Category: Global Finance

Interview with Anthem Hayek Blanchard on AnthemGold

What is AnthemGold?AnthemGoldLogo

AnthemGold is a cryptocurrency company focused primarily on making gold easy to own and, ultimately, to become a preferred currency. Each ANTHEM (AGLD) is backed by one gram of physical gold, securely vaulted with a nonbank operator and fully insured.

But looking at the bigger picture, our goal is to bring gold and cryptocurrency together to create the world’s most stable form of money… to become a Gold Standard, if you will, in verifying supply chain management when it comes to the transfer and storage of physical, fungible items of value such as precious metals.

Do you see AnthemGold as a service to be primarily used by people to transact in gold, or as a way for people to easily buy gold as a store of wealth?

Ultimately, I think it will be more of the latter – storing gold as a form of wealth – but I believe the reason people will want to buy our form, AnthemGold, is that it will be a superior way of owning gold, allowing digital transferability via peer-to-peer, decentralized networks.

How does an AnthemGold transaction compare to a traditional bank transaction?

A transaction using AnthemGold can be performed for mere cents and executed in seconds, compared to significant dollars and several days of delay for traditional bank transactions. For example, I recently sent several thousand dollars via the traditional banking system. It cost over a hundred dollars in fees and it took several days.

In stark contrast to a bank, AnthemGold provides a fully gold-backed cryptocurrency that is transferable across the Ethereum global computer network. The one gram of physical gold that backs each ANTHEM is securely vaulted at a nonbank vault and is also fully insured. What this means is that not only is each ANTHEM fully backed with gold – the world’s ultimate store of value for 5,000 years – but they are also fully protected from confiscation and from company failure.   

What are the implications of AnthemGold for the banking industry?

The current state of affairs in banking is bizarre due to excessive government control,  regulations and compliance. When you look at the countless hours that financial service companies spend on compliance, it is absurd, and it is getting worse. People who work in financial service companies will confirm this. For example, I know an investment banker who spent the first 7 months of his first job learning all the compliance rules, instead of focusing on strategies to build wealth and value for the company’s clients.

Unfortunately this is the reality, but it is something people don’t understand when they look at cryptocurrencies and marvel at how they are gaining in value. If you add up the cost of banking fees and calculate all the time wasted waiting for bank transactions and banks following compliance rules, then you begin to see the value of a decentralized and low-cost cryptocurrency. Sadly, we have become used to the current archaic government-controlled system, thinking it normal that every bank is directed and constrained by an increasingly authoritarian centralized system.

45 minutes is the average time I have to spend, when I am dealing with a bank, and I probably interact with a bank or financial service institution 25 to 30 times a year. So when you add this up, I am wasting two waking days of my life each year.

But a decentralized cryptocurrency like AnthemGold’s eliminates the need for a lot of this wasteful and time-consuming management. A cryptocurrency is so much more efficient than the current hierarchical structure. It is comparable to what innovative tech companies have done to disrupt their industries with decentralization. Think of Airbnb and Uber.

What could a decentralized cryptocurrency like AnthemGold mean for the future of banking and financial services?

Ethereum cripto currency vector logoThe current model means that almost all payment systems must clear through the centralized banking system. Banks have this special privilege for a host of reasons such as legal tender laws, bank charter laws, the Fed wire system, etc.

Fast forward to the present, and there is no denying that we are well into the digital age, and are now at the dawn of the decentralized age. Bitcoin made it possible for trust to be established in a decentralized world, and that very innovation itself has allowed us to look beyond the current Bitcoin model.

The future is in decentralization and voluntary groups, rather than involuntary compliance and a dominant centralized system. This has major implications. For example, a government today can put a lien or a freeze on an account, but in a decentralized world this couldn’t happen. It completely changes the relationships, enhancing trust, efficiency and security. In short, it changes the whole nature of the game.

Banks traditionally make money through payment services and lending, supported by protectionist government regulations that make it extremely difficult, even impossible, for any other business to duplicate a bank’s services. But although the payment system is still largely controlled by the banks, cryptocurrencies are now offering another option. Once cryptocurrencies start taking the payment business away from banks, the only big advantage that banks will have is their ability to supply credit and their access to tap into the government to monetize debt.

