Tuesday, July 14, 2009

Open Forum







99 comments:

J said...

Is what Geithner did in that vid even legal? He should be fired on the spot.

Martijn said...

Fofoa,

If I'm not mistaken you see a (yellow) shiny future for the middle-east.
Also you were thinking that real estate might be consolidated and the dream of home-ownership will be shattered in the future.
Ever thought of buying up some real-estate in the middle east? Prices are falling fast at the moment...

Martijn said...

Fofoa,

You are correct on the shifting of risk.

At first society had - amongst others - money and debts. Banks listed debts at a certain value on their balances. However, the risk of default that is imminent on any debt at some point in time made certain debt papers trade for only a couple of cents on the buck. Deflationists like to believe those debts papers are money too, but something that trades for a couple of cents on the buck can never be money. However, by guaranteing those debts, the government turns them into money: the shall never trade under the buck again. This is enlarging the money supply without printing.

Well seen.

Mic said...

What I see is the invisible dictatorship getting visible. This should be seen by everyone. Masses got to get concious to where their energy is flowing. Who is the invisible steering man? The present monetary system is the biggest fraud in history of mankind.

Martijn said...

If I could buy someone's printing-press-guaranteed debt, it would be as good as dollars. I would have no urge to exchange the debt for real dollars, as my debt papers already are dollars now.
This also means I would not make too much trouble of having the debt repaid. Why should I? I have dollars already. I would only do anything if I were required to. Doing so plus administrative costs would be the only costs differentiating debt paper from real dollars.

Martijn said...

Still figuring out some things.

One thing that is clear is that we have adapted our whole financial system to permanent growth. Everything is leveraged and interlinked. If growth dissapears, the whole system reverses and collapses. By (evolved) design growth really has become a basic necessity for survival. The reason for evolution towards growth is the continues positive inflation that our central banks have created over the past era.

I guess things are becoming clearer. This indicates that we are progressing to resolving this crisis. As fofoa said:
How will we know we are “there”? For one thing, many of the great questions about this crisis will have been answered.

Mic said...

@ Martijn

Another reason is that in a pyramid-game you permanently need others who to your depts. The systems works als long als you get new deptors (Globalisation). And another reason would be the interest to be payed to those who create money out of thin air. Acutally it is not thin air but stolen gold.
:-)
Best regards

Mic

Martijn said...

@Mic

Correct indeed. The creation of the pyramid and permanent growth probably mutually influenced each other the same way dependent ecosystems grow.

Here is another commentary on gold ETFs (and gold price supression) from marketskeptics.

Martijn said...

Those future world coin guys - funny site btw - sure have interesting prices:

PRIZES for winner works:
* 1st work: 1 Gold Banknote, in pure gold 999.9
* 2nd work: 1 Gold Coin, official
tender
* 3rd work: 1 silver coin, official tender

Martijn said...

I was refering to the silver.

Martijn said...

I also did not know this.

You guys probably can't read it, but the pictures speak for itself. So far various eurocoins have been minted from gold (EUR 100) and silver (EUR 10) by official European mints (the linked pdf is from the Belgian mint).

Martijn said...

Also interesting to notice:

If paper gold is not really realiable, and the only thing that counts is holding physical gold, why not short some paper?

This is an enforcing loop: paper is less reliable than physical, hence less valuable, hence it can be shorted, hence it becomes less reliable etc.

This is not a real way to make money, but I do believe shorting paper gold might be perceived to carry less risk than generally accepted by some players.

Martijn said...

Fofoa,

On this guaranteeing of debts: what happend is in the past loans were given that will not be repaid. That is the basis of this crisis. These loans are currently overvalued, that's key to this problem. In order to correct this situation, either the loans themselves should devalue (by means of writeoffs), or the currency they're denominated in should devalue. By guaranteeing the loans a choice is made for the latter, isn't it?

Martijn said...

Devalue against what? Devalue against reality (gold, oil etc.).

The choice for the boys in charge is to include the dollar to the reality or not. By devaluing the loans, they devalue against the dollar and the world. By devaluing the currency the loans are denominated it, that very currency is devalued against reality - and it's fictional nature is revealed.

Martijn said...

What the loose money policy did was rig the system morally.
In a normal situation an entity achieves a state where protection of what he has achieved is enough for survival. This given point creates a natural balance for various (uncountable) entities to live together in harmony.
By loose money policy and inflation, that natural, steady state where protection of achievements/possesion was enough is disturbed: the only way to survive now is to grow. When survival requires growth, greed becomes a dominant drive.

When a plane crashes, we do not blame it on gravity; we ask ourselves how gravity became dominant enough to pull down the plane.
The same goes for economy: greed is a given, but somehow it became so dominant it pulled down the system.
Inflationairy policies and the subsequent moral shift (hazard) are key to this.

Martijn said...

A printing press guarantee on debt does not necessarily create hyperinflation.
Sometimes complex systems have a way of falling apart once a certain level is crosses somewhere within the system. Passing that level causes the system to overflow and collapse. The same for the wobbly skateboard. However, if that (temporal) overflow is corrected, the system can continue. On the skateboard: if you could temporarily lean on a bike or anything near to you, chances are you'd be able to continue the ride (at lower speed perhaps). The skateboard in itself is fine for transportation.
The same for the printing press: should debts become temporarily undervalued, guaranteeing them for a while might prevent them from collapsing. Later on they will be revalued and trade can continue.
Same with a bankrun: it can to a certain event be prevented by an FDIC guarantee.
So. while guaranteeing debt with a printer might temporarily increase the money supply, the velocity of that supply (debts) decreases (as nobody really wants to buy them). This decrease might offset the inflationary effect, as inflation is the product of money supply and velocity.
It is not guarnateed to work, and inflation remains likely, but there is a chance.
When confronted with the current situation on financial markets while being in Geitners' shoes, I might have considered the same.

