Invitation to Subscribe

[Gary North]

               AN INVITATION TO SUBSCRIBE TO
                      "THE GOLD WARS"

                        Gary North


     [First, please print out this letter.  Click the
     PRINT button now.  Second, take 60 seconds to
     create a new e-mail folder, "Gold Wars."  Then
     file this letter in it . . . plus all of the
     others to follow, should you decide to subscribe. 
     Third, let me persuade you to subscribe. . . .]


     This is my invitation for to you to subscribe to THE
GOLD WARS, my free e-mail newsletter.  Before you decide,
you need to know what I intend to do with the newsletter. 
THE GOLD WARS has three primary goals: (1) clarify the free
market/Austrian perspective on gold as money; (2)
demonstrate that the Establishment's war on gold is in fact
a war on individual liberty; (3) let you make some money.

     The question is: Which form of money?  Dollars or
gold?


A NEW GOLD CYCLE

     We are at the beginning of a new gold cycle.  Take a
look at this chart.  It traces the recent rise of gold's
price in several currencies.  

      http://www.the-privateer.com/chart/g-multi.html

     Hardly anyone in the financial world recognizes this
new cycle today.  The public is not interested.  Here is
where the profit opportunity is: the leverage potential of
getting into a narrow, ignored market, and then selling
back into it when the general investing public discovers it
and a mania develops.  You want to be a Johnny-Come-Early. 
You want to sell to Johnny-Come-lately.

     You are in a select group: self-selected.  The average
American has no clue about gold, and will not get the
message until it's too late.  They will be like Albert
Einstein's clueless Aunt Rosa.

     According to Dr. Norbert Einstein, Albert's cousin and
a banker, who told me this story 25 years ago, their Aunt
Rosa was caught in the post-World War I inflation, just
like everyone else in Germany.  Like most Germans, she did
not understand monetary theory.  She did not understand
that the German central bank was inflation's cause: money
creation.  She dutifully held marks as they depreciated to
a million per dollar and then much lower.  Finally, she
caught on.  She figured out that she had to get rid of
marks.  But by that time, nobody was selling hard goods at
a price she could afford.  It was too late.  Finally, an
opportunity appeared: bedpans.  She could buy a pile of
used bedpans.  She did.  This was in late 1923.  Not long
after this, the German central bank abandoned the old mark,
brought out a new mark, and stopped printing money.  A
depression began.  Prices of hard goods fell.  There,
figuratively speaking, was Aunt Rosa, sitting on top of a
pile of used bedpans.

     The typical American is still in the stock market,
either directly or through his pension fund.  Like the
Germans in 1922, Americans still trust the system.  They
still believe that Alan Greenspan or someone in charge in
Washington is going to kiss the stock market and make it
well.  They are paying no attention to gold.  They regard
gold the investment equivalent of used bedpans.  (Lenin
once said that under full Communism, gold would be used for
urinals -- the sexist!)

     I beg to differ.  I am begging you to differ, too.


CARD-CARRYING GOLD BUGS

     I am among a remnant of a remnant: a card-carrying
gold bug.  I was taught by the master: Dr. Hans Sennholz,
the dean of American gold bugs -- at least of those still
alive.  I have been an active participant in the gold wars
ever since the summer of 1962, when I heard a lecture by
Sennholz on Gresham's law: "Bad money drives out good
money."  

     (This famous law is mis-stated.  The accurate
     version is this: "Money that is artificially
     overvalued by the government drives out of
     circulation money that is artificially
     undervalued by the government."  It's an
     application to money of the unbreakable economic
     law of price controls.)  

     Sennholz told us that silver dollars were about to
disappear from circulation, and that a boom in gold would
eventually follow, for the same reason: a policy of
monetary inflation by the Federal Reserve System.  

     I began buying silver coins in July of 1963, one month
after the U.S. government ceased issuing silver
certificates, which were redeemable in silver coins. 
Beginning in July, I bought silver coins at a local bank. 
By the end of the summer, I had something like $1,500 face
value -- in today's money, $9,000.  It was everything I had
earned that summer.  (I had the best job I ever had: I got
paid $500 a month to sit and read the works of Hayek,
Mises, Rothbard, and Ropke, and I was given free room and
board by my boss and future father-in-law, who got me that
job.)  

