The problem with gold physical supply is very real indeed! But, there is no way that the CBs will continue to sell off an asset for it's commodity price that has many times more value as money! The talk of sales will continue for years but the real act may come to a close very soon as they try to take the LBMA off the supply hook by offering "gray paper" deals.
If they are not buying it, then: The falling markets worldwide are an early warning that the gold for oil deals are coming undone! As the big players are now heading for the exits in anticipation of exploding oil prices, the selling pressure from the CBs will quickly come off gold. The end of a parallel gold market pricing structure will leave many, many players holding nothing at all! The third world markets are the first to go as their currencies are crushed time and time again. Europe will be next, closely followed by the USA!
As for the US$ and T- bills held overseas, "they don't really exist"!
In the world today there are only three assets, gold, oil and currencies. The paper currencies, so long admired and accepted are now in a war of self destruction. They will consume each other in an end battle of "I'm the last man standing but have lost all use as a unit of value". Each nation state is trying to add a "kicker" or "premium" to it's trading paper as a means of buying oil. This does not mean any country will go without oil, they will have to work with "oil priced at a value rendering them uncompetitive". National stock and bond markets do not like this kind of news!
Inflation? We are not speaking of currency price inflation here. This is currency "destruction" because my national IOUs are being devalued by cheap oil supply problems!
Will Japan sell US treasury debt and risk taking dollars out of "usage"? Not in your life! Nor will any other CB! They will talk about it. They will sell a little. But sell a lot? It will not happen. You see oil is the key and that connection to the dollar is changing. Foreign CBs will even sell some gold to try and keep the US$ in play ( see my other posts ) . Ever wonder why the US treasury has not sold gold, it would have the opposite effect! The oil that since the early 70s, held together the world monetary system is now causing it to slide apart! We are not going to see inflation or deflation again. What we are now seeing is the "destruction" of our paper monetary system.
30 Days
At this moment in time and space, the price of oil in US$ terms is about to roar! It will crush the Pacific Rim and South America. It will drive the US$ sky high in terms of other major currencies but the dollar will collapse in terms of gold! Short term interest rates in the USA will be driven thru the floor much the way they have been in Japan from the early 90s. This will be done to combat an imploding equity market. Long government bonds will almost stop trading as their yield soars from the oil price fears of "inflation"! Because of today's "new digital paper markets" this entire act will be played out in 30 days or less. Yes, you are right! During that time we will have inflation and deflation.
What to look for
The actual buying of gold ( no other metals ) by huge players is not a prediction, it is ongoing. In 1997 it exploded! The price of the metal in currency terms will be made for all to see as it moves quickly upward for a very short period of time ( 30 days ) . After that only black market traders and third world nobodies will understand it's price! When is this going to happen? I have no idea. Is there anything to look for that will tell us when the problems have started? At first the US$ and gold will go up together against all other assets!
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The above was written by Another in November of 1997. I ask you, was he wrong? Or was he early?
Sincerely,
FOFOA
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3 comments:
WOW!!! Talk about insight.
OK, reading this post, i was wondering why things weren't completely clicking w/the way i've been thinking. it's because it was written some 12 years ago. so all of what he said couldn't possibly come true exactly as he expected it. fair enough. so let's discuss some of his ideas.
"Will Japan sell US treasury debt and risk taking dollars out of "usage"? Not in your life! Nor will any other CB! They will talk about it. They will sell a little. But sell a lot? It will not happen."
this post confused me quite a bit, i must admit. the above comment. why would japan's selling of US treasury debt take $$ out of circulation? they would seemingly still be in circulation, just in other hands. i'm not sure why, when china is presumably selling $$ that japan would not as well. i could understand the perspective that by holding that debt it gives them a bit of control, but it seems like they'd have more control doing what saudi arabia supposedly does: sell that for gold, oil, copper, and other tangible discounted assets.
"Foreign CBs will even sell some gold to try and keep the US$ in play ( see my other posts ) . Ever wonder why the US treasury has not sold gold, it would have the opposite effect!"
this one confuses me as well. according to the GATA guys, the US has likely sold off a significant chunk of its gold reserves via the carry-trade. unless you're suggesting that they've sold, but replenished all of it from ground production. or you're suggesting that the carry-trade hasn't been happening? i'm a bit confused.
it's the 30 days or less thing which has my mind spin every time i read it. not that i can't imagine it on some level, just that I bet i can't fully appreciate how profound those 30 days will be/feel. i've known quite generally that this collapse was planned some 12 years ago and yet, even after telling people it's coming (though i called it as happening after 3/2000, and again, after 9/11, clearly both timing mistakes), seeing it happen now, on whatever level it turns out, has been fascinating.
what fascinates me more than watching this from a considered "alternative" yet more conscious perspective, is to contemplate (as a historian) just what lame popular mythology will settle in as the "facts" and "history" in the future, and just who wins and gets to tell that story.
i would imagine a black market for gold would be highly unlike the "black" (read: light shade of gray) market that exists currently for drugs. i'm curious to know just how "black" that market will be and what it might look like.
"why would japan's selling of US treasury debt take $$ out of circulation?"
He didn't say it would take $$ out of circulation. He said "usage", in quotes. This refers to the dollar being the world reserve currency through "usage demand". "Usage" is the only thing that gives the dollar ANY value at all.
"Foreign CBs will even sell some gold to try and keep the US$ in play"
We just saw the ECB do this recently with DB. They saved the dollar this time.
"the US has likely sold off a significant chunk of its gold reserves via the carry-trade."
Don't assume that things will be as they seem. Here is what I think... possession will be 90% of the law very soon. The US may have "used up all it's gold" in the carry trade even without the gold leaving the vault.
Also, all the gold in the ground will become public property when this goes down. Did the government have any problem taking GM? Do you think it will have a problem nationalizing Barrick? How about GLD?
But don't worry. I don't see the government ever going after the gold coins little old ladies have stuffed in their socks.
The black market he refers to will only be temporary. Perhaps 6 months. Once things collapse gold will already be worth an enormous sum, perhaps $50K to $100K in today's dollars. People simply will not understand this. Therefore, gold will not trade. At least not until this new paradigm becomes clear. Gold will still trade among certain black market traders and third world nobodies who already know its value. But for the rest of the world, "gold will go into hiding for a time". I say 6 months to a year.
FOFOA
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