Almost 80 years have passed since a person could walk into a bank and swap paper currency for gold coins.  (It has been almost a half century since one could swap paper notes at a bank for silver coins.)

   The fact is, banks don't traffic in gold and silver.  Generations have been told that "money" is what Congress decrees - that is, paper Federal Reserve notes are legal tender.

   The folks at Agora Financial point out in the chart above, however, that the central bank of the U.S. - The Federal Reserve System - is apparently quite fond of gold even though it hasn't served its ancient role as money for a very long time.  The Fed holds more than twice as much physical gold as Germany.

   One argument is the Fed is storing a gold stash owned by the U.S Treasury Department and cannot sell it. Another is most of the official U.S. gold has long since been sold or loaned.  But assuming the graph is relatively accurate, and the United States government actually holds the largest gold hoard in the world, the question is - - should Joe and Jane Twelvepack bother hoarding any?

   We've spent nearly 50 years mulling that question and concluded that since gold has a track record as store of value for more than 5,000 years and has served the role of "money" on and off for several millennia, it probably makes sense to have some.  The ultimate "rainy day fund," one might say.

   Restless investors have lately been searching elsewhere for return on their assets, hence the recent price drop in the precious metals.  With inflation perceived as low and the U.S. dollar and the stock market showing strength, gold has lost some of its luster.  That could change very quickly.  If history be a guide, it will.

Bill has supper with Neil and learns a lot!
But where the $700 billion TARP went is still a mystery.

   Mr. Bonner went to Washington last evening for supper with the former head of the TARP fund, Neil Barofsky.  He asked Barofsky how the program turned out.

  Barofsky explained;  "It was amazing to me that no one knew. We gave [the money] to the banks. But no one knew what they did with it. I proposed to Tim Geithner that we find out. He was outraged. He cursed me out, using the F-word. He said it would bring the whole banking system down, if I asked.

  "I went ahead and sent out a letter. I didn't really have the authority or the staff to insist. But all of the big banks wrote back. And most of them gave me dodgy responses or gave me the brush-off.

  "What did they do with the money? They were supposed to increase lending to help bring about a recovery. None of them did that. Instead, they used it to repay each other's loans. In other words, they used it to reduce the amount of credit available... not increase it. And they bought US agency bonds... just as you'd expect. And they paid out their bonuses."  What Mr. Bonner Learned

  Recommended.  Mr. B. also tosses in a brief squib that explains why government spending does not usually help the financial position of average folks.  

 Rep. Stivers is playing a losing hand.

   U.S. Rep. Steve Stivers is tired of waiting for change. The Columbus congressman began pushing a plan more than a year ago  that would alter the make-up of pennies and nickels to a new, more-affordable composition using American-made steel.

   His proposal, dubbed the Cents and Sensibility Act, sat last year as a two-year study by the U.S. Mint on the topic was nearing completion. The results of that study? More study needed.

   Stivers’ response? Move ahead with an expanded act that would include dimes and quarters as well. The 50-cent piece and $1 coin were left off since neither are made or used in large volumes.  Reluctance to Change

   The Stivers plan isn't very good.  The better plan would be to merely stop minting cents and nickels.  Let dimes, quarter-dollars and half-dollars continue to be made from nickel coated copper until such time as Congress gets it act together and mints coins of more valuable materials, as directed by the U.S. Constitution.