     By September, Gresham's law was in full force. 
Turnpikes in the East Coast were running out of coins for
change.  Turnpike representatives were sent out on Sundays
to buy coins from churches, who got coins from children in
collection plates.  In 1964, silver coins were replaced by
the clad coins of today.

     I knew then that Sennholz was probably correct about
gold, too.  I began buying gold coins -- U.S. double eagles
-- from Burt Blumert of Camino Coin Company, whenever I had
any money.  I was in grad school, and I had little money at
first, until I won a pair of national scholarships and
started teaching Western Civilization at the university. 
Blumert has been laboring in the trenches for a long time. 
In a recent report on www.lewrockwell.com, he made an
important point: the talking heads aren't talking about
gold's rally this time.

     No surprise to me that the talking heads aren't
     covering gold.

     In my last essay on the mysterious yellow metal,
     I discussed the different types of rallies.

     There's the "Blow-Off" rally, where the price
     increases are accompanied by media coverage. The
     higher the price, the more prominent the
     coverage. I have lived through several Blow-off
     rallies where gold's story finally winds up in
     headlines on the front page.

     I described the other type of rally as the
     "Unnoticed Rally." In that instance the price
     goes higher WITHOUT media focus, or, often,
     without any kind of focus.

     The past months have brought us a classic
     "Unnoticed Rally."

     When the talking heads discuss the drop of the US
     dollar, for example, their "take" is either: "It
     really doesn't matter" or "A cheaper US dollar is
     good for our exports."

     Am I alone, or do you hear the same garbage I do?

     It's not just Blumert who is still at it.  Sennholz
writes one of the most cogent e-mail letters out there.  In
his March letter, he wrote the following.  You would be
hard-pressed to get the story of the gold wars any clearer
in just a few words.  Please don't skip over these
paragraphs.  Your economic future depends on your clear
understanding of the gold wars.  (To the hard corps, I
recommend clicking on the link and reading the entire essay
. . . twice.)

     Throughout the ages governments have had a
     love-hate relationship with gold. Most of the
     time they sought to amass it in their treasuries
     and monopolize its use. They claimed and brutally
     enforced a monopoly of the mint. At other times
     governments waged war on gold, seeking to ban it
     under penalty of fine, imprisonment, or even
     death. During the French Revolution hundreds of
     businessmen died on the guillotine because they
     had dared to calculate prices in gold or ask for
     gold. In the United States of 1933 to 1975, it
     was a crime punishable by fine and imprisonment
     to own standard gold coins. At the present, the
     U.S. government, while clinging to a sizable
     hoard buried in Fort Knox, seeks to disparage it
     and make little of it as an unimportant metal. 

     We are living in an age in which all governments,
     regardless of the system of political and
     economic organization, whether interventionistic,
     socialistic, democratic or dictatorial, are
     occupying an economic command post. Most of them
     work through central banks issuing legal-tender
     notes and through government mints manufacturing
     coins. In 1971 they all suspended gold payments
     and made the most important and most stable
     currency, the U.S. dollar, take the place of
     gold. The world has been on a dollar standard
     ever since. 

     For the federal government the dollar standard
     has been a magical guide to cheerful spending and
     soaring debt. It released the Federal Reserve
     System from the shackles of gold and set it free
     to finance federal deficits no matter how large.
     In 1971 the federal government deficit amounted
     to $23.033 billion and the federal debt stood at
     $409.5 billion. By now, the 2003-2004 federal
     budget calls for expenditures in excess of $2.1
     trillion and a debt of some $7 trillion. Since
     1971 the American dollar has lost almost 70
     percent of its purchasing power and is losing
     more every day. It makes it difficult to project
     future debts and deficits, but it is likely that
     the dollar standard will disintegrate if foreign
     investors should ever lose their confidence in
     the U.S. dollar. . . .

     For most of a generation the almighty dollar has
     been a great object of confidence and trust
     throughout the world. It brought honor, friends,
     influence, and possession to the United States.
     As a symbol of power and prestige it answered all
     things. Although we do not know what the future
     has in store for us, we are fearful that the age
     of the world dollar standard may some day draw to
     a close. Huge federal government deficits and
     chronic Federal Reserve inflation may destroy it.
     The deficits force the Fed to generate ever more
     money and credit which in turn weaken and erode
     the dollar's trustworthiness in the eyes of the
     world. Its present weakness toward many other
     currencies, such as the euro, the Swiss franc,
     and the British pound, is an early symptom of the
     erosion. 

