The Austrian School is probably best known for its condemnation of government intervention in the marketplace.  Interest rates, for example, should be determined by the supply of money available to be lent and the number of qualified persons seeking to borrow.  But, no, what do we have: Government rules and regulations that require lenders to have loan portfolios based on race, ethnicity and income.  To anyone with two brain cells to rub together, it is obvious that money should be lent on the borrower’s ability to repay the money.

Government mandated (controlled?) lending is only one step at bringing about economic egalitarianism, where all persons share equally in a nation’s resources, regardless of those persons’ contributions to the creation of wealth.  Under egalitarianism, there are no poor, no wealthy.  All are equal.  Egalitarianism is the pipe dream of socialism, which, everywhere it has been tried, has resulted economic ruin.

The old Soviet Union was the greatest attempt – and the greatest failure – of socialists’ dreams.  Red China was another enormous socialistic failure.  To argue which was the largest failure would be splitting hairs.  But the thing to keep in mind is that the economies of both nations were bailed out only when just a small amount of economic freedom was introduced.

Here in this great country, government intervention, in an attempt to bring about egalitarianism (”Everyone’s entitled to own their own home.”), helped bring about the Housing Crisis, one of the worse financial debacles since the Great Depression, which, by the way, was brought on by – guess what? – government intervention.  Read the late Murray Rothbard’s America’s Great Depression for an understanding of the Fed’s role in causing the Great Depression.  (I know that some readers are coming out of their seats screaming that the Fed is privately owned and not “part of the government.”  When the hand is at work, the glove moves.  The Fed and the government are one and the same when it comes to financial matters.)

The Fed, under Alan Greenspan, who now denies any blame for the Housing Crisis, dropped the discount rate to 1%, making money available at artificially low prices.  Coupled with the notion that “Everyone’s entitled to own their own home,” the housing boom took off.  Five-year ARMs were touted (by Greenspan, I distinctly remember) as the way to finance house purchases.  Many ARM loans even gave borrowers below-the-market rates for the first years, thereby increasing the number of “qualified borrowers.”

Now, why didn’t the lenders see that advancing money to such borrowers was risky?   Stupidly, the lenders had bought into the notion that housing prices would rise forever, making the loans “self-liquidating.”  The link below takes you to only one example of how many of those loans were liquidated.

Foreclosure Alley.  Although the clip runs 12 minutes, the first five minutes show the sad results of government intervention in the housing market.

As most readers know there is a shortage of silver in the physicals market, and the dearth extends to all products.  Major wholesalers, which for decades stood ready to sell “junk” silver coins by the hundreds of bags, have none, and rarely are junk silver coins sold by investors.  Actually, investors now rarely sell any form of silver.

One hundred ounce bars cannot be had as their production has been sold months in advance.  [Note, Friday, November 7, 2008: 100-oz silver bars are now available.]  The popular Engelhard 1-oz Prospectors, which were last minted in 1988 but often surfaced in the secondary market, have disappeared.  Sunshine Minting silver rounds, like 100-oz silver bars, are months behind in production.  Ten ounce silver bars seem to be as extinct as the dodo.

Silver Eagles, despite the U.S. Mint producing some 1.8 million a month for the last few months, are next to impossible to get, and when they are available they sell at ridiculously high premiums.  In a normal market, Silver Eagles would be available at about $1.80 each over spot.  When available nowadays, they carry premiums of over $5.00 each in 500-coin Mint-sealed boxes.  For a while, the Royal Canadian Mint filled the breach with their 1-oz Silver Maple Leafs but they are not now available.

In short, the vaults of precious metals dealers have been emptied by silver buyers.  The marketplace, however, has responded.

The Royal Canadian Mint, producer of the Gold Maple Leaf and the Silver Maple Leaf coins, is now pouring 850-oz .9995+ silver bars.  The uniqueness is not so much the .9995+ fineness but the weights and the dimensions of the bars.

