Wednesday, July 1, 2009

New Open Forum

The old one was getting a little full!

I'm sure most of you have seen some of these videos already.

Market Rigging 1
Jump ahead to 3:43 - 70% of the trade volume is FICTITIOUS !
(Hat tip Martijn)



Market Rigging 2














$5,000 Gold



Bearer Bonds



Hyperinflation



Green Shoots














Black Swans












79 comments:

Anonymous said...

@ Fauvi : About "old" Europ > 500 Million consumers with an internal economy and a relative PP-stable currency (€).

EMU has not the ambition to destabilize (control) world trade by using the leverage of floating currencies.

Kind of trading partner the Chinese do appreciate over a dominant $-force.

@ FOFOA : US as $-importer of last resort >>>
Remember " $= Our (US) currency and your problem ".

THAT'S WHY WE HAVE FREEGOLD WEALTH RESERVE NEXT TO THE PILES OF WORTHLESS DOLLARS.

These $-reserves can burn,...The freegold doesn't burn.

Anonymous said...

" Flip Flop " $-talk :

http://www.bloomberg.com/apps/news?pid=20601087&sid=asTxu0VPryus Dollar Gains as China Says ‘Not Aware’ of Reserve Currency Talk

http://www.bloomberg.com/apps/news?pid=20601087&sid=aSjI0Em3hjZc Asian Currencies Pare Gains as China Calls for ‘Stable Dollar’

>>> Talk it up and talk it down ($).
And then suddenly comes the Armstrong " transition phase " as the finale of the Crisis of the $-Debt System.
End of flip/flop talks.

FOFOA said...

Anon,

In case you missed it, this was a curious tidbit from yesterday.

Be sure to peek at the NY Fed link!

Anonymous said...

$-Confetti Bubble :

Guardian
Banking system like South Sea bubble, says senior Bank of England official
by Ashley Seager
1 July 2009 13.26 BST

'Banking became the goose laying the golden eggs. There is no period in recent UK financial history which bears comparison,' says executive director for financial stability, Andy Haldane

A senior Bank of England official today compared the banking system over the last 20 years to the South Sea bubble of the early 18th century and said bankers had merely "resorted to the roulette wheel" to keep up with each other.

Anonymous said...

@ FOFOA : Wether we call it black swan or domino,...that transition phase will come and will be "devastating" !

I do feel the heat when walking through the many kitchens : Jobs and profits are "melting" !

I don't listen to official blablablah, anymore. Distrust of the state is rising fast and broadly...everywhere.

Relax and enjoy your responsible knowledge and anticipation.

Anonymous said...

" Asian Stratego " !

Chinalco buys $1.5bn Rio Tinto shares
By Elizabeth Fry in Sydney

Published: July 2 2009 03:11 | Last updated: July 2 2009 09:21

China’s state-controlled Chinalco on Thursday confirmed it had taken up its full entitlement to Rio Tinto’s $15.2bn share issue to maintain its 9 per cent shareholding in the miner, despite the soured relationship between the two companies.

A Chinalco spokesman called it an economically rational decision to prevent the dilution of its ownership in the Anglo-Australian miner.

“Chinalco believes in the long-term prospects of the industry and will continue to explore opportunities to advance its strategic objectives. Chinalco will, as the company’s current largest single shareholder, continue to monitor developments at Rio,” he said.

The Chinese group’s decision to maintain its stake in Rio — at a cost of around £880m ($1.5bn) — came one month after the miner rejected a $19.5bn investment package that would have seen the Chinese group’s stake rise to 19 per cent.

>>> 1/ Get rid of $-digits (in Rio shares).
2/ Build a LT strategy where Rio commodities are used to add industrial value to.

This type of investment(s) are not at all a $-FI play !

Anonymous said...

That look on Volckers face when eyeing Obama!Not very appreciative...it quite amused me!
But your cats,Fofoa are more amusing, especially the diva one!

Anon, we have about 7 M jobless in Germany, we badly need a "change"...
the gov' are quite afraid there might be riots, which I do't believe, but they seem very worried and now they talk about islamic potential "terrorist atacks" - maybe just in order to intensify a closer look on the population. Not very funny. Therefore I prefer cats.
Fauvi

Anonymous said...

The badly needed "change" will certainly NOT be of a kind that most are hoping/expecting !

The states continue to sell us their cats in bags with their boring "stereotype" blablablahaha.

I prefer the Big cats on safari. :))

Anonymous said...

Mainstream financial media :

CBs should stop talking about QE exit-strategies !? Because the QE isn't producing the expected results, yet .

In other words : Keep inflating pedal to the metal (full throttle)!

What a mess...

Anonymous said...

That "exit" they call upon is also only manipulation. The day we'll have the crash they want to be said, they had done everything they could. Once they are in, they find no exit, as they are caught in!

Fauvi

Anonymous said...

" Goldmines " :

JOHANNESBURG, July 2 (Reuters) - South Africa's ruling ANC party dismissed a call from the party's youth wing on Thursday to nationalise the country's mining and manufacturing industries in the wake of the global financial crisis.

Martijn said...

I've posted this one in the previous topic also, but perhaps it's better to continue here.

@Mad

How does this budget deficit thing work?

It states that more dollars went out then dollars came in, right?

Who tells what the outgoing dollars were buying? How do we know it was not gold?

And are we sure Another was only speaking of SA, or were there more oil producing countries involved?

Anonymous said...

Think that is a correct view, Fauvi.

Problem is that CB-talk about a responsible (!?) exit is not good for a positive sentiment on the FI.
The "re-flation" efforts must be succesfull.

