Saturday, September 25, 2010

The Assault on Gold

I wanted to title this post, "The Assault on Reason," but I will not have to. The lack of reason will speak for itself. On September 23 the US House Energy and Commerce Subcommittee on Commerce, Trade, and Consumer Protection held a hearing on HR 6149, The Coin and Precious Metal Disclosure Act, introduced by Congressman Anthony Weiner (D-NY,9th) to regulate the gold industry. At the hearing, Weiner stated, "Goldline rips off consumers, uses misleading and possibly illegal sales tactics, and deliberately manipulates public fears of an impending government takeover – this is a trifecta of terrible business practices..."

When making this statement, Weiner was of course drawing on his own deep business experience of 0 years and Congress's exemplary record of economic policy making. I'm still curious why a successful business of 50 years with a Better Business Bureau rating of A+ has to explain itself to a collection of dolts with an approval rating of 22.7 percent.

The sad thing about Wiener's legislation is the veiled attempt to convince the public this is for their own good and that Congress is protecting the consumer. Weiner seems to think that the value of gold is somehow a closely guarded trade secret. It's so secret in fact that you can only find it at Google Finance, the Wall Street Journal,, the Financial Times, The Investor's Business Daily, the Washington Post, the New York Times, the LA Time, the Chicago Sun Tribune,, and another 213,000,000 sites that are found after one enters, "value of gold" in any garden variety search engine. Frankly as a consumer, I'd much rather see Weiner introduce legislation protecting me from Congress by restricting Congressional actions to the District of Columbia.

What Weiner fails to realize is the cause an effect of why gold prices have soared. Gold did not shoot up in value because of a random bubble or misleading advertising. It increased in value because of an idiotic financial policy that flooded the market with cheap money while at the same time empowering under capitalized individuals to buy things they could not afford. Eventually, the castles that were build on thin air collapsed, the dollar tanked, the market crashed and people looked for refuge in a stable investment. Gold served as that investment because its value is not tied to paper currency or monetary policies.

Gold, like other commodities, has an inverse relationship with the market. When the dollar falls, gold goes up. Additionally, buying and selling gold is no different than buying or selling anything else. There is really no mystery to it. You can buy physical bullion or you can buy interest in gold through stocks like Central Fund of Canada (CEF).

Goldline is just one of many companies that sell gold. However, Goldline has celebrity endorsement from Glenn Beck, Laura Ingraham, Mark Levin, and Fred Thompson; all are conservative pundits. So perhaps Weiner's problem is not Goldline at all, but the fact that Goldline's endorsers are not fans of Democrats or Obama. Is this Weiner's way of shutting down and desecrating the gold industry? Is this really what Congress needs to be doing? Wading into the market place again and regulating an industry out of business? Lucky for us Goldline could just move offshore and join the millions of other non-US companies buying and selling to consumers without ridiculous restrictions. Weiner has given me another reason to consider why I should move my life offshore.

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