Spanish-Colonial Reales ~ Profile History

The Spanish reales, specifically, the Spanish-Colonial Reales, loom large in the history of United States coinage– particularly the silver coinage of the United States.

Specifications
Designer:
Obverse Design: Crowned Pillars of Hercules and the crowned hemispheres of the Old and New World floating on the sea 
Reverse Design: the crowned Coat of Arms of Spain
Composition: silver fineness of .916
Dates Minted: (1701-1746) approx.

Background
The Spanish reales, specifically, the Spanish-Colonial reales, loom large in the history of United States coinage– particularly the silver coinage of the United States:

• The Spanish-Colonial half-reale was the forerunner of the U.S. five-cent coin (which at first was the half-dime, later to become the “nickel”). It was actually the equivalent of 6 and ½ cents in U.S. money.
• The Spanish-Colonial one-reale was the forerunner of the U.S. dime. It was actually the equivalent of 12 and ½ cents in U.S. money.
• The Spanish-Colonial two-reales was the forerunner of the U.S. quarter. It was the equivalent of twenty-five cents in U.S. money.
• The Spanish-Colonial four-reales was the forerunner of the U.S. half dollar. It was the equivalent of fifty-cents in U.S. money.
• The Spanish-Colonial eight-reales, or “peso”, was the forerunner of the U.S. silver dollar. It was the equivalent of one-dollar in U.S. money (though in truth, the Spanish-Colonial peso was heavier than the first U.S. silver dollars, so it was actually worth a bit more).

From the above, one might think that “reales” are roughly equivalent to “cents.” Not true. Remember, it takes 100 cents to make one dollar. It only took 8 reales to make a “peso.”

So it was actually the Spanish-Colonial reale coin subdivisions that are the rough equivalent of the U.S. coin subdivisions (at least from the half-dime through the dollar), not the units of measurement themselves that are equal. Also bear in mind, during the era of the reales, Spanish copper coin denominations were measured in “maravedis,” while gold coins were measured in “escudos.” Don’t get too much of a headache trying to calculate it all out– let the economists worry about that.

History
The “reale” originated in Spain during the Middle Ages. In the 16th century, when Spain set up colonies in the New World, specifically in Mexico and Peru, a tradition of New World Spanish reale coins began. The first were struck in Mexico, beginning in 1536. Silver ½, 1,2,4, and 8 reales struck in Mexico City from 1536-55 were the first coins struck in the New World. The design on these silver coins featured two crowned Pillars of Hercules looming above rolling waves. On the reverse was the Spanish coat of arms. While the ½, 4 and 8 reales of 1536-55 are quite scarce, the 1 and 2 reales are more common, and even affordable today. The 1 reale is the most affordable, retailing around $85-$125 in average circulated condition. Not a bad price for a coin of this historical magnitude!

Except for a few rare ½ and 1 reale issues of 1568-73 Peru, the latter part of the 16th century, starting roughly from around 1556, saw the earliest production of “cob” reales. These were struck in the 16th century Spanish New World mints of Mexico City, Lima, Peru and Potosi. “Cob” reales, struck in the ½,1,2,4 and 8 reales denominations, featured a Spanish cross on the obverse, the Spanish shield of arms, or in some cases (as in 18th century Peru and Bolivia) a monogram instead of a shield of arms. Cobs were struck for a LONG period of time in the Spanish New World– from 1556 to 1770 (though by the late 1700's only a few Spanish-Colonial mints were still making cobs)! But it’s not so much the design that sets the cob reales apart, as it is their ultra-crude craftsmanship! Spanish-Colonial silver cobs were struck more as transportable bullion to be shipped back to Spain, than to be used as mediums of exchange in commerce. The vast silver deposits were coined into cobs just as soon as they could be extracted from the mines of South America! It’s rare to find a round cob– many are square-ish, rectangular-ish, heart-shaped even. Oftentimes the design is only partly struck onto the flannel– which is why a cob coin with a full date is exceptional.

Yes, the Spanish-Colonial 8-reales was the forerunner of our nation’s silver dollar– but not so much the “cob” 8 reales, as the predecessor to the cob reale coins: the Spanish-Colonial silver milled coinage. The first of these would be the Pillar Type ½, 1, 2, 4 and 8 reales coins of 1732-71. In fact, if you look in the front section of The Red Book: A Guidebook Of United States Coins, you will see an illustration of the Pillar Type Spanish-Colonial peso. Now, instead of crudely-handstruck silver cobs, the mints of Spanish America now were producing silver reale denominations that were of uniform weight, roundness and artistic merit. The obverse of these handsome silver coins features a crown adorning two globes (showing the Old and New World map outlines) that rest atop an island mound with waves beneath. The crowne globes are flanked by the Pillars of Hercules. On the reverse is a crowned shield of arms.
After the Pillar Type ½, 1, 2 , 4 and 8 reales coins, came a series of “Portrait” Spanish-Colonial silver coins. The denominations remained the same. The size and weight remained the same, but the obverse featured the bust of the Spanish ruler, and on the reverse, a crowned shield of arms, flanked by the Pillars of Hercules. There are three types of “Portrait” silver reales: the Charles III type (1772-89), the Charles IV type (1789-1809), and the Ferdinand VII type (1809-21, though up to 1826 at some Spanish-American mints).