Martijn said...

@Fofoa

They don't have to have "spent" them if they have promised them in a contract in exchange for tangibles. The seller of the tangible takes the loss if the dollar falls in purchasing power. The Chinese just keep paying the contract in worthless dollars.

How is the math on this? These contracts would involve a rather large sum of money altogether. Who would have been willing to enter into those agreements and sell off their assets to China? Can such a thing go unnoticed?

Interesting theory altogether, but it needs some extra work.

Anonymous said...

I think they could use some other kind of arguments in order to stop the music.I do not believe that they will let inflation in. Because if that were to happen, there would be civil wars all over the world. Germany might be peaceful, (we don't have a Dennis Kneale to make us aggressive!Btw, it's charming the way he tells the truth, not by words, of course) but other EU countries may not be that patient.... Now they failed the H1N1(hope Fofoa won't see that;)they may have a black swan in oven. Surely G8 Italy will give them the inspiration for a tasty recipe to cook it for us. As I said, I'm not sure gold necessarily needs an inflation even if there is so much talk about. There can be other currency events to produce the event.

Fauvi

Anonymous said...

Actually not but could one say? Eastern EU? What about if they had bought our museums?!
The Chinese are not invited in Italy? No observer?

Fauvi

FOFOA said...

@Martijn: "Interesting theory altogether, but it needs some extra work."

"Long term contracts" are basically the same as a standard 30 year fixed rate mortgage. Only the Chinese are in a unique situation.

There are three arguments re: buying homes right now. The best is probably just to rent until the dust settles. House prices should be at an all time low (in real terms) upon collapse. Another is to buy with a fixed rate mortgage. Then when hyperinflation hits, you will be able to pay off your house with just a couple ounces of gold. The risk is that you lose your job before hyperinflation comes and you can't afford the carrying costs. The third is to own a home outright, so that unemployment won't take it away.

The Chinese are in the unique situation of doing #2 (without risk) even though they could do #3. The Chinese have so much money that #3 has the risk of inflation! If they bought their properties outright, they would flood those dollars into the system and the system would notice. The dollar would fall and they would get LESS real tangibles than they otherwise could. But if they pay over time, no one will notice. The trick is to get enough mortgages going to use up all the $$ you have over time, then you are free to let the dollar fall.

The clever home buyer may pay off his house with ounces of gold. The Chinese will pay all of theirs off with their currency reserves. Sure it is a large sum of money, but spread out over the entire globe, it is hidden! A tillion dollars could buy you all of lower Manhattan. Or you could spread it out all over the world.

FOFOA

Martijn said...

What if the Chinese hedged their dollars by buying some futures?
People do say that those derivative markets are rather large. And I believe it is possible.
Buying futures means you are still dependent on the counterparty for delivery, so it is less safe than buying assets, but it might be a lot easier...

I would not be too surprised to learn that China is already (partly) out of the dollar.

Martijn said...

Inflation is priced in a bit (at least it is why stock and oil have risen I believe).
The Gold thing I can understand, but it goes for any asset, not just gold. If I have a ship of oil it remains the same etc.
China could also make remarks about the dollar while still being in it. A basic analysis of the situation suffices to see that the US is not going to deliver on those dollars. Other countries aren't likely to either. Hence if you see some stuff really going wrong you might want to make some remarks in order to try to correct it, even at the risk of loosing value in your dollar holdings (as you had already discovered they are not so valuable anyway).
It would however not surprise me to see China out of the dollar. If have heard that before from people in the financial sector. Perhaps they've also bought more gold, maybe the recent increase in their gold holdings was only to show the world, to prove that they have been doing things other than what was expected. Perhaps there announcement of increased gold holdings was indeed because their bluff was called.

I am however not too sure that they've invested everything in tangibles. Perhaps they also bought futures in order to spread and be less noticed.

What is clear all together is that they must have been wondering what to do with their imported money as soon as they received their first dollar. They've seen this coming for a long time, I'm sure.

Anonymous said...

N. Taleb:

http://www.ritholtz.com/blog/2009/07/black-swan-were-in-the-middle-of-a-crash/

Fauvi

S said...

FOFOA,

I would agree that the Chinese have done at least something to hedge their risk. Indeed a third tier bucket shop has a dedicated risk management officer. it is presumptuous and arrogant to assume that Chinese have not taken advance measures to hedge away some of their exposure. Please see the Brehzinski speech earlier this year where he lauds Deng for pursuing goals in an unnoticed fashion.

The wild gyration in the dollar is telling us something. Gold is all over the place with so many ghoping for a technical pullback, to buy!

Martijn said...

China is not totally out of the dollar, at least they have not invested all their dollars in oversees assets. If they did, and announced that they had gotten out of the dollar the world would not like it, and they would not be granted access to all their assets as some of them would be seized.

Therefore, they must have done something to at least keep part of their value close to home: buy gold, oil and other commodities, and perhaps also buy futures.

I am not into the markets enough, but perhaps oil and other commodities were at such highs recently because China was buying a lot of it.

An other thing: if China would be out of the dollars, those parties that got the Chinese dollars are likely not to have put them in circulation again, as that would have most likely cause a gigantic inflation. So, who would want to sell off assets to the Chinese in return for dollars and subsequently held on to those dollars?

Futures would not be such an unreasonable option. Perhaps indeed combined with some tangible assets (such as plants etc.).

Martijn said...

@S

My feeling from some others fora is indeed that there are quite some gold buyers on the side.