Anonymous said...

The interactions between 1/ The political industry - 2/ The financial industry and 3/ The central banks, have become obscene/pervers !

The political industry creates the deficits ...The financial industry profits from it...The central banks are supposed to solve the problem.

All three act pro forma as independant whilst the system keeps rolling.

There is ONE adequate solution to stop this insane system : Force every individual and enterprise that fails into "default" ! This is healthy "responsabilization".

Problem is that nobody wants this...cannot, will never, enforce such a policy.

In a free market, defaults are a natural (sanitizing) selection.

The relationship between strong and weak must be build on the principle of meritocracy. But that seems too much of an ideal world.

An UNFREE market and no meritocracy is a self-destructive system.

That's what we are heading for !

Martijn said...

Fofoa,

Another was all about oil for gold. As the "backdoor exchange" finally stops, oil would surge.

Are you in any way invested in renewables? The should come in handy once oil becomes unaffordable, won't they?

Or is that not a scenario you see happening?

FOFOA said...

Martijn,

"what happend is in the past loans were given that will not be repaid."

And this SHOULD cause a shrinkage in the money supply (M1-M2) when the banks must take a loss. They do create the money from thin air when they make a loan, but when it is defaulted they must fill that hole with their own equity. At least, that's the way it worked for 95 years.

"This also means I would not make too much trouble of having the debt repaid."

Yup! Why bother, you have passed on the risk to someone else! And not only that, but you have fooled them into not pricing in the risk they are now ignoring!

"By guaranteeing the loans a choice is made for the latter, isn't it?"

Exactly!

"Devalue against what?"

The free market devalues currencies by running up prices! Governments can do the same thing. If you read some of the SteveH pieces, or even the Larry Edelson pieces, they talk about the US govt. devaluing against gold. The easiest way the govt. could (hypothetically) do this is to become a BUYER of gold AT HIGHER PRICES. All they have to do is announce that they are now buying gold at $10K per ounce. Then start printing money to pay for the inflow of gold. Very quickly the inflow will slow down because others will also be trading gold at this same price. The dollar will be devalued, and you (the govt) will have some more gold!

Think about this... Did they devalue the dollar by becoming BUYERS of debt at INFLATED prices?

"By loose money policy and inflation, that natural, steady state where protection of achievements/possesion was enough is disturbed: the only way to survive now is to grow. When survival requires growth, greed becomes a dominant drive.

When a plane crashes, we do not blame it on gravity; we ask ourselves how gravity became dominant enough to pull down the plane.
The same goes for economy: greed is a given, but somehow it became so dominant it pulled down the system.
Inflationairy policies and the subsequent moral shift (hazard) are key to this."


Good Thoughts here! .....

FOFOA said...

...

"A printing press guarantee on debt does not necessarily create hyperinflation."

What I am looking at here are specific differences and similarities between Zimbabwe and the $-regime. A credit money system is more organic in nature than the Zimbabwe money system which was solid, like stone. By organic, I mean it can grow and shrink like a living person can get fat and then go on a diet. But when you guarantee this credit money, you turn it to stone. Like turning a living person into a marble statue.

My theory is that our monetary base has the same qualities as the entire Zim money system did. In other words, Zimbabwe's monetary system during hyperinflation was one large M0! And so far we have doubled our own M0 on the books!

But then, I am also theorizing that we have turned a good portion of the higher level organic measurements of money to stone by guaranteeing that they will not disappear, even if there is a run on the banks! And further, I am speculating that the markets have not had a chance to realize this yet, because of all the manipulation.

With the skateboard analogy, the point is that once the speed wobbles begin, there is NO WAY to recover. Your description of a recovery on a skateboard can only work if you don't hit the wobbles. Speed wobbles are a vicious, exponentially accelerating feedback loop that cannot be stopped except by crashing.

"The same for the printing press: should debts become temporarily undervalued, guaranteeing them for a while might prevent them from collapsing. Later on they will be revalued and trade can continue."

This is "their" theory. The problem is that the underlying problems have not been fixed. And the biggest problem of all is the IMBALANCE built into the paper system. This NEVER WAS fixable with paper.

"When confronted with the current situation on financial markets while being in Geitners' shoes, I might have considered the same."

It is true that they had an impossible situation to deal with. It is likely that a RESET was coming no matter what they did. So they chose the route that was both politically expedient and that saved them and their friends in the case that it NEVER WAS fixable through paper shuffling.

This was the only alternative. ANON has it right:

"There is ONE adequate solution to stop this insane system : Force every individual and enterprise that fails into "default" ! This is healthy "responsabilization"."

I agree with this 99%:

"An UNFREE market and no meritocracy is a self-destructive system.

That's what we are heading for !"


Only I would say that's where we ARE !

To fix the system we need GLOBAL meritocracy! Balance between the paper and the real!

FOFOA

FOFOA said...

Martijn,

No, I am not a "green energy investor". And even if I believed that was a good area to get into right now, I realize that most of those investments, just like oil investments, are paper products. Unless you are going to buy your own physical windmill farm. That is actually not such a bad idea if you are a billionaire!

I might be willing to invest in a solar roof for my house some day (PHYSICAL INVESTMENT). But right now I think the technology is overpriced and underperforming. I expect that could change in the not-so-distant future at which time I will surrender a quarter ounce of gold for a Sun Roof!

