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June 29 2018

moneymetals

Frank Holmes: Tariff War Akin to Raising Taxes, Recession Looms

Mike Gleason: It is my privilege now to welcome in Frank Holmes, CEO and Chief Investment Officer at U.S. Global Investors. Mr. Holmes has received various honors over the years, including being named America's Best Fund Manager for 2016 by the Mining Journal. He is also the co-author of the book, The Goldwatcher: Demystifying Gold Investing and is a regular guest on CNBC, Bloomberg, Fox Business, as well as right here on the Money Metals podcast.

Frank, welcome back and thanks for joining us again. How are you today?

Frank Holmes: I'm great, and it's great to be chatting with you about this languishing gold market.

Mike Gleason: Yeah, we certainly have a lot to talk about. Never a dull moment here in these markets. To start out here, Frank, when we had you on back in March, we talked about the steel and aluminum tariffs Trump imposed. Things have escalated since then. The president is talking about tariffs on European automobiles and another $2 billion on imports from China. We're very curious about what impact this trade policy might have on the dollar and, by extension, precious metal. So far, at least, the dollar has been strengthening, but we aren't sure how seriously the markets are taking the possibility of a trade war becoming a currency war. If that happens, the U.S. certainly seems vulnerable. We have by far the most to lose given the dollar's status as a global reserve currency. What do you make of the recent strength in the dollar, and where do you think things may be headed if we wind up in a full-blown trade war?

Frank Holmes: Well, first, what I'd like to say is I wrote a piece said, "President Trump, you can't suck and blow a balloon at the same time." It was a just amazing feat to get corporate taxes down, and that was really the catalyst that launched the stock market, that fulfilled and provided visibility for the next several years of robust economic growth. When I talk to all the macroeconomists, all the macro analysts who are pointing out that immediately Walmart increased salaries as a consumer company, and a manufacturing company started spending more money on factory upgrades. 10 years since they've really spent a lot of money on durable goods. And that was really important for the metals as a whole.

But with this whole tariff war, well, that's basically raising taxes. Tariffs are always an indirect tax on an industry or sector of the economy, and it's defeating. And this week, the Fed chair was saying that, Powell, that he's getting feedback that exports are starting to be canceled because of the tariff battle right now. So I think the combination of the stronger dollar along with the tariff battle is only going to set us up for a recession faster than we thought, unless he can tune back what he's been talking about.

But I think to understand capital markets, the flows of funds, that historically when the two-year government bond, which is the bond that relates to all the short-term currency fluctuations, they compare 90 days and two-year government yields to the inflationary rate of their country, and then they look at all the countries and compare them to net positive return. And right now, the U.S. dollar is strong because the two-year government bond is above the dividend yield of the S&P 500. Well, as soon as that happened, immediately, pension fund institutions stopped buying stocks because they can turn around and get a guaranteed yield for the next two years with no risk on a dividend yield that's higher than what the S&P's forecasted to deliver in the future of two years and giving now.

So that creates this VIX explosion. And then we have this sort of fear that rates are going to continue to rise with the CPI number because inflation is rising, and that's put a dent in the price of gold and made the dollar strong. But a strong dollar at this stage, along with tariffs, is the worst thing for economic growth and prosperity. And Trump's ego is big enough and rational that he wants growth and he wants economic growth, so I think we're going to see in the second half, we've had a peak in rates, and we'll see rates come off. And I think then you'll see this move in the price of gold.

Mike Gleason: Setting aside any ramifications for the dollar, do you think the U.S. can win a trade war? I mean, the president certainly seems confident. On the one hand, we agree with an observation you made when we spoke last, China has stolen a lot of intellectual property, and it would be nice if we could do something about that. But on the other hand, tariffs are bound to raise prices for Americans. It's a tax, like you said, and there are plenty of examples of trade restrictions and that sort of central planning leading to all sorts of unintended consequences. So how do you rate the president's chances for success here, Frank?

​Read/Listen to the entire article here. ​


April 16 2018

moneymetals

Senator Ted Cruz’s Bill to Remove the Inflation Tax from Capital Gains Addresses a Symptom but Not the Cause

Washington, DC (April 13, 2018) – U.S. Senator Ted Cruz (R-Texas) has just announced he will introduce a bill to end taxes on capital "gains" that are simply a result of inflation.

Cruz’s inflation-indexing bill seeks to "expand economic growth and encourage more investment into the economy, helping create more opportunities for hardworking Americans."

"If you invest a thousand dollars, and then ten years later you sell whatever you have invested in for two thousand dollars, right now, you are taxed on that full gain, ignoring inflation, and ignoring the fact that inflation has eaten away a big chunk of that gain," Sen. Cruz said.