Than a again there is a lot of cash on the side overall. People are wondering what do to with their capital.

On inflation: what is a bit strange in most of the hyperinflation talk is the reported high insider selling.

FOFOA said...

Thanks Fauvi,

I added it to the post. Nassim is one of a very few that is worth paying attention to.

Martijn,

How about the chain of hurricanes theory? I think this theory meshes well with Taleb. But I would increase the size of the current hurricane, and change the I to an H, for hyperinflation. And I would say the leading edge was Aug. 08 - Oct. 08, we entered into the eye of the hurricane in Nov. 08, and we will probably hit the leading edge (end of the eye) in late summer or fall. Thoughts?

Re: Insider Selling - The insiders are moving DOWN the inverted pyramid at the same time as they encourage the public to climb UP. The public climbing up allows them to climb down with more wealth!

They have sold their soul to the devil a la Lenon Honor and have received advanced knowledge of what is coming, and where it is safest on the pyramid.

At some point soon "insider selling" will shift to dollars.

FOFOA

Martijn said...

Re: Insider Selling - The insiders are moving DOWN the inverted pyramid at the same time as they encourage the public to climb UP. The public climbing up allows them to climb down with more wealth!

This is possible, but that would mean others would indeed to go up, else the smaller bottom sections would explode. I wonder who does so at this time.

If China is out of the dollar, they should be short on it too. I cannot think of a situation with more insider knowledge than being China and knowing that I'm out of the dollar.

If China knows it, some others will also know it. They will also be short the dollar.

Martijn said...

Hurricane: I need to think about it for a bit. As I mentioned above, positions of many players in the market might not be as we think them. This will in turn lead a flip (e.g. move out of the dollar) to cause profits were we don't expect them, as goes for losses. This might be the surprises that shall come.

Another thing that crosses my mind will pondering over Mads remarks: social capital. I guess I mentioned it before, but apart from storing wealth in gold or paper, it can be stored in social capital (agreements). Gold is one end of the line, a purely verbal agreement the other. Paper is in between.

Believing that all paper is to go to zero is believing all social capital will burn.

I don't believe that. Lenon Honor might.

How about you?

FOFOA said...

"I wonder who does so at this time."

Anyone smoking the green shoots. Also, mutual funds and pension funds. Any fund where insiders are "playing" with OPM, other people's money.

I don't believe paper will go to zero. Perhaps as I wrote before, paper investments get decimated, cut by 10, as well as the dollar, cut by 10, for a net cut of 100.

If you are only in dollars, you only lose 90% PP. If you are in dollar FI paper, you lose 99% PP. If you are in investments in other currencies that don't get decimated, perhaps halved, then you don't lose quite as much. Maybe 95%.

If you are in commodities, perhaps it is even less of a loss of purchasing power.

This is how I imagine "all paper burining". "Paper" will prove itself NOT to be the real tangible. Of course round percentages like this are a very general feeling. And something like hyperinflation is a process, not just an overnight adjustment.

Martijn said...

@Fofoa

If we see 99% wealth cuts we shall have to also see 99% debt cuts. Otherwise social unrest will "settle" things.

Perhaps so. I have read about a biblical debt reset now and then lately.

But still: 99% decrease is 99% of social capital evaporating. I will not argue that the social capital has not been hollowed out by corrupt and incapable politicians and businessmen, but I cannot believe that a developed society (well...for the sake of the argument) shall loose 99% of it's social capital.

FOFOA said...

BTW, I am still considering Mad's comments. It is a complex challenge, not simple arithmetic as he proposes. It will take a while for me to reconcile Another's message with Mad's statistics. Any help is welcome.

Also, you must realize that Another's message is like Kryptonite to 99% of the "gold community". This is why the subject is now banned on its home site, USAGold. It is why Another and FOA stopped fielding questions, comments and denigration. It is why "others" have eventually given up sharing the message. And it is why it is rarely discussed anywhere, and it is ridiculed, mocked or ignored when it is (like on GIM).

So it is not in the least bit surprising for Another to be called delusional.

In fact you don't even need to assign 100% or even probability to Another's message in order to apply it to your investment "strategy". Even if you only give it a 25% probability, it should have a profound affect on your thought process.

Anyway, this is why I am here.

Sincerely,
FOFOA

FOFOA said...

Martijn,

Hyperinflation is forced debt forgiveness. So is a dollar devaluation. The creditors LOSE the PP of their contracts. The debtors pay off their debts with devalued paper.

The market would have taken care of this imbalance on its own. But instead the government "papered" over the problem taking on the debt itself and issuing new dollars to the creditors. But only SOME of the creditors received this windfall.

The "social capital" of this debt monster is an illusion. When you say we would be losing 99% of social capital, I don't agree with this. We will lose some. There WILL be some unrest. But it will be like a reset of the entire system.

The problem is that the banks are escaping the worst of it through government programs (TARP), so the creditors that will lose their purchasing power are the savers and retirees that have been coaxed into the position of creditor to bad debtors through the financial industry. Their savings DOES have a counterparty that can default, unlike those Indian wives who save in gold.

This is the crime of the "debtberg" as Anon calls it.

The lifeboats are being given to the first class passengers only.

Those without savings (the most likely to riot) will suffer the ravages of supply shortages and hyperinflation, but they will not take a big loss of savings. Many of them will even find their debts reduced!

The retirees will likely suffer in silence. Some of the younger savers will riot while others just cry.

The Biblical Jubilee was much more organized than this will be!

Paper is not the real thing. This is why I say POSSESSION will be 9/10ths of reality after paper burns! Paper obligations will be settled in worthless paper. It is what you POSSESS that you will keep.