The Pillar Type 8 reales is fairly costly, being such a historic Colonial-Era coin, not to mention being large and silver. An average circulated specimen will cost you around $150-$175. The 4 reales is scarce, but should cost less at around $50-$85 in average condition. The ½, 1 and 2 reales retail around $15-$25 in Good, $45-$60 in Fine.

Two new types of reale coins were introduced late in the Spanish-Colonial period. The first of these was the tiny silver 1/4 reale, featuring a crowned lion on the obverse, a castle on the reverse. These were first struck around 1796, during the reign of Charles IV, and were struck up through about 1816. During the reign of Ferdinand VII, a copper 1/8 reale coin was introduced in 1814 and struck through 1821.

The 1772-1821 8 reales are all quite available, but not cheap, still being Colonial-Era “dollars” in the practical sense– or at least they were used as “silver dollars” alongside our nation’s first silver dollars from the U.S. Mint. Average specimens will cost around $50-$75 in Fine condition. The ½, 1, and 2 reales are easily found, and cost just $12-$25 in average circulated condition. As always, the 4 reales denomination is the toughest to find, but still isn’t that expensive in relation to its scarcity. It will cost you roughly $45-$60 in average circulated condition– sometimes you can get them for lower than that.

The final phase of the Spanish-Colonial reales coinage, were those struck during the War of Independence, when Mexico and other South American countries were fighting for their independence from Spain. During those years of 1810-21, (in Peru it stretched to about 1826), silver reales of various denominations (but mostly pesos) were struck in the name of Ferdinand VII were struck in Royalist strongholds such as Chihuahua, Durango and in Mexico. Some of these royalist silver coins bore the usual ruler bust/Pillars of Hercules reverse (though rendered much cruder than the royal-issued coins) though some featured unique designs. Silver reales struck by royalists during these tumultous years are scarce and pretty costly– average specimens usually start around $50 and oftentimes go above $100.

When the War of Independence ended around 1821, so ended the era of Spanish-Colonial silver reales. But it was not the end of the reale as a denomination– it continued on as a denomination for coins of Mexico, Peru, and other South American countries up through the mid-1800's.

Collecting

Of course, the large-size 8 reales cobs garner a lot of attention from collectors today. These coins are virtually everyone’s idea of what “pirate treasure” coins look like. And that’s pretty much accurate. Many a treasure chest laden with 8 reales cobs was hijacked on the high seas by 17th-18th century pirates! Today, an average circulated, sea-salvaged 8 reales cob can be purchased for roughly $65-$100. Again, not a bad price for a coin with so much legendary history. The ½, 1 and 2 reales cobs are also reasonably priced. Average circulated specimens can be purchased for $15-$45.

Mints

Mexico City Mint - Santo Domingo Mint - Lima Mint - La Plata Mint - Potosi Mint - Panama Mint - Cartagena Mint

Bogotá Mint - Cuzco Mint - Guatemala Mint - Santiago Mint - Popayan Mint - Zacatecas Mint

External Links
Wikipedia.org Spanish colonial real
Personal.net Spanish Colonial Currency
NewWorldTreasures.com Spanish Colonial Silver Reales Coin Types

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A.M. Kitco Metals Roundup: Comex Gold Firmer amid Middle East Worries, Slumping U.S. Dollar Index

28 February 2011, 08:00 a.m.
By Jim Wyckoff
Of Kitco News
http://www.kitco.com/




(Kitco News) - Comex gold futures prices are trading modestly higher Monday morning as the market is supported by continued safe-haven investment demand amid the ongoing tensions in the Middle East. A weakening U.S. dollar index is also an underlying bullish factor for gold. Comex April gold last traded up $4.90 an ounce at $1,414.20. Spot gold last traded up $3.70 at $1,414.00.

While the civil unrest in the Middle East did not see any new, dramatic developments over the weekend, the situation is still inviting safe-haven investment demand into the precious metals markets. Nymex crude oil futures prices have backed down from last week's 2.5-year high of $103.41 a barrel, on ideas oil will continue to flow from Libya even during a regime change. There are technical clues crude oil prices last week did put in a near-term market top. If so, that would be at least slightly near-term bearish for the precious metals. Still, precious metals traders are keeping one eye on the crude oil market as a gauge of tensions in the Middle East.

The U.S. dollar index hit a fresh four-month low overnight. The technical posture of the index is very weak at present. The greenback has also not seen safe-haven buying interest it had enjoyed during past geopolitical unrest. If the U.S. dollar index continues to trade sideways to lower, which is what the technical picture is suggesting at present, then that would be gold-market-bullish.

The specter of inflationary price pressures worldwide is also a bullish underlying factor for the precious metals. While crude oil prices have backed down from last week's high, commodity prices in general are still at multi-year highs. Combine that with the central banks of the major industrial economies that have implemented quantitative easing (printing money) and that is a recipe for consumer price inflationary pressures.

U.S. economic reports due for release Monday include personal income and outlays, the Chicago ISM business survey, pending home sales and the Texas manufacturing survey.

The London A.M. gold fixing was $1,409.75 versus the previous P.M. fixing of $1,402.40.

Technically, the gold market bulls have the near-term and longer-term technical advantage. Prices are in a four-week-old uptrend on the daily bar chart and are poised to produce a bullish monthly high close on Monday, the last trading day of the month. On the longer-term charts, gold prices have been trending higher for 10 years.

