Of course we all remember Dragnet, with Joe Friday telling everyone that he just wanted the facts. (If you are in the west and love old radio, LA 50,000 watt KNX radio, AM 1070, has old radio shows twice a night, at 9PM and 2AM Pacific time. I get it here in Colorado easily.) Here are some facts that you might find interesting…mam.
I was astounded on May 6th, to hear on NPR, that over ONE TRILLION DOLLARS WORTH OF WELL DONE, FAKE T BILLS, BONDS, and US CURRENCY OF VARIOUS DENOMINATIONS, had been uncovered at a counterfeiter's shop in the Philippines. No, they never got into circulation. In spite of the new bills with all the supposed counterfeit proofing, they are still being turned out. Ask any grocery store clerk, and they'll tell you. How many hundreds of millions of counterfeit bills are out there which have never been discovered? The US government, during WW II, printed trillions of German Reichsmarks, and showered them from bombers over Germany, thus helping to destroy that currency. There are thousands of counterfeiters of US and other currencies around the world, doing their "thing," and going undiscovered. It has been a common profession of the underworld for over a hundred years.
Of course it's illegal, and punishable by huge fines and jail. But selling drugs, if caught, costs huge fines and jail time also, but it hasn't deterred the profits or popularity of engaging in the drug sales profession. How many counterfeiters are caught, and how many do a million bucks or so, retire, and are never discovered? How many turn out a few twenties every week, and travel, for the fun of it, to spend them in varied locations? All a counterfeiter has to do is pass off a bill the first time, and he's home free, to use a baseball phrase. He is untraceable. I am certain they pass off the stuff to the unwary, and if the fake is uncovered, the current holder loses, not the original counterfeiter. How many such locations are there in the Philippines alone?
One of the reasons I hate numismatics, is that back in the 1970's, when gold was shooting up, and the only coin we had to sell was the Krugerrand, old US twenty dollar gold coins were the rage, selling for a huge premium over the "Krug." Guess what happened? Communist countries were turning out fake Double Eagles by the thousands, and they were perfect, unless examined with a jeweler's loop. Yes, they were real gold, but hardly worth more than their content in gold, which is about where the Krug was, and still is; close to the spot price. (The "spot" price is the price at the mouth of the mine, and of course, does not include the cost of minting, distributing, transporting, etc.) Those fake Double Eagles are still circulating, and no one seems to remember that tens of thousands of them were injected into the numismatic trade 20 years ago. Maybe they remember, but don't tell their unwary customers. Like the real Double Eagles, they were made of real gold. Suppose an unwary holder of a fake Double Eagle tries to sell it to a coin shop, whose owner knows about the counterfeits, examines it under a jeweler's loop, and pronounces it to be a fake? They will get the value at spot price of the gold content, but not any numismatic value. They'll wish they had bought a bullion coin. Like the real dollar bills and treasury notes, the fake ones are made of the same stuff: Paper. This is why all unbacked paper currencies eventually go the way of the dodo bird. This is why, the German mark started all over again in 1948, and everyone who had saved in the old ones lost everything they had.
Richard Russell has written the "Dow Theory Letter" for many decades, and in a recent one he made fun of Alan Greenspan for running up the money supply about 7-8% every month for the last three or four months, and declaring that American "productivity" (?) is marvelous. Russell noted that prices continue to rise in dollars. Of course! The more of anything there is, the less they will be worth, be it Model A Fords or used computers. The difference between those guys in the Philippines that got caught, and the fed, is that in America, when Uncle Sam needs "liquidity," (I love that term, because it's a sophisticated way of saying inflation) he calls up Alan Greenpieces of paper with ink on them, and orders it up. Just like a drive through McDonalds. Instant service. Then, a sufficient number of notes and bills are printed up, sold, or simply issued to banks, and the currency supply is officially increased. Ever wonder if the huge number of greenbacks that were sent to the banks for the Y2K thing, (hundreds of billions of dollars worth) were ever called back in? Ever wonder if George Sr. ever got paid the tens of billions promised him for fighting the Gulf War? I doubt that either ever happened, which means that the supply of currency increased by that much…legally.