FOFOA

Martijn said...

Market Skeptics

The only thing limiting the widespread use of gold in a variety of applications is its scarcity and expensiveness. If gold was cheap and plentiful, it would be used in virtually everything electronic (electrical wires, computer chips, etc).

We already knew that, but just to remind you.

Martijn said...

Also relevant (also from deCarbonnel):

Chinese efforts to boost domestic consumption while maintaining its dollar peg is creating massive demand for raw materials, driving up prices. Eventually Chinese demand will drive up commodity prices to an extent which forces it to drop the dollar to contain domestic inflation. Judging by its incredible levels of commodity imports, this event will happen in the very near future.

FOFOA said...

The only thing limiting the widespread use of gold in a variety of applications is its scarcity and expensiveness. If gold was cheap and plentiful, it would be used in virtually everything electronic (electrical wires, computer chips, etc).

Gold IS plentiful at the right valuation for its widespread usage as a wealth reserve.

Martijn said...

Gold IS plentiful at the right valuation for its widespread usage as a wealth reserve.

Haha. That is also one of gold's properties.

One more thing: if China is out of the dollar that means they've used the future income stream over their treasuries to buy up stuff. Otherwise they must have sold off those treasuries. Might be so, not very likely.

But I could imagine a scenario where they sent some Japanese looking man to Italy. I could also imagine a scenario where they let those man get caught - either with real or fake treasuries - as a warning shot to the rest of the world. But I must warn you, I myself don't deem those scenarios very likely, even after watching Lenon Honor.

Shanti said...

@FOFOA 2:20

Removing the pages of ANOTHER/FOA by MK is a significant sign. Means even more explosive to me.

At what point will your blog pulled?

Shanti said...

Have to come back on former post as tru the archieves at USAGOLD it still could be viewed. But it has indeed been burried far away.

The next big treasury auctions will be July 7,8 and 9 with the 30 year bond being on the 9th.

Yeah, the 9th would be great to ignite, wasn't that the birthday of WD :))

The Mad Scientist said...

FOFOA and Martijn,
Your opinion about this new level of madness
Executive Board of the Riksbank has therefore decided to cut the repo rate by 0.25 of a percentage point to 0.25 per cent. The repo rate is expected to remain at this low level over the coming year. At the same time there are several signs that economic activity will improve.

The decision on the repo rate will apply with effect from Wednesday, 8 July. The deposit rate is at the same time cut to -0.25 per cent and the lending rate to 0.75 per cent.

That Negative sign is not a typo.
Swedes buying Gold and Silver now?

The Mad Scientist said...

To your questions in the previous post.

Martijn,
My point about the budget deficit was that SA spent all of its revenues (most of which was oil revenue)and spent more over and above that.
To spend all, it would either buy goods with USD, which it probably did, and when they were used up it would print their local currency to buy more goods and services.
My point was that they would not care a damn what would happen to to USD in 50 years if they never held it for more than 50 hours.
Could they buy Gold with some USD? Absolutely. But Another's assertions about oil going sky high and SA wanting exchange USD of Gold are illogical.
Other countries in the ME have even less spare capacity than SA, and could not even change oil prices back then if they wanted.
Could all of them together do it?
YES! But that was not the point of Another's argument. Again most had budget deficits leading them to be unconcerned about the long term health of the USD.

FOFOA said...

Mad,

You have leveled a fairly serious charge, that Another was a fraud. You used the term delusional, but essentially this implies that he was representing speculation as fact. Or even worse, that he was making up facts.

I wish Another was here to defend himself as he always did so well, but, alas, he is not. So here is my very limited attempt at a counter-argument!

On the surface, your arguments, challenges and statistics are reasonable. But I do not believe that Another was either a fraud or delusional. So please allow me to present a few alternative analyses of his writings.

Unfortunately I do not have the background of studying oil statistics that you do. So I must rely on Google to supply me what I need. Also, I will attempt a forensic ("Lenon Honor-type" !?) analysis of what Another was really saying, in his own cryptic way. I think perhaps you are missing the big picture he was revealing.

In a moment, I will point to a timeline problem that I may have contributed to. But first let us look at some of the math you proposed. You said his "piece de resistance", or his defining statement was that Saudi Arabia would not be able to purchase enough gold on the open market without "pushing the price higher".

Your numbers (and I realize you were erring on the high side for Another's benefit) were that SA was earning a profit of maybe $25b per year during the 80's. You also claimed that they were barely getting by on this profit. But I would point out that the Sheikhs were living quite well during the 80's! Anyway, you "assumed" a savings rate of 20% (again, on the high side admittedly) and you pointed out that their dent in the market would be less than 1% of the world's gold supply. (Total above-ground gold!)

But how much gold COULD they buy at $400/ounce with $5b per year? That would be 12.5 million ounces or 388 tonnes. Just for fun, let's speculate that regardless of gold's dollar price, this was the weight they wanted to accumulate annually. From the time Nixon closed the gold window until the present they would have accumulated 14,744 tonnes of gold! That is more gold than the three largest national hoards combined, the US, France and Germany! In only 38 years!

Even if we cut their "savings rate" in half, we are still talking about the second largest national hoard in the world, and in a tiny country with 1/10th the population of the US, the largest hoard. In other words, 7,500 tonnes in a country of 30 million! Compare that to China's 1,200 tonnes (?). And they have how many people?

Another consideration when it comes to "pushing the price higher" is WHO is buying gold and WHY. If the world were to watch SA accumulating gold openly at this rate it would be very clear that OIL WANTS GOLD! This would have more than just a supply and demand effect.