The bars do not weigh exactly 850 ounces but range from 760 to a high as 890 ounces.  Making exact-weight silver products adds to the cost, so by pouring approximate-weight bars, the RCM lowered the cost of production.   Further, the bars’ weights, on the light side at about 48 pounds (avoirdupois) to about 60 pounds (again, avoirdupois) make them manageable.  By comparison, a $1,000 bag of junk silver coins weighs right at 55 pounds.

Of further importance, these new bars are of sizes that enable them to be shipped in the U.S. Postal Service’s Flat Rate boxes, which means that the bars can be delivered economically.  Each bar is stamped with its weight, is serial numbered and bears the RCM hallmark.

A limited number of these bars have been made available to CMI Gold & Silver Inc., and we are selling them at premiums of $1.20/oz.  That’s a delivered price.  Orders for multiple bars will result in lower premiums.  Presently, shipment can be expected in about a week after good funds are verified.

At CMI Gold & Silver Inc., we think that these new bars are ideal for the time.  Silver is trading at ridiculously low prices, and these bars have low premiums relative to other silver products.  If you would like to take advantage of this offer, call us at 800-528-1380.  We take calls 7:00 a.m. to 5:00 p.m., Mondays through Fridays.

If you have not yet done business with CMI Gold & Silver Inc., click here for information about doing business with us.

With the sharp drop in the price of gold, Krugerrands are scarce because few investors are willing to sell. Further, for a while the U.S. Mint was not able to supply enough 1-oz Gold Eagles. So, a major wholesaler began importing, for the first time in decades, new Krugerrands.

Yes, 2008-dated Krugerrands are for sale. However, they sell near the same price as new 1-oz Gold Eagles as the wholesaler’s cost is about the same for Krugerrands as it is for Gold Eagles. I recommend that gold buyers wanting 1-oz gold coins go with Gold Eagles, not 1-oz Krugerrands.

When gold again moves up in price—and it will shortly after the bullion houses get finished with their manipulation—the premium on secondary market Krugerrands will fall as sellers return to the market.

It is estimated the some 25 million 1-oz Krugerrands call the United States home, and for decades Krugerrand sellers more than met the demand for the coin, causing the Krugerrand to be the low premium “bargain” gold bullion coin. I believe that situation will return as the price of gold moves higher.

Meanwhile, 1-oz Gold Eagles have maintained solid premiums (except for the Y2K selling throughout 2000 and part of 2001). So, don’t buy Krugerrands at Gold Eagle prices when Krugerrand premiums are likely to shrink when sellers return.

Investors seeking low premium gold coins should consider the Mexican 50 Pesos Centenarios (1.2057 oz) and the Austrian 100 Coronas (.98 oz). Although the coins are not now promoted and therefore not well known with the public, these two coins are well known in the coin and bullion industry and can be easily liquidated. Although Centenarios and 100 Coronas are not always available, they are worth an inquiry. One-ounce gold bars and 10-oz gold bars are other low premium options

The sad history of paper money is that it is printed until it is worthless. This is to say that whenever paper currencies are de-linked from gold or silver (made no longer redeemable in gold or silver), politicians print those currencies until they are worthless.

In no case did any politician come forth and say, “Our currency is now no longer redeemable in gold or silver, so let’s print it until it is worthless.” In all instances, the politicians thought they had good reasons to print.

The most infamous destruction of a paper currency occurred in post World War I Germany. The Germans had lost the war, and the French demanded reparations. Coupled with the costs of reconstruction, Germany turned to the printing presses.

The French, ironically, had their own sad encounter with paper money during the French Revolution (1789 – 1799), which was eloquently documented by Andrew Dickson White, cofounder of Cornel University, is his Fiat Money Inflation in France.

The French currency of the time was the assignat. White’s account tells how members of the French Assembly rose and called for the printing of more assignats with every slow down in the economy. In the end, just as would be the case in Germany 1923-1924, hyperinflation destroyed the currency.

Politicians always have what they consider good reasons for the printing of more paper money, regardless of the inevitable consequences. Of course, I’m sure, they rationalize that “Just this one time, it is necessary.” Later comes another time.

