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Wednesday, February 13, 2019
WHY THE PRICE OF INTRINSICALLY VALUABLE HARD ASSETS LIKE ANCIENT COINS MUST CONTINUE TO RISE BY 10 to 15 percent per year.
The Dirty Open Secret of Western Economy is that every Major Western Economy considered to be Capitalist is dominated by the actions of its respective Central Bank.
The Function of a central bank is to set the Cost of Money. In this, they control the flow of money.
An economy wherein the cost and flow of money is controlled by a Central Planning organization is in essence a socialist economy.
We don't like to think of it as such, because it is Socialism for the Wealthy.
In a true market capitalist economy the cost of money (interest rate) would reflect the future value of money plus a risk factor.
If the money devalues at say 10 percent a year, a capitalist economy would require and basic yearly interest rate of 10 percent plus a very conservative risk factor of say 2-3 percent.
In the United States the top 50 items purchased in the 50 largest cities get 10 percent more expensive every year, and they have done so for the last 50 years.
When you loan money to a bank, therefor, in a capitalist economy, you should receive an interest rate of about 13 percent.
But in Socialism for the Wealthy Capitalism wherein the Central Bank sets the cost of money they "base" their rates on a fairy tale CPI which excludes everything that costs money: Housing, Education, Health Care, food, heating oil, prescription drugs etc. Thus they say there is no inflation, even though each dollar buys about 10 percent less year over year.
In this Socialism for the Wealthy economy then, when you loan money to the bank in the form of a bank account, the bank pays you an interest rate of ZERO.
This becomes an unvirtuous cycle as it in turn causes money to lose value even more quickly, as it subsidizes speculation at the expense of savings, and it encourages the accumulation of massive debt.
The bank then takes that money and speculates with it - or extend it to client speculators at well below real market rates (Why not? - their speculation is being subsidized to the tune of about 13 percent, and if it fails they get bailed out anyway) and that money floods into the risk markets -especially for hard assets (like Real Estate funds for example), and also assets coveted by the Wealthy class. This in turn, drives up the cost of everything a consumer needs to buy - Housing, Food, Heating oil, Education, Health Care etc, (as opposed to discretionary items like TV sets)
This flow of funds from savers to speculators causes the wealthy get ever richer and the poor and middle class get ever poorer.
A direct beneficiary of this is the Investment Hard Asset Market.
Why? Because as the value of money is ever eroded, and the transfer of wealth is one way from the middle class to the wealthy - the wealthy become ever wealthier and they are incentivized to invest in assets that benefit from the destruction of the value of money. These are assets that have intrinsic value.
What assets have intrinsic value?
Coins for one. Especially Ancient coins, as they are manuscripts, artifacts and artworks central to the History of Human Kind. They are also easy to maintain, especially in slabs, easy to store, and difficult for the government to account for. And best of all they have a track record of retaining their value over large swaths of time.
So as long as the Cost of Money is functionally Negative - as it is now by about 10 to 15 percentage points, hard assets will continue to appreciate by about that much per year - not taking into account the vicissitudes of crowd psychology (fetish value) which causes certain pieces to rise more quickly than others.
So it is best to still choose wisely, but in Ancient coins you are choosing in a market supported by the current economic system.
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