Moving on to the timeline. Here is a graph I found of the inflation adjusted price of oil from 1947 to 2008. Notice that the price was pretty steady until the oil crisis. This graph correlates the price volatility with the Yom Kippur war, but interestingly it also coincides with the closing of the gold window which was permanent while the war was not. (The war lasted 20 days).

(Cont...)

FOFOA said...

...

Regarding Another's timeline, I may have led you to believe that the "oil deal" started in 1982 or thereabouts. But I am not sure that is correct, and from Another's very first post it seems it may have started in the "early '90s" because of the Gulf War. From his first post:

"In the early 1990s oil went to $30++ for reasons we all know. What isn't known is that it's price didn't drop that much. You see the trading medium changed."

"for reasons we all know" would mean the Gulf War. "What isn't known is that it's price didn't drop that much." From this sentence, it sounds like a deal was struck sometime between oil hitting the $30's during the Gulf War and when it dropped to $19. Remember, Another was writing this in late 1997, so we are only dealing with a SEVEN year window of time here where a deal may have been struck and then was damaged by the LBMA having to go public with their trading volume.

Remember also, GATA was formed in 1999 after Bill Murphy had spent a few years researching anomalies in the gold market.

Back to Another: "Oil went from $30++ to $19 + X amount of gold!" So he is saying that "we" (the West) bought oil by providing gold through back channels. Remember, he also said in this first post, "It is the movement of gold in the hidden background that has kept oil at these low prices." And "Around the world it is traded in huge volumes that never show up on bank statements, govt. stats., or trading graph paper."

As far as a timeline goes, I think we are looking at 1991 through 1996 for this "deal". That's only five years! If this is true, it fell apart fast!

Another important point he made in this first post was that "non-Westerners" don't care about the dollar price of gold. They view it as "wealth", as they have for centuries:

"In the real world some people know that gold is real wealth no matter what currency price is put on it."

I think Another thinks the West made a mistake by playing this game with "oil" (SA?) after the Gulf War. The West tends to think in "dollar terms" only and this played right into the hands of "oil", because it was an unsustainable game! Here is the mistake...

"The Western governments needed to keep the price of gold down so it could flow where they needed it to flow. The key to free up gold was simple. The Western public will not hold an asset that going nowhere, at least in currency terms."

But the problem was that the physical gold that was available on the market (not the world's above ground supply) was too small to last more than a few years. The paper-gold game had to expand exponentially to keep it going... and then ultimately the CB's had to chip in their OWN physical!

"Westerners should not be too upset with the CBs actions, they are buying you time!"

If they had simply been willing to let the price of gold rise to the level it wanted to be, the oil-flow game could have become sustainable. But now we are in a different situation since so much gold has already been "spent". Now the price must rise much higher to keep the oil flow game going. A great rise in price will satisfy the Middle East for a long time because it will raise their current hoard to where they think it should be. And the West can no longer afford to suppress the public price of gold because it has cost too much of its physical. So it is really a Catch 22 with pressure from both sides!

If Another was an "insider" (as I believe he was), he would have been aware of this development in 1997!

(Cont...)

The Mad Scientist said...

FOFOA,
Whether Another was a fraud or delusional..is irrelevant. He is clearly wrong mathematically. That is all that matters. You are right my assumptions were exceptionally generous.
Saudi Arabia NEVER had budget surplus during the years Another discussed

Here is a link

http://news.bbc.co.uk/2/hi/business/2523937.stm

The world's largest oil producer Saudi Arabia has announced a 209bn riyal (£36bn; $55.7bn) budget for 2003 and forecast a deficit of 39bn riyals.

The only time it has recorded a surplus in the last 20 years was in 2000.

Analysts told BBC New Online they were surprised at the size of the budget and the deficit.


Read that again. In 20 years they never had a budget surplus. Since SA produces oil and sand and they really cannot sell sand, or use it, they would have to use every last dollar before they could buy 1 gram of gold let alone 388 tonnes.

FOFOA said...

...

One last link I found to share with you. Oil-Price.net. Seems to be owned by one Steve Austin (6 million dollar man? or Stone Cold? I do not know.) Steve has an article on there called "Profitability and $100 oil". Here is the final paragraph:

"High oil prices have allowed Gulf Cooperation Council (GCC) countries to boost their foreign assets to more than one trillion dollars during the 2002-2006 period. With a looming recession (read "western assets on sale") and high oil prices we can expect this trend to increase."

$1 Trillion from '02 through '06 ?!! That's enough Benny Bucks to buy up the entire gold stash of ALL Central Banks in the world! (At current prices. Of course you'd never get that far with over the counter deals. It would drive the price TO THE MOON!)

I really didn't want to talk about oil with you, Mad. But you left me no choice. So go ahead, have at it!

Sincerely,
FOFOA

The Mad Scientist said...

Regarding them buying Gold without disturbing the market...come on.
Indians accumulated 15,000 tonnes of gold privately. They buy large amount of Gold all the time. ALL SA would have to do was do it slowly regular throughout the year. I mean almost every last ounce of the freaking thing is still around!
And Indian demand the largest in the world is very very price sensitive. They do get used a higher level over time (they have no choice) but short term if the price went higher whenever our resident beggars bought, it would push Indians out of the market.

The Mad Scientist said...

Oh I am not disputing right now what they could do with those dollars.
In fact I told Greg when oil was at $130 that we would retarded if we did not invest our money (which we made with oil options) into gold and Silver because that is what the Sheikhs would be doing!
As you can imagine the bulk was not accumulated during the years referred to.

