Thursday, November 13, 2008

D17, E18, F19...

It's just a feeling I have, but I sense a subtle shift in The Matrix over the past few days. Anyone else feel that?
“If we can’t print money fast enough to fend off another deflationary Great Depression, then let’s change the value of the money.”

" How can they reprice gold to $30,000? "

Mr. Sharfin,
This question from you, it proves for my eyes what I have said. Indeed, if I viewed as a western person, gold money as $30,000 paper dollar credits, my thoughts would also show " this cannot be"! But, from another world, I view this US$ and say "how can it be of such value to all and have numbers as the stars in heaven"? Please understand, money as paper or metal is as "perception of value in the minds of people". If all the gold held by earth were placed in the hands as money, it would be used to revalue every "real thing" at a fair price. A tiny fraction of gold would buy much production of goods and services, on a basis equal for all men, not as a debt for later settlement, as currencies are now!

Thank you - Date: Sat Apr 04 1998 22:42

If you think this weekend’s G-20 meetings in Washington are only about designing short-term fixes to the financial system and regulatory reforms for banks, hedge funds, brokers, mortgage companies and investment banks … think again.

Behind the scenes, a far more fundamental fix is being discussed — the possible revaluation of gold and the birth of an entirely new monetary system.

I’ve been studying this issue in great depth, all my life. And given the speed at which the financial crisis is unfolding, I would be very surprised if what I’m about to tell you now is not on the G-20 table this weekend..... Link

"It seems more than likely that the world's central bankers will eventually convene to reprice gold to a level sufficient to persuade a world of paper skeptics that the metal must be reinstated as the numeraire."
- John Hathaway, Tocqueville Asset Management L.P.
November 18, 2003

Some Thoughts from Steve Hickel on this subject:
What should Gold be valued to to relinquish National Debt…?
Per article below, $60T is amount of US debt. US holds 8,000 tons of Gold (we think) plus or minus a few tons. US would want 1/2 of its Gold reserve remaining after the pay down, so here is the math:

60 trillion divided by 128 million = four hundred sixty-eight thousand seven hundred fifty dollars per ounce. $468,750/ounce of gold (and growing).

Funny how the last three digits is where gold is now… $750(ish). Only $468,000 to go.

Immediate action:

Inventory US gold.

Link Dollar to gold at $500,000/ounce (overnight and swiftly with no leaks).

Peoples’ jewelry would then pay off all personal debt. Peoples’ wedding rings and teeth will pay for cars. (the heck with chewing)

Fire all Wall Street insiders in government or prevent them from going back to wall street after their jobs are up.

Fire all upper management on all major banks.

Change rules of public firms such that fate of profits is the fate of salaries and bonuses at the public firm. Put skin back into the game.

I am sure there are more ideas you have…

The uptick in gold to $500K/oz must be secret until done…

Any leak on that would cause a run extraordinaire…

All this talk about gold may go to $10K would not satisfy debt and cause a depletion of all gold reserves. The debt and notional derivatives around debt is simply too large. It will take over $100K/oz or more to do the trick and any such move would have to be a secret until done, imo.

The Group of 20:
1. Argentina 54.7 Tonnes of gold
2. Australia 79.8 Tonnes of gold
3. Brazil 33.6 Tonnes of gold
4. Canada 3.4 Tonnes of gold
5. China 600 Tonnes of gold
6. France 2562.3 Tonnes of gold
7. Germany 3417.4 Tonnes of gold
8. India 357.7 Tonnes of gold
9. Indonesia 73.1 Tonnes of gold
10. Italy 2451.8 Tonnes of gold
11. Japan 765.2 Tonnes of gold
12. Mexico 2.9 Tonnes of gold
13. Russia 402.8 Tonnes of gold
14. Saudi Arabia 143 Tonnes of gold
15. South Africa 124.3 Tonnes of gold
16. South Korea 14.3 Tonnes of gold
17. Turkey 116.1 Tonnes of gold
18. United Kingdom 310.3 Tonnes of gold
19. United States 8133.5 Tonnes of gold
20. European Union 563.6 Tonnes of gold (ECB)
(Source: World Gold Council)


FOFOA said...

