July 2015 – Week 1 Edition

Gold trended down last week, despite a Greek vote which could lead to secession from the euro-zone. By a plurality of 61% to 39%, Greece rejected the latest bailout offer from the IMF and European Central Bank (ECB). Greek banks had been closed all last week and they may be partially closed indefinitely (or limited to small withdrawals) until the Greek government decides which currency to use in denominating future debt payments and pension contracts. The lack of a gold rally in the face of this crisis probably means that most investors don’t take Greece very seriously!  In addition, a major failure in the euro-zone will likely hurt the euro and help the dollar, which tends to depress the price of gold in U.S. dollar terms. 

Two “Mainstream” Market Sources Come Out in Favor of Gold

The prestigious Royal Bank of Canada (RBC) has upgraded its recommended allotment for gold to an “overweight” position, meaning a higher percentage of gold in their model portfolios. By comparison, they are now “underweight” the base metals.  They wrote: “Precious metals are increased to overweight due to Q3 being a seasonally strong period with steady fundamental demand from India and China, continued central bank buying, the European Union’s QE (quantitative easing) program, and dovish signals from the Fed and potential for the deferral of the expected rate hike,” adding, “We would view a pullback driven by a rate hike and resolution of the Greek crisis as a potential buying opportunity.”

Also, a report by StreetAuthority on the NASDAQ market Web site says that this may an opportune time to buy gold.  They write: “Now may be the time to give gold a fresh look. Fundamental drivers appear in place for long-term upside, and technical support could provide a near-term catalyst.” They point to limited new supply due to the closing of some mines, writing: “The average capital investment last year by the five largest miners was less than half of that spent in 2012. The World Gold Council reported that global gold supply dropped 4% sequentially in the first quarter of 2015,” said the report.

Update on the New Texas Gold Depository Law

The idea of storing one’s gold in Texas doesn’t seem all that revolutionary to us, but the opponents have gone overboard in saying things like “Texas wants to mint its own currency” or even secede from the Union.  But the actual stated goals of the depository are modest and sensible – the goal of having a closer physical proximity to your stored wealth. Maybe other Americans in most other states would also prefer to store or visit their gold closer to home. This could be the start of gold depositories in many other states.

As I told the Texas Tribune in an article last Friday, “I could see some of the customers I do business with saying I’d like to see it stored in Texas rather than Delaware.”  Republican state Representative Giovanni Capriglione, who sponsored the bill (House Bill 483), puts it a bit more strongly: “I would like to see this all come together so we become a commodities hub for the continent…I think we’re perfectly situated.”

As with most new laws, the details of implementation and regulation are left up to the relevant authorities. A task force has been set up by state Comptroller Glenn Hegar, whose team will draft the depository’s regulations and contract with a private firm to manage it. In addition, the state’s Department of Banking will begin licensing depository agents to serve as middlemen between the depository and customers. (If a major bank becomes involved, we could see things like a “Texas Gold” debit card denominated in gold.)

If it works in Texas, other states may follow.  Governor Abbott said “The Texas Bullion Depository will become the first state-level facility of its kind in the nation,” implying that others may follow.  For now, the only Texas state entity that owns a significant amount of gold is the University of Texas Investment Management Company (UTIMCO), which oversees the assets of both the University of Texas and Texas A&M. UTIMCO controls $660 million worth of gold bullion in storage at the HSBC Bank in New York.

‘In God We Trust’ Was Inspired by ‘The Star-Spangled Banner’

Exactly half a century before the motto “In God We Trust” first appeared on circulating U.S. coinage, a close approximation of this now-famous phrase turned up in a poem that went on to attain equally iconic status when it was set to music and became “The Star-Spangled Banner.”  Few Americans are aware of this precursor, for the words are embedded in the seldom read – and almost never sung – fourth stanza of the poem, but it provides a fascinating link between our country’s official national motto and official national anthem.

Actually, it’s much more than just a “link.”  The words in “The Star-Spangled Banner” served, in fact, as a model and inspiration for the motto that ended up on U.S. coins and, eventually, U.S. paper money.  This was confirmed in a document written in 1863 by James Pollock, Director of the United States Mint, a well-respected public official who had served previously as both Governor of Pennsylvania and a Congressman from that state.

Pollock was a close friend of President Abraham Lincoln and, like Lincoln, had been active in the antislavery movement in the years leading up to the Civil War.  He was a pious man whose strong religious beliefs led people to call him “The Great Christian Governor.”  His role in selecting the phrase that expressed Americans’ faith in God resulted from a directive he received from a fellow-Pennsylvanian, Treasury Secretary Salmon P. Chase, during the first year of the War Between the States.

