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Amidst the twenty-four hour news fiasco concerning the swine flu
pandemic, television stations have failed to mention that the largest
gathering of swine can be found on Capitol Hill. As an American taxpayer, I
have had the "swine flu" since the Clinton Administration.
According to the majority of my customer base, our comrades in the land of
the giant obelisk and all-seeing eye, in tandem with their masters at the
Fed, are very much to blame for our economic tribulations. Which naturally
brings up a related question: why are precious metals investors so enamored
with government-issued bullion, such as the United States Eagles, the
Canadian Maple Leafs, and the South African Krugerrands?
Nearly every day customers inquire about the merits of government bullion
versus private-issue bullion, and I have consistently taken the minority
position and favored the private mints (even though we sell everything at Gold&SilverNow). I have listed the three most common
arguments in favor of government coins below, along with my responses:
ARGUMENT #1: The
weight and purity of these coins are backed by the full faith of the
government.
RESPONSE: The
irony of this argument is that investors are gravitating to gold precisely
because their faith in the U. S. government has become shaken. The reasoning
is circular: If one doubts the integrity of our politicians and the financial
system, why demand a coin issued with the full faith of the same architects
manipulating it? The "full faith" of the United States government
is hardly reassuring.
Let me be clear. I am not doubting the weight and purity of the United States
Eagle. I am simply doubting the good faith of the U.S. Government. Does
anyone deny the plausibility of underhanded tactics at an institution run by
Timothy Geithner and the U.S. Treasury Department?
I'm just sayin' . .
When considering GATA research about price suppression, who can we trust? Our
socialist Canadian brothers up north? Our communist Chinese partners to the
East? How ethical is the track record of the South African government?
Instead of blindly accepting the markings on any coin, buyers should always
be cautious.
ARGUMENT #2. The
coins are universally recognizable.
RESPONSE:
By whom? Less than one percent of the United States population owns gold or
silver bullion. Ask your neighbor if he knows the difference between a Gold Krugerrand and a Golden Girl. If you are worried
about dealers recognizing private-issue bullion, consider this: you can walk
into most places and receive cash for a 14-karat gold bracelet from the Home
Shopping Network. So why would you have trouble selling private-issue gold
bullion? Gold is gold.
ARGUMENT #3.
The coins are legal tender.
RESPONSE:
You must be joking. The face value of a gold U. S. Eagle is $50, while the
cost of that same Eagle is roughly $1,000. So I ask: What sharpshooter is
going to square a $50 tab at Applebee's with a $1,000 gold Eagle? The face
value of these coins is already inconsequential. If and when the price of
gold skyrockets, the face value will be rendered valueless.
On the other hand, there are some major advantages to purchasing gold from a
private mint, namely:
COST: More
often than not, the premium for a private issue coin is significantly less
than that of a government coin, which means you can purchase more bullion for
your money. Honestly, does it surprise anyone that private businesses are
more cost efficient than the government? Why pay more than necessary?
AVAILABILITY:
The availability of government bullion rises and falls dramatically with
market conditions. In fact, the United States Mint recently ceased production
on fractional coins altogether. In October of 2008, nearly every dealer in
the country was placed on a waiting list for bullion, and in many cases the
lead times exceeded four months for those customers patient enough to wait.
Considering the risk involved with the default of any business in our present
economic situation, and beyond that, the risk involved with the default in
each business' bank, I find it mystifying that investors would harbor the
risk of floating hard-earned cash for lengthy periods of time. The risk is
entirely unnecessary.
CONFISCATION:
I have been told that many customers purchasing U.S. Eagles are now being
asked for their social security numbers and other contact information. Call
me paranoid, but why would Big Brother want this information? History repeats
itself, and the threat of a 1936 gold confiscation lingers like a bad
toothache. Whatever happened to privacy?
Those entering the bullion marketplace for the first time are rightfully
concerned about counterfeit coins. They want assurance that the gold is real,
even though counterfeiting is less common that one might guess. But these
questions linger whether the coin originates from a government outfit or not.
Counterfeit coins do exist, and criminals are indiscriminate when it comes to
their make and model. I will go into detail about the process for evaluating
gold authenticity in my next article.
In the meantime, for those who survive the swine flu, my humble opinion is:
purchase private mint bullion to save time and money, and be diligent
regardless what products you purchase.
Til next time, that’s my Saab Story.
Tarek Saab
Guardian Commodities
Tarek Saab is the President of Guardian Commodities and a former finalist
on NBC's "The Apprentice" with Donald Trump. He is an international
speaker and syndicated author.
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