FOFOA

Martijn said...

Didn't know the were growing those things in the Rocky's (or whatever the place).

Smiley.

Shanti said...

Anon 10:57

"Problem is that nobody wants this...cannot, will never, enforce such a policy"

That a 'lot' of people (from the west)have butter on their heads i agree, aldhough that does not seems the case for Asians, they make - plans for 100+ years - And imho that does not include an unstable (failing) monetairy system. (Cfr. the docs of PBOC)

The ones with the butter will learn only by - EXPERIANCE -

Anonymous said...

Trichet repeated it many times : The risks are UNDER-PRICED !

And this permanent underpricing of risks was the cause that more risks could easely be added and distributed.

Trichet can't blame the $-regime for this, because the EMS had to follow that underpricing with the provision of ever more cheap digits.

We all spiraled down this catch-22dark whole.

Now, the risks cannot be priced properly anymore without crashing the global economy that became addicted to this underpricing (AAA-ratings).

No other way out than to "devalue" all paper and reprice (hyperinflate) all goods/services.

We will certainly go from the present underpricing (deflation) t overpricing (hyperinflation). From the one extreme to the other...Hoping that the massive debts can sufficiantly be inflated away.

The *underpricing* was a long and steady process : Started in 1980 when (double digit) IRs came down to almost zero in one long steady move (unfree market fenomenon).

This decade we are ALL going to pay an extremely heavy (hyperinflated) price for this long abusive mismanagement.

The absolute minimum starter for gold's repricing is the restoration of gold's PP in the coming hyperinflation environment.

The above will happen in a best case scenario . But the fundamentals scream for a worst case scenario : STAGFLA DEPRESSION !

Anonymous said...

Yes Shanti, you are absolutely right.
I was speaking for ourselves > Westerners.

Asian tangible wealth-producers know damn well what meritocracy means (mercantile genes).

Anonymous said...

" Risk pricing " :

DoJ demands CDS trading data from dealers
By Aline van Duyn, Joanna Chung and Michael Mackenzie in New York

Published: July 14 2009 16:47 | Last updated: July 14 2009 16:47

The US Department of Justice has opened an investigation into the credit derivatives market, with demands sent to over a dozen dealers for several years’ worth of detailed information about trading and ---pricing---.

The move comes as the regulatory spotlight shines on the credit default swaps (CDS) market and other privately-traded derivatives markets, parts of which grew dramatically in the last decade and generated huge profits for Wall Street.

FOFOA said...

Hyperinflation happens fast!
A PBS Essay on the German Hyperinflation

A very good perspective piece!

CLIFFSNOTES FOR THE LAZY:
The nervous citizens of the Ruhr were already getting their money out of the currency and into real goods -- diamonds, works of art, safe real estate. Now ordinary Germans began to get out of Marks and into real goods.

Pianos, wrote the British historian Adam Fergusson, were bought even by unmusical families.

Yet the ruling authorities did not see anything wrong. A leading financial newspaper said that the amounts of money in circulation were not excessively high.

More than inflation, the Germans feared unemployment.

The great German industrial combines -- Krupp, Thyssen, Farben, Stinnes -- condoned the inflation and survived it well.

Inflation kept everyone working.

So the printing presses ran, and once they began to run, they were hard to stop.

The flight from currency that had begun with the buying of diamonds, gold, country houses, and antiques now extended to minor and almost useless items -- bric-a-brac, soap, hairpins. The law-abiding country crumbled into petty thievery. Copper pipes and brass armatures weren't safe. Gasoline was siphoned from cars. People bought things they didn't need and used them to barter...

The publisher Leopold Ullstein wrote: "People just didn't understand what was happening. All the economic theory they had been taught didn't provide for the phenomenon. There was a feeling of utter dependence on anonymous powers -- almost as a primitive people believed in magic -- that somebody must be in the know, and that this small group of 'somebodies' must be a conspiracy."

When the 1,000-billion Mark note came out, few bothered to collect the change when they spent it. By November 1923, with one dollar equal to one trillion Marks, the breakdown was complete. The currency had lost meaning.

Obviously, though the currency was worthless, Germany was still a rich country -- with mines, farms, factories, forests. The backing for the Rentenmark was mortgages on the land and bonds on the factories, but that backing was a fiction; the factories and land couldn't be turned into cash or used abroad.

All money is a matter of belief. Credit derives from Latin, credere, "to believe." Belief was there, the factories functioned, the farmers delivered their produce. The Central Bank kept the belief alive when it would not let even the government borrow further.

With the currency went many of the lifetime plans of average citizens.

Pearl Buck, the American writer who became famous for her novels of China, was in Germany in 1923. She wrote later: "The cities were still there, the houses not yet bombed and in ruins, but the victims were millions of people. They had lost their fortunes, their savings; they were dazed and inflation-shocked and did not understand how it had happened to them and who the foe was who had defeated them. Yet they had lost their self-assurance, their feeling that they themselves could be the masters of their own lives if only they worked hard enough; and lost, too, were the old values of morals, of ethics, of decency."

Martijn said...

Isn't it all about balancing the future with today?