     No other currency, national or international, can
     conceivably take the place of the American
     dollar. They all suffer seriously from the same
     ideological malady: they are the creation of
     political concern and authority. Whatever we may
     think of gold, it always looms in the background,
     beckoning to be used as money, as it has been
     since the dawn of civilization. 

http://www.sennholz.com/gold.html


GOLD BUG INSECTICIDE

     In academia, the war against gold is universal.  The
academic economists join forces with sociologists and
political scientists in their policy of spraying gold bugs. 
The Keynesians, the monetarists, and the supply-siders are
agreed: a full gold coin standard without fractional
reserve central banking is both unthinkable and
undesirable.  Keynesians despise the gold standard.  Keynes
dismissed gold as "a barbarous relic."  Milton Friedman
merely berates gold as a monetary tool.  He has always
opposed government controls on gold ownership, as with any
other commodity, but he has also always opposed gold as the
basis of the money supply.  Some supply-siders officially
accept a government-run gold standard, but they oppose a
pure gold coin standard in which governments do not buy,
sell, or control the price of gold.

     The economists oppose the gold standard because they
don't believe that the free market, created by private
contract law, is trustworthy in one area: monetary policy. 
They all trust the State to regulate money -- all except a
handful of Austrian School economists, of which Sennholz is
one.  (He is one of only four Americans who earned his
Ph.D. under Ludwig von Mises, the most famous of the
Austrian School economists, and the dean after 1914.)

     I, in contrast, don't believe in the gold standard
because I don't believe that any civil government is
trustworthy in setting monetary policy.  I am not in favor
of any gold standard run by a government.  This is because
I understand the fundamental lesson of monetary history:
governments always steal the public's money before they
debase it.  The lone exception was Byzantium, from 325 to
its conquest by the Ottoman Turks in 1453.  That was the
only government-built yellow brick road that did not lead
to Debasement City.  

     Whenever governments set up a gold standard, this
invariably leads to future confiscation.  A government
encourages the public to deposit gold coins in fractional
reserve banks.  The bankers say, "Don't pay us to store
your gold.  That's an absolutely free service.  Why, we'll
even pay interest on your gold, but you can get it back at
any time."  In short, it's something (interest payments)
for nothing (risk-free storage).  This is the bankers' #1
lie, and whenever a major war breaks out, governments then
confiscate the public's gold, either directly or through
the central bank.  It happens every time.  There are no
exceptions in modern history.  

     The government allows the banks to suspend gold
redemption -- always.  That is, it allows the violation of
contract.  This is because the government wants no threat
to its wartime policies of mass inflation, which help fund
the war effort.  The public's ability to withdraw gold from
banks is the biggest of all such threats.  Gold
convertibility ends, by law.  This happened in 1861-65 in
North and South.  It happened during World War I in every
nation.  Full gold coin convertibility was restored only by
Great Britain and the United States after the war, but
Great Britain reneged in 1931, and the U.S. followed suit
in 1933.  

     A government-guaranteed gold standard is an official
guarantee of future confiscation.  For more details, click
here:

      http://www.lewrockwell.com/north/north177.html


MAKING MONEY WITH GOLD

     Gold is not money today, except among central bankers,
who settle their accounts in gold and dollars.  So, in
order to "make money with gold," most people assume that
they must buy gold (a non-monetary commodity) with true
money (fiat money issued by the government's central bank),
hold this commodity, and sell it back for real money, pay
taxes on the profit, and then buy something else.  I think
you can make money this way -- a lot of money.  Here is my
opinion: the way to make the most money with this money ==>
gold ==> money strategy is with in North American gold
mining shares.  That is believed by few people, and most of
those few who believe it are unconventional establishment
investors in unconventional establishment markets.

     Then there are the gold bugs.  They believe that you
exchange today's money (dollars) for future money (gold
coins).  You will never convert back to paper money, so you
will not suffer a "taxable event."  You will spend your
gold coins into circulation.  People will sell things to
you in exchange for gold coins.  

     The gold bug says "buy and hold."  The gold investor
says "buy and hold for a while."  

     Blumert is a gold bug.  Here is how he explains the
gold bug's approach to gold.

     Hold your gold, sell ONLY when you need the
     dollars.

     When, for instance, you are buying a house,
     helping the kids, paying for your brain surgery.