Gold bulls' next near-term upside technical breakout objective is to produce a close above strong technical resistance at the all-time high of $1,434.10, scored in early December. Bears' next near-term downside price breakout objective is closing prices below solid technical support at $1,390.00. First resistance is seen at last week's high of $1,418.80 and then at $1,426.30. Support is seen at the overnight low of $1,407.90 and then at $1,400.00.

May Comex silver futures last traded up 66.7 cents at $33.59 an ounce Monday morning. Silver bulls have the solid overall near-term and longer-term technical advantage. Prices are in a four-week-old uptrend on the daily chart and are also poised to produce a bullish monthly high close on Monday.

The next downside price breakout objective for the silver bears is closing prices below solid technical support at the January high of $31.27. Bulls' next upside price objective is producing a close above solid technical resistance at last week's high of $34.315 an ounce. First support is seen at the overnight low of $33.255 and then at $33.00. Next resistance is seen at $33.76 and then at $34.00.

By Jim Wyckoff of Kitco News; jwyckoff@kitco.com

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Counterfeit Detection Guide

Fake Morgans

“But how do you know it’s real?" It’s a question I’ve been asked many times over the years upon showing someone an ancient coin or some other kind of centuries-old coin that only cost me a few dollars. It’s a valid question, after all, most people have heard horror stories of antique collectors who have purchased old paintings, vases, artifacts, etc for hundreds or thousands of dollars, only to be told that their “antique” is a virtually worthless modern fake!

The prospect of throwing away money on a worthless counterfeit scares many people away from purchasing coins. So let’s get the bad news out of the way: yes, counterfeits, replicas, fakes, imitations, bogus pieces – they are out there in abundance. Now for the good news: By applying a few basic principals, you can usually protect yourself from getting ripped off. Happily, there are “red flags” to be aware of when it comes to spotting a fake.

"Fake" vs. "Counterfeit"
First, some terminology issues. For the purposes of this article, I will use the term, “fake” rather than “counterfeit,” because to my way of thinking, they are two different things. A “counterfeit” is not necessarily a bad thing. A “fake” is. Why? Because a counterfeit coin is not necessarily a piece that was made to fool you, the collector (more on that later). A fake generally IS meant to fool you, the collector, and separate you from your hard-earned money. But a word of caution though, to be clear. Replica coins sold in legitimate souvenir shops are fakes. BUT, all such pieces, by law, will have “COPY” stamped somewhere on the face of the piece so the buyer will know they are purchasing a REPLICA, not the genuine article. A seedy, under-handed fake coin (as opposed to a legitimate replica) NOT.

The First General Rule of Thumb
RARE/BIG MONEY COINS ARE FAKED; COMMON/SMALL MONEY COINS ARE NOT. Yes, there are exceptions to this rule, but not many. In other words, coins like these are faked far more often than others– big ancient greek silver coins, big Spanish silver coins, rare U.S. Colonial coins, rare early U.S. coins, and generally, any decent-sized world or U.S. gold coin. In other words, if you see a rare 1776 Continental Currency dollar up for sale, chances are slim that it’s NOT a fake, no matter what the seller claims (legitimate Colonial coin dealers or coin auction houses being the exception) ---so do your due diligence and have the coin independantely appraised. By the same token, if you see a 1752 Dutch copper doit in circulated condition, being sold for around $5... you probably don’t have a thing to worry about. Despite being 250 years old, it’s a common coin and hardly likely to be faked. Why? Not worth the time and effort.

General Rule Number Two
BEWARE SLICK, BUBBLY PIECES. In other words, many fake coins are produced via the process of “electro-plating” or “casting.” Though it takes a little practice, you can soon learn to tell the difference between a “struck” coin (usually genuine) and a fake made by casting or electro-plating. Such fakes will have full designs, but they will be noticeably weak and faded– not typical of genuine struck coins, especially struck coins with intact designs and legends. Also, such fake coins will often have a slightly “bubbly” surface, a leftover result of the heating process. Lastly, such fakes will often feel quite slick, far more noticeably so than a genuine struck coin.

General Rule Number Three
BEWARE TOO-GOOD-TO-BE-TRUE COINS. This can be tricky. For instance, there are many genuine ancient greek coins out there that look like they were just struck yesterday. Still, I would be immediately suspicious of a private seller’s flawless, super-sharp-looking ancient Greek silver tetradrachma, if only because you know that big impressive Greek silver coins are popularly faked. ESPECIALLY look at the legends and/or inscriptions on such coins. If they are completely bold and intact, even on a super high grade ancient coin, that to me is a red flag (of course it helps to know that ancient coins were rarely fully-struck up, particularly the legends). For another example, if you see a medieval silver coin that’s perfectly round with completely clear legends and design elements, beware! Ancient and medieval coins – or any coins from the “hammered” period up to around 1660– were RARELY nicely round.

General Rule Number Four
LOOK FOR SHODDY WORKMANSHIP. This is a pretty easy way to spot a fake. Many fakes simply look amateur-ish compared to the original. Of course, it helps to know what the genuine article looks like first, but this just comes with reading and experience.

General Rule Number Five
BEWARE PRE-1878 SILVER DOLLARS FROM THE ORIENT. It saddens me to say that, because there are doubtless many honest coin sellers who work out of such places as Singapore and Hong Kong. But in recent years, there have been a rash of fake U.S. silver dollars coming from the Far East, that have been turning up on the Internet. Generally these are U.S. Draped Bust Dollars (1795-1803), Seated Liberty Dollars (1840-73) and Trade Dollars (1873-85). SOME OF THESE FAKE SILVER DOLLARS LOOK QUITE AUTHENTIC! Some do not. And this doesn’t mean that fake U.S. silver dollars are not being sold here in the United States as well– be especially wary of Draped Bust silver dollars being sold or auctioned at a bargain price. Which leads me to my next general rule of thumb.

