Gold History in your Hand!

The $20 Liberty Gold coin, also known as the Double Eagle is a gold coin of the United States made from 1850 to 1907. (Its gold content of 0.9675 troy oz was worth $20 at the then official price of $20.67/oz). The coins are made from a 90% gold (0.900 fine = 21.6 kt) and 10% copper alloy.

The first double eagle was actually minted in 1849 (extremely rare), coinciding with the California Gold Rush. In that year, the mint produced two pieces in proof. The first resides in the Smithsonian Institution in Washington DC. The second was presented to then Treasury Secretary William M. Meredith and was later sold as part of his estate - the present location of this coin remains unknown.

In 1850 regular production began and continued until 1933 (when the official price of gold was changed to $35/oz by the Gold Reserve Act). Liberty design Double Eagles ended in 1907. Prior to 1850, eagles with a denomination of $10 were the largest denomination of US coin. $10 eagles were produced beginning in 1795, just two years after the first U.S. mint opened. Since the $20 gold piece had twice the value of the eagle, these coins were designated "double eagles".

These are wonderful pieces of history that can be purchased at a reasonable premium over their intrinsic value. Usually you will find dealers offering them for sale - simular condition to the example coin I show - at a 20 to 30% premium over their gold value. However, it is important to understand that condition determines value, so this 20% to 30% premium I mention is just a starting point in price.

I think United States $20 Double Eagles are great coins, though most are not rare! The U.S. Mint made plenty. But if you're looking for an alternative to just bullion gold, you may want to consider them. I also find that for the price, they offer a remakable opportunity to handle something of our country's past! A tangible that you can pass down from one generation to the next. Your thoughts?

Inflation and Rare Coins

There are two major outside influences on the rare coin market; the value of the U.S. dollar/rate of inflation, and the price of gold bullion. And both of these factors are of course very related to one another. Rare coins are a classic inflation hedge and the last time we had big inflation and rising gold prices (the 1970s), rare coin prices went up over 1000%.

This recent quote from a nationally recognized rare coin dealer reiterates that inflation and the value of the US Dollar are the “major” outside influences on the rare coin market. Although I would agree that such a statement may prove to be true, I would caution readers to consider this also:

-Inflation can affect different parts of the economy at different times. For example, oil prices move up and down rapidly, because they are driven by the bids on the price of oil futures contracts. As a result, gas prices are also very volatile. This can drive up the price of food, as transportation costs to deliver it can rise quickly. For this reason, the price of food and energy is left out of the core inflation rate. (This is used by the Federal Reserve as a better indicator of true inflation.) So not all inflation is the same.

-Core inflation, or core CPI, is important because this is what the Federal Reserve looks at to decide whether or not to change the Fed Funds rate (interest rate charged to Banks). Core inflation is simply the Consumer Price Index (CPI) minus food and energy prices.

Given this information, just how did the Feds factor inflation back in the mid to late ‘70’s? Were the criteria for figuring the CPI the same as it is today? Is it fair or safe to assume that the forces that drive inflation, or for that matter, the criteria that tracks inflation, is the same of 3 decades ago? Perhaps these questions are relevant to the discussion before making any decisions about buying rare coins as an inflation hedge. Thoughts?

Goldline trouble?

Just recently New York Congressman Anthony Wiener came out with the accusation that conservative talk show host Glenn Beck was working in cooperation with Goldline International (a gold bullion and rare coin dealer) in “using misleading sales techniques to overcharge consumers for gold coins”. As a sponsor of the Glenn Beck radio show, Goldline has annual sales of nearly $500 million annually.

"It is not surprising that Glenn Beck is attempting to deflect from his behavior in promoting Goldline," Weiner told Yahoo! News in a statement. "But the facts are clear. Goldline rips off consumers and Glenn Beck helps."

Now here’s my question … Do the accusations about Goldline have any merit? I understand that part of the issue, according to Wiener, is that Goldline is “charging to much” for the product they sell. Now I am not necessarily a defender of companies such as Goldline, but how does one determine (especially a Congressman) what is a “fair price” for a product?

In addition, Goldline promotes Swiss Gold 20 Francs as one of their mainstays of inventory, highly recommending them to potential and current customers. The accusations the Congressman is making against Goldline concerns such coins, as apparently the difference between the intrinsic value of the 20 Francs is significantly lower than what Goldline charges.

Now I have no problem in what any company wants to charge for their product. But does a company have an obligation to tell the potential buyer what the markup is? Is there a moral or ethical component to this, must the seller always disclose one's profit-margin? Or is this simply a case of “let the buyer beware” ? Thoughts?

Greece Problems

The world is breathing a sigh of relief now that the financial crisis in Greece is "over." Yeah, right. Greece's financial misdeeds — the country has racked up a lot of debts it can't pay — will probably come back to haunt Europe, and soon.

But we in America shouldn't be too smug, because U.S. states have their own money problems, many of them worse than anything facing Greece — and the problems at home are starting to erupt!

Let's put things in perspective. Greece's gross domestic product (GDP) is approximately $357 billion. Meanwhile, the state of Illinois has a GDP of around $633 billion — and, on Monday, Fitch Ratings downgraded Illinois' credit rating and warned of possible further action, leaving the state's credit on negative watch.

Why? Because Illinois has a $13 billion budget deficit and is careening into a liquidity crisis.

Is Illinois not big enough for you? California is the largest U.S. state with roughly $1.8 trillion in GDP — the eighth largest in the world. That puts it roughly on par with Russia, Spain, or Brazil. How bad are things in California?

• California is wrestling with a $22 billion budget deficit.
• The deficit is expected to get worse, and hit $25 billion in 2012. And that's a CONSERVATIVE estimate. Other estimates put it over $40 billion.
• Including state pension obligations, California's debt burden is 37% of its economic output.
• The crisis is so bad, the credit default swaps — or insurance against default — on California general obligation debt now show California's bonds are at greater risk than the bonds of Kazakhstan, Croatia, Bulgaria and Thailand. That's right, Kazakhstan! Where Borat comes from!
• The financial situation is so severe that California is paroling prisoners early, slashing what once were deemed essential services, and doing the equivalent of rifling the couch cushions (shifting funds temporarily) to try and bridge the fiscal gap.

Across America, the big picture is just scary. According to the Center on Budget and Policy Priorities, 48 states face shortfalls in their budgets for fiscal year 2010 that total $196 billion or 29% of state budgets — the largest gaps on record. Experts say 10 states are bordering on insolvency — along with California and Illinois, other states in the hot seat including Arizona, Florida, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin. They are all in the soup, financially. And in 2011, many states face revenue gaps as big as or bigger than the ones they are wrestling with this year. Sure, states have faced budget crises before. But not like this, not in modern history. The last recession saw budget shortfalls that lasted for several years, but they were half the size (or less) of the gaps that states are facing now. Collectively, U.S. states will probably face a shortfall of $180 billion in 2011 and at least $120 billion in fiscal 2012 (the fiscal year starts in July). States are required to balance their budgets. They'll probably do this by slashing services and payrolls. As firefighters, police officers and teachers get pink slips, they cut back on their personal spending — which worsens the downward economic spiral.