Remarks by Governor Ben S. Bernanke
Before the National Economists Club, Washington, D.C.
November 21, 2002
Deflation: Making Sure "It" Doesn't Happen Here

"Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt's devaluation."

FOFOA said...

If we are to "build together the capitalism of the future," as Mr. Sarkozy puts it, the world needs sound money. Does that mean going back to a gold standard, or gold-based international monetary system? Perhaps so; it's hard to imagine a more universally accepted standard of value.

Gold has occupied a primary place in the world's monetary history and continues to be widely held as a reserve asset. The central banks of the G-20 nations hold two-thirds of official world gold reserves; include the gold reserves of the International Monetary Fund, the European Central Bank and the Bank for International Settlements, and the figure goes to nearly 80%, representing about 15% of all the gold ever mined.

Wall Street Journal

FOFOA said...

Dear Mr. Sinclair,

Is this at all possible? Could you comment please?

Thank you,

[The G-20’s Secret Debt Solution
by Larry Edelson 11-13-08...]

Dear CIGA N,

Maybe not in this form, but at some time this will happen. Gold will basically be a control factor. That is a form of FRGCR.

I rather doubt that the G20 will do much other than yell and scream at each other for more Quantitative Stimulus from Washington in their area of economic concern.

I have learned never to say never with respect to other’s opinions.

I doubt it, now.


FOFOA said...

A different view of the Hugo Salinas Price graph from Mish.

(but is it really different? I guess it depends on how you define imports and exports. And what about that "repatriating of funds from asia"? Mish says that'll be disinflationary in asia. What about here?)

FOFOA said...

A view from Wall Street:

"However, fund managers and commodity analysts said that the G20 meeting would not result in any agreement that resembles a new Bretton Woods agreement or the gold standard.

"That's basically a 19th century device that was repackaged in Bretton Woods, where the dollar was linked to a physical gold price," said James Steel, chief commodity analyst at HSBC.

"I don't think that's happening at all because the gold market is far too small to be able to play any role in that dimension..."

FOFOA said...

A view from the Doctor:

FOFOA said...

Bernanke's words from above, edited for clarity:

"a policy of intervening to affect the exchange value of the dollar... enforced by a program of gold purchases... can have powerful effects on the economy" ;)

Ender said...

FOFOA, In light of recent conversations here on your blog, the clarity provided by the crafty editing of Bernanke’s words, done above, may be a little misleading.

The problem that we are faced with today is not one of there being too many dollars or too few, but rather a complete brake down in the trust of the management behind the dollars. What exists behind the dollars has no credibility.

FOFOA said...

Hi Ender,

I agree with you and Ivo Cerkel in the recent line of thinking. I agree that "what exists behind the dollar has no credibility".

Here's a question. If they did a public video-taped audit of Fort Knox and all the 8,133.5 Tonnes were there, would the credibility be restored, or at least improved?

FOFOA said...

November 15, 2008
What does the $3.5bn Saudi gold rush in two weeks mean?

Filed under: Gold & Silver, Oil Prices, UAE Stocks, US Stocks — peterjcooper @ 8:22 am

The revelation on this blog, actually sourced from what appears to be a reliable story in the Gulf News, the leading regional newspaper, that Saudi Arabia has spent a total of $3.5 billion on gold over the past two weeks has naturally attracted huge worldwide interest.

I can not verify the source but all I can say is that this has the hallmarks of a genuine story, based on my 25 years in financial journalism. First, it was buried on an inside page and the amount was given in UAE currency later in the story - hardly the action of somebody looking to manipulate the gold price, more an indication that the sub-editors did not understand the importance of this story.

Second, this is how the best stories emerge from Saudi Arabia - the market is not very transparent but insiders do notice big changes and pass this information on, and it surfaces as well sourced rumor. I am afraid this is about as good as it gets in the Middle East.

Truth in rumors?
After 9/11 we had rumors about chartered 747s flying full of gold and dollars back to the Kingdom to avoid the increased scrutiny of US regulators. Was it true? Real estate here is said to have boomed on the back of this new money - that certainly happened, did the transfer? We do not know for sure.

So what is going on? By whom and why are these gold purchased being made? Again we can only indulge in informed speculation - nobody is ever going to give an on the record comment on this.

