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Rickards on Gold Risks

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  • GoldMiner
    replied
    Re: Rickards on Gold Risks

    I think portfolio diversification might help a big. I wonder if they'd do anything bad to alternatives to gold - e.g. platinum or palladium. You could buy a few platinum rings or anything - not necessarily in the form of investment metals. Diversify as well as possible...

    I've always been a fan of Rickards, by the way

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  • Guest's Avatar
    Guest replied
    Re: Rickards on Gold Risks

    I spoke to my account that I knwoa nd trust abotu strategies for avoiding a tax on my gold, and he said they'll egt yuo somewhere. His recommendation was to use it as a medium of exchange for real estate of some sort that generated a return. If you purchase the real estate with gold, the seller who now has your gold doesnt pay the gains tax on it, and you dont have to pay the gains tax until you sell the piece of real estate. Taxes delayed are better than taxes paid. Considering the fact that the NAR is exempt from money laundering laws, you could buy with gold, and I dont even know if someone would have to report that.

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  • Fiat Currency
    replied
    Re: Rickards on Gold Risks

    Originally posted by Adeptus View Post
    Step 3. Convert US dollars into safe fiat currency on your FX account
    I forget ... is that a Type I or II error?

    Leave a comment:


  • Adeptus
    replied
    Re: Rickards on Gold Risks

    Originally posted by raja View Post
    Let's say someone had GLD or another paper gold asset, and it looked like a crash with the subsequent creation of a NewDollar was likely . . . .
    What good is it to sell paper assets and get Old Dollars, only to see them devalued in the next day or two? Would there be time to convert them into real property? I think not.
    Step 1. Buy gold at low price
    Step 2. Sell gold at high price
    Step 3. Convert US dollars into safe fiat currency on your FX account
    Step 4. PROFIT!

    Leave a comment:


  • raja
    replied
    Re: Rickards on Gold Risks

    Originally posted by Adeptus View Post
    Aside from some collectors coins which EJ has mentiond in the past were a good deal since premiums vs the latest mint issued coins were at a minimum due to high price of gold, he seemed to have managed to offload a few hundred thousand (possibly worth closer to 1 mil) of silver in a matter of a couple of daysback when it hit $48.50. Unless you have family memebers or best friends in the coin store business or know well heads of local banks, I can't imagine how he offloaded that much physical silver in succh a short time. My gut is that it was mostly, if not all, online invested which he could dump in secods at the click of a button. To boot,he recommends on the website bullion vault - an online vehicle for pm investmnts.xcuse the typos.. am on tablet.
    Let's say someone had GLD or another paper gold asset, and it looked like a crash with the subsequent creation of a NewDollar was likely . . . .
    What good is it to sell paper assets and get Old Dollars, only to see them devalued in the next day or two? Would there be time to convert them into real property? I think not.

    Also, keep in mind that many gold owners own gold because they fear economic mayhem. So they will be particularly observant of the economic situation. If there is scary news that would suggest dumping gold, expect the gold price to drop at lightning speed.

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  • Adeptus
    replied
    Re: Rickards on Gold Risks

    Aside from some collectors coins which EJ has mentiond in the past were a good deal since premiums vs the latest mint issued coins were at a minimum due to high price of gold, he seemed to have managed to offload a few hundred thousand (possibly worth closer to 1 mil) of silver in a matter of a couple of daysback when it hit $48.50. Unless you have family memebers or best friends in the coin store business or know well heads of local banks, I can't imagine how he offloaded that much physical silver in succh a short time. My gut is that it was mostly, if not all, online invested which he could dump in secods at the click of a button. To boot,he recommends on the website bullion vault - an online vehicle for pm investmnts.xcuse the typos.. am on tablet.

    Leave a comment:


  • raja
    replied
    Re: Rickards on Gold Risks

    Originally posted by jiimbergin View Post
    EJ had a post about this that indicated that perhaps a high tax on gold would not be coming.
    It was not what I expected. Hint: No high taxation as I have been discussing here since 2001. The expectation is that a high gold tax rate will criminalize gold and create a black market, the opposite of what they want. They want an optimal tax rate on gold that generates the highest tax receipts for the IRS but without creating a black market. He pointed me to this paper. In fact there is concern, he said, that the existing classification of gold as a collectible may cause the tax rate to be too high if the gold price keeps rising; as the gold price rises, so does the incentive for gold holders and dealers to conspire to evade taxes.
    Here is a link
    http://www.itulip.com/forums/showthr...Janszen/page25 post 241
    Thanks for reminding me, jiimbergin.
    That EJ post was not too long ago, and I actually responded to it.
    (I guess I've been stuffing my head with economics to the point that it's affecting my memory.)

    And I'll stick with my previous reply to that post:
    Again, too optimistic . . . .
    That might be the way it plays out in the Fed's dreams -- that they will always maintain control, and everything will be OK.

