Wednesday, August 24, 2011

Kim Kardashian Gold Commemorative Coins . . . This is Not a Gold Bubble?

I'll never forget that day at work when my department secretary told me she wanted to buy a house simply to "flip it." She wanted to know what I thought and I told her I thought housing was in a bubble. She smiled at me and said, "my son told me there's no bubble and he's been doing it for over a year now."

I went home that night and told my wife that we had to sell any stocks that had anything to do with housing. I remember owning Brookfield Homes (BHS) . . . gone!  Toll Brothers (TOL) . . . gone!  and Home Depot (HD) . . . gone!

When secretaries start flipping houses, it's time to get out. That was 2005.

The Gold Bubble?

Today I keep reading about experts trying to explain why gold is not in a bubble.  How this time it is different.

CoinWeek posted an article today giving 10 reasons why gold is not in a bubble.  Also posted today was a story at Business Insider that said someone is going to be producing Kim Kardashian commemorative gold coins. Last week Gold Resources Corporation announced that it was going to start minting its own coins in both silver and gold. The company's investors could choose to have their stock dividends paid in the new coins.

But it was the Kardashian gold coin story that reminded me of the secretary who decided to "flip houses" at the absolute peak of the housing bubble. When Kim Kardashian starts gracing the obverse of commemorative gold coins, this gold investor thinks it's time to start taking some gold off the table . . . maybe even all of it.

Tuesday, August 02, 2011

Trillion Dollar U.S. Platinum Coins

In a recent post I talked about how a bill had been submitted to Congress to cancel the Presidential dollar program and therefore lose the half billion in seigniorage from the coins currently piling up in Treasury vaults.

Since then a new idea has been making the rounds in the media that takes seigniorage to the extreme.

The idea is for the U.S. Mint to produce two new platinum coins and to give them each a face value of 1 trillion dollars. Since seigniorage is simply the difference between the "value" of money versus the cost to produce it, the government would then have 2 trillion dollars that it can do with as it pleases.

Sound far fetched? Maybe but the reality is that it could be done.

Apparently there is a statutory limit to the amount of paper currency that can be in circulation, but there is no limit  on the amount of coinage.

The one problem that arises is that generally a coin must circulate for the government to capitalize on its seigniorage. It's when banks order the coins, or when you and I buy the coin directly from the mint. This obviously isn't going to happen. I personally don't know anyone who can make change for a trillion dollars.

The apparent solution is to have the government deposit the coins into the Treasury General Account (TGA) at face value so that the government would then be able to write checks against the balance.

As a U.S. taxpayer, I'm saddened by the fact that our politicians have let things deteriorate to where ideas like this are taken seriously, . . . but as a coin collector, the coins would be COOL!