However, we do know that the Saudi stock market has crashed over the past two weeks. There has been an enormous amount of money cashed out. The obvious source of the money for gold purchases has to be that money.

The problem for Saudis is that by cashing out of local stocks they get their own riyals in exchange, and riyals are effectively US dollars due to the currency fixed link. The US dollar is presently high, so diversifying into another asset class makes sense.

But what do you buy? What is safe these days? Dubai villas, perhaps but the rest of regional real estate is crashing? US stocks - you must be joking?

Conspiracy nonsense
I think some of the conspiracy theorists are wide of the mark. People love to come up with elaborate rationales for actions. It is laughable to see Saudi Arabians rushing to buy gold as a conspiracy to bring down the West. The West has brought that on itself, and the Saudis are just trying to find an effective shelter for their wealth from that collapse.

Gold and silver are precious metals with a limited supply that retain their value over time. Also if we are in a repeat of the late 1970s, as this author believes, then cash and gold are the safe havens, with silver probably the best of all, if very volatile.

Therefore, my lesson to draw from the Saudi gold rush is that very much higher gold prices are coming and investors in the Kingdom are making a logical choice ahead of the global pack. If you can not beat them I would join them and preserve your capital.

Incidentally, what I would like to know is who is buying? The report in Gulf News makes it sound like the broad mass of local investors, not the government, and that would explain why such a report has surfaced. If it was the government we would not have heard about it.

So this is just a local flight to a safe haven asset class by people panicking about plunging local and global stocks. But $3.5 billion in two weeks is a big shift in demand for gold in a short period.


FOFOA said...

TEHRAN, Nov 15 (Reuters) - Iran has converted financial reserves into gold to avoid future problems, an adviser to President Mahmoud Ahmadinejad said in comments published on Saturday...

"With the plans of the presidency...the country's money reserves were changed into gold so that we wouldn't be faced with many problems in the future," presidential adviser Mojtaba Samareh-Hashemi was quoted as saying by business daily Poul.
He gave no figures or other details...

Iranian officials in July denied reports Iranian banks were moving funds from Europe, with one report suggesting as much as $75 billion had been withdrawn and converted into gold or placed in Asian banks, because of a threat of tightening sanctions...

Ender said...

Sadly, I would guess not. The whole idea behind the dollar system is that it’s better than gold. An audit of the gold would show the gold’s importance over the dollar. The stand has always been, value the dollar – gold is a barbaric relic.

Ultimately, there are dozens of reasons why credibility has been lost, but it could be that, at the root of it, people, long ago, stopped thinking about honest money and what constitutes wealth. Instead, they learned to value something that is fraudulent and actually worked to foster it.

In my opinion, there is nothing left for the government to do to restore confidence in the current system. People should defend themselves and prepare for change. During this time, we will most likely see a mass psychological or philosophical change in people regarding how they value gold.

FOFOA said...

The G20 meeting appears to have been a non-event. That is all well and good as long as the markets don't collapse this week.

In my view, the US being at the head of this table was the fantasy. The reality was the whispers that passed between other members.

Things aren't good right now, and if they get worse, some members of the G20 will take steps that were not discussed openly at this meeting. But that's just my opinion.

FOFOA said...


I found this article particularly touching. Letter from Iceland

FOFOA said...

Just archiving some (THOUGHTS!) of others...

Snippet from MK:

With respect to all the talk about a new monetary system, I would point out from the start that it doesn’t appear that much of anything got done over this past weekend’s G-20 conference. We don’t know, however, what went on behind the scenes.

The proposals I have seen thus far about returning to some sort of a gold standard in my view fall short of the mark because they do not address what is to be done with the trillions in dollar reserves taken in by China, Japan, the Gulf states and many others. In the cases of China and Japan, for example, they do not own sufficient gold reserves to benefit from a revaluation. What does it matter if you revalue gold at some astronomical number if the amount held by some of the key nation states is so small? If they agreed to such a measure without a redressing of the gold reserve issue, wouldn’t they in essence surrender their gains? Any attempt to remonetize gold must address this issue or render the use of gold irrelevant. What has happened in the past must be redressed before we can move to the future, that is if you wish to build the future on anything resembling a solid foundation. That is what I mean by a marriage of design and function. The design is academic; the function is political and economic. One is no good without the other. Gold is not fairy dust. Re-instituting it in the monetary system is not like waving a magic wand. It isn’t going to make everything better simply because it has taken the throne. In order for a new monetary system to function, the world’s gold reserves structure will have to be reconfigured by mutual agreement. Frankly, I do not see that happening any time soon, and in its absence all we have are meaningless conclaves that probably aren’t going to get us anywhere.