    But if there is a run on the dollar, and the Fed/Treasury can't stop it, and the US Gov needs to take the drastic measures such as those suggested by Rickards, your Fed informant's strategy will not prevail.
    Political needs will trump the economic needs . . . and a windfall profits tax on gold "profiteers" wil be enacted.


    Also, the paper EJ referred to discusses the benefits of a black market, so I don't see how it backs up EJ's contention that the Fed fears the black market so will reduce gold profit taxes. (That said, the paper was quite technical, and I may have misunderstood something.) Here's an excerpt:

    In his well-known textbook, Rosen (2005, p. 353) claims that a black market, or
    "underground economy," might improve welfare by effectively allowing some economic
    activities to be taxed at lower rate than others, in a manner consistent with optimal tax rules. We
    investigate this reasoning by introducing a black market into an economy where different goods
    are taxed at the same rate. We present conditions under which the black market moves the
    economy closer to an optimal discriminatory tax system, where goods are taxed at different rates. In some cases, the black market can be used to replicate this tax system.




    People tend to expect the future that they want, and deny the one they don't want. The Fed wants things to stay under their control, so that is the future they see, and their predictions are based on that premise. The iTulip philosophy for over a decade has been that gold is a good investment, so they see a 90% windfall profits tax as unlikely. Not only reputation, but the personal fortunes of people who are heavily invested in gold are at stake, especially if they are not diversified in other assets.

    I would really, really like it if the government did not invoke a 90% windfall profits tax . . . and got rid of the 28% collectibles tax. But I have yet to see a convincing argument that gives me hope . . . .
    I would also like to see more discusssion on this topic in this forum . . . . .

    Leave a comment:


  • jiimbergin
    replied
    Re: Rickards on Gold Risks

    EJ had a post about this that indicated that perhaps a high tax on gold would not be coming. Here is a link

    http://www.itulip.com/forums/showthr...Janszen/page25 post 241

    I've discovered at the various meetings I've had with Fed economists and others who attend meetings there that there is no faster way to clear the table after dessert than to bring up the topic of gold.

    They really, really, really do not like to talk about gold.

    But over the years some have learned that I'm not a journalist but an analyst; I'm not going to quote them on my web site to create controversy and traffic for me and headaches for them. That's not our business model. So one or two have opened up a bit.

    One official gave me his personal and unofficial thoughts on what might happen in the highly, no extremely, no next to impossible event that the USD is officially associated with gold in some fashion some day off in the nearly infinite future. With all of those qualifications preceding his comment, he went on to give his opinion. It was an enlightening conversation and a window into a thought process.

    It was not what I expected. Hint: No high taxation as I have been discussing here since 2001. The expectation is that a high gold tax rate will criminalize gold and create a black market, the opposite of what they want. They want an optimal tax rate on gold that generates the highest tax receipts for the IRS but without creating a black market. He pointed me to this paper. In fact there is concern, he said, that the existing classification of gold as a collectible may cause the tax rate to be too high if the gold price keeps rising; as the gold price rises, so does the incentive for gold holders and dealers to conspire to evade taxes.

    Leave a comment:


  • raja
    replied
    Re: Rickards on Gold Risks

    Originally posted by BadJuju View Post
    I don't understand why they would tax gold, though. The least trouble would be to repeal any tax on it because they are going to revalue it anyway. What purpose would it serve to tax it and thus only discourage people from giving it up? Given all the hubub about lowering taxes in the US, especially with regards to investments, I think we'll see the same thing happen with gold.
    The government will behave differently when the economic situation goes critical.
    Read my posts in this thread in which I have laid out the rationale . . . .

    Leave a comment:


  • BadJuju
    replied
    Re: Rickards on Gold Risks

    I don't understand why they would tax gold, though. The least trouble would be to repeal any tax on it because they are going to revalue it anyway. What purpose would it serve to tax it and thus only discourage people from giving it up? Given all the hubub about lowering taxes in the US, especially with regards to investments, I think we'll see the same thing happen with gold. I am not saying it cannot happen because if governments acted rationally, we wouldn't be where we are now.
    Last edited by BadJuju; 10-13-12, 12:08 PM.

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  • raja
    replied
    Re: Rickards on Gold Risks

    Originally posted by aaron View Post
    If the government wants gold, they should encourage its sale to the treasury. This means paying full price and not over-taxing gains. Otherwise, ALL 'their' gold goes into hiding.
    According to Rickards scenario, the US gets the amount of gold it needs through confiscation from the gold depositories in NY. The remaining gold in private hands will not be needed.

    However, lets say the government wants all the gold . . . .

    Sure, you can hide your gold if the government tries to confiscate-buy it at pre-NewDollar prices. Or, you can refuse to sell it if the government invokes a 90% windfall tax. But what good does it do you if you can't eventually convert your gold to currency or use it to buy things?

    Let's say you hide your gold . . . .
    Someday, you will want to sell, and it will have to be on the black market. When you sell, you will be transferring your risk of owning and selling an illegal item to whomever buys it, and that risk premium will be deducted from your profits. You also have to hope that the person you are selling to is not planning to collect the "gold trafficker" reward money offered by the government.