The counterfeiters do the same thing illegally, as does Uncle Sam: legally. They print dollars and bills to enrich themselves, and Uncle Sam does the same to enrich his bevy of worthless bureaucrats, judges, agents, and other 'job for a lifetime' hacks, who drain us dry with huge taxes. As if the taxes weren't bad enough, (see a former piece of mine on just how many taxes you really pay…click on it at end of this) our currency loses value every single day, due to official and unofficial counterfeiting, which accomplishes the same thing. Both increase the supply of currency. It happens everywhere. From the smallest sand parched colony of unmentionables, to the largest, most civilized nations…all have legal and illegal counterfeiters who gleefully turn out monsoons of currencies, and all of their outputs, legal or illegal, have the same effect. The purchasing power of the pieces of paper with ink on them swoons into eventual worthlessness. Some faster than others, but all eventually can be used to make cellulose insulation…to be polite.
There are fakes in everything! Fake rare art and stamps, fake antiques of all sorts, fake currencies, and fake brand names of just about everything. When the fakery is discovered, those who invested in the fakes lose their investment, other than the raw materials the fake is made of. Paper is paper, no matter what is written upon it, and currencies represent nothing, as opposed to deeds, titles, wills, and even stocks.
This is why I love tangible things! Things I can see, touch, and fondle. (no dirty jokes here please!) It is actually fun to hold one's gold and silver, and know that whoever produced it, had to invest time, capital, and expertise to produce that coin. Dollars are churned out by the millions every day, and are merely pieces of paper, worth less than a non-copper cent. A gold bullion coin isn't going to be a fake. There is no profit in counterfeiting a bullion coin. They are too close to the actual spot price of the metal for anyone to show a profit by making them. Without a profit, no activity ever takes place, other than government schools, bureaucracies, land, forests, subsidies, and myriads of other hocus pocus outrages heaped upon us on a daily basis. Why counterfeit anything, if a profit cannot be made? Double Eagle counterfeiting was (is?) highly profitable, but a bullion coin counterfeiting outfit would go bankrupt instantly, so they simply do not exist. Fake stamps, fake pedigree dogs, fake auto parts, fake stock certificates, fake bonds, and fake dollars are everywhere, but no fake bullion coins.
Gold and silver are being ridiculed by every purveyor of pieces of paper with ink on them, and every single government on earth. They have to do this, you see, because gold and silver require effort, energy, and exploration, as opposed to pressing the "on" button of a printing press. Those presses print not only the currency of the realm, but T bills, US treasury bonds, and all the other "securities" the fed and its sales force pushes on a daily basis, like so many used car salesmen. The ridicule will cease eventually, as history always repeats itself…sooner or later…without exception. I just got back from a test drive in an old Mercedes I recently bought for a pittance ($150) from a man who knew no better. On the way home, I saw a sign at a gas station that hawked Marlboro Cigarettes at $22.73 per carton. The "Marlboro Man" died of lung cancer. I grew up in a drug store, as my dad was a corner druggist in DC, as was my grandfather and great grandfather…also in DC. When I was a teen, cancer sticks were thirteen cents and two packs for a quarter. Now they are well over 2 bucks a pack? Same cigarettes, but the paper money buys less. Prices up? Of course not! Paper money down. "Pepsi Cola hits the spot, twelve full ounces, that's a lot, twice as much for a nickel too, Pepsi Cola is the drink for you. Nickel nickel nickel nickel, trickle trickle trickle trickle, etc." Know how much twelve ounces of Pepsi costs today? It isn't a nickel! Prices up? No, unbacked currencies down.
The manipulators of gold and silver are trying to repay their 1% interest loans by keeping prices in the cellar. No one ever defeated a market forever. Never. All things come to those who wait. While prices in currencies of everything from abacuses to zoo admissions go up as if filled with helium, the presses keep running, and gold and silver are kept at absurd prices in paper money. An opportunity such as this rarely occurs in anyone's lifetime. The majority has never been right, and the majority thinks the stock market will rise again. Like the South? God only knows I love the South, believe Robert E. Lee was one of the greatest men ever to live, and I still hope. But I am not quitting my day job waiting. I hope you reader, will realize what a capital opportunity these times are to get out of paper and get something tangible. If you can't find an old Mercedes, (which can't be counterfeited) try gold and silver. - Protect yourself.
May 12, 2001
Don Stott has been a precious metals broker since 1977, has written five books, hundreds of columns, and his web site is www.coloradogold.com