ECON Germans Flock To Gold Vending Machine

[Dozdoats]

http://www.timesonline.co.uk/tol/money/investment/article6521486.ece

June 17, 2009
Germans flock to gold bars vending machine at Frankfurt airport
(Tamara Abdul/Reuters)
Roger Boyes in Berlin

Germany has devised the ultimate in credit crunch vending machines: Gold to Go.

After inserting your euros in the slot there is a familiar whirring noise as if the machine is readying itself to spit out a can of lemonade or a bar of chocolate. Instead there is a satisfying clunk as a prettily wrapped bar of the world's favourite precious metal thuds into the dispenser.

"It's better value than the bank," Romy Erhardt of TG-Gold-Super-Markt told The Times, "And it's very convenient — no waiting time — you just put in your cash and a minute later you are an investor in gold."

The prototype gold-dispenser has been installed in Frankfurt airport and today there was a queue of passengers mulling over whether to buy one gramme, 5 grammes or ten grammes of gold.

The one-gramme bar was available for €30 (£25). Other options — rather like a high-end coffee machine it has five selections — included a Maple Leaf Five Canadian dollar coin and a Kangaroo Fifteen Australian dollar coin. Both represent about one tenth of an ounce of gold and the price on today was hovering around €80.

"The price is updated every 15 minutes," Ms Erhardt explained. "The vending machine is linked to the computer which we use for our online gold outlet."

The margins are lower than those offered by banks but fluctuate at about 20 per cent higher than market prices. That is the price of being able to pick up your gold before boarding an aircraft and having it packaged in a metal case labelled "My Golden Treasure".

A less sophisticated version of this Gold to Go machine was installed in Frankfurt's main railway station last month and has been doing well. The company hopes to put 500 of the machines throughout Germany, Switzerland and Austria.

They are riding on the crest of a wave of investor interest in gold as the market price edges up towards $1,000 for a troy ounce.

Online gold dealers — who offer a discreet armoured-car delivery for large purchases — are reporting boom times. The World Gold Council said that individual purchases started to rise dramatically in the last quarter of 2008 and have broken all records in the first quarter of this year.

Above all, small individual investors — nervous about the future of the dollar and other currencies — are buying and selling the metal. In the US, the gold equivalent of Tupperware parties have caught on and the idea has spread to Britain.

The Michigan based company My Gold Party — a housewife acts as a company agent and invites her friends to her home to have their gold rings and bracelets professionally valued — has been taken up by 28 US states.

The online company Cash4gold.com meanwhile is reporting 25,000 transactions a month. And Exboyfriendjewelry.com — whose testimonials are full of stories about the cathartic effect of selling jewelery given by former husbands and lovers — is thriving.

The Germans are particularly interested, partly because of the collective memory of the currency collapse after two world wars.

Some high street jewellers even buy dental gold to be melted down. "German investors have always preferred to hold a lot of personal wealth in gold, for historical reasons," said Thomas Geissler, head of the Stuttgart-based TG-Gold-Super-Markt.

There is a German fascination with gold that goes even deeper than anxiety about failing currencies. One of Germany's best loved fairy tales, a classic bedtime story, features a donkey that excretes gold coins every time that one shouts the magic word "Bricklebrit!"

To make sure that no one tries a similar trick with the Frankfurt gold vending machine, the company has positioned it near high-resolution closed circuit television cameras and given it an armour-plated casing.

 

[Dozdoats]

http://www.321gold.com/editorials/bonner/bonner061809.html

Yodelers & Sausage-Eaters Know Best

Bill Bonner
Provided as a courtesy of Agora Publishing & The Daily Reckoning
Jun 18, 2009

The Dow fell another 107 points yesterday. Oil held steady at $70. The dollar fell to $1.38. And gold rose $4 to 932.

What if the rally is over? Could be... it began on March 9th. That makes it more than three months old. Most likely, it will continue through the summer. But who knows?

The important thing to remember is this:

There can be no major, sustained bull market without one of two things happening.

Either the mistakes of the Bubble Epoque must be cleared away... allowing for a new era of genuine growth and real prosperity. At best, this would take a few years to achieve. Just imagine how long it will take to restructure GM into a profit-making business again. Just imagine how long it will take consumers to pay down their debts so they can begin to spend again. Just imagine how long it will take to save enough money to build new factories... and convert shopping malls to warehouses and apartment complexes... And just imagine how long it will take with the feds fighting it tooth and nail. At least a decade!