The Mad Scientist said...

BTW oil is not my specialty...it is Microbiology...So you can engage on oil without trepidation.

To summarize,
I find that Another's conclusions are at best illogical considering the facts at hand, at worst , plain deception.
Who is going to worry more about the fate of the USD today? The labourer living hand to mouth or Bill Gates.. SA's fate was like the former, and in the presence of such huge amount of Spare oil capacity they had zero clout.
If anyone else would like to explain how the math makes sense please go ahead.
I do not disagree with his thesis about Gold however. AU (pun intended) contraire, as you know, I think Gold will be a great salvation in the times to come. Not the only salvation IMO but enough to blow the balls of Bernanke's schemes.

Now getting away from my mathematical side....I see some of Another's points as being very possible. Good gracious! Just seeing that video about the $134 Billion in Bonds ...which no one is talking about? His version of what was happening certainly fit in with what these crooks are capable of.

Anonymous said...

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
http://www.bloomberg.com/apps/news?pid=20601087&sid=apWwNzoIflIM

July 3 (Bloomberg) -- Former Chinese Vice Premier Zeng Peiyan highlighted the nation’s concern at the risks posed by a global financial system dominated by the dollar, urging more oversight of countries issuing reserve currencies.
“There should be a system to maintain the stability of the major reserve currencies,” Zeng, the head of a Chinese research center, said in Beijing today. He advocated supervision of fiscal and current-account deficits, adding that “your currency is likely to become my problem.”

>>> China and many others want a stable and reliable dollar as the anchor in the floating currency system.

That "dollar" cannot deliver ! And the $-system will never want to offer a "stable" dollar !

The $-FI thrives on ever moving capital flows : When all $-paper declines,...the underlying $-unit rises in PP (and vice versa).
Needless to repeat that these flows are organized by the $-system and to the sole profit for the $-system.

>>> Up until now, the $-regime was able to hold the main oil swing-producers on its $-side. Now, China comes up with the $-problem !
And China has "much" more ambitions (and power) to adress this $-problem.

Anonymous said...

What if....The $-piramidetop' grand Crisis " THEFT " (Madoff-ism) is a sign that the rats (Ohbama entourage) are leaving the (sinking) $-ship !?

Just a nasty thought. Comments ?

FOFOA said...

Mad,

I am conscientious of the fact that the '91 to '97 timeline constitutes a "conspiracy theory". But this is one I can accept because it fits empirically. I know you disagree mathematically. But try thinking about gold in terms of ounces instead of its dollar value. Also, the way this "theory" was presented, rejected, defended, ridiculed, then abandoned seems to fit a certain reality that I can accept.

And one last thing. It was not an evil conspiracy. It was simply misguided by dollar-denominated Western "banker" thought.

A "thought" that only benefited the West! Or so they Thought!

FOFOA

FOFOA said...

@Anon!

"Just a nasty thought. Comments ?"

I have been saying this for a while now! "Scorched Earth retreat" [my phrase] = the rats (Ohbama entourage) are leaving the (sinking) $-ship !? [your phrase]

One - And - The - Same !

Anonymous said...

Addendum :

Next to the ambitious China pressure on the $-system,...there is also the increasing $-pressure on the €-system (EMU) that risks desintegration (?)

Is the organized global export of the $-debt-Crisis of the nature that trans atlantic ties (EU/US) are going to strengthen ???

Martijn said...

Sometimes market manipulation is punished after all.

Anonymous said...

Yes, Im afraid they are.
Take a look who Sarko, Merkel, Brown.
First two have been installed by...
Why?Vassals Yes!
Fauvi

Anonymous said...

Anon,

what exact intention are Chinese following with their sometimes cotradictory statements? Menace? Warning? "Only" pushing for SDR?

The way, the frequency these statment come in is following an exact strategy IMO.

Fauvi

Tekin said...

@ Mad Scientist

On Saudis and many other fine points, one could refer to the following excellent post by Aristotle:

http://www.usagold.com/halloffame.html#anchor318280

I tried to post a portion of it here, however, the system does not accept long posts.

A very short quotation:

You can also see why the economists can look at the Saudi balance books and see tremendous currency debts and budget deficits where once there were surpluses that threatened to buy up the world. They have in fact bought up a significant portion of the Gold mined well into the future...through Loans and Hedges bought all the way down from the top. So who are we to question whether to exchange our currency for Gold now or tomorrow, and to gripe over a missed opportunity of $10?

Anonymous said...

Amazing ! " Electronic oil casinos " :

http://www.ft.com/cms/s/0/e0ae2b2a-66f7-11de-925f-00144feabdc0.html

This is the kind of (true nature) of the $-FI that backs the $-system & regime !

A genuine example of "stability" !?

Let's get rid of it !

Martijn said...

Fofoa,

Still thinking about mad and the hurricanes and trying to, as we say in Holland, make some chocolate out of it.

As for social capital and it's relation to paper wealth, I think it is quite interesting to notice how openly the subject of market manipulation is discussed these days. That is somewhat comparable to an audit of social capital, and these talks indicate that some write offs are required.
Social capital can be compared to "the system" that people have invested in. This would indicate downward pressure on paper, although it is always difficult to tell how much of this has already been discounted in the market.

Martijn said...

The Bloomberg article really are senseless.

Consider this:
Premier Wen Jiabao said in March that he was “worried” about his nation’s $763.5 billion of Treasuries as spiraling U.S. debt threatens the value of the dollar.