Investing is discounting the future to the present by predicting the path of the world. Where a positive result can be found, the difference can be pocketed. As it is always unclear what path shall be taken, this reward can be regarded as a payment for the risk.
Stock prices aim at future capital. Debts aim at future capital.
Money – the USD – is supposed to represent present capital. The USD sort of covers the world, and prices everything. As we print more money, prices will grow as the world will not.
We did print more money. However, only the price of future capital (debts, stocks, houses – although the latter is present capital as well) increased.
Now we find ourselves in a discrepancy. Either the price of future capital must come down, or the price of the present world must increase in order for the two to balance.
By deleveraging and writing off on debts, bonds and stocks we can lower the price of the future. However by doing so we clearly see people taking the pain today (as they’ve also took the illusional profits in another day in the past).
We were led to believe this process would be too painful. Hence we increase the price of the world today to match our high future expectations. The technology to do so: a printing press.

Martijn said...

My above post does say it. Please note that inflation is a development over time. The amount of currency at a given time - however large it may be - does not tell you anything about inflation. Only a graph of the amount of currency over time does.

By inflating our current pricing of the world, we are growing towards our high future expectations.

It does make sense. We printed money, and spent it on the future (stocks, bonds, etc). Now we must print money and spend it on the present to balance the two.

Anonymous said...

Geithner promises to defend dollar
By Abeer Allam in Riyadh

Published: July 14 2009 13:13 | Last updated: July 14 2009 14:57

Tim Geithner, US treasury secretary, sought to assure Gulf nations on Tuesday about their holdings of treasury bills when he told Saudi business leaders that his country “has a special responsibility to play” in defending the value of the dollar.

He also said that the US is committed to maintaining the openness of its economy to foreign investment and to expanding international trade.

Martijn said...

One more remark:

By repricing the present world we also shift the risk that was initially with those predicting the future (wrongly) to all that live at present.
However, so far some efforts are being taken to hide the risk from one possible future - stocks and debts - to another - US treasuries.
This will not work.

FOFOA said...

Martijn,

Two things...

1. Your Thoughts are moving in a very good direction!

2. You play and excellent Devil's Advocate when you want to.

FOFOA

FOFOA said...

Anon,

Geithner to Oil translated :
"Don't worry about your dollars. We will keep them strong by pounding your two REAL assets in our rigged marketplace! So you just keep buying dollars and we'll just keep ----ing you up the ---!"

FOFOA said...

A Tremendous Secret
by John Rubino

An absolute MUST-READ!

SatyaPranava said...

i am curious to know if there is a graph out there showing the amount of paper gold ounces to real gold ounces.

btw, i was floored when I heard geithner at the end of that video the other day.

Elango said...

Now i know why Geithner is still the secretary of the US Treasury. Long live USSA.

J said...

FOFOA@5:20

Congrats on all the attention you're receiving

-J

FOFOA said...

New video added up in the main post.

Martijn said...

Whoopsidaisy!

Anonymous said...

Why "Whoopsidaisy!"? That's gut just for SPDR! Not for PHYSICAL!!!

Martijn said...

Ambrose is worth reading.

Martijn said...

July 14 (Bloomberg) -- Greenlight Capital Inc., the $5 billion hedge-fund firm run by David Einhorn, told investors it switched all of its holdings in a gold exchange-traded fund into bullion during the second quarter.

I believe that a big player switching from paper to physical is a strong signal. A signal that does not promise much good for the world economy in the short run.

FOFOA said...

Drudgereport:
LANDLORD IN CHIEF: OBAMA MULLS RENTAL OPTION FOR HOMEOWNERS...

SNIP:
"...delinquent homeowners would surrender ownership of their homes but would continue to live in the property for several years..."

FOFOA FLASHBACK - AUG. 23, '08:
"When we finally get to "there", we'll still have the same homes that are standing now, and we'll have the same amount of people as now. We will also have the same percentage of people willing to enslave their futures in order to live in a nicer house.

The big difference, I think, will be that these same people will be enslaved to landlords rather than to mortgage companies."

Martijn said...

Fofoa,

Henry Liu is seeing it too:

The non-banking financial system is essentially an anti-banking system in that it allows securitization to convert debt into security; that is, credit into capital. It is an insurgent war against capitalism itself. Pension funds are allowed to invest in debt instruments as if they were security instruments. Such instruments are in reality stripped of security, with returns commensurate with risk levels. The word security is derived from the Ancient Greek se-cura and literally translates to "without fear". Structural finance actually promotes fearlessness that no regulation can negate.

Interesting...

Martijn said...

Fofoa,

I recently came across that old post on housing. Good post, interesting indeed!

Martijn said...

And legal forces continue their influence.

All economy is political economy.

Martijn said...

China's reserves remain of importance. Speculation was that they'd exited the dollar already, and perhaps are applying some bookkeeping tricks.

This article does not directly substantiate that claim.

Martijn said...

Very good Asian Times from July 1st!

Jimmpy said...

Italy to review gold tax after ECB complains :

http://www.iii.co.uk/news/?type=afxnews&articleid=7423636&subject=markets&action=article

My gutt tells me the above is a pretty important signal . . .

regards

Martijn said...

Fofoa,

From another old post:

Many notable writers including Don Coxe and Jim Puplava have speculated that Paulson (and the PPT) engineered the commodity collapse simultaneously with the rally in financials and the ban on short sellers (in financials only) starting on July 16th. This commodity collapse, currently called deflation, continued through November. Now if I were to believe that Paulson started this "deflationary" collapse in commodities, must I now believe it is real? Should I believe it will continue once he is out of office? I don't know. But I think I know.

We now have seen the answer, haven't we?

Martijn said...

@Jimmpy

They are starting to come after us.

Anonymous said...

Very interesting writings FOFOA.