What is the potential market for cryptocurrencies?

The amount of gold above ground is estimated to be around $7 trillion in value, whereas Bitcoin, currently the largest cryptocurrency, is only $30 billion. So it is still early in the day, and there is so much opportunity facing us. There is easily 100x left in the space, maybe even 300x or 400x. In ten years time, the cryptocurrency market could easily be worth a trillion dollars.

Look at it another way. The gold market trades at around $22 trillion a year, which is more than the Dow Jones Industrial Index, the S&P 500 and most of the world’s currencies combined.

What are the implications of negative interest rates on cryptocurrencies?

A great question. Not only do the numbers support the market potential for cryptocurrencies, but the reasoning is there as well in our current environment of negative interest rates. As banks continue to pump out easy money and credit, this creates the demand for more cryptocurrencies because people want a currency that is not continually being debased. So it’s a feedback loop.

Once interest rates go meaningfully below zero, then it is cheaper to keep cash in a vault than to hold cash as excess funds at the central bank. The question then becomes, “How much does the central bank trust the commercial banks?” The central bank might start to enforce penalties for keeping cash reserves in a bank vault rather than with the central bank. As you can imagine, once the central bank starts to demand this cash, the system will start to fall apart. Quickly.

Another way to address this is to limit or even ban cash, a trend we are seeing in other countries. As long as governments can force central banks and financial institutions to hold cash on their ledgers, they can easily apply negative interest rates or taxes. Correct?

Exactly. That’s a big part of it. Restricting or banning cash puts more money into the banking system, to create higher excess reserves.

Many people, especially Americans, are accustomed to pricing everything in U.S. Dollars, seeing the dollar as a reliable measuring stick for valuing goods and services. But where or when do you see the tipping point when people wake up and realize that the dollar – and other fiat currencies – are not the ultimate measuring stick and that alternatives do exist?

When you look at places like Venezuela or Ukraine, the people have already woken up. In Venezuela, you hear of people setting up Bitcoin mining equipment and having to transact in Bitcoin because there is no other way to exchange goods and services, except for simple barter. Ukraine has a lot of Bitcoin activity, even a network of Bitcoin ATMs, which is fascinating given that Ukraine is a relatively undeveloped country, still struggling to break free from the crippling institutions of the Soviet era.

Cryptocurrencies make good sense when you understand how they allow people to transact globally, securely, at high speed and with low costs, and to hold assets safely and independent of government interference.

Since AnthemGold is backed by gold, do you expect the price of ANTHEMs to be more stable than other cryptocurrencies, and do you expect them to track the price of gold?

Yes and Yes. We expect ANTHEMs to track the price of gold, similar to how a one gram ingot tracks the price of gold, with a small premium being attached to it due to its form factor. For example, a one gram ingot would have more utility than a one kilogram bar because it is easier to spend a one gram ingot, due to its small size and divisibility.

What do you hope to achieve with AnthemGold?Virtual Currency Icons Set Flat Style

My hope, and our team’s goal, is to play a material part in protecting people’s wealth and their individual store of value and in particular, guarding against a scenario of civil unrest, such as will occur if inflation takes off. We hope to do this by building up the cryptocurrency infrastructure as quickly as we possibly can. At the end of the day – and without wishing to sound dramatic here – this is a matter of survival because human beings must have ways to transact. But this is still very early days, and the coding language needs to be further developed. After all, Bitcoin is not even ten years old. Like anything in our developing world, it takes a while for technology to advance and then for people to adopt something new until it soon becomes quite commonplace.

Is there anything else you can add?

A brief history lesson, if I may, but an important one concerning gold and the future of money.

My entire career has been spent in the precious metals business, and my father, James U. Blanchard III, spearheaded the movement for Americans to legally own gold once again, a right we lost in 1933 and thankfully regained in 1975, in large part due to my father’s incessant lobbying for legalization.

My parents created James U. Blanchard & Company in 1975, a precious metals and rare coin company that at one time was the world’s largest. Following in their footsteps, even my own three names reflect my aspirations and my heartfelt mission: Anthem (the freedom-seeking hero of Ayn Rand’s novella), Hayek (the Nobel prize-winning economist and philosopher Friedrich Hayek) and Blanchard (continuing the family tradition).  

