Today, we will explore several compelling data points.
Firstly, gold and silver bullion coins are flying off the shelves, reminiscent of the swift sales of boysenberry funnel cakes at a county fair. U.S. Mint sales of the American Eagle 1-ounce gold coin surged by 47% from January 2012 to January 2013. Additionally, sales of American Silver Eagle (1-ounce) bullion coins rose by 22% in the same period.
Secondly, Olin Corporation, the largest retailer of small-caliber ammunition, reported a staggering increase in pretax earnings from its Winchester unit, which jumped to $16.5 million in the fourth quarter, up from just $500,000 the previous year. This translates to an astonishing 3,300% increase in pretax earnings.
Lastly, the S&P 500 achieved its best January performance in 16 years, climbing 4.84%. Furthermore, an influx of approximately $32 billion flowed into stock-based mutual funds.
At the Economic Prism, we cannot clearly define how record sales of gold and silver coins, ammunition, and stock market performance are interconnected. However, we suspect there may be a link among these trends.
Broken Promises
“The world was astounded in 1914 when Bethmann-Hollweg, the chancellor of Germany, referred to the treaty ensuring Belgium’s neutrality as a ‘scrap of paper,’” noted economist and author Benjamin Anderson in *Economics and the Public Welfare*.
Anderson went on to observe, “In hindsight, this statement was one of the most disastrous ever made. The world today is filled with scraps of paper.”
Indeed, we live in a world awash with scraps of paper. But what do these scraps signify?
In essence, they symbolize broken promises.
These pieces of paper are merely records of treaties, contracts, or commitments—documents that capture what is agreed upon in good faith. When individuals, businesses, or governments honor their commitments, the paper holds value; it reflects the rule of law. However, when such promises are disregarded, the paper loses its meaning, reducing it to a mere scrap.
Over the past century, the actions of the U.S. government have, sadly, rendered parts of the Constitution as mere scraps. To illustrate, the legitimacy of money has been compromised since the establishment of the Federal Reserve on December 23, 1913. This isn’t an exaggeration—it’s a reality.
Article I, Section 8 of the Constitution grants Congress, not the Federal Reserve, the authority to mint money and regulate its value. Furthermore, Article I, Section 10 explicitly states that no state shall issue bills of credit—like Federal Reserve notes—or recognize anything other than gold and silver coins as tender for debt payments.
Scraps of Paper Be Damned
Thus, the currency you carry in your wallet or hold in your bank account is fundamentally unlawful. It reflects a broken promise. Moreover, the Federal Reserve’s assurances are questionable, akin to promises made with crossed fingers.
Today, the Federal Reserve—not Congress—dictates the value of money, primarily through measures that devalue the dollar. As evidence, just last Friday, the dollar reached a 14-month low against the euro.
This underscores why gold, silver bullion coins, and even stocks are being sold at unprecedented rates. They are viewed as superior assets for preserving wealth compared to Federal Reserve notes. The surge in ammunition sales also reflects a similar sentiment.
Apart from their inherent value, ammunition sales have spiked due to actions by President Obama and certain senators that appear to undermine the Second Amendment. This has spurred a buying spree, leading to shortages in stores as shelves are cleared faster than they can be restocked. Truly, we have never witnessed anything like this.
Unlike the gradual erosion of monetary value, Americans are staunchly opposed to any infringement on their Second Amendment rights. Remember that in 1913, when the Federal Reserve was created, the public had faith in their government. They believed that their leaders would act with integrity and not resort to financial trickery.
Today, after consistent deception from politicians and ongoing scrutiny from the government, public trust has disintegrated. No matter what legislation Congress enacts regarding gun control, Americans will push back. Scraps of paper be damned.
Sincerely,
MN Gordon
for Economic Prism