And a response from SteveH:

To the high value of gold proposal. Those with high dollar reserves and low gold reserves is Exactly the point of a gold revaluation. By the US divesting itself of one-half of its gold reserves (let’s take a count first, however) of 261M ounces of yellow at a value of $500K/ounce, it can swap, aka GSO (Gold Swap Option), $500K for each ounce of one-half of its reserves. In the end, China and others will not have any or fewer reserves in dollars and much higher gold reserves and the US will (allegedly, if it has not already divested without our knowledge or consent) still have half of its reserves.

Preferred buyers of US gold are those holding large tranches of US Debt. We have all heard (read) here that $60T appears to be the value of all US debt both internal and external. I would belabor the math again, but to summarize, if the US swapped half of its gold for $60T in debt, it would have to do so at $500K/oz. plus or minus a few 10’s of thousand dollars per ounce.

A one-time quick and unexpected valuation of gold at $500K per ounce, of course, would have unintended consequences. But let’s suppose the US and IMF decided as a measure to support International currencies that such a one-time act was warranted (this was one of the measures of the G20 goals — support international currencies). It can not be worse than the unintended consequences were are seeing by adding more debt on debt. Those left in the cold regarding gold value would be those countries such as the UK, who under PM Brown, divested most or all of its gold holdings at the low in the market. It would also leave out non-holders of gold assets in the investor class worldwide.

Again, I point out the absolute ridiculous nature of gold pundits who predict a price of $1600 as a high-mark of gold. It may hit $1600 on its way to $500K/oz., but only for a few seconds. I believe the reason there is the gold battle documented earlier today between Asia and the US gold markets is because the line in the sand is $1,100/oz. If this is breached then as we have heard cited, “we stare into the abyss….” I take that to mean that the dollar will be toast.

The cost of high gold in the eyes of those who spend so much to keep gold down (the Fed and some Banks who act as its agents) is a failed currency. Time does not favor the anti-gold. They who seek to control the paper gold market through outright manipulation and secret back-room deals, have already lost the battle, in my opinion. It is a matter of time now that such matters will resolve themselves. Ammunition is running low. We only hope that US gold is not running low too — as I fear they may have tapped the hidden wealth of America to keep Humpty Dumpty propped up on the wall a tad longer.

Time for America to come clean and pay its debts…

Anonymous said...


"Things aren't good right now, and if they get worse, some members of the G20 will take steps that were not discussed openly at this meeting. But that's just my opinion."

The silence so far, does indeed point strongly into this direction, you are probably close.....


FOFOA said...


Anticipation and hope led up to the G20. But now that is over. The great white hope has fired his bazooka and nary a fart came out. Don't expect bankrupt nations to sit around and wait for an April G20 meeting if things don't improve soon. And the momentum is not in that direction at the moment.

Did you see this chart? Notice when the other dips to .1% were... Sept 18 and Oct. 9. Now look at what the markets did at those times. That should give you a glimpse of this coming week.


Anonymous said...


Seems the one who has the most to lose ($ hegemony), is desperatly trying to buy more time. Liquidity is pulled/pressed out of every corner worldwide until nothing's left, "that moment" is approaching in warp speed. Once the unwinding of the first thumbled domino's starts to be reality, a melt down of trust in paper will vanish the value of all paper.
i.e. close tho the revelations of ANOTHER.

I was ideed scared when i saw that chart popping up friday or saturday, if holders lose theire trust, and wants to exit the door all together, it will be a stampede.... This could be one of the above mentioned domino's. (reminds me of Mandelbrot's expresions)

I still hope sincerly we can celebrate a panick-free Christmas this year....


Ender said...

Shanti, I see a number of price guesses, but no bulls-eye. I wish you my luck in the next contest.

Anonymous said...

To Ender,

You are right, no cristal ball, just my interpretations. What are yours?


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