General Rule Number Six
BEWARE OF TOO-GOOD-TO-BE-TRUE PRICES. It’s been said many many many MANY times over the years: There is no Santa Claus in the coin business. Now don’t get too discouraged – I can testify that there are MANY great deals out there to be had in coins. BUT.. as a general rule, if a seller is willing to part with a decent-shaped 1652 Massachusetts Pine Tree Shilling for $200, or a nice 1785 USA Bar cent for $100, you can usually bet you’re buying a $10-$20 fake. Or maybe, just maybe, you’ve run into the most clueless seller on planet earth.

General Rule Number Seven
LOOK FOR “COPY” OR A TRACE OF “COPY” ON THE COIN. I mentioned this earlier, but it’s worth repeating. Around 1960, a law went into effect here in the United States, that any coin replica had to have “COPY” incused on the face of the piece. Sometimes sellers put up a coin up for sale as “genuine” not even realizing that “COPY” is stamped on the face of it! Sometimes, REALLY sleazy sellers will try to remove “COPY” but will not succeed completely. Look for it. The hitch to this is, replicas from BEFORE when this law took effect, will obviously not have “COPY” on the face of the coin.

There are other, more scientific ways of testing whether a coin is authentic or not. One of the truest ways, is to weigh the piece. Is it heavier than the genuine article should be? Lighter? Wrong weight usually means fake coins. Testing of a coin’s metal is another way. An expert can tell or test out whether a “gold” coin is actually brass, or whether a “copper” coin is actually made of lead. Also, is the coin the right thickness and diameter to be a genuine piece (a hammered Spanish reale from the 1400's is not going to have a thick enough edge to write on). Granted however, these are more scientific kinds of tests more often done by experts than everyday collectors.

Now, as far as the distinction (at least to my way of thinking) between “fakes” and “counterfeits.” Speaking for myself, I have little to no interest in a fake 1652 Massachusetts Pine Tree shilling. But I would be THRILLED to own a counterfeit 1652 Massachusetts Pine Tree shilling! Why? Because a fake Pine Tree shilling was probably produced in the late 20th or 21st century. It has no historical value whatsoever – it’s only value is as a souvenir piece. BUT, a counterfeit 1652 Massachusetts Pine Tree shilling could have been produced in the 1600's or even early 1700's! In other words, it’s a CONTEMPORARY counterfeit, a piece struck roughly the same time as the original. Contemporary counterfeit coins were struck to circulate roughly the same time as the originals were circulating. They were meant to be used as MONEY, not to passed off as “collectibles.”

That’s why “counterfeit” is not necessarily a dirty word to coin collectors. There are many enthusiastic collectors of contemporary counterfeit coins, particularly of the Colonial period when MOST of the copper coins in circulation were counterfeit. In fact, contemporary counterfeit coins are often more valuable than the genuine article! All this is to say, don’t lump MODERN counterfeits into the same category as CONTEMPORARY counterfeits.

Altered Coins
It’s worth discussing “altered coins.” Altered coins are close cousins to “fake” and “counterfeit” coins. Altered coins, however, are genuine pieces– but they have been “altered” to be something they are not. Namely, a rarer coin.

Generally, two things are altered on a coin to enhance its value: the date and the mintmark. For instance, a common 1897 Indian Head cent worth $2 might be altered to appear as an 1877 Indian Head cent worth $500. A 1909 VDB Lincoln cent worth $4, may have an “S” mintmark unscrupulously added to it so that it’s now a $600 value 1909-S VDB cent! A 1922-D Lincoln Cent might have the “D” chiseled OFF to make it a much rarer 1922 Lincoln cent! And a 1914-S Lincoln Cent might have its’ “S” mintmark altered to a “D”, thus increasing the value an extra $200! You get the picture. The “altered coin” phenomenon is particularly a problem when it comes to rare U.S. coins, since date/mintmark combinations play a huge role in values.

Other things can be altered to increase a coin’s value: little marks, design elements, letters in a legend, even. Still, be aware of rare dates and mintmarks. A general rule is: THE RARER THE COIN, THE CLOSER YOU SCRUTINIZE FOR SIGNS OF ALTERATION.

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Gold Forecaster - Why is the Dollar Falling in Gold and Currency Terms?

By Julian D.W. Phillips
Feb 25 2011 11:51AM
www.goldforecaster.com




In the last few days a fairly new market perception has been creeping in. The expectation that Eurozone interest rates are going to start rising ahead of U.S. interest rates is taking hold. But while the original intention in Europe was to raise them as soon as it was seen that the recovery was really taking hold, it is becoming apparent that inflation may well beat them to it. As energy and food inflation are here to stay the reason rates will rise now is to tackle inflation. We find that this will be tragic. Although growth is taking hold in both the U.S. and the northern parts of the Eurozone it is too fragile to bear rising interest rates alongside food and energy inflation. Should rates rise then we are of the belief that growth will be either extinguished or wounded so badly that it will limp along at best. Only Asia can afford this not the developed world. The U.S. is not immune to such inflation, but will delay raising interest rates so as to not burden the consumer at a time when he is sensitized to bad times and will save at a time when the government hopes he will spend. What will be the effect internationally on the dollar, other currencies and the global economy and precious metals?



