being the rationale for the close observation of the market. The author was suggesting the possibility of using PM to buy foreign currency, then exchanging the foreign currency back to US dollars as a means of avoiding the capital gains. Hmmm. Take a vacation accompanied by a healthy dose of PM??? Interesting.

His point was that at this point, foreign currency exchanges are not particularly monitored, and so might be useful to avoid taxes.

Anonymous said...

FDR called in the gold for the classic reason; class warfare. There was a very real anger in America during the depression and it was aimed at what would have been called "preppers" then if such a word existed. Anyone not sufferring was assumed to be part of the problem. After all if the world falls apart and you can afford a nice home, nice clothes and a new car then YOU were the greedy bastard that caused it by sucking up all the money. You see the same thing today. The left cannot open their mouths without claiming that the richest 10% have 50% of all the money/assets. This envy/jealousy makes leaders do strange things. There will be real and palpable resentment towards anyone who is not sufferring as much as you are. Part of the ability to make it look like you are doing something is to sieze the gold and silver. Make no mistake, they will sieze the gold and silver. They will probably go after guns and ammunition too.

Chief Instructor said...

Sue, there are a couple of reasons to track PMs, and you touched on one of them in your follow-up post: Taxes.

Note: I'm not suggesting any of the following things, just pointing out that they exist.

Right now, unless you're a big-dog in the PM trade, I'd guess very few people report the gains they make when they sell PMs. You buy a coin for $1000 and sell it for $1200, you must pay tax on that $200 gain.

What? You didn't keep the purchase records for the coin? Bummer. Pay taxes on the whole $1200 sale.

So, people don't report the sales. No money made by the gov.

You now have this stack of cash from your PM sale that you're going to spend. If you work hard to keep your other reported income down, but you want some of the finer things in life, you need to be able to buy them without leaving a money trail - checks, credit cards or debit cards. You must pay cash.

Anything you can buy that doesn't need to be registered with the government (such as cars, firearms, phone service, etc) can be purchased anonymously with cash.

Groceries, fancy dinners, alcohol, gas for your car, etc. Consumables, not durable goods.

If PMs are tracked, the sources of cash are tracked, and more taxes are collected.

Government has become so bloated and so tax-happy, law abiding folks in huge numbers are willingly disregarding our tax laws.

Here's an example of government getting desperate for money: In California now, many small businesses are getting tax bills for Use Tax for out-of-state purchases they made.

You're aware, of course, that when you buy something online from another state, you must voluntarily pay your state a Use Tax, right?

Apparently, most businesses didn't know this, and are now having to prove they didn't buy anything from out-of-state. California didn't get any Use Tax from them, so a big red flag was raised.

Confiscations are also part of the reasoning. Maybe I'll do a post on this whole subject this coming week. I need to think this through - facts and reasoning, and not panic and fear.

Chief Instructor said...

Anon, as I alluded to in my reply to Sue, I think seizures are a possibility, but I don't know the probability.

There will have to be a great number of loopholes to allow the really big dogs to retain their PMs.

Figuring out the probability, justification and the methods of seizure are the key.

suek said...

>>...most businesses didn't know this, and are now having to prove they didn't buy anything from out-of-state>>

Heh. Now...just exactly _how_ do you prove a negative???

Chief Instructor said...

My friends that have gotten the letter are asking the same question. My guess is that this is just a fishing expedition by the Calif government to see what they can snag.

There is a published sales threshold that the state has set before you're even asked to give proof of Use Tax payment, and they're both below that number. I'm guessing that their franchise, being Canadian, gets them on a list that the state takes a swing at.

They have both tossed out the letter. It will be interesting to watch if the state pursues this issue with them.

Ryan said...

Now and then an article like that about PM trading being backed by nothing comes up. No worries for this guy as he takes physical delivery.

Chief Instructor said...

Ryan, yep, if you don't take physical possession, you can use the certificates in your preps as TP.