Iceland First to Adopt a New Monatary System?

The bank crisis of 2008 revealed an urgent need to apply more restrictions on the banking sector. Many has also raised the question whether a reform of the current financial system would be in place. Most recently, in March 2015, Iceland’s prime minister commissioned a report, written by Frosti Sigurjonsson, on the subject of a new monetary system for Iceland.

It is hardly surprising that Iceland is a keen contributor to the topic, as the country has experienced many periods of extreme financial pressure over the last 50 years, including inflation, hyper-inflation, devaluations, an asset bubble, collapse of its banking sector which ultimately brought the country to bankruptcy in 2008.

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OMX Iceland 15, January 1998 to October 2008

Sigurjonsson explains how the fractional banking system is not just a contributing factor in creating boom and bust cycles, but also responsible for amplifying them severely. The explanation is simple: when economic outlook is positive, banks will maximise their profits by increasing their lending, which increases the money supply. In bad times they will slow down their lending, leading the money supply to slow down or contract. The fact is, he explains, that as long as commercial banks are able to create money by giving loans, the Central Bank is not in control of the country’s money supply.
The solution to this problem could be a so called Sovereign Money system, which doesn’t allow commercial banks to create money. All lending effectively goes through the Central Bank, while the commercial bank will act as an intermediary. A similar system was proposed by a group of economists already back in 1939, that was supported by 235 economists from 157 universities, but did not receive any following from policy makers.
I strongly recommend reading Sigurjonsson’s full article, which is in pdf format.

Andreas Afeldt

What is Semi-Numismatic Gold and Why is it a Great Investment?

Being a firm believer in gold as a long term investment as well as a passionate coin collector, I want to share my knowledge in this specific field in numismatics. It outperforms bullion investment and offers the investor several other perks. Read on, I hope you’ll learn something!

What is numismatics?

Most people get this word wrong, and I don’t blame you. Probably the only people that know the real meaning of this word are numismatists!

Wikipedia: Numismatics is the study or collection of currency, including coins, tokens, paper money, and related objects.

What is semi-numismatic gold?

Semi-numismatic gold coins have both numismatic and bullion value. This may sound simple enough, but as you will soon understand, this combined value offers insurance and leverage at the same time, outperforms pure gold bullion holdings in the long run and should be regarded an investment class in its own right, one that deserves any serious investors’ special attention.

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Great example of semi-numismatic gold is this Queen Victoria 1881 full gold sovereign from Sydney mint

Bullion component

A bullion coin is a coin that has no numismatic or affection value and follows the exact value (less charges) of the underlying metal content, usually gold or silver. Investing in gold bullion is straightforward – if gold price goes up, gold bullion goes up, and vice versa. As much as holding gold is important for a diversified portfolio, it becomes unattractive when gold price goes down, like in 2013, or stays largely unchanged, like in 2014. On the back of the last 2 years investors are shunning gold and seem now to have forgotten its safe haven status.

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Example of a bullion coin – the South African krugerrand

The gold price is often a reliable barometer of how equity markets and/or the US dollar are doing. When the equity markets are performing well and companies are paying dividends, investors are less interested in the gold market. On the other hand, when equity markets are doing well some of investors’ profit will stream in to alternative investments such as fine art, collectibles, coins etc., as investors seek to diversify.

Numismatic component

The collectable coin market has performed extremely well in the last 20 years. The emergence of online auctions coupled with improving logistics and global trade has brought an explosion of interest, especially in emerging markets such as Russia, China and Brazil.

The Knight Frank Wealth Report 2015 reported rare coins the No. 3 collectible in 2015 with a 13 % return, close after colletable cars (16 %) and fine art (15 %). Over a 10 year period rare coins have returned 232 % and over 5 years 92 %. See the Stanley Gibbons Rare Coin Index for British rare coins below. Note that the chart goes only to 2012, it would be considerably higher today.

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While this market looks stronger than ever, one has to be aware of a potential top here. So how can we hedge against this possibility?

‘Collectable bullion’ – 2 flies in one!

Semi-numismatic gold coins have a bullion component that works like an insurance if the collectable coin market would decline. To understand why this is an insurance one has to realise, that for the coin and collectibles market to decline a wider down trend would have to materialise in the financial and equity markets, in which case the gold price would most likely go up considerably. On the news of the Lehman Brothers bankruptcy gold price went up by over 50 % in less than 6 months, August to November 2007. In the ensuing credit crunch and recession gold went from $830 to $1850 (over 230 %) in less than two years, January 2009- November 2011.

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Gold price over 10 years, monthly

The numismatic and collectibles markets – together with financial markets – may enjoy several more years of good returns. As we all know (but tend to forget in the euphoria of a bull market) there will be a correction or downturn at some point. Finding investments that offer returns in both good and bad times are extremely hard to come by.

A great place to buy semi-numismatic gold is The Coin Cabinet Ltd, a power seller on eBay and an Amazon.com certified coin dealer.