The dollar headed for a weekly gain versus the euro on speculation the global recession will be prolonged, increasing demand for the relative safety of the U.S. currency.

How can one put that in the same article and pretend not to be talking gibberish.

Martijn said...

From the same article

The IMF should expand the functions of its unit of account, Special Drawing Rights, the report said.

I don't quite get this. China is not too influential in the IMF, nor are other BRICs. I had the impression the IMF is dead. Why is China calling for it's action nonetheless?
Perhaps they feel that the dynamics of increasing IMF powers will enable China to claim a more influential position.

If China were out of the dollar already, this dialogue should be interpreted differently. I still need to figure this out a bit more.

Martijn said...

FOFOA, Mad,

As I have not read another that thouroughly, wasn't he saying the SA (Middle-East) wanted gold for oil

If they did, would they be concerned about a paper budget deficit?

Guess not...

Anonymous said...

@ Martijn : The IMF is dead,...long live the IMF !? Exactly Sir, what a paradox.

Maybe the Asians want a de-dollarized IMF ...A multi-polar global institute ?

A cover for Asia to organize more influence through this failed institute (IMF). As to not be pinpointed (blamed) as troublemaker...consolidator of the $-debt-crisis.

Anonymous said...

China Business : Interesting view !

http://www.cibmagazine.com.cn/Columnists/Andy_Xie.asp?id=992&taming_the_beast.html

Martijn said...

Apart from these very high profile events, the number of failures of large, medium and small companies and financial institutions is rapidly and steadily growing.

This is correct. In the 1930 the misery started with small banks collapsing. Then for a little while nothing happened, and finally the big boys went under.
Since the start of this year quite some (I believe 50) small banks have been closed.
Wonder what will be next.

Martijn said...

Through its rhetoric and actions, the Obama Administration has made it clear that no matter the current or future costs, the federal government will not allow a collapse of the banking system. The resulting aura of certitude has, in turn, encouraged investors to roll the dice one more time. Some of these investors are likely trying to make good prior investment losses through speculative trading in U.S. equities. The surety of the government guarantee has sadly allowed them to overlook the fact that U.S. corporate earnings continue to fall.

So, as is the case with all government guarantees, the risks our economy faces are now disproportionate to the opportunities. Haven’t we been down this road before
?

Martijn said...

Sweden actually passed Japan I guess. I wonder what will happen now.
Negative interest on savings should cause a bank run. Perhaps I missed some sort of massive deflation in Sweden that insures a positive real interest rate.
However, Sweden is a very socialistic country in a sense. Perhaps some deals with pension funds were made so as to insure not too much money leaving bank accounts. I would have to see some numbers, but I can't image consumers leaving their money in the banks.
I wonder how much private money Sweden has.

Martijn said...

Fofoa,

Hyperinflation is forced debt forgiveness. So is a dollar devaluation. The creditors LOSE the PP of their contracts. The debtors pay off their debts with devalued paper.
Correct. Perhaps we shall see hyperinflation; for those trusting the bible (or Quaran) hyperinflation should not come as a surprise.

The "social capital" of this debt monster is an illusion. When you say we would be losing 99% of social capital, I don't agree with this. We will lose some. There WILL be some unrest. But it will be like a reset of the entire system.
A system that has been reset needs to be rebuilt. That might be a wise thing, but resetting it will destroy social capital. Trust in paper agreements, banks and politics is one of the forces that allows society to manifest itself in its current form. Resetting this system will cause trust to evaporate. New trust will have to be build up as the reset system is being used. Resetting it will cause a major loss of trust.
As I indicated, perhaps this trust/social capital has already been secretly extracted from the system. Perhaps those talks about riggid markets andsoforth can be regarded an audit of the system, and perhaps that outcome will be rather disappointing.

The problem is that the banks are escaping the worst of it through government programs (TARP), so the creditors that will lose their purchasing power are the savers and retirees that have been coaxed into the position of creditor to bad debtors through the financial industry. Their savings DOES have a counterparty that can default, unlike those Indian wives who save in gold.
Correct. Among with their wealth they will loose their trust. So both real and social capital will be destroyed.

Those without savings (the most likely to riot) will suffer the ravages of supply shortages and hyperinflation, but they will not take a big loss of savings. Many of them will even find their debts reduced!
Those were under the illusion they had pension savings. They don't.

Paper is not the real thing. This is why I say POSSESSION will be 9/10ths of reality after paper burns! Paper obligations will be settled in worthless paper. It is what you POSSESS that you will keep.
Possession means storing all your wealth into physical goods. All paper burning means burning social capital as I said before. It is possible, but it would have severe consequences. I think that at a certain point the smart money will go long on social capital and buy some paper. The paper markt might be severely harmed, but it won't burn to the ground.

Martijn said...

Fofoa, Mad,

Once again: oil exporting countries did want real money instead of confetti, if another is to be believed.
That would mean that they would prefer loading up on gold, while at the same time perhaps be short the dollar.

My point was that they would not care a damn what would happen to to USD in 50 years if they never held it for more than 50 hours.
This is also what another said, isn't it. The difference is that another said they would have to deliberately perform an action in order to get rid of the dollars, while Mad states that they got rid of the dollars simply by means of their lifestyle.

I wrote the above before reading on, and now see fofoa sort of shares my view:
But how much gold COULD they buy at $400/ounce with $5b per year? That would be 12.5 million ounces or 388 tonnes. Just for fun, let's speculate that regardless of gold's dollar price, this was the weight they wanted to accumulate annually. From the time Nixon closed the gold window until the present they would have accumulated 14,744 tonnes of gold! That is more gold than the three largest national hoards combined, the US, France and Germany! In only 38 years!