Going from memory, I can think of a few of those times. There was the Russian crisis in late 1980s, followed by the Mexican crisis in the early 1990s, followed by the Asian crisis. Then there was the slow down in the economy, which prompted Alan Greenspan to lower the Fed’s discount rate to 1%.

Greenspan’s hammering of interest rates helped bring on the housing boom, which turned into the housing bust, which gave us the Fannie Mae/Freddy Mac debacle. Now, Congress has instructed the Fed and the Treasury to work together for the creation of still more fiat paper money.

Ron Paul, who needs no introduction to gold/silver investors, gives an excellent analysis of the Fanny Mae/Freddy Mac bailout legislation that will allow the Fed and the Treasury to commence printing. Paul prepared his comments in video form. The video, which can be found on goldseek.com, is only 7-1/2 minutes. Note below the video the printed summary of the bill.

For some investors, and apparently for the media and for Congress, judging their coverage and comments, the looming failures of Fanny Mae and Freddy Mac were surprises. To other investors, however, the lid was simply pulled off a barrel of rotten apples.

For years, the head of Fanny Mae has bragged about lending money to low-income homeowners. Sounds great, right? Struggling Americans want to own homes just like everyone else, and along comes a White Knight with plenty of money to lend. And, you don’t have be all that qualified. Able to sign your name, fog a mirror? Viola! You have a home mortgage.

And, you couldn’t lose. The housing market was hot, up 17% to 20% annually in some areas, at higher rates in a few regions of the country. Why not buy? “If you can afford to rent, you can afford to buy,” said the posters in banks, which decided to get in on a good thing and also entered the mortgage business in a big way.

Fanny Mae and Freddy Mac, however, had the upper hand over banks. Fanny Mae and Freddy Mac are government sponsored enterprises (GSEs) and enjoy the implied backing the federal government. The implied government backing enabled them to borrow in the money markets at lower rates than other lending entities. That position resulted in Fanny Mae and Freddy Mac garnering 50% of the mortgage market in the US.

Under the laws that set up Fanny Mae and Freddy Mac, the federal government did not agree to back debt issued by the two lenders. Past Secretaries of the Treasury have said so. But, in the world of political expediency, Congress and the Fed stepped up to the plate.

So far, the U.S. government has not agreed to guarantee Fanny Mae and Freddy Mac debt. At this time, the Fed has announced that it will only buy Fanny Mae and Freddy Mac debt on the open market. That is a long way from guaranteeing the debt, but had the Fed not agreed to do make the purchases, Fanny Mae and Freddy Mac debt holders would have suffered huge losses.

As investors became aware that Fanny Mae and Freddy Mac did not have the capital to cover all the bad loans that they had written, Fanny Mae and Freddy Mac stock prices collapsed, losing about 85% in twelve months. Meanwhile, a large California mortgage lender, IndyMac Bank, was taken over by the FDIC, further spreading concerns about the banking industry.

Under such circumstances, gold and silver become of interest to an even larger number of people, and for good reason. Gold and silver are the ultimate monies. They cannot default; they need no government guarantee to maintain their values. Investing in gold and silver at this time makes sense.

A final note: Why was it that some investors knew to avoid Fanny Mae and Freddy Mac debt while huge financial institutions, such as insurance companies and mutual funds, got stuck? Primarily because those investors were attune to what was going on. Fact is, you cannot be attuned to what is “going on” by watching Establishment financial programs and by reading Establishment publications. You can learn what has happened by following Establishment sources, but it’s rare that you learn via Establishment media what is happening while it is happening.

One non-Establishment source is Weiss Research, founded by Martin Weiss, PhD, in 1971. Weiss’ understanding of banking and its inherent flaws, i.e., fractional reserve banking, gives him great insight into today’s financial markets. Visit his website at http://www.moneyandmarkets.com/. And, get more information about investing in gold and keeping up with silver prices on our website.