The U.S. dollar

Stored up for future crises at the moment in the U.S. are:

• A ‘hung’ government where President Obama’s administration does not have enough power to legislate as they want. The Republicans, while they have enough power to stop Obama’s legislation, don’t have enough power to get their own through. This is the last situation the U.S. wants right now. It will ensure that each crisis gets to the brink before action is taken. Even then we may tip over the brink. This will shake global confidence in the dollar and produce ratings agency downgrades for and in the U.S.
• A potential debt crisis from the federal government down through individual States such as California, Wisconsin and the rest. These are of a size that makes the Eurozone crises look tame.
• A governmental budget deficit that is not being addressed properly. We will see the first such game of brinkmanship when the time comes to legislate an increase in borrowing limits, soon.
• The U.S. Treasuries are over half owned by foreigners essentially subsidizing U.S. low interest rates.
• A loss of global power, as China’s growth, not only will eclipse that of the U.S. [China’s economy will be double the present day’s by 2020] but will see manufacturing move to China from the U.S. a process well underway already.
• The future prospect that the dollar will lose its role as the sole global reserve currency to the Yuan and perhaps a basket of other hard currencies of which it will remain only a lesser part.

The results of these crises, as we see now is an economically weakened U.S. that will find it extremely difficult to bear up under the strain of rising interest rates in an inflationary environment. Once interest rates rise to try to contain inflation, we will see the bond markets turn to cash to avoid the dropping capital value of fixed interest rate securities. The equity markets will likewise fall in the face of rising yields on fixed interest rate rises and diminishing future prospects for the economy. Add to that the above confidence-sapping problems and we will see foreign investors unhappy to watch the steadily falling dollar exchange rate, as we see at the moment.

The falling dollar and other currencies

The dollar won’t fall in isolation. Its trading partners cannot afford to allow their exports to suffer at the hands of a weak dollar. As we have seen all too clearly in the last few years, the trading partners of the U.S. intervene in the foreign exchanges to weaken their own currencies [in the face of a surplus on their Balance of Payments] to retain export competitiveness. We are of the opinion that central banks have and will be operating in the foreign exchanges to hold key exchange rates [such as the $: €] within a narrow trading band to give the false appearance of stability. To date this has led to the export of inflation as the money created in QE has seeped into the emerging nations as ‘hot money’ deposits. We believe that this will continue until interest rates start to rise in the U.S. Then like a reversing ripple of water that hot money will stream home to repay the original loan. This will create major capital flow problems as it exits its emerging nation home to the U.S.

The net result will be that the bulk of the world’s foreign exchanges will look relatively stable as they all sink in value together. Hence all falls in the dollar will be temporary in the future. How can this be measured? We expect that assets, in particular precious metals will rise against them all as they have been doing this century already. Even if the Yuan becomes a global reserve currency, we do not expect it to appreciate against the dollar. Global currencies will then cease to operate as measures of value but will be used simply as a means of exchange with constantly varying sets of values.

As we look at the performance of the dollar in the last couple of years, we think that much of this falling value has been absorbed in deflation and will only become apparent once inflation takes off [rapidly when it happens]. Overall the monetary system will prejudice the surplus nations like China. We expect them to take measures to protect themselves against this, which will see the dollar [and its following currencies] falling lower still. The net result will be a move towards gold along the lines suggested by the head of the World Bank, as a reference point of value.

Eventual Protectionism

Once it is in the interests of the main global trading blocs and or individual nations, Tariffs, Capital Controls and even in some cases Exchange Controls will be used to block imports of cheap goods, outflows of ‘hot money’ and permit the rebuilding of manufacturing in nations where it has been lost. Just as sanctions produced an economic boom of note in Rhodesia, so will these sets of controls.
It will see globalization retreat as nations just will not cooperate on an international front at the expense of national interests now. International trade and capital movements will require money that is not influenced by national conditions and remains highly liquid. Gold and eventually silver can carry this role in extreme times [as collateral, not as a means of exchange].

Gold as part of the global monetary system

Such an opportunistic set of principles underlying the global monetary system that we see now will savage the remaining confidence in it. Some anchor values will then have to be incorporated into the system to stop its complete decay.
While gold has been moving back into the system tacitly, through the cessation of gold sales, by the developed world and the buying of gold by the emerging world, there is no public recognition of gold in the system. We do believe it is there already. For instance the ‘gold – currency swaps’ executed with the Bank for International Settlements was used last year by debt-distressed central banks to secure foreign currencies to assist in their [sovereign debt] market defense. These guaranteed repayment by the debtor nation of their ‘rescue funds’. It was by these golden guarantees that the loans to the nations were secured. They had nothing else of independent value with which to do it. This method neatly avoided using gold publicly and to the shame of the debtor nation. If they fail to repay the retention of that gold by the B.I.S. will nail the coffin closed on that country’s creditworthiness.

Should this involve one of the major world powers in the future the global economy will then have two sides, the emerging Asian nations and the declining developed world. We have no doubt that Asia will then be the main reforming force in the reformation of the global monetary system.

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Julian Phillips

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Legal Notice / Disclaimer
This document is not and should not be construed as an offer to sell or the solicitation of an offer topurchase or subscribe for any investment. Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina only and are subject to change without notice. Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report.