“The trust of our people in God should be declared on our national coins,” Chase told the Mint Director.  “You will cause a device to be prepared without unnecessary delay with a motto expressing in the fewest tersest terms possible this national recognition.”

After studying the subject, Pollock wrote to Chase as follows:

“The motto suggested, ‘God our Trust,’ is taken from our National Hymn, ‘The Star-Spangled Banner.’  The sentiment is familiar to every citizen of our country; it has thrilled the hearts and fallen in song from the lips of millions of American Freemen.  The time for the introduction of this or a similar motto, is propitious and appropriate.  ’Tis an hour of National peril and danger, an hour when man’s strength is weakness, where our strength and our nation’s strength and salvation must be in the God of battles and of nations.  Let us reverently acknowledge his sovereignty, and let our coinage declare our trust in God.”

In the penultimate sentence of “The Star-Spangled Banner,” those who read – or sing – the entire set of lyrics will find the words that inspired Pollock’s choice for a short but powerful reference to the Almighty:

Then conquer we must, when our cause is just,

And this be our motto: “In God is our trust.”

The search for a suitable coinage motto began in late 1861, six months after hostilities commenced in the bloody Civil War, when Treasury Secretary Chase received a letter from the Rev. Mark R. Watkinson, a Baptist minister from Ridleyville, Pa., urging that provision be made for “the recognition of the Almighty God in some form on our coins.”

Several different mottoes – including “God our Trust” – were considered for use on U.S. coinage before officials settled upon “In God We Trust” for placement on the new bronze two-cent piece in 1864.  Chase set in motion the steps that led to this affirmation of faith because he, like Watkinson and Pollock, considered it important to profess the nation’s trust in a higher being at a time of such turmoil and travail.

During the century after its words were written, “The Star-Spangled Banner” came to be widely viewed as the national hymn, as it was described by Mint Director Pollock.  It didn’t attain that status officially, however, until the early part of the 20th century.  In 1916, with the Great War (later renamed World War I) raging in Europe and American involvement a growing possibility, President Woodrow Wilson issued an executive order proclaiming the song to be the national anthem.  This had little effect beyond requiring military bands to play it at public performances.  The song’s official status was finally solidified 15 years later, in 1931, when Congress passed a legislation formally declaring it to be the national anthem.  The legislation was signed by President Herbert Hoover.

A quarter-century later, on July 30, 1956, President Dwight D. Eisenhower signed legislation establishing “In God We Trust” as the nation’s only official motto.  Sentiment favoring adoption of this motto had been building since the end of World War II, a conflict which – like the Civil War – caused many Americans to turn to a higher power for guidance, solace and hope.  A year earlier, in 1955, Congress had approved the insertion of the words “under God” into the Pledge of Allegiance and mandated use of “ln God We Trust” on all U.S. paper money.

On July 30, 2006, the 50th anniversary of the 1956 bill recognizing the status of “In God We Trust” as the national motto, President George W. Bush issued a proclamation reaffirming the appropriateness of this designation.

Bush said, “As we commemorate the 50th anniversary of our national motto and remember with thanksgiving God’s mercies throughout our history, we recognize a divine plan that stands above all human plans and continue to seek His will.”

Despite the publicity surrounding these events, many Americans continue to believe the official national motto is “E Pluribus Unum.”  A case in point came to light during construction of the Capitol Visitors Center, a three-level, 580,000-square-foot “waiting room” for tourists beneath the U.S. Capitol in Washington, D.C.  Initially, a plaque was placed there declaring “E Pluribus Unum” to be the official U.S. motto.  But once the mistake was discovered, Congress ordered the plaque replaced by a new one, still in place, that correctly identifies “In God We Trust” as the national motto.  This serves as highly visible confirmation, in a major public building, of the latter motto’s official status and stature.

Perhaps most alarmingly, President Obama showed similar ignorance about “ln God We Trust“ – and lack of appreciation for how meaningful it is for many Americans – in 2011, when he incorrectly identified “E Pluribus Unum” as the national motto, then dismissed congressional critics when they overwhelmingly passed a resolution, 396 to 9, setting the record straight. The resolution was sponsored by Congressman Randy Forbes, a Republican from Virginia. It supported and encouraged the display of the words “In God We Trust” in all public schools and government buildings.

You can read more at www.ingodwetrustonmoney.com

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