Guest post: Truth in Government, Part II

And here’s the second and final part of the guest post by Sandy Sandfort. Part I is here

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TRUTH IN GOVERNMENT? YOU BETCHA! (Part II)
A Short Guide on How to Read Government “Tells”

By Sandy Sandfort

Before I give you two final financial examples, I will give one from my own family. On 5 April 1933, FDR signed Executive Order 6102 (just like Obama, he had a pen and a telephone) which required Americans to turn in their gold in exchange for paper money at $20.67 per ounce.

When my father read about the order in the newspaper, he immediately told my mother, “They’re going to devalue the dollar!” In other words, he skipped past all the order’s rhetoric and jumped to the “why.” When he figured out what and why the order was given (devaluation), he set about illegally amassing as many gold coins as he could. He was able to get rid of a lot of paper in exchange for a lot of gold. As he predicted, the dollar was devalued (40% to $35 per ounce. For decades, he and my mother paid for fun trips to Mexico with gold coins they sold in Mexico for the world price of $35 per ounce.

Note: What my parents did was a violation of Federal law that carried a maximum fine of $10,000 (about a third of a million dollars in 2015 dollars) and up to ten years in prison. I am tremendously proud of my parents. They were never timid when it came to fight for their freedom.

Okay, now two further examples. Consider them to be exercises for the student. Read them and think about the nine bullet points in part I and see how many you can identify.

The first occurred in the days leading up to 23 July 1965. For some months, the price of silver was climbing. People were concerned that the melt value of silver coins would surpass their face value. President Johnson had made several remarks in which he assured the public that the US had no intention of removing silver from US coinage. Nevertheless, Congress passed the Coinage Act, which authorized the minting of non-silver coins with the face value of the then current silver coins. Johnson publicly signed the Act into law and made these remarks:

Some have asked whether our silver coins will disappear. The answer is very definitely — no.

Our present silver coins won’t disappear and they won’t even become rarities. We estimate that there are now 12 billion—I repeat, more than 12 billion silver dimes and quarters and half dollars that are now outstanding. We will make another billion before we halt production. And they will be used side-by-side with our new coins.

Since the life of a silver coin is about 25 years, we expect our traditional silver coins to be with us in large numbers for a long, long time.

If anybody has any idea of hoarding our silver coins, let me say this. Treasury has a lot of silver on hand, and it can be, and it will be used to keep the price of silver in line with its value in our present silver coin. There will be no profit in holding them out of circulation for the value of their silver content.

Okay dear reader, given the preceding guidelines, what should a smart person have figured out and done back then? In the unlikely event you need a clue, look up Gresham’s Law.

Now the next example of government double-speak is really delicious… if you like that sort of thing. Nixon throws in everything but the kitchen sink (unless, of course, it was bought overseas). The statement’s internal inconsistencies, non sequiturs plus out-and-out lies are breathtaking in their audacity.

Unfortunately, there wasn’t much the average Joe could have done to mitigate the damage. Opening bank accounts in strong foreign currencies, buying silver and then buying gold when it became legally possible four years later. Of course, buying any non-dollar denominated asset was, and still is, a viable way to protect one’s wealth from the depreciation of the dollar.

On 15 August 1971 President Richard Nixon made an address to the nation entitled, “The Challenge of Peace.” Later, some commentators referred to it as the Nixon Shock. In part, he said:

We must protect the position of the American dollar as a pillar of monetary stability around the world.

In the past 7 years, there has been an average of one international monetary crisis every year. Now who gains from these crises? Not the workingman; not the investor; not the real producers of wealth. The gainers are the international money speculators. Because they thrive on crises, they help to create them.

In recent weeks, the speculators have been waging an all-out war on the American dollar. The strength of a nation’s currency is based on the strength of that nation’s economy—and the American economy is by far the strongest in the world. Accordingly, I have directed the Secretary of the Treasury to take the action necessary to defend the dollar against the speculators.

I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interest of monetary stability and in the best interests of the United States.

Now, what is this action — which is very technical — what does it mean for you?

Let me lay to rest the bugaboo of what is called devaluation.

If you want to buy a foreign car or take a trip abroad, market conditions may cause your dollar to buy slightly less. But if you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today.

The effect of this action, in other words, will be to stabilize the dollar.

Now, this action will not win us any friends among the international money traders. But our primary concern is with the American workers, and with fair competition around the world.

Wow! That is one tricky Dick.

Currently, the US is turning up the rhetoric volume in anticipation of the next exercise in futility called the presidential election. Tweedle Dumb and Tweedle Dumber will battle it out. One of them will win and nothing will change. My bumper sticker logic says, “don’t vote, it only encourages them” and I’m sticking to it.

However, if you like politics as a spectator sport, you are in for a great show. From the standpoint of candidate tells, just remember they only have one purpose and that is to get you to vote for them and not for the other guy. Beyond that, the ins will do exactly what they want to do and the outs will bitch and moan. Same as it ever was… same as it ever was.

So have a good time listening to the candidates as they say the most outrageous things possible. They want to be the ones driving the Titanic, to keep the system rolling just a little bit longer. In the meantime, know that the emperor has no clothes and get your Plan B in order. There is a storm coming. Don’t let government words send you down the wrong path. Know what the government wants, then do what you want.

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Sandy has a new website in the works. If you’d like to be notified when it goes live, contact Sandy at sandy-at-privilegedcommunications-dot-net (corrected address) with the subject line “new website notice.”

Sandy would also like to exchange some of his Bitcoin for USD (which can be sent to his U.S. bank, though he resides in Panama). Contact him at sandfort-at-gmail-dot-com if you’re interested in making the trade.