In conclusion, the coming marriage of gold and cryptocurrency is my heritage, my expertise, my vision and my passion, and it is something that I take very seriously. AnthemGold’s experienced team has created an innovative gold-backed cryptocurrency that simply and securely allows you to acquire, store and spend gold worldwide, with silver and other precious metals soon to be added. This, if I may be so bold, is the future of money.

Where can people find out more about AnthemGold?

One of the best places to go is our AnthemGold page on BnkToTheFuture.com an online investment platform.

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2017 War on Cash

US dollars and troops2017 War on Cash

Overshadowed by colossal events such as Brexit, the U.S. election and the Dow nudging 20,000, investors may not have noticed an escalating war over the past year: the sinister War on Cash.

We have previously covered the ongoing “currency wars” of central banks that continually try to depreciate their currencies with lower interest rates and quantitative easing. But this goes even further because it is a war on actual, physical, paper cash.

Unprecedented Strikes Against Cash

2016 saw prominent academics and politicians shamelessly writing about the benefits of reducing or even outlawing cash. Former Secretary of the Treasury, Lawrence Summers, called for the U.S. to get rid of the $100 bill.

Former Chief Economist for the IMF and Harvard Professor, Ken Rogoff, published a book entitled The Curse of Cash, followed by numerous op-eds and endorsements by the New York Times and Financial Times endorsing a ban on cash. Australia is currently reviewing whether it will ban its $100 note.

India’s Prime Minister, Narenda Modi, announced without warning on November 8 that all 500 and 1,000 rupee notes would cease to be legal tender. Although claiming these were “high-denomination” notes, they actually equate to approximately US$7.50 and US$15 respectively, and they constitute 86% of the country’s cash currently in circulation!

Banning Cash: Rationale versus Reality

One of the biggest reasons cited for banning cash is to cut down on crime. While it is true that criminals prefer cash for the anonymity and the ease of transactions, there is no reason to believe enterprising criminals will stop their activity because transaction costs will be higher.

Criminals will easily substitute other forms of payment: lower denomination bills, other valuables like silver or gold bullion, diamonds, bitcoin, etc. Even Tide detergent has been found used as a common currency for drug trades.

The popular press surmised Tide was used by drug users because it could be stolen easily and traded for a quick fix. Yet this misses the point of why drug dealers would accept Tide as a currency at all.

The reason Tide became a currency was because it fit most of the properties of what makes a currency viable. It is recognizable (given the brand name), homogenous, easily divisible, and it has a (relatively) high value-to-weight ratio, making it portable. Bottom line: criminals are enterprising enough to surmount all kinds of obstacles inherent in illicit trade, so banning cash will not turn them into law-abiding citizens.

The next reason for banning cash is a little closer to the truth; to curb black and grey market transactions and collect all of the taxes the government is currently missing out on. India’s actions are squarely aimed at this because most Indians make virtually all daily business transactions in cash.

Further, the government will be receiving a report on any Indian citizen who deposits more than 250,000 rupees as a result of trying to rid themselves of the now illegal notes. The intention will then be to assess a tax and penalty on any of this money, if viewed by the government as unreported income.

While this may give a little boost to government coffers in the short-run, it is likely to backfire because the overall effect will be to tamp down economic activity in general, leading to even less wealth creation and less tax revenue.

The Real Reason for a Ban on Cash

The biggest reason for banning cash, especially in developed countries, is for governments to have the ability to enact even more extreme negative interest rates. Rogoff and others are actually quite transparent about this, recognizing that if banks charge an ever larger negative interest rate on deposits, savers have the option of withdrawing their money in cash and stuffing it under a mattress or in a vault, costing them less in relative terms than paying the bank to hold their money.

This highlights the ludicrous position in which central banks have put themselves, yet it is obviously the next logical step in their fallacious reasoning. To a central banker, if zero interest rates have not sufficiently spurred an economic boost with increased borrowing and spending, then the next step is to make interest rates negative, something we are already witnessing on a smaller scale.