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Gold & Silver PAC Update and Is Inflation A Problem?

Posted by Richard Schwary on February 24, 2011 7:06 AM


Gold & Silver PAC update from Mark Olanoff

The House and Senate are home in a district work period so now is the time to let your legislators know how you feel on the 1099 issue. Both the Senate and House have taken some action on the 1099 issue.

On Feb 2nd , the Senate voted on an amendment by Sen. Debbie Stabenow of Michigan to repeal the 1099 requirement scheduled for Jan 1, 2012. 81 Senators voted for this amendment. However this amendment was put on a Federal Aviation Agency Authorization Bill. This bill has passed the full Senate and must go to the House for consideration.

Bills that are passed by the Senate and House are usually different so then a Conference Committee would be needed to agree on a single bill. Also, the bill is fully paid for by a reduction of $44 billion dollars from FY 2012 budget accounts excluding defense, veterans’ affairs and social security. Although the amendment was voted by an overwhelming majority, this is the first step of a long process for this bill to become law.

On February 17th, the House Ways and Means Committee passed two bills that have been sent to be considered by the full House. HR 4 (Rep. Lungren of CA) and HR 705 (Rep. Camp of MI and Chairman of the House Ways and Means Committee) were both approved by the Committee. These bills are a step further to eliminate the 1099 requirement, however action must still be taken by the full House, the Senate Finance Committee and the entire Senate.

Is Inflation A Problem?

The common measure of inflation comes from our friendly government minus food and energy costs which has never made sense to me but everyone seems willing enough to accept the number. So each year for decades I have heard that the inflation rate remains low if our Fed Chairman is to be believed. And I’m a good citizen and think he is an honorable and worthy public servant. So like everyone else I’m man enough to take him at his word.

Still the cost of living which directly relates to the much talked about inflation rate seems to grow year after year. Maybe it’s just my age group but most folks I talk to seem to believe it does cost more to live these days because they are shelling out at rates thought unimaginable just 20 years ago.

I also don’t remember ever remarking to my family how nice it was that prices at the grocery store are moving lower. My last visit cost $162.00 and my family is not only small but we are also not big meat eaters. But I have leaned to avoid these conversations, if for no other reason than to keep my daughter from rolling her eyes and claiming everyone’s in for another long story.

I know my place in life even though a modest new car costs more than my first home and I have faith that Uncle Sam is working hard in my best interest to insure inflation is not a problem.

For all the rest of you consider the following: “The very latest inflation related news from leading world media sources discussing US inflation, rates, data and impact on economies.” US Inflation Calculator

Gold & Silver Political Action Committee (PAC) Formed to Support Rare Coin & Precious Metal Community

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Daily Pfennig: 02/25/11: More QE On The Way?

By Chuck Butler
Feb 25 2011 11:11AM
www.caseyresearch.com



In This Issue…

* Currencies trade tight range…
* Gold & Silver back off…
* Russian Central Bank hikes rates…
* Oil backs off of $100…

And, Now, Today’s Pfennig For Your Thoughts!

More QE On The Way?

Good day… And a Happy Friday to one and all! Another snowy morning here, not much to talk about there, just a dusting, but an unhappy reminder that it IS STILL WINTER! UGH! I haven’t been here to wish you a Happy Friday in 3 weeks, and after today, I won’t be around on a Friday, until we get to April! So… Happy Friday, today, and for the next month! Let’s see what we can do to make it a Fantastico Friday, eh?

Well, front and center here this morning, is the news overnight that the Russian Central Bank raised its refinancing rate 25 Basis Points (1/4%) , their first increase since December 2008… Not that the Russian Central Bank or their rate hike news is something that would move the markets… I talk about it because, yesterday I told you that the ruble had reached a 10-month high VS the dollar… Well, this rate hike, which was needed due to the increase in Oil prices, has the ruble at 15-month highs this morning…

Long time readers, that know me well, will be scratching their heads, wondering just what has gotten into me, talking about Russian rubles… Awwwwww, come on… it’s a currency isn’t it? It’s part of our BRIC CD isn’t it? OK… Let’s move along now, these are not the droids you’re looking for…

Speaking of Oil prices… The one that I track in the currency roundup, is the West Texas Intermediate spot price… WTI… it’s the world’s most liquid forum for crude oil trading, as well as the world’s largest volume futures contract trading a physical commodity… So, when I quote the price of Oil, I’m using this, and not Brent Crude, or any of the other Oils that get reported… Just so ya’ know! Well… the price of Oil backed off the $100 figure yesterday, but don’t think for a minute that the “run-up” in the Oil price is over… There’s still plenty of geopolitical problems for this “run-up” to be over… Shoot Rudy, I wish it were over, for I certainly have no love of $4 gas… But, unfortunately, I just don’t see how we’ll get out of that in our near future…

Yesterday, we saw the currencies trade in a very tight range, which was fine with me, for the volatility lately has been giving me a rash! HA! The slippage I saw yesterday morning as I headed to the Big Finish, didn’t have any follow through, so the currencies like the euro, remained strong, throughout the day. The overnight markets didn’t move the currencies much either, so it looks like we’re trading in yesterday’s clothes this morning…

Gold & Silver took a turn on the road that led them to Sellersville… that was pretty strange watching the euro hover around 1.38, and Gold selling off $10… But it was what it was… And this morning, with the currencies still in a tight range, Gold is off another $2…