Martijn said...

From the article on SA deficit:

The secretive rulers do not reveal the oil price which was used to calculate the budget, but it is thought to have been between $16 to $17 per barrel for 2002.

And we are now only talking about the dollar price of oil. If there is also a gold price, we know even less.

We should find some figures on gold flows regarding SA or some data on their gold reserves (if there are any).

How much of Middle-East gold is still in London btw?

Martijn said...

@Mad

Suppose:

Saudi does not trust the dollar to store it's wealth for a long time. It wants gold instead.

Therefore the West sets up a "scheme" that keeps the dollar price of gold artificially low so that SA is able to buy the gold they want with the dollars they receive in return for oil.

In order to maintain this situation this deal has to be secret, otherwise gold could not be kept low.

In line with their view on wealth the Saudis go long gold and short dollar.

Can we test this?
Not really, but we could look for things that match this line of reasoning.

Saudi being long gold ans short dollar (paper) would lead to a situation where:
They have gold inflows and paper outflows (deficits.

I don't have data on their gold holdings, but someone recently showed me they have been having a paper deficit for a while...

Interesting case!

Martijn said...

In supplement to my previous post: Did U.S. Export Over 175 Million Ounces of Gold?

Martijn said...

As for Sweden: the winning word is most likley "Eurozone".

The Mad Scientist said...

WOW! all this while a guy sleeps!
Thanks for your link Tekin. I will read it as soon as my blood stream has some caffeine.

The Mad Scientist said...

Martijn,
"FOFOA, Mad,

As I have not read another that thoroughly, wasn't he saying the SA (Middle-East) wanted gold for oil

If they did, would they be concerned about a paper budget deficit?

Guess not..."


I would have to disagree there. See if they used up their dollars and were printing their own currency to make up the difference, then they could never be worried about the USD, which is what Another implies.
The only thing they would have to worry about is their own currency, which believe me they abused to keep their princes happy.
See how many UST Bonds and How much US stocks SA has bought over the past 30 years,certainly it does not look like Gold is their favorite asset class.
Lastly if they did want to accumulate Gold over the said time period it would be a small amount since they were already stretched fiscally. The market would have been able to absorb that.

Look at the Silver market.
Before Silver ETFs people kept saying how a 100 million ounces would be enough to send Silver $100/ounce. Now with Barclays publishing bar lists and several other funds accumulating Silver, Silver still has not gone over $14!
Even if 1/2 of all the Silver is there in those Etfs ( i believe some have all of it) it is several fold higher than what people kept saying could be absorbed by the market without spiking the price several fold.

Martijn said...

I would have to disagree there. See if they used up their dollars and were printing their own currency to make up the difference, then they could never be worried about the USD, which is what Another implies.

We have to get this straight.
Aonther said they were worried about the USD, and hence wanted to buy gold. That we can agree on, I guess.
Now you state that they had no reason to worry about the USD because they were running a deficit.
I say they were running a deficit because they were worried about the USD (and buying gold, as another said).

Martijn said...

See how many UST Bonds and How much US stocks SA has bought over the past 30 years,certainly it does not look like Gold is their favorite asset class.

Where can I find that data?

Tekin said...

Russia, U.S. to sign military cooperation, Afghan transit deals

http://en.rian.ru/russia/20090703/155424800.html

"MOSCOW, July 3 (RIA Novosti) - Russia and the U.S. will sign deals expanding bilateral military ties and on transit of military supplies via Russia to U.S. troops in Afghanistan during the U.S. president's visit to Moscow, a Kremlin aide said."

Strange. Very strange. Shades of a Yalta Conference.

FOFOA said...

Martijn (and Mad, even though you believe this was made up),

There is one other interesting nugget found in Another's first post. He says:

"That's because oil is being partially used to pay for gold!"

Is he talking about a barter deal? Bypassing paper currency altogether? Why would they do this? Who would be supplying the gold? How would this affect the books? Could this contribute to a DEFICIT on the books?

This is an interesting concept. Because it takes the conspiracy angle even deeper.

Martijn said...

This calls for a bit of calculation I guess.

"That's because oil is being partially used to pay for gold!"

Partially used to pay for gold, partially used to pay for something else (dollars I guess).

So, either some oil is traded directly for gold, or oil is traded for dollars and subsequently those dollars are traded for gold. Right?

The discussion with Mad still seems to be one causality, this point you bring up relates to operational aspects (in what order are the trades being carried out).

Both are relevant btw.

Tekin said...

According to Aristotle's post which was linked previously, my understanding is that Saudis had two streams gold income. If I understood it correctly;

1) Loan to the gold mining company was made in gold ounces and the company paid its debt in gold ounces. CBs acting as loan guarantors. No gold moved at all. Saudis just pledged their oil in the ground as collateral. Bullion banks arranged these two sided deals and charged commission.

2) The gold mining company had to hedge its total gold output. Saudis also positioned themselves on the long side of this trade. If they they did not have the cash, the bullion banks provided it again with oil in the ground as collateral.

The way the Saudis are publishing their balance sheet must be "wicked". I do not know any thing about it, however my guess is that they either forget to express their gold receipts or priced gold in 35 dollars or something like that. So that their books appear to be in red. Just my two cents.

FOFOA said...

Tekin,

Thanks for the link!

"I tried to post a portion of it here, however, the system does not accept long posts."

I took care of that problem for you. ;)

FOFOA

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