Investing in gold? Here come Waxman & Weiner

We’ve all seen those commercials on TV selling gold and other precious metals. The price of gold and silver are at all time highs and demand has skyrocketed as well. The US Mint has stopped minting collector (proof) grade gold & silver Eagles (in favor of bullion coinage), claiming a shortage of blanks. People are investing in precious metals for a variety of reasons – not the least of which is the fear of the collapse of the dollar.

Apparently this has gotten the attention of the inquisitors in congress but not for the reasons you may think. According to this story, it’s because of the politics of the advertisers.

Just as the government is trying to prevent people from investing in anything other than T-Bills by raising taxes on taxable interest and dividends to confiscatory levels, it’s also trying to prevent you from parking your wealth in assets, like gold, that compete with the paper dollars issued by the Federal Reserve and the Treasury. A press release from Rep. Anthony Weiner, Democrat of New York, not yet (as of this instant) posted on Mr. Weiner’s Web site, announces that a September 23 hearing of the Subcommittee on Commerce, Trade, and Consumer Protection (a subcommittee of Rep. Henry Waxman’s Commerce Committee) will focus on “legislation that would regulate gold-selling companies, an industry who’s [sic] relentless advertising is now staple of cable television.”

From the press release: “Under Rep. Weiner’s bill, companies like Goldline would be required to disclose the reasonable resale value of items being sold.” That’s great. Are Mr. Weiner and Chairman Bernanke also going to agree to print on every dollar the reasonable expectation that its value will be eroded by inflation?

Gold investors (or speculators) are already punished by the federal government by having their investment, even in a gold exchange-traded-fund, taxed at the higher rates that apply to collectibles rather than long term capital gains.

Not to mention the fact that Mr. Weiner’s regulatory push seems as much aimed at conservative journalists as at the gold-dealers. The press release says, “Goldline employs several conservative pundits to act as shills for its’ [sic] precious metal business, including Glenn Beck, Mike Huckabee, Laura Ingraham, and Fred Thompson. By drumming up public fears during financially uncertain times, conservative pundits are able to drive a false narrative. Glenn Beck for example has dedicated entire segments of his program to explaining why the U.S. money supply is destined for hyperinflation with Barack Obama as president.”

I find several things striking here:

  1. People invest in precious metals for a variety of reasons. Anyone who is considering such an investment should do some research, just as they should for any other investment. If they make a bad investment, is that the government’s business?
  2. It appears that the impetus for this inquisition may be the messengers – in this case “conservative pundits.” Can you imagine the outcry from the state-run media if a republican-controlled congress targeted advertisers of the NY Times? Or MSNBC?
  3. If this were about trying to dispel the “fears of hyperinflation,” why not invite George Soros to the inquisition? He has bought an awful lot of gold recently.

There are plenty of reasons for and against investing in precious metals. The bottom line is you should do the research to determine if it’s a wise investment for you. This holds true for any investment. The choice should be yours – not the government’s.

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