Yesterday, I was having an discussion (via email) with a reader, who is a real chartist / technical guy… He sends me stuff that I use in my fundamental research… For instance, Yesterday, we were discussing the Australian dollar (A$)… I told him that I thought the A$ had more room to move higher, but… it needed to get moving, otherwise, the long held positions in institutions and hedge funds will throw in the towel, and move on to some other asset, for the A$ had been around 1.01 for a few weeks now… I do believe that those long position holders gave the A$ a “get out of jail free card” because of the N.Z. earthquake, but now the A$ needs to get moving! The technical guy, then said, that’s exactly what the charts show… He said that if the A$ breaks out to the upside, the move could be big, but there is a horizontal resistance level…

Nice to see that technical and fundamental analysis can work together, but in most cases, I prefer to think that assets go into trends for fundamental reasons, and don’t come out of those trends until that fundamental reason is corrected or well on the way to being corrected…

Yesterday, we saw 1.38 in the euro in the early morning trading. The increased rhetoric from European Central Bank (ECB) members is really doing the trick for the euro’s rise. I think that the comments, that I told you about on Tuesday, from ECB member, Mersch, got the ball rolling, and now ECB President, Trichet, has to temper the markets’ reaction to the thoughts that the ECB will hike rates at the next meeting… They may hike them, but I doubt that they will, because, Trichet is not going to be backed into a corner by the markets’ expectations…

Last week at our editors’ meeting, there was a comment from an editor that the euro was a bad idea from the beginning… I said, “hold on there! You have to go back to the 90’s… the Berlin Wall had collapsed, West Germany was reunifying with East Germany, and the combination would have made Germany so powerful VS the rest of Europe… Having seen that play out a couple of times in the past, the rest of Europe had to do something to rein in Germany, and having them join a European Union, was a very clever idea, and… they made the German Chancellor, Helmut Kohl, think it was his idea!... and in less than 10 years, the euro became the 2nd most liquid currency in the world, and was nipping at the dollar’s heels” I don’t call that a “bad idea”…

Now, one could argue that Germany, Austria, Netherlands, France, and Luxembourg, would have been a good strong Union, and the southern countries of Italy, Portugal, Spain, Greece, along with Ireland to the north, should have been left off the roster… but… there’s strength in numbers… It’s with much angst now that the these periphery countries have caused such a debt debacle… But, they’ll figure it out… Remember, that at the base of all this, is the economic engine of Germany…

Well… did you see the New Home Sales data for January, yesterday? New Home Sales fell -12.6%, wiping out the previous months’ so-called 15.7% increase… The previous day, we saw Existing Home Sales increase 2.7%... but, let me tell you that the bulk of those sales were “short sales”, and foreclosures, they were NOT first time home buyers… and… the price fell out of bed on those sales! These “distressed” sales caused home prices to fall to levels not seen in 9 years! So… 9 years of home price gains have been wiped off the slate, folks… That’s a very sad state of affairs, I’m afraid to say…

Today, we’ll see the first revision of 4th QTR GDP… I’m suspecting it to be revised downward, but then, who knows what the “boys” in the back room are “cooking up”, eh? And then the U. of Michigan Confidence report will print… I’m sure this will be just as “mamby-pamby” as all the other Confidence reports!

Ok… enough on U.S. data! The Irish election is beginning about now… As with most of these parliamentary things, there won’t be a clear winner, and a new coalition will have to be formed… In all my years of covering foreign countries, this has been the case almost every time… with the mess they have in Ireland right now, I don’t see anyone “volunteering” to lead! HA!

There were more rumors about an emergency meeting of the Reserve Bank of New Zealand (RBNZ) circulating last night, but when no meeting materialized, kiwi rallied… This also helped the A$ to move past $1.01… Like I said above, the A$ is armed and ready to make a move higher, and it had better do so soon!

Did you see where Saudi Arabia increased their oil output to help smooth out the disruption caused by the violence in Libya? The Saudis raised their oil output by 8% or 9 million barrels per day… I’m sure that decision to help smooth out the disruption, came from some meetings, and lots of sawdust was left on the floor…

There’s a story on the Bloomberg this morning that caught my eye… the title reads: “Imperialist dollar ceded to gold, euro havens”…. OK, admit it, if you saw that story title you would be all over that like a cheap suit too! Ok… So, now, I’m intrigued, and drill down on the title to read the story… Here’s a snippet… “Middle Eastern investors appear to prefer the euro as a more stable and secure currency these days, while the idea of buying “imperialist” U.S. dollars may not appeal to your average North African dictator”… WOW! The story then goes on to say that , “Global crisis usually causes funds to flow into U.S. dollars, gold prices normally pull back when the dollar rises. This time, funds may prefer to flow into the euro rather than into U.S. dollars, and this may be helping Gold… The writer then goes on to forecast the price of Gold rising to $1,485 within a few weeks…

I’ve been quite long in the writing this week at times, so I thought I would keep the Friday edition of the Pfennig to short-n-sweet… But first…

Then there was this… Rick Rule, is a long time friend of ours… In fact, it was in his house that the idea of EverBank, the online Bank, was hatched… Rick is a commodities guru, and I always enjoy catching up with him… Well, yesterday, Rick was interviewed by King World, and he said something that really made sense to me, especially since I’ve called for QE3 and QE4… Rick was asked about the exploding Oil prices… here’s a snippet from the interview… and here’s Rick Rule! “The bottom line is that the increase in energy prices will have inflationary impacts. The U.S. government wants to report the CPI excluding food and fuel, sadly people eat and drive and it does impact people’s cost of living.