In case some one missed it, here is a link for Armstrongs recent writings
http://www.scribd.com/kzuur58

Btw. He does not favour gold as money and for quite good reasons (he still sees it as a private store of wealth).
Regards from Austria

Ishkabibble said...

Noticing a significant increase in momentum these last 10 days or so... more quantity of accurate news, higher velocity. It says something.

From Martijn:
"Greenlight Capital Inc., the $5 billion hedge-fund firm run by David Einhorn, told investors it switched all of its holdings in a gold exchange-traded fund into bullion during the second quarter."

It wasn't long ago I was reading about all the gold Dubai, Russia, and others wanted to store personally, in the physical. This was to be a bomb for obvious reasons. I've not heard a peep about it recently. Do they still anticipate delivery and when? It seems to me private industry, consumers, and hedge funds drawing out the physical will heighten this focus again.

Martijn said...

It wasn't long ago I was reading about all the gold Dubai, Russia, and others wanted to store personally, in the physical. This was to be a bomb for obvious reasons. I've not heard a peep about it recently. Do they still anticipate delivery and when? It seems to me private industry, consumers, and hedge funds drawing out the physical will heighten this focus again.

I also have not been able to find more news on it. Recently asked for it on some fora... no response.
Will ask again, and keep my eyes op for it.

Martijn said...

Remember Eric de Carbonnel stating that Chinese inflation would destroy the dollar?

Chinese inflation concerns are up

Did someone mention a plot thickening?

Jimmpy said...

Martijn,

My personal interpretation of the news article :
Snip :
In a legal opinion published on its Web site, the ECB said the draft law -- taxing capital gains on gold reserves due to rising market prices -- would weaken the Italian central bank's finances and mean it might not be able to carry out its tasks.

The ECB considers Gold as the safest item on any balancesheet. Levying a tax on gold now, would scare away any potential Jo Sixpack considering to exchange his paper of digital reserves for the real thing.

Snip :
"The draft article needs to be reconsidered to address the concerns expressed in this opinion, relating in particular to central bank independence and the prohibition on monetary financing," the ECB said in a strongly-worded opinion.

The ECB knows that the consumer has a Purchasing Power problem. So I believe they will use the gold revaluation path (monetary financing)to again put PP into the hands of the sheeple, and they will be (slowly)directed onto this golden path. Any tax would destroy the psychology behind preserving your wealth through gold.

Please feel free to tell me if I somehow "dropped the ball" in my interpretation.

Siege said...

Is it time for a tin buffalo?

It seems the mint is unable to produce golden buffalos and their delays on gold delivery are WAY up.

http://seekingalpha.com/article/148475-the-u-s-mint-again-suspends-gold-coin-sales-is-it-really-out-of-gold?source=email

Martijn said...

@Jimmpy

I interpreted it roughly the same. I think the ECB so far "stood up" for gold, while Italy was trying to squeeze some extra tax income.

However, the article also shows that people are beginning to look at gold owners with different eyes, hence my reaction.

Another interesting aspect: Italy's gold reserves related to its population are very high. Italy hence would on of the European countries benefitting the most from a swith to some sort of gold standard. Therefore I do not quite understand their attitude.

Perhaps - and that is what I think - they are secretly arguing with the ECB. They do not want to meet the stated budget requirements and therefore take a hit a something important to the ECB: gold.

Martijn said...

Fofoa,

I'll work out those thoughts to a more understandable format either tonight or tomorrow.

FOFOA said...

Martijn,

I don't know if this will help, but consider that the "time function" (future risk, future debt) can be compressed into the present. For example, future inflation is actually present theft of real economic goods by the printing authority. Future inflation RISK is actually RECOGNITION of the present theft. Guarantees are a transfer of purchasing power in the present. That purchasing power is transferred to those who hold underpriced risk, etc...

All transactions happen in the present. All theft happens in the present. The time function is the camouflage.

FOFOA

Martijn said...

Fofoa,

I agree. And it does help reading it from you. It is a huge game, and it is good seeing it now.

I have to find the right words, but it basically involves the real world, the financial (and abstract) system and time.

It also leads back to gold in a way. Money used to be part of the real world, it evolved there as the unit of account. From that accounting we devised the financial system. The financial system is an abstract sphere floating over the real world. IN its beginning days it was anchored to real world by means of money from the real world, e.g. gold/silver. When than anchor was dropped, money was no longer part of the real world, and the financial system was able to drift away. That was overlooked by many.

Now investing is positioning oneself for the future in todays(!) world. A farmer does that for instance by chosing to saw out his entire stock of grain, or hold something back to be able to survive a year of bad weather. This is in the real world. Investing nowadays involves the financial system too. A factory worker for instance positions himself for the day his body gives up on him by exchanging a part of his effort for financial credits, that he then positions somewhere in the financial system and at old days hopes to transpose back into the real world by exchanging them for food or healthcare.

However, the financial system since it dropped its golden anchor is drifting freely over the real world. Its captains continu to telling us we'll arrive at some beautiful shore one day, but in the meantime the are gaming the system.

As I said yesterday they have projected us a financial future that is so different from the state of the current financial reality that the required transposition cannot be matched by the real world. The real world is too limited for that, but those limits were not properly accounted for in the financial system since it dropped its gold anchor.

Therefore either the guys holding the financial future (debts, stocks etc.) must adapt, or the entire present system and it's mapping onto the real world must be reshaped. We are now chosing for the latter.

I'll write this down properly when I find the time and words.

FOFOA said...

Martijn,

"The financial system is an abstract sphere floating over the real world. IN its beginning days it was anchored to real world by means of money from the real world, e.g. gold/silver."