The Sound Money Defense League lauded the measure for acknowledging the problem created by the official policy of devaluing the purchasing power of the Federal Reserve Note "dollar" and for taking a reasonable first step to addressing it.

"Because of inflation, much of what is taxed as capital gains is not a real gain, but rather a nominal gain created by the Federal Reserve System through its policy of serial devaluation," said Jp Cortez, Policy Director at the Sound Money Defense League.

"We praise Senator Cruz for advancing a bill that addresses a symptom of Federal Reserve currency debasement," continued Cortez. "However, the fundamental solution is a return to sound money in America, i.e. gold and silver, as intended by our nation’s Founding Fathers.

"Until we strip central bankers of their abusive power to create money out of thin air, our nation’s investors, savers, pensioners, and wage-earners will be robbed of their assets through the insidious inflation tax."

(Original Source)

March 15 2018

moneymetals

BOOM: Wyoming Ends ALL TAXATION of Gold & Silver

Breakthrough Sound Money Bill Becomes Law Today with Wide Support


Cheyenne, Wyoming (March 14, 2018) – Sound money activists rejoiced as the Wyoming Legal Tender Act became law today. The bill restores constitutional, sound money in Wyoming.

Backed by the Sound Money Defense League, Campaign for Liberty, Money Metals Exchange, and in-state grassroots activists, HB 103 removes all forms of state taxation on gold and silver coins and bullion and reaffirms their status as money in Wyoming, in keeping with Article 1, Section 10 of the U.S. Constitution.

Introduced by Representative Roy Edwards (R-Gillette), HB 103 received a 55-5 favorable vote on final passage in the Wyoming House last week following Senate approval by a vote of 25-5. Gov. Matt Mead let HB 103 become law today without his signature.

The most immediate impact of the new law, which formally takes effect on July 1, is to eliminate all Wyoming sales taxes when purchasing gold or silver.

While Wyoming does not currently have an income tax, the bill stipulates “the purchase, sale or exchange of any type or form of specie or specie legal tender shall not give rise to any tax liability of any kind.” That means no income tax, property tax, sales tax or any other Wyoming tax can be assessed against the monetary metals.

Lead sponsor Roy Edwards said, “Imagine going to the grocery store and asking the clerk for change for a $20 bill and being charged $1.00 in tax. That’s what we’re doing in Wyoming by charging sales taxes on precious metals and we’re taking steps to change that.”

With the adoption of HB 103, Wyoming joins all its bordering states (South Dakota, Idaho, Utah, Colorado, Nebraska) and more than 30 other states that do not assess a sales tax against precious metals.

Some states have specifically eliminated income taxation on gold and silver (Arizona and Utah) or have established precious metals depositories to store the state’s own physical gold and help citizens save and transact in gold and silver bullion (Texas).

You can view the full press release here (source

January 30 2018

moneymetals

Illinois’ Debt Crisis Foreshadows America’s Financial Future

Those wanting a glimpse into the future of our federal government’s finances should have a gander at Illinois. The state recently “resolved” a high-profile battle over its budget. Taxpayers were clubbed with a 32% hike in income taxes in an effort to shore up massive underfunding in public employee pensions, among other deficiencies.

But, predictably, it isn’t working. People are leaving the state in droves.

Illinois the land of debt

In fact, Illinois now leads the nation in population collapse. Statistics show people leaving the state at the rate of 1 every 4.3 minutes and the state dropped from 5th place to 6th in terms of overall population.

Turns out that people with options aren’t planning to stand there and take the epic tax increase.

Illinois officials’ hands are tied. Decades ago, public employee unions successfully lobbied for an amendment to the state constitution which prevents cuts to pensions. The taxpayers are hostages.

Illinois officials are instead considering one final gambit, one well-tried by many insolvent governments through history. They will address the problem of too much debt by borrowing even more money. Specifically the plan under review calls for selling $107 billion in debt in the largest ever municipal bond offering.

Worse, the state would use the borrowed funds to invest in financial markets. The state would purchase stocks and other securities near their all-time highs.

The Illinois credit rating has suffered in recent years, so borrowing costs will be higher. That means the state will need to take on even greater levels of risk to generate returns. What could go wrong?

Illinois is demonstrating a universal truth which certainly still applies at the national level. Governments do not voluntarily shrink. They grow until they can no longer be sustained. Then they get desperate – just before the default.

(Original Source)


December 26 2017

moneymetals

Trump’s Tax Cuts: The Good, The Bad, and the Inflationary

At last, tax reform is happening! Last week, President Donald Trump celebrated the passage of the most important legislation so far of his presidency.