But if minimally negative interest rates do not work, then their logic is to remove the next barrier to make interest rates even more negative. Thus the wrong intervention of the first action necessitates further interventions that distort the regular function of banks and interest rates even more.

Savers and Investors

The biggest surprise of the recent currency bans and proposals to ban currency in developed countries has been the lack of protest from citizens. Most people already use credit and debit cards for many transactions anyway and don’t seem to see the problem.Many coin bank of yellow and white metal. Cash closeup.

However, if negative interest rates are imposed on regular bank accounts, and savers have no way to withdraw their money, they will likely become more a lot more interested in what is really going on here. Fortunately, many alternatives exist to regular currency, and while governments may try to curb an exodus to these alternatives, it will likely be hard for them to do so, given the myriad of substitutes available.

For example, gold and silver will remain popular substitutes, as well as other alternative assets like other commodities and real estate; perhaps Tide detergent will even become more widespread as a common currency! Technology will also enable the ownership of these assets to be transferred and verified more readily.

In any case, investors and savers need to stay properly diversified and remain informed…..

Losing Credibility – Japan’s Central Bank

The central bank of Japan headquarters in TokyoWith the latest Federal Reserve meeting and subsequent announcement last week that interest rates will not be raised at this time, many missed the news from the Bank of Japan. The central bank of Japan not only unveiled a new monetary policy experiment, but also admitted it’s current plans thus far have not worked and that it’s losing credibility.

From Influencing to Manipulating

By now, almost everyone understands that central bank policies push short-term interest rates lower, even though these policies are prompted by a desire to spur borrowing, increase hiring by businesses and boost spending in an effort to increase wealth in a “virtuous circle” that jumpstarts the economy.

The Bank of Japan has been trying particularly hard to shovel money into the economy, not only to spur activity but also to combat deflation. The bank fears falling prices will lead to consumers resisting spending and businesses becoming too risk-averse. As we have noted here before, both of these theories – jumpstarting an economy with money-printing and fearing deflation – are wrong.

Japan Doubles Down on Failure

However, instead of realizing this, the Bank of Japan continues to double down on failure. On Wednesday last week, the bank unveiled a new experiment. Rather than announcing it would inject a certain amount of money into the economy, such as buying a predetermined amount of bonds, it will instead target long-term interest rates directly.

Specifically, the central bank will target the 10-year government bond yield to be zero percent. This means the Bank of Japan will stand ready to buy or sell 10-year bonds so the yield stays near zero. Let that concept sink in for a moment.

Interest rates are important price signals in any economy. Simply stated, they are the price to borrow money. Even more crucially, they coordinate people’s time preference; in other words, they coordinate resources between people who need them now, versus those who want to use them later.

Any institution claiming they know what a price should be, while interfering with the natural free market process of price-setting, is bound to run into trouble. Governments and central banks have tried to control prices of goods before, always resulting in a market shortage or surplus since the price is not left alone to freely coordinate supply and demand.

In this case, the Bank of Japan is setting a hard price on government loans. Japan is one of the most heavily indebted countries on the planet at over 200% debt-to-GDP. If investors ever lose confidence in Japan to pay back this debt, or do so in its own currency, they will sell the bonds, driving up the yields. The central bank will then have to stand ready to buy up all of these bonds to keep the yield at zero, effectively monetizing its debt.

Losing Credibility

Haruhiko Kuroda, the Governor of the Bank of Japan, in a speech accompanying the new policy announcement, noted their 2% inflation target was obviously not working. The bank’s former plan had been to make a strong verbal commitment to a 2% inflation target, and back it up with the bank’s large asset purchases (their QE), hoping they should then see inflation move towards their goal.

Instead, prices continue to fall in Japan. Mr. Kuroda concluded that the plan is not working, theorizing that consumers base their inflation expectations on past prices and psychology, rather than what central bankers tell them.

Too Late

Unfortunately, rather than admit defeat and recognize the limits of centrally-planned monetary policy, the Bank of Japan will continue to pursue any and all policies, ever bolder and more absurd, until it sees the consumer price inflation it desires.

Japanese currency with the text, YENBut higher consumer prices due to monetary policy will not generate more wealth and economic prosperity for Japan. By the time prices rise above their 2% target, it will likely be too late, because confidence in the central bank’s control and the country’s currency will have already been eroded.