And gold was the ideal store of value, because it could be hoarded in great quantities without infringing on any other function in society. It had no other uses. Only money.

"When that anchor was dropped..."

...money ceased to perform the store of value function.

"That was overlooked by many."

In the modern world, investors are engaged in a frantic rat-race to constantly earn a "yield" since it is the only way to stay ahead of the theft of value that inflation inflicts.

"As I said yesterday they have projected us a financial future that is so different from the state of the current financial reality that the required transposition cannot be matched by the real world. The real world is too limited for that, but those limits were not properly accounted for in the financial system since it dropped its gold anchor."

I like to think of the modern financial and monetary system as a virtual, three-dimensional grid or graph (imagine it is criss-crossing laser light) laid over the real world.

"or the entire present system and it's mapping onto the real world must be reshaped."

This grid can be turned off with the flick of a switch!! For so long we have lived with it, that most people believe it is as real as the grass we walk on, but it is not. It is a figment of imagination and belief.

This grid allows bankers on Wall Street to claim ownership of the very grass you walk on through financial trickery. But what will happen when the switch is turned off?

FOFOA

Martijn said...

In the modern world, investors are engaged in a frantic rat-race to constantly earn a "yield" since it is the only way to stay ahead of the theft of value that inflation inflicts.

Yes, I noticed that too yesterday. This is one of the aspects were the abstract financial system and the real world do not correspond. In the financial system this growth is required for survival, in the real world it is impossible and unnecessary to sustain such a growth rate.

We can put this story together nicely.

Martijn said...

I like to think of the modern financial and monetary system as a virtual, three-dimensional grid or graph (imagine it is criss-crossing laser light) laid over the real world.

Exactly.

Martijn said...

The Matrix has rightly gained popularity recently.

In the end Neo was able to see the matrix. People are beginning to do the same.

It falls together nicely for me.

FOFOA said...

Yes! "The Matrix" fits nicely.

A virtual (financial) environment that most people believe is reality.

FOFOA said...

Time for a couple ANOTHER (QUOTES!)

"The present digital money undervalues all real things in terms of "gold real money". This process hides the "current debt" that by default, encumbers all assets denominated in "digital currency"! It is to say " your wealth isn't as great as your currency says it is"!"


"One should grasp that "today, your wealth, is not what your currency say it is"! In this world, paper currency is for trade, only! It is for the buying, selling, earning and paying, not for knowing the value of your family holdings! Know this, "the printers of paper do never tell the owner that the money has less value, that judgment is reserved for the person you offer that currency to"! Again, I ask, how can we know a true value for our assets, when they are known only in currency that finds it's worth, as in the exchange rate for another currency?"

Martijn said...

"The present digital money undervalues all real things in terms of "gold real money". This process hides the "current debt" that by default, encumbers all assets denominated in "digital currency"! It is to say " your wealth isn't as great as your currency says it is"!"

In the modern world, investors are engaged in a frantic rat-race to constantly earn a "yield" since it is the only way to stay ahead of the theft of value that inflation inflicts.

I like to think of the modern financial and monetary system as a virtual, three-dimensional grid or graph (imagine it is criss-crossing laser light) laid over the real world.


When the gold anchor to reality was dropped, they created undercurrents (e.g. inflation and overvaluation of the future) that people didn't notice. They thought they were perfectly on course, but in reality they were drifting of from their set goals in the real world. Al their effort perhaps prevented them from drifting off far enough to notice, but it certainly did not brought them any closer to their real world goals.

"One should grasp that "today, your wealth, is not what your currency say it is"! In this world, paper currency is for trade, only! It is for the buying, selling, earning and paying, not for knowing the value of your family holdings! Know this, "the printers of paper do never tell the owner that the money has less value, that judgment is reserved for the person you offer that currency to"! Again, I ask, how can we know a true value for our assets, when they are known only in currency that finds it's worth, as in the exchange rate for another currency?"
This is what will happen when people finally descent from the matrix. The gatekeepers from the real world will determine their position.

Interisting story altogether.

Joshua Kane said...

Hi my name is Joshua Kane. This is the first time I've been to FOFOA, although that's a bit surprising since I've been a supporter of the GATA movement and LemetrepoleCafe since their inception. Regardless, I dig this blog! Although this message is meant more as words of support, I cannot fail to mention that I have a blog that people who find FOFOA interesting might find interesting as well. Here is the URL:
http://thesystemisblinkingred.blogspot.com/
And here is the description:
This blog is about the ongoing slow-motion collapse of the global political-economic order and ways to trade on the seas of uncertainty stirred up by it.

Thanks and I look forward to reading your blog regularly!

Joshua Kane

The Mad Scientist said...

FOFOA,
Regarding solar panels, the real cost of one has fallen 99% from the 1970's inflation adjusted. Still it could of course fall more.
Regarding buying a Solar roof with very little Gold, It struck me that the monetary chaos which we all are expecting might be accompanied by a severe decrease in production of goods. Compare that with the total amount of Gold which remains static.
in such a scenario while appreciation against paper money is guaranteed, appreciation against things of scarcity ( not suggesting Solar panels is one of them) is extremely unlikely. You might be able to buy the same number of barrels of oil or bushels of wheat in 10 years with an ounce of Gold as today.

FOFOA said...

Hi Mad,

We can certainly agree to disagree on this. But as I have stated many times, freegold and consumer price hyperinflation are separate events, even if they happen at the same time.

FOFOA

The Mad Scientist said...

How would "freegold" change supply and demand logic?

FOFOA said...