Hope you enjoyed the article! Please comment below and follow me on twitter @AndreasAfeldt

6 Great Tips to Investing in Gold Coins

Now that the gold price seems to have bottomed out it could be a good idea to diversify into gold. Here is some interesting points to take into consideration if you are looking into buying gold any time soon.

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Buying gold bullion is all about finding a safe supplier with low margins. Bullion is really all about margins, the more gold you get for your money the better. However, one type of gold investment that most investors overlook is investing in older gold coins. You can get a range of gold coins from the days of the gold standard (generally ca 1850-1915) for a slightly higher spread.

Buying, for example, French Napoleons (Gold 20 Francs) from early 19th century, or Queen Victoria gold sovereigns, at say 10 % above spot may be a better idea than buying 2014 krugerrands for 2 % above spot.

In order to do this successfully though, you have to know a little bit about the coin collecting market (or know a trustable and knowledgeable coin dealer, who can invest on your behalf). Even though it can be a difficult marketplace the major forces are still supply and demand. Following these 6 points will make sure you end up on the right end of the scale.

1. Stay away from the most common types. Generally this means, the older the better. As gold wears quickly most older gold coins have been melted and re-minted as they fell below a certain minimum weight.

2. Do a bit of historical research and buy a type which has historical relevance. This will ensure a larger number of collectors will be interested. For example, Spanish gold doubloons is one of the most iconic gold coins and a large number of collectors and investors world-wide could be interested.

3. Best is to source your investment personally, meaning in store or at a fair. Or else if you do business online, ask the supplier to pick out the nicer looking coins in the lot for you. If you found yourself a good supplier they will happily do this, especially if you are a returning customer.

4. Choose a type that you like! Investing in gold coins is a fun way of diversifying. You also learn a lot and the feeling of owning a piece of ‘real money’ is something of a bonus.

5. When you want to sell, make sure you get to keep the bulk of your profits. There are several marketplaces out there for collector items. eBay is quite expensive (10 % seller fee), so a better idea is to speak to a dealer who can sell them on their website (www.thecoincabinet.com offers this service at a negotiable fee). For a larger number of coins, where you wouldn’t care much to take pictures of each coin and sell them separately, the best bet may be to consign to an auction.

6. When buying and selling remember this: always fight hard for your price. Whether it’s a bullion dealer wanting 10 % above spot or an auction house wanting 10 % seller fee, it’s usually negotiable. Auction houses have become very expensive, some charging 20 % to their sellers AND buyers. If everyone fought harder to get a better deal prices wouldn’t be so high.

Chart of the day – US inflation since 1913

With all the talk about deflation today it’s like we’re being fooled into thinking that we have no inflation. The truth is that you can have inflationary and deflationary forces in play simultaneously in an economy, which is exactly what’s happening now.

As a reminder of inflation I dug out this chart from inflation.com showcasing the extreme take-off of inflation since President Nixon’s New Economy in 1970. The explosion of debt since economies were lifted from the peg to gold is understandable, but how long can it continue? When are we going to pinch ourselves and wake up to reality?

Paying the interest off existing debt by issuing more debt is an accepted Central bank policy. And of course the public is to blame for not consuming and spending enough to support these policies. The moral obligation to one day pay off your debt has eroded as quickly as we have forgotten about why the world looks the way it does today.

This is why this chart is important to remember.

Cumulative_Inflation_by_Decade

Read the entire article titled Cumulative Inflation by Decade Since 1913 by following this link

How to drive traffic to and monetize your blog

With all bloggers out there questions that often come up are “How to increase traffic to my blog?”, “How do I monetize my blog?” or “How to use affiliate marketing to make money off your blog?”

What the blog www.pinchofyum.com do different than other blogs writing on the subject is they have published their entire monthly revenue from day 1 since they started trying to make money off it.

Reading it from day 1 is extremely interesting and helpful, giving lots of advice how to be a successful and money making blogger.

Find the direct link to this resourceful series here 

Bringing the best of money blogs

In the information age of today there are so many bloggers and writers, all spinning the same information to get a new point across. You, the reader, are the commodity everyone is fighting for. And you are bombarded by information from all corners. It really takes a lot of time to go through even the most popular blogs to see what’s new – is it worth your time once a day or once a month?

We all know all information is portraying the world in one way or another beneficial to the person who wrote it. Just compare a news article from a US newspaper with a Saudi Arabian one, it soon becomes clear that there are different interests in play. Which one is right or wrong often means you have to go deeper and subsequently form your own opinion.

Unfortunately, in the information world we live in few people have time to do their own research, but simply take what they’re being served to by an established media entity, forgetting that there are always stakeholders and different interests in play.

I spend a lot of time going through a select, yet quite large, number of websites and blogs that publish content that sometimes explain things in more detail. I could tell you what those blogs are called and who to listen to but it will take you a lot of time to screen all of them. Time you don’t have. So following a smaller number of blogs like this one will save you lots of time!

Comments about what I write, or what you would like to read about are most welcome! Even just saying hi!