The Bank of Japan has frequently been at the leading edge of new monetary policies and experiments, such as negative interest rates and now direct and blatant manipulation of the yield curve. Expect other central banks to watch closely and to try similar measures soon.

This Time, it IS Different

This Time it IS Different

It's Different

It IS Different

The four most dangerous words in the world of finance, often repeated, are “This time it’s different.” During both of the last two major booms and busts, a common belief was that the new internet age was different (2000) and later, that housing was also different (2008).

However, used to describe our current interest rate environment (particularly negative interest rates), the over-worked phrase actually does ring true.

Financial journalist and observer Jim Grant noted at a recent investment conference that research on interest rates shows that over the past 5,000 years of history, there has never been an instance of negative interest rates… until now.

The ever quick-witted Grant remarked, “If these are the first sub-zero interest rates in 5,000 years, is this not the worst economy since 3,000 B.C.?” Perhaps. Or maybe this is just the first time in history where we have central banks active in monetary policy, attempting to drive interest rates as low as possible.

Record Negative-Yield Debt

The current amount of debt sporting a negative yield continues to grow. In early 2016, there was over $5 trillion in negative yielding debt. This grew to nearly $12 trillion by the end of June, and it is now closer to $13.4 trillion!

Not only has more debt become negative in yield, but it is increasingly happening to longer term debt. Yields on 10-year government bonds have become negative for Germany, Switzerland and Japan.  

Remember that bond yields are an inverse to bond prices. As bond prices get bid up, their yields go down.

What makes this unique is that bonds are a relatively simple financial instrument. Bonds do not have the subjective valuation that applies to stocks, and this makes the math and the logic of bonds fairly straightforward.

A person can buy a stock from another person while thinking it still has the potential to go higher, given higher growth prospects for the company. The price is based on one person’s subjective valuation.

On the other hand, bonds are not as subjective. If you buy a bond at a certain price, with a certain coupon payment, then the yield is a mathematical certainty. It is the yield you will receive per year if you hold the bond to maturity, and if it pays the principal in full without defaulting.

What Bond Buyers are Saying

By stark contrast, today’s current bond buyers are purchasing a security where they know they will lose money if it is held to maturity. For example, if you buy a bond today with a negative 0.5% yield, and it has five years until maturity, then after five years, you will be paid back less than what you originally paid for the bond. Even with the coupon payments you received during the life of the bond, the total payout will be equivalent to getting a minus 0.5% return on your money.

Therefore, we must make one of two different assumptions about current buyers of negative yielding debt. One assumption is they could be anticipating the bonds will continue to go up in price and that they will then sell them for a profit. In other words, the negative yields will become even more negative, and they will sell the bonds before maturity.

Unfortunately, this requires the buyer to believe there will always be a ‘greater fool’ out there who is willing to accept a higher price than what the original buyer paid. It it not unlike those who bought houses before 2007 on the premise they would flip them to a higher bidder. Remember that with bonds, someone must be holding these financial instruments at all times.  

The second assumption is that buyers are perfectly fine accepting a negative yield, and are willing to ‘pay for the privilege’ of lending out their money. This goes against all basic laws of finance. It only makes sense insofar as these buyers have no other place to put their money, and are therefore choosing the lesser evil.

But this is a weak explanation, because they could put their money in cash and get at least a zero percent return. Also, this doesn’t seem to make sense for longer maturity debt, as it means these buyers think negative interest rates are here to stay for at least ten years or more.

Both of these scenarios point out how this time, it is very different, and we are living in a twisted financial world, a world only exists because of the manipulations and distortions of central banks.

It is always precarious to try to make predictions, but it seems that there will come a time in the not too distant future when people will look back at this period and say “What were people thinking?”Secure Your Wealth

Like a frog languishing in a slowly heating pot of water, investors have warmed up to the environment of negative interest rates, not realizing how absurd and dangerous the situation has become. But take time now to assess, and be well prepared for the inevitable.

In this zero/negative interest rate environment, it is stunning to consider that since 2000, the DJIA (Dow Jones Industrial Average) has increased in value 63% while silver has increased in value 289% and gold has increased 380%…. an annualized return of 23.75%!