Or people must be willing to go even further into debt... thus increasing the errors of the debt-soaked boom. Anything is possible. But here at The Daily Reckoning we think the economy is already saturated with debt. It can't absorb more. Besides, the financial industry is no longer capable of pushing debt on the public. That machine is broken. The bubble in finance exploded when Lehman Bros. went down. Once a bubble blows up, it can't be reflated.

And so far, the feds' efforts to reflate the bubble in consumer finance have caused a return of speculation in oil, commodities, and emerging markets. There is no sign of consumer price inflation or expanding consumer credit. Instead, consumer credit is contracting.

So don't expect a real bull market.

Instead, let's move on... this just in:

The Financial Times reports that a vending machine company is soon to install machines in Germany where you'll be able to buy gold as easily as buying a chocolate bar. There's one machine already in the Frankfurt Airport, where for 30 euros you can buy a 1-gram wafer of gold.

Already, in Switzerland, you can buy gold in the post office.

What do these yodelers and sausage-eaters know that we don't? Germany was required to pay reparations after WWI. The amount was about $1.121 trillion in today's money. In gold. She had no choice. She had to turn over her real money - gold - to the victorious French and English. Thus, she had no real money left in the domestic economy. What could she do? Germany printed up marks... not backed by gold and experienced hyperinflation, up close, in the '20s. Coming not long after the debacle of WWI and the Treaty of Versailles, it not only destroyed the economy... it also wiped out savers and destroyed Germans' residual faith in their own sausages. Soon after, there were armed gangs of communists and national socialists fighting for control of the streets. And we all know how that turned out...

So, back to the U.S.A.: The United States has entered the third and final stage in the life and death of a great country.

America's history can be divided into three broad stages. The first stage was industrialization. This is what took the United States from a marginal nation of settlers, explorers, farmers, entrepreneurs and religious refugees to become the world's richest and most powerful country. The source of its wealth and power was its factories... and its people. The factories were the best in the world. And the people how labored in them were accustomed to hard work, saving, and self-discipline. There were no free lunches in America during this period. The fastest growing cities of the time were manufacturing centers - Chicago, Gary, Detroit, Pittsburg, and Birmingham. Thanks to its smokestacks and assembly lines, the US could make things better, cheaper and faster than any other country, with the possible exception of Germany before WWI and Japan after WWII. That is how the US became the world's largest creditor - by selling US-made goods to foreigners. And it's how the United States won WWI and WWII too. American factories could turn out more tanks, more planes, more guns and more butter than any other nation. And the United States had an abundant source of fuel too; "Texas Tea" they called it.

After WWII America enjoyed its glory days. It was on top of the world... in practically every sense. The United States was #1.

Nothing fails like success. The New Deal had fundamentally changed Americans' relationship to the state. Federal meddlers began playing a larger and larger role in the economic life of the country. Soon, American attitudes evolved to fit the circumstances. With the world's reserve currency... a huge lead over its competitors... and a government that promised to take care of its wants and needs, the US workforce relaxed. Gradually, it shifted from making things to buying them... while industry turned its focus from production to sales... and then, financing. Then, the United States entered the second stage: financialization.

In this second stage, the center of gravity shifted from the wealth-producing factories to the financial centers - mainly Manhattan. Prices of real estate in New York soared. Wall Street came to be seen not merely as a place to invest the proceeds of honest toil... but a way to create wealth. The most ambitious college graduates turned from engineering and manufacturing first to sales and marketing and later to finance; because that's where the money was. At the peak, in the Bubble Epoch, 2003-2007, Wall Street was drawing in the world's leading scholars in mathematics and statistics... These people were creating the biggest debt bombs in history... exotic, complicated financial concoctions... that eventually blew up in their faces.

Detroit went into a decline as early as the late '60s. GM continued to make cars, but it looked to financing as a way of make money. GMAC became the major source of GM's profits. Still mills along the Monongahela River began to rust in the '70s. Ships began to come to the US laden with goods in the '80s and '90s... and to go back empty. The US Fed tried to stimulate the US economy on several occasions, but it had a strange effect. It put more credit in the hands of US consumers - who used the money to buy goods from overseas. In effect, the US Fed was stimulating manufacturing in China!