Further, the political response to the economic shock engendered by higher energy prices will doubtless be more quantitative easing. The markets response to central bank counterfeiting will likely be much higher gold prices.”

Thanks Rick! Chuck again… That’s how I see it too… I scoffed and wiggled in my seat last week at the editors’ conference when not one but at least two editors got up and talked about the Fed ending Quantitative Easing…

To recap… The currencies traded in a tight range yesterday, with only Aussie, kiwi and Canadian dollars / loonies able to add to their values VS the dollar. The price of Oil has backed off the $100 figure… Today, we’ll see the first revision to U.S. 4th QTR GDP… And the pressure is on ECB President to temper the markets’ expectations of a rate hike coming very soon, which has been the reason for the rise in the euro this week.

Currencies today 2/25/11… American Style: A$ $1.0140, kiwi .7510, C$ $1.02, euro 1.3785, sterling 1.61, Swiss $1.0770, … European Style: rand 6.9725, krone 5.6270, SEK 6.40, forint 197.80, zloty 2.8840, koruna 17.75, RUB 28.92, yen 81.85, sing 1.2745, HKD 7.7935, INR 45.32, China 6.5760, pesos 12.12, BRL 1.6615, dollar index 77.15, Oil $97.70, 10-year 3.46%, Silver $32.68, and Gold… $1,402.80…

I’ve decided to not type out all those zeros in the national debt each day, and instead will just give you the link to the debt clock… I’ve done this for years now, but thought doing it each day, might drive home the point a bit more…

Debt clock…. www.usdebtclock.org/index.html

That’s it for today… Good luck to my son Alex, who travels to Chicago today with the high school jazz band to perform … My beautiful bride is going along, in her new car, so… I’ll be “Home Alone” this weekend… but get to spend my day tomorrow getting my running board replaced! I sure know how to have fun, eh? HA! I got a note from the Big Boss, Frank Trotter, last night that an old colleague at Mark Twain Bank, Bob Butler, had passed away… Bob was a great person, and was one of the people that helped me get hired at Mark Twain Bank… We were no relation, that we knew of… I just looked up and saw on the TV on a national cable station, they were talking about the pet parade that will take place in St. Louis, tomorrow, as the start of the Mardi Gras celebration here… That’s pretty amazing that they are getting this spotlight on national news! It will be a cold day for them tomorrow… And with that, I’ll hit send and be on my way… I hope you have a Fantastico Friday!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837

****

Two decades ago, Chuck Butler embarked on his extensive career in foreign investments as the Director of Operations for the Fixed Income Division of the Mark Twain Bank. He oversaw the clearing and custody of all bond department trades and Mark Twain portfolio transactions.

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China Steps up Silver Purchases

By Dr. Jeffrey Lewis
Feb 24 2011 2:27PM
www.silver-coin-investor.com





Carefully hidden in the depths of a recent Forbes blog was perhaps one of the most important stories for all of 2011, at least for silver. Robert Lenzner wrote that “China’s Industrial and Commercial Bank (ICBC) reports purchases of physical gold and gold-related investments are growing at record setting rates.”

The post goes on, “In January alone ICBC sold 7 tons of gold– almost half the 15 tons it sold in all of 2010. It also sold 13 tons of silver in January– almost half the 33 tons of silver it sold to clients during the past year.”

Of course, it wasn’t much further in the article (it was actually the next sentence) that the media spin begins to show through in a quote from Zhou Ming, the head of the precious metals department of the ICBC. The quote essentially declares gold and silver to be the new speculative market in China after real estate was essentially shut down to leveraging.

Real Estate vs. Silver

While it is true that silver may be a replacement market for Chinese investors, the products aren’t exactly as much of a substitute for one another as the media would like. Most investors know that real estate is purchased primarily for income, while gold and silver are for wealth protection. That understanding gets lost on the press, even media that is supposed to be finance-related, but it can be shaken off.

The most important part of this story is that even if Chinese investors are finding silver and gold to be an applicable substitute for real estate, investors are obviously worried about inflation. Recently, China recalled information about the status of its real estate markets, and there is little doubt that China’s inflation numbers are equally fudged.

If we are to take China’s numbers at face value, it can be concluded that, at best, the rate of inflation is still several whole percentage points higher than current deposit rates, a sign that the currency is under serious stress.

Perhaps hilariously, though, is that while China inflates like there is no tomorrow, the value of the Chinese currency continues to rise against the US Dollar. It doesn’t get much more obvious. Inflation is an international sickness, and it is only those in metals that are truly shielded from its devastating effects.

Time is Running Out

While silver and gold are limited in supply, they will always exist. They will not, however, always exist at an affordable price.

While no one could expect that gold and silver would rally in spring, the season that is usually the most forgiving to both stores of value, it is becoming evident that historical trends are easily rewritten by trying times. Silver recently broke $33 per ounce, and gold is looking toward $1400, maybe even $1500 by the end of the weakest season.

It isn’t as though gold and silver are an anomaly, either. Take into consideration the fact that gas prices are at seasonally-adjusted records, despite record oversupply of oil. Shortage, or abundance, there is absolutely no shortage in the desire to inflate world currencies, and we’re already paying witness to the aftereffects.

Dr. Jeff Lewis

****

Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of ~

Silver-Coin-Investor.com

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