Cash, anyone? Or gold!

Helicopter Money

Helicopter Throwing money from a piggy Bank. Yen versionPost Brexit jitters have faded away and the market has gone on to crack new highs, partly aided by the rumors swirling of ‘helicopter money’ coming to central banker’s toolboxes around the world, but most notably Japan in the near future.

Once thought of as an imaginative or hypothetical example of what central bankers could do to combat deflation and get economies jump-started, helicopter money is now being seriously talked about. This is further evidence of the central banker’s mindset and why it is important now more than ever to make sure investment portfolios are fortified with a certain allocation of physical gold.

So when will money start dropping from the sky?

Surprisingly, the term helicopter money was first most famously used by the free-market economist Milton Friedman as a simple illustration of how money could be injected into an economy.

Former Federal Reserve Chairman Ben Bernanke then repeatedly used this term to additionally mean injecting money into the economy, but he also advocated for it in terms of central bank purchases of bonds and other financial assets, or to help the government finance fiscal stimulus. This earned him the nickname, Helicopter Ben.

It was therefore not lost on market participants when Helicopter Ben visited Japan a number of days ago and spoke with Prime Minister Shinzo Abe, the father of Abenomics – the grand experiment of trying to boost Japan’s economy by aggressive monetary and fiscal stimulus.

Mr. Bernanke did not specifically mention helicopter money in subsequent interviews, but he did note that Japan has more tools at their disposal to continue monetary easing. Ever since the meeting, market participants have continued speculating that some kind of easing will take place, sending the yen lower and stock markets higher.

Call it what you will, the result will be the same

Central bank actions have taken many forms over the past years since the crisis: lower (or even negative) interest rates, quantitative easing, monetary stimulus, and now helicopter money.

While it is not certain what helicopter money will actually look like if implemented, it would likely be some arrangement whereby the central bank directly finances government spending. In its extreme (and most literal) form, it could involve somehow getting newly printed money into the hands of consumers.

These are all slightly different programs and they work in different ways, but they all have the same thing in common: creating (printing) money and credit and then injecting it into the economy in an effort to try to boost spending, depreciate the domestic currency (thereby boosting exports), stoke inflation, or a combination of all three.

Add gold to your portfolio – now

This highlights why it is so important to be holding some physical gold. Bernanke is right in one sense: there is nothing physically holding back central bankers to continue these programs, and central banks will continue them because efforts thus far have proved unsuccessful.

What was once thought unthinkable and merely a thought experiment is becoming a reality. If in doubt, think of all those who thought negative interest rates were a crazy idea that would never be implemented.

Secure Your WealthMonetary easing, in whatever form, will likely continue until there is a severe depreciation or collapse of currency and correspondingly high inflation. Unfortunately, Japan already learned this lesson in the 1930’s and 1940’s when it embarked on a similar program of using the central bank to directly finance government spending, which unsurprisingly resulted in an inflationary surge.

History is repeating, and the chances of central banks admitting their policies do not work, and ceasing them or reversing course, is slim. Therefore, it is especially prudent at this time to allocate a portion of your investments to physical gold, and that is why we recommend a 10-20% allocation.

What Investors Can Learn from Sound Economics

Austrian School for InvestorsReaders of this blog will be familiar with the Austrian School of Economics; the school of economic thought whose name derives from the fact that many of its early scholars came from Vienna. The school adheres to the individual as the basic unit of economic analysis, and it focuses on the market process.

The Austrian School is noted for some of the fundamental concepts that endure in mainstream economics today, and one of its prominent scholars, F.A. Hayek, received a Nobel Prize in economics. But does the school have anything to offer in terms of investment advice?

Enter the recent book Austrian School for Investors: Austrian Investing between Inflation and Deflation. Continuing with the theme here at Anthem Vault of being financially responsible by reading and continuing one’s education, I was delighted to read through this book, a volume that sits at the crossroads of my two main intellectual interests: Austrian economics and investments.

If you feel like recent economic developments concerning central bank quantitative easing, negative interest rates and government stimulus programs are leaving you confused as to how to invest your money, then this book is for you.