If you read my last article, you have some idea of how I came to be involved with the work of Professor Fekete, with Gold Standard University Live, with The Gold Standard Institute, with Fekete Research, and with the New Austrian School of Economics. I hope you also understand the importance of all this; how knowledge of money, credit, and the Gold Standard is the road to economic salvation for humanity.
It is one thing to understand a concept intellectually, quite another to have a visceral, gut feeling… a true knowing. So with Gold; reading and studying is fine, but nothing sets the reality of a concept like a traumatic experience. Meeting armed border guards at night, after walking for hours across frozen plowed fields while escaping from Hungary was traumatic for a nine year old… and set the reality of Gold vs paper deep into my psyche.
Freedom and life itself depended on Gold; without Gold, we would never have passed from Hungary to Austria, we would never have been able to start a new life in Canada… and my father’s life in Hungary would not have been worth a plugged nickel. I received a visceral knowing of Gold early; it took much study to fill the intellectual gaps, but the knowing was there.
So it goes with another concept; the concept that life is a journey, a journey with no beginning and no end… a never ending story. A story with waypoints, highlights, lowlights… but with no beginning, with no end. Our personal part of the story may start with our birth and end with our death, but the story goes forever on.
I am learning this concept not so much through a traumatic experience… like leaving Hungary under duress… but through constant repetition. After all, ‘repetition is the mother of learning’, is it not? Ongoing repetition is the equivalent of one traumatic incident in the way of learning life lessons.
I thought I had completed my journey in economics when I studied Mises… till I learned of Professor Fekete… then my journey really began. I thought I had completed my journey when I made the commitment to help preserve and disseminate the Professor’s knowledge… but then my journey really began.
I thought I had completed my journey with the declaration that Fekete Research will not only preserve and disseminate the Professor’s knowledge, but will work to carry it forward… but now I see that my journey is about to begin.
I am an engineer by trade… and engineers put scientific principles to work in the real world. They do this by designing things and processes that make life easier; like bridges that cross obdurate obstacles, like ships and trains that conquer distance… and so forth. I feel challenged to put the principles discovered by Professor Fekete to work in the real world. This is my next chapter of the never ending story.
One of the biggest concerns of students of Gold is how to transition from the current Fiat fiasco, to honest money… to an Unadulterated Gold Coin standard… without having to go through economic collapse and bloody revolution. In other words, how to put the theories of Gold and Real Bills into effect, in our world, right here right now.
As I write this article, Professor Fekete, now an octogenarian, is traveling the world in his ongoing efforts to kick start the process; he is currently in Bermuda, having discussions with His Majesty’s Loyal Opposition, to persuade them to embrace the concept of opening their Mint to Gold; to accept unlimited quantities of Gold and fabricate the Gold into coins of the realm.
This is one of the keys to Gold money; unlimited minting guarantees that there will be a plentiful supply of coins to support Gold circulation… without circulation, the Gold standard will never get off the ground. No long term planning such as issuing Gold bonds or Gold insurance policies is possible unless a future supply of Gold Coins, indeed Gold income, is assured.
NASoE is pursuing the same goal with a slightly different twist… a market driven rather than a sovereign driven approach to creating coins capable of circulation in unlimited numbers. What drives this effort is the premium of Gold coin over Gold bar; if you investigate the Fiat price of Gold, you will find that coins always carry a premium vs. bars.
This is simple; a coin is more valuable, has a larger purchasing power than the equivalent Gold in bar form. A coin is more liquid, easier to spend than a bar… thus the premium. The Mengerian theory of marketability (liquidity) predicts this effect, and market action shows the theory to be true; coins sell at a premium to bars, period.
We are organizing a company with the mandate to do just this; accept Gold bars, and return Gold coins to all comers. The coins could be one ounce coins, like the Maple Leaf or the Krugerrand, but for many good reasons will be Sovereigns.
One ounce coins are large; with current evaluation at around $1,200 one ounce coins will have difficulty circulating. The Sovereign is only about ¼ ounce and much more suitable for common, modest value monetary transactions.
Furthermore the Sovereign was the basic coin of the Classical Gold Standard; history and tradition are important. Coinage of the Sovereign has been uninterrupted since its inception in 1816, unlike most other monetary coins. The Royal Mint of England has been coining, is coining, and will continue coining Sovereigns. Negotiations with the Royal Mint have already born fruit; they are eager to continue their business of coining Sovereigns… and so is the Royal Canadian Mint.
The Sovereign has no face value stamped on it, unlike the Maple and other current bullion coins. Face value is a sham, and needs to be eliminated. Indeed, the Sovereign class coin was the standard coin of the Classical Gold Standard; the Gold Frank, the Gold Napoleon etc. all have the same Gold content, and are exchangeable with the Sovereign.
This mint operation is a no brainer; the premium of the Sovereign over Gold bars is substantial, and is much more than the cost of fabrication (brassage cost) so a risk free profit is available to any Gold bar holder. Hoarders, investors, miners… whoever has Gold will be able to take advantage of this opportunity; turn Gold bars into God coins, and earn a Gold profit.
However, the implications of this process go beyond direct profit; once a bar is delivered, the really interesting aspect kicks in. In accepting bar to be coined, there is a time lag… we are not talking about trading bar for existing coin, but actually processing bar to produce brand new coin.
Depending on quantities, a delay of 30, 60, or 90 days is to be expected before the new coins are delivered. The royal mint will accept the bars, and accept a bill, payable in sovereigns on the due date up to 90 days in the future. Think about this; these bills will be Gold bills, payable on maturity in Sovereigns by the Royal Mint! These are Real Bills of the highest caliber, the most desirable Real Bills of all.
Goldsmith Bills that morphed into bank notes are being reintroduced to the world. Indeed, this is the key to the new operation; auctioning freshly accepted Gold Bills, to establish a Gold rate of discount. Like this; you deliver a Kilo bar of fine Gold to the Royal Mint, and are issued a signed and accepted ( by the Royal Mint ) bill guaranteeing Gold Sovereigns in ninety days.
You may simply wait for the due date, and collect your Sovereigns; or, you may put your bills up for auction… and receive Sovereigns right now. Furthermore, you may also bid in these ongoing auctions; exchange your cash Gold for a Gold Bill, and wait for delivery. By choosing to do this, you will obtain Gold Sovereigns at a discount. At a discount to the Sovereign count; pay fewer Sovereigns for the bill now than you will receive on maturity of the bill.
Is this not a no brainer? Real Bills are market driven, and offer benefits to both the writer and the acceptor. Both have potential to gain; profit, at the cost of time, or time to pay (credit) at minimum cost. This is the current chapter in the never ending story; the creation of a market for Gold Bills… and a taste of things to come.
The next paragraph of the story is already clear; to facilitate the creation of Silver Bills, in a similar manner. Bring Silver bars to the Mint, and receive Silver Bills. The premium on Silver coin vs. Silver bar is even higher than on Gold, as the specific value of Silver is less… and the brassage is therefore a higher percentage of value. More profit is possible in the coining of Silver coins than the coining of Gold.
And what about the next chapter? Who knows, life deals and we play the cards we are dealt. Perhaps once the Gold and Silver bills are in play, other metal bills can be addressed; copper and other base metals. Perhaps we will have an opportunity to tackle the thorny problem of sovereign (Fiat) debt through the mechanisms of Gold bonds, Gold insurance policies, and Gold annuities.
As far as more specific details about this new venture, I am not at liberty to name the company being formed, as the charter is presently being written, and the company is being registered. The exact terms and details of the Bar/Sovereign transaction will soon be available, as well as information about Bill auctions. I will have more to say about all this as the never ending story continues.
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