The final bill falls far short of the “file on a postcard” promise of Trump’s campaign. It even falls short of the bill trotted out by Congressional Republicans just a few weeks ago. It is, nevertheless, the most significant tax overhaul in more than a decade.

Corporations and most individual taxpayers will see lower overall rates. That’s the good news.

Unfortunately, there is also some not so good news investors need to be aware of.

Because no spending cuts will be attached to “pay” for the tax rate reductions, the legislation will grow the budget deficit by an estimated $1 trillion to $1.5 trillion over the next decade. The actual number could end up being smaller…or bigger, depending on how the economy performs. But more red ink will spill.

The GOP tax bill is effectively a debt-financed stimulus package. It will boost economic growth in the near term while saddling taxpayers with larger long-term debt burdens.

“Even if we get the kind of growth we hope to get,” admitted GOP House Speaker Paul Ryan, “You cannot grow your way out of the entitlement problem we have coming.”

He’s referring to tens of trillions of dollars in unfunded Social Security and Medicare obligations. They are all but politically impossible to tackle, except through the voodoo of new debt and currency creation that will keep benefits flowing with devalued dollars (i.e., inflation).

​Continue reading... (source)​


December 18 2017

moneymetals

A Bit of Tax Planning Can Turn Lemons Into Lemonade

Inline image 1

The IRS classifies bullion coins and bars which carry zero collectible value the same way it categorizes a collection of baseball cards. Because of the IRS’s dishonest interpretation of tax law, gold and silver bullion is currently subject to the higher 28% long-term capital gains rate for “collectibles.” By comparison, the rate for Wall Street and government approved assets – just about everything else – is 15-20%, depending upon the taxpayer’s income.

Investors might as well use this punitive long-term capital gains rate to their advantage. Metal purchased more than a year ago at a higher price can be sold to unlock losses and reduce taxes. Individuals can claim up to $3,000 in losses against ordinary income, and more if they have capital gains on another asset. (Check with your own tax advisor.)

Tax breaks

Now is certainly not a great time to exit the metals markets, in our opinion. Fortunately, realizing capital losses can be done without relinquishing a position in metals for more than a few seconds. Investors can immediately buy replacement metals without having the transaction classified as a wash sale (wash sale rules do NOT apply to precious metals – only to securities).

Read more: (source

November 21 2017

moneymetals

Will the Tax Reform Debate Impact Precious Metals?

November 20, 2017 -- Precious metals got a boost last week as investors were reminded that stock prices move in two directions -- up and down. The S&P 500 and the Dow both finished the worst two weeks they have seen since August.

The selling certainly wasn’t dramatic (both indexes remain within about 1% of their all time highs), but it does represent the recent negative correlation between stocks and metals. Absent the return of an inflation trade, any sustained rally in metals will likely have to be fueled by investors fleeing the stock markets. We’ll see how the equity indexes fare this week. 

Taxes

Wall Street is focused on the debate over tax reform. Whether Congressional Republicans will muster the majority needed to pass a tax bill remains too close to call. We remain skeptical given the combined animosity of the Republican leadership and Democrats towards the president.

At least metals investors who would like some tax relief may get higher gold and silver prices as a bit of a silver lining. Should tax reform fail, it will likely hurt the stock markets and prompt some flight to safety. Trading figures to be lighter this week given the Thanksgiving holiday, but there is some significant economic data due out. We’ll see reports on existing home sales, durable goods, and the FOMC minutes from the Nov. 1st committee meeting. 

Source

June 26 2017

moneymetals

Louisiana Ends Sales Tax on Gold & Silver Bullion

Louisiana Governor John Bel Edwards Signs House Bill 396 to Remove Sales Tax from Certain Precious Metals

Baton Rouge, Louisiana -- Sound money advocates rejoiced as Governor John Bel Edwards signed House Bill 396 into law in recent days. HB 396, which passed in the Louisiana state house and senate earlier this month by overwhelming majorities, removes state sales taxation of precious metals, specifically gold, silver, and platinum coins and ingots.

May 26 2017

moneymetals

Arizona Ends Income Taxation on Gold & Silver Coins

Phoenix, Arizona (May 23rd, 2017) – Sound money advocates rejoiced today as Arizona governor Doug Ducey signed House Bill 2014 into law last night. The measure, which passed in the Arizona state Senate on May 10th by a margin of 16-13, removes all income taxation of precious metals coins at the state level.

Under House Bill 2014, introduced by Representative Mark Finchem (R-Tucson), Arizona taxpayers will simply back out all “gains” and “losses” on any precious metals that are in legal tender form and reported on their federal tax returns from the calculation of their Arizona adjusted gross income (AGI).

Continue reading here.

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