     Never sell gold to use the dollars for another
     investment UNLESS it's a business venture you
     know something about (preferably YOUR business).

     And then we have those dramatic instances when
     you are forced to liquidate your gold.

     For example, you're thirsty, I'm the only one
     with water, and it's going to cost you a gold
     coin per bucket.

     Or, the LAST TRAIN is leaving the station and the
     price for a ticket is a gold coin.

     I trust this message is clear.

     Blumert is clear, but most people who buy gold because
"it's the latest thing" aren't clear.


AFTER 9-11

     When I saw the Federal Reserve's response to 9-11 --
massive monetary inflation to inject "liquidity" into the
economy -- I knew that the gold war was about to enter a
new phase.  I knew that gold would soon take the offensive
against the dollar.  I suspected that the price of gold
would move up against the dollar and all other fiat
currencies.  The vulnerability of all governments to
terrorism was now visible.

     When people buy gold they are "shorting the
government."  

     The fall of gold's price against the dollar from 1980
to 2001 had been relentless.  Investors believed in the
U.S. government.  But I had sensed, beginning in January,
2000, that this faith was about to crater, beginning with
the NASDAQ.  In February, 2000, I warned my REMNANT REVIEW
newsletter subscribers to get out of all tech stocks.  In
March, I begged them again that the tech sector was way
overvalued.  This warning arrived in the week that the
NASDAQ peaked at 5040.  I predicted the recession of 2001
in November, 2000.  Now this: a successful terrorist attack
on the U.S., followed by massive expansion of money by the
Federal Reserve.  The State had only one response: get
Greenspan to create money.  It took no persuading.

     This indicated to me that the State had gone on the
defensive.  Meanwhile, China had become the fastest growing
economy on earth.  Older Chinese remember the great
inflation under Chiang Kai-shek, in which the struggling
middle class was wiped out.  Mao's Communists were aided by
this collapse of money.  Gold has never lost supporters in
China.  As they grow richer, a small portion of their
wealth will go into gold.  But I did not predict what has
happened this year: the Chinese government's legalization
of a free market in gold.

     I made a decision in September, 2001.  I called
America's premier specialist in North American gold mining
shares, Sam Parks.  I have known Sam for over 25 years.  He
takes new clients only if they are willing to invest
$10,000, which few people are willing to commit in this,
the tail end of gold's defensive war.  I asked him if he
would begin writing a column for REMNANT REVIEW on which
mining shares to invest in.  As a favor to me, he did. 
Those REMNANT REVIEW subscribers who did what he
recommended are up a minimum of 100% on their money, and
maybe 200%.  He called them perfectly, and our timing was
equally good.

     I phoned Parks in February, 2003, to do an interview
on gold and gold mining shares.  I audiotaped it.  He then
revised it for written publication.  We chatted again after
the Iraq war and the fall in gold's price.  He revised it
again in early May.  When he did, gold was at $340.  I had
to update it to $350 two days after he submitted it.  Gold
was at $370 within a week.

     I released the interview on Friday, May 16 -- 29 years
and one day after the initial issue of REMNANT REVIEW went
out.  I sent it to e-mail REMNANT REVIEW subscribers.  I'm
now going to let you read it.  If you want to know what has
happened to the North American gold mining market, why the
leverage on this investment is spectacular,  and what is
likely to happen next, Parks can tell you better than
anyone I know.  

     I am making the interview available to anyone who will
subscribe to a series of reports I am writing (or wrote 30
years ago) called THE GOLD WARS.  Beginning today, you can
sign up for a series of reports sent automatically, free of
charge.  This will take you through the economics of gold,
the politics of gold, and the investment potential of gold
in its various forms.  

     The biggest potential for the money ==> gold ==> money
strategy is Park's strategy.  So, I will start with the
interview.

     To subscribe to THE GOLD WARS, click on the link (keep
reading), and then click SEND.  

     1.   You will receive a "Subscription
          Confirmation -- Take Action!" e-mail
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     2.   After your e-mail program sends out
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     3.   Read my message.  Then click on the
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          provider.  

     4.   Click SEND/RECV to retrieve it. 

     Each issue will have this return address: The Gold
Wars.

     So, if you want the Parks interview as the first
installment in a my series of free reports on THE GOLD
WARS, click here, and then click SEND:

                 mailto:goldwarzone at kbot.com

Or just send an e-mail to:

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