But in 2007-2008 the bubble in consumer debt blew up. GM went broke in May of '09. The financialization stage ended. In its place comes a new stage: politicization, the third and fatal phase of a great nation.

Where is the money now? It took the train from Grand Central Station in Manhattan down to Union Station in Washington, DC. Want money? Ask Washington. It's pledged an amount equal to three times what it spent in WWII to the fight against deflation.

Where is the power now? Just ask Chrysler bondholders; in the end it didn't matter what their contracts said... when the US government turned against them, their goose was cooked. The Obama Administration, owner of GM, now sets top salaries and determines what kind of cars the company will make. Washington also determines which businesses will be kept alive - AIG - and which will die - Lehman Bros. Now it's the politicians, not Wall Street, nor investors, who decide the allocation of big capital...

And when ambitious young people buy a ticket to begin their careers, are they going to Milwaukee... to Manhattan... or to the lobbyists' mecca in Northern Virginia?

Jun 18, 2009
Bill Bonner
email: DR@dailyreckoning.com

 

[Satanta]

Wonder what the % over spot is?

 

[Dozdoats]

I've seen other stories indicating the vending machine prices were 20-30% over spot prices. The story in the OP indicates about 20%-

The margins are lower than those offered by banks but fluctuate at about 20 per cent higher than market prices. That is the price of being able to pick up your gold before boarding an aircraft and having it packaged in a metal case labelled "My Golden Treasure".

There's always a premium- sometimes a pretty substantial one- for getting gold in marked/minted units of one ounce or less. The cost of seignorage runs up the price of minting fractional (less than one ounce) gold coins, for example- since it costs more to mint four quarter ounce coins or ten 1/10 ounce coins, than one one-ounce coin.

dd

 

[Satanta]

DD...why would it cost more? Same plate material with different sized plug punches or whatever. Same over, same amount of metal just spread out-seems it would cost less since it is easir to melt smaller amounts of the same material.

Bet we will never see those machines here-cannot have the common people owning real value.

 

[eXe]

Ya know what I am wondering, are these machines legal in the USA and if so, can you get one and put it somewhere that gets a whole lot of traffic. Lots of money to be made, PLUS it would make it super easy to invest in gold as well. Right now all we have is coin stores and that isnt always the best option.

 

[Dozdoats]

It costs more because it takes different dies (thus more engraving) and more strikes per ounce, versus one ounce coins. And premiums differ from coin to coin as well, even for one ounce coins. Take a look at the coin prices listed at http://www.tulving.com/goldbull.html for example.

Look at the box at the top of the page. For a Mexican 50 peso coin (a bit over 1.2 ounces of gold) you pay a premium of only $9.95 over spot. For an Austrian Philharmonic or a Canadian Maple Leaf, you pay a premium of $29.95 over spot. And for a US Eagle dated 2009, the premium is spot plus $39.95. The Philharmonic, the Maple Leaf and the Eagle are all one ounce coins- so why the difference?

"Because they can" is the only thing I can figure.

You might remember that the US mint announced a while back they were stopping production of fractional Eagles ( http://ezinearticles.com/?Why-Has-t...nprecedented-Demand-For-Gold-Coins&id=2097231 )- and even stopped production of one ounce Eagles for a while ( http://www.reuters.com/article/businessNews/idUSN2539668920080825 ). Shortage of physical gold? Trying to keep what gold there was out of the hands of consumers eager to trade paper dollars for it? Who knows- I sure don't- but the lesser availability of smaller fractional gold coins and bars plus higher spot prices of gold increases demand for the smaller amounts of gold. More demand = higher prices...


For a long time the 'low premium' leader was the South African Krugerrand. Tulving shows them as 'sold out' and has for some time now. Why? Well, a while back, someone came along and bought all the k'rands left in South Africa in one fell swoop ( http://www.africancrisis.co.za/Article.php?ID=37537& ). Sorta reduced the supply for a while. They do turn up now and then, as someone sells their holdings into what is known as the secondary market. Pretty much the same thing as gold everywhere- it is where you find it, when you find it. More people are holding onto their gold as opposed to selling it, which reduces the supply available to the marketplace. As primary sources (new material from the various mints) dry up as well, the supply available to meet the growing demand is more and more inadequate. More demand + reduced supply = much higher prices...

dd