Mad,

Freegold as a theory says that gold's true value IN TODAY'S DOLLARS is much higher than today's gold price, especially once it assumes its global wealth reserve status and frees itself from the paper gold derivatives market. Freegold represents a correction of macro/global imbalances through gold revaluation. Yes, it will decimate those with paper savings. But it will not punish those with NO savings and no net worth like hyperinflation will.

It is gold achieving global wealth reserve status and at the same time, the dollar losing its global wealth reserve status. This kills the financial industry and financial paper products (paper investments) which rely on the dollar's wealth reserve status. It does not NECESSARILY cause a massive inflation in the price of consumer goods.

Think of it as asset-price deflation combined with hyperinflation in only one thing, real money! The very foundation of the pyramid.

As Another said, "In this world, paper currency is for trade, only! It is for the buying, selling, earning and paying, not for knowing the value of your family holdings!"

Hyperinflation, if it occurs, will likely be partially CAUSED by shortages and will also CAUSE more shortages. It will be a nasty feedback loop of low productivity, high unemployment and many shortages.

There are many possible triggers for this. And Freegold may even be one of them. Alternatively, hyperinflation (like Zimbabwe), dollar devaluation (like 1933), or currency collapse (like Iceland) may also be a trigger for Freegold.

The fact that Solar Panels have come down in price 99% does not mean that they are undervalued in today's dollars. It still costs me about $40K to do my house properly right now. That is fairly reasonable, but I certainly wouldn't part with 42 ounces of gold for it, knowing what I know!

Freegold is actually an economic and financial reset event, while hyperinflation is a psychological and currency destructive event. If we have both, gold will go higher than has ever been mentioned on this blog. In fact, if we have both, gold will be unavailable at ANY price in terms of the inflating currency.

The trade function and store of value function of paper money should be viewed separately. Gold price suppression (whether intentional or not) has blurred this difference and mispriced all real things in terms of real money (gold).

One last example. One I KNOW you will disagree with because I know you believe that ratios will survive this event... like gold:oil and gold:silver. Under Freegold, with gold at its free floating wealth reserve level, Arabia will be more than happy to receive a TINY amount of gold for a barrel of oil. Another wrote quite a bit about this. But then again, you think he was either a fraud or delusional. So I guess we are back to agreeing to disagree! :)

Sincerely,
FOFOA

FOFOA said...

New video added.

FOFOA said...

http://www.gata.org/node/7597

SNIP:
"In his new essay, "A Tremendous Secret," financial writer John A. Rubino, co-author with GoldMoney's James Turk of "The Coming Collapse of the Dollar," foresees an imminent worldwide currency revaluation. This revaluation, Rubino thinks, will correct the biggest financial imbalance of all, the ratio between the value of the world gold supply and the supply of fiat money....

A clue in support of Rubino's speculation may be found in the communique issued last week by the G8 conference in Italy..."

Martijn said...

Volatily is back, better buckle up...

Sanford said...

An overnight currency devaluation would cause rioting in the streets. The government doesn't operate that way, they would rather inflate at a slower pace while jawboning "strong dollar policy". Like the proverbial frog, we will be cooked slowly.

I also enjoyed the video about GS. But what I don't understand why there isn't more mentioned about their proprietary "computer progamed" market manipulations?

FOFOA said...

It may not seem like it since we all hang out in the gold community sites, and contrarian sites, but the VAST majority of the investing public is absolutely PSYCHED about Goldman Sachs' rebound. GS is actually a HERO in the mainstream investing community. To them, GS is the PROOF that the "recession" is over.

Here is an email quote I received today from a trustee on a large trust fund regarding an investment decision teleconference for tomorrow...

"Goldman is a no brainer! Very bullish on that one."

FOFOA

Martijn said...

"Goldman is a no brainer! Very bullish on that one."

If they continue to rig the market this guy might be right. However, I'd gladly take is money if his unthoughfulness does not turn out in his best interest.

Martijn said...

Here is a good interview on goldman.

Martijn said...

Such revaluations, as Rubino notes, are not done gradually but overnight, so that no one can trade against them and so there is no chaotic escape from the new currency system after it is imposed.

We have theorized on this before. Doing it over night guarantees maximum impact for those engineering it. It seems farfetched to say the least, but not entirely unlikely.

About a year ago I began taking on maximum debt, so I would not oppose to this too much.

As for the debt, I have saved all the money plus I have more than sufficient cash to deal with temporary adjustmenst, I won't get cought. However, I felt I had to short the fiat system by taking on some percentage of debt (it is against a very good interest too).

But of course the G8 pledge against "competitive devaluations" was not a pledge against coordinated and cooperative devaluations.

This is not so much a hint to me, but I agree it does leave some space for interventions

Martijn said...

However, Brown did say:

"There was not a serious discussion about this," Brown told reporters. "In this present situation as we're trying to get out of a deep recession, I don't want to give the impression that there's some major change about to happen round the corner that suggests that the present arrangements are destabilized."

To me that does not sound all too positive.

Martijn said...

There has been no positive news on the economy over the past 6 months. It even keeps getting worse.
Yet the stock market has risen by 30-40 percent. On terrible economic data.
This could be a "normal" rebound, but I guess it already is inflation.
Think about it: if inflation is to arise, it will not happen in all product classes at the same time, it never does (lest a massive currency devaluation).
Now, where inflation be most likely to occur first? In the better informed (this is a doubtable statement I realize) economic sector I'd guess.
So, I believe markets are rigged, and that the upward move was manipulated, but I could also see a scenario where this manipulated move gained support from those that saw inflation coming and chose to buy stocks while they were relatively low (compared to inflated prices).