    So as a gold owner, you will have to choose between possible future imprisonment and taking a risk-premium loss when selling . . . or turning in your gold. I think the government will assume that most people will choose the latter, safer alternative.

    Let's say gold is not confiscated, and only a tax is imposed. If you decide not to sell your gold to avoid the profits tax, then again, what good is it?
    The whole reason you have gold is because you belive times will get hard, and you will need the money, so sooner rather than later you will have to sell it. Then, the government will get your profit.

    One option is to own silver as the insurance on your insurance. If the government takes your gold away, you will still have your silver stash and that ought to at least keep up with inflation. I got a little platinum and palladium as well.
    FDR confiscated silver . . . what's to stop it from happening again?

    There are probably 3 kinds of people who buy gold right now. Super rich people, informed people, and ditto heads. The ditto heads have guns and gold and bibles. I would not want to piss them off if I were in the government. The super-rich write the rules and will make sure that large gold holders are well-compensated. That leaves the iTulip crowd (and others) left to pillage. It is not worth the trouble unless it is for political showmanship.
    If that's true, it seems most likely that the least trouble would be for the government will impose a 90% profits tax. All gold dealers will be required to report transactions, so anyone trying to sell gold and avoid the tax will have to deal on the black market. See my comments above about that.

    There is a lot of controversy about what will happen with gold, not only on this site, but all over the financial arena. Yet I haven't seen much discussion by EJ -- iTulip's very own gold expert -- dealing with these various controveries. Perhaps I missed the discussion, and if so, can someone please restate the iTulip position?

    The iTulip recommendation is that everybody should invest in gold. In my mind, iTulip's credibility is suspect if it doesn't respond and counter some of the various scenarios that Rickards and others have put forward that cast a shadow on the wisdom of iTulip's recommendations. Again, if these issues have already been addressed, would someone mind sharing them? IIRC, EJ did try to whip up support for a repeal of the 28% collectibles tax, so I know gold profit tax is a concern for him, too.

    Leave a comment:


  • raja
    replied
    Re: Rickards on Gold Risks

    Originally posted by jk View Post
    think about holdings in cef, gtu, phys- all closed end funds, not a direct holding of gold [or silver also in the case of cef], with their metals stored in canada. then there is sgol, stored in switzerland. what do they do about bullion vault? what about holdings of a closed end held within a tax sheltered account like an ira? there are a lot of wrinkles to be addressed.
    The more difficult times get, the more governments will avidly seek out any possible sources of income.
    I suspect that CEF and the like will lose it current capital gains tax status, and be taxed at whatever rate is applied to other types of gold, such as physical, GLD, etc.

    Leave a comment:


  • raja
    replied
    Re: Rickards on Gold Risks

    Originally posted by vt View Post
    I've been told that the Gold ETF (GLD) assets are held at HSBC bank in London. So if they are not in the United States, does this prevent confiscation by the U.S. Government?
    It may prevent confiscation by the US government, but it wouldn't prevent confiscation by the British government . . . or by any government in a country where the gold is held.

    Leave a comment:


  • raja
    replied
    Re: Rickards on Gold Risks

    Originally posted by Raz View Post
    raja, my question for you is: why then does Rickards own gold?

    Possible reasons why Rickards owns gold:
    1) He realizes his predictions might be wrong, and he's hedging his bets by diversification.

    2) He is planning to let his gold appreciate, then sell sometime before the crash occurs. He'll miss the final manic buying price rise and the upward revalution created by the New Dollar, but he will avoid the 90% windfall tax.

    3) He is hoping that sometime, perhaps many years in the future, the windfall tax will abolished, at which time he'll cash in his gold. Until then, he will live on other investments or businesses.

    4) He owns gold held in a foreign country that he believes will not confiscate it or tax away the profits.

    5) He expects that there is a good chance of social chaos, and gold will be helpful for survival in the more lawless society. Taxes won't be a concern.



    Actually, I would like to ask Rickards your question, and also ask why the same potential political reaction that would prevent confiscation would allow a 90% windfall tax. Unfortunately, I have been unable to find his email address, or any kind forum through which I could address him . . . .

    Leave a comment:


  • aaron
    replied
    Re: Rickards on Gold Risks

    If the government wants gold, they should encourage its sale to the treasury. This means paying full price and not over-taxing gains. Otherwise, ALL 'their' gold goes into hiding.

    One option is to own silver as the insurance on your insurance. If the government takes your gold away, you will still have your silver stash and that ought to at least keep up with inflation. I got a little platinum and palladium as well.

    There are probably 3 kinds of people who buy gold right now. Super rich people, informed people, and ditto heads. The ditto heads have guns and gold and bibles. I would not want to piss them off if I were in the government. The super-rich write the rules and will make sure that large gold holders are well-compensated. That leaves the iTulip crowd (and others) left to pillage. It is not worth the trouble unless it is for political showmanship.

    Leave a comment:

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