Posts Tagged ‘investment’

Sign of a mortgage centre in East London

In 2007, when the so-called subprime mortgage market was collapsing, the natural question was, “what is a subprime mortgage?”

I discovered that it used to refer to what it sensibly means. Namely, mortgages with an interest rate lower than the prime lending rate.

Since then, the definition has changed to refer to mortgages of subprime quality. However, “subprime” is highly misleading, in that anything less than the best quality is subprime.

In the case of bonds, a triple-A credit rating is prime. Anything less than that, by definition, is subprime. However, there is a significant difference between AAA bonds, and BB and lower-grade bonds, to the extent that the latter are called “junk bonds.” Yet, according to the strict definition of subprime, AA+ and BB+ bonds are “investment grade.”

Banksters love twisting the meaning of words. Like their Federal Reserve System, which isn’t federal, doesn’t have any of its own reserves, and was called a system to obscure the fact that it’s a private central bank.

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In this 2006 article, Gary North admits gold was a “very bad investment” from 1980-2001:

“Only after September, 1976, did it soar: from $106 to $850 for one day: January 20, 1980. After that, it became a very bad investment until 2001. It was then that I began promoting gold once again.”

This, after claiming in the beginning of the same article that he’s a gold bug:

I am a gold bug. A gold bug is a believer in the public’s use of gold coins as the basis for a nation’s money supply.

However, if gold coins should be the basis for a nation’s money supply, how could they have been a bad investment, especially for so long?

Previously, I wrote about his claim that gold coins by the U.S. and Canada aren’t real money, despite being legal tender, and his claim that gold is an inflation hedge in the “medium term,” which he arbitrarily defines as up to at least 21 years, in order to justify gold’s embarrassing performance from 1980-2001, which he himself admitted to.

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I came across this May 28, 2008 article by Gary North on LewRockwell.com, where he claims gold coins produced by U.S. and Canada aren’t money.

This is what monetary policy is in the United States and Canada. Both nations produce gold coins. They are not really coins. They are not counted in the money supply. But they look like coins. People can buy them.

That’s an interesting claim — considering they are legal tender! (as the U.S. and Canadian Mint state)

On July 19, I wrote about Gary North’s claim that 21 years is a “medium term” investment in order to justify gold’s embarrassing performance from 1980-2001.

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According to Gary North of LewRockwell.com, it is.  That is, when you have to justify gold’s embarrassing performance from 1980-2001, from a closing high of $850 USD an ounce in January 1980, to a low of $255 an ounce in 2001.

He writes:

The case for gold as an investment is different. First, it is an inflation hedge over long periods of time, though not necessarily in the medium term, e.g., 1980–2001. Second, it is a crisis hedge when the international capital markets are in turmoil. (So, for that matter, is the U.S. dollar.)

Official inflation from 1980-2001 was 115%, according to the BLS, while gold declined by 70% over that period. Gary North has to rely on making the arbitrary claim that 21 years is the medium-term in order for his claim about gold being an inflation hedge over the long-term, to not be utterly embarrassing.

BusinessDictionary.com defines a long-term investment as one “that matures in more than 10 years,” and to me, 21 years falls well within the scope of a long-term investment, and outside that of a “medium-term investment”.

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