Weak point of this analysis is that it is purely qualitative, and that I have not looked at much data to support my claim.

The Mad Scientist said...

I understand what you are saying and I have not heard anything about Another that refutes my Math on his talks.
Solar Panels excluded you are making the assumption that just because Gold is undervalued it will trump supply demand for everything else. Even things that may be more undervalued today and even things that may be extremely scarce tomorrow.
In the next few years we will hit resource limits for many many things, if that environment is combined with chaos resulting in lower production, well Supply demand trumps everything.
How much would you pay for a glass of water in the desert if you were going to die without it?
Hell someone may ask for 1 ounce of gold from you and you would give it.
If there were 3 others competing with you with 999 ounces of Gold each and you had a 1000, well we know how much you would pay at that auction.
this may seem like a moot point, but I believe that many resources will face severe shortages in the next 15 years, Silver, oil, Natural gas, uranium and Food being some of them.

Ishkabibble said...

Goldman Sachs is just a shell. I think a lot of people go bullish on Goldman due to it's history, but it's the business phylosophy and people within that make it a success, not the name. When the timing is right, those within the shell will exit and regroup elsewhere, hidden from view.

Goldman Sachs is very much in the media and public eye. This would serve a pump 'n dump on their own name very well. The powers within won't want to be permenantly in the spotlight. There is NOTHING preventing their exit if they are so inclined.

I for one am NOT bullish on GS. I expect them to pop their own bubble.

SatyaPranava said...

what the heck has just started happening in silver in the past bit? temporary decouling with gold and running w/the manipulation in the dollar? has there been any word of a huge buyer? this doesn't make sense considering all the algorithms for the hedgies.

just think it's interesting.

SatyaPranava said...

ok, less significant than it appeared to be. but for a good half hour, silver kept running up while gold started down and the USD had "turned up" ever so briefly. anyway. thought it was interesting.

FOFOA said...

JS -

"There is something I cannot yet define that is coming down the track at the dollar."

define = reveal ??

Martijn said...

I am sure China and BRICs are not going to simply jump up and down screaming bloody murder. There is something I cannot yet define that is coming down the track at the dollar. My eyes and ears are open everywhere.

He has heard the talking. Maybe not the exact plan. But if he did he will not be thanked for revealing it.

If I were in dollars, I'd think again now.

Personally I am considering buying more gold tomorrow.

Martijn said...

Some guys bring rather reasonable tv these days.

Martijn said...

Fofoa,

This financial matrix basically is a map. On that map people chose certain paths that lead to a potential future. E.g. if I buy shares in Goldman I believe that in the future Goldman will be of great value. Betting on such a path - or future - is what we call financial investing.

The things we do in the financial domain can to a certain extend reflect on the underlying real world. If we loan lots of money to people that have the want but not the means for a home, they will use that money to purchase homes in the real world. As a result the real world will allocate more resources to the constructions business.

The real world does however have its limitations. People that have no real means of paying back a loan - as they are e.g. unable to add real value to society by performing a decent job - will never be able to do so, no matter how much the financial system wants them too.

When gold was the anchor of the financial system, it was calibrated to the real world - and its limitations - by nature. Gold was part of the real world by being physical, and part of the financial domain by functioning as money. With paper money that natural anchor was dropped. As a result the means of calibration between the financial map - which is an abstraction - and the real world can be changed.

Remember that even with goldmoney people are free to bet on any financial future they want, and to loan out as much as they want (hold) to people that cannot repay. It is in the reconciliation where the difference between paper and gold is.

For instance, as due to stupid betting the housing or consumer goods market grows at an unsustainable rate, under a gold money system they will have to shrink at one time in order to restore balance. This means that perhaps they have to sell inventories or machinery or stock at reduced prices. Such an adaption is what we call deflation. If money is loaned out that cannot be re-payed, the lender will have to write off on his loans.

Under paper everything is different. Now we can choose to hold on to the future financial destination we chose (bet on) and change the real world instead. Well, not exactly the real world, but its representation - calibration - on the financial map. We can choose to keep the loans valued at 100%. However, the people that they were given to and that can't repay them can never be enable to repay them in the real world. So the relative value of the loans can also not be changed. So if we artificially revalue those loans in the financial system, this value has to come from another place in the financial system. Most likely candidate: savings.

The funny thing: at the moment the financial map is changed, it is re-calibrated to the real world. At that very moment all financial representations of real world value that are effected are changed and mapped to a new value in the real world. However, sometimes it takes time to see, as we do not travel all roads as one.

FOFOA said...

Very nice Martijn.

In the paper world, we MUST loan out our savings or else they diminish and disappear. THE QUEST FOR YIELD! Loaning means taking risk. This was not necessary back when gold was money.

The financial industry has grown around the risk-free practice of skimming a profit (middleman fee, bonus) off the NECESSARY action of lending and chasing a yield. The financial industry does not really care if the lender loses his savings nor if the borrower defaults, as long as it ($FI) receives its FRONT END fee. This is how the entire financial industry feeds off the productive economy. Through the NECESSITY of lending out your savings to unknown borrowers.

Even making a cash deposit in a bank is lending your money to that bank. The only bank deposit that is NOT a loan to the bank is what goes into a safety deposit box. But if that is paper money, it is still exposed to risk of diminishment because it is not chasing a yield!

If the "savings function" of money is taken away from paper, then the financial industry can no longer survive. The gold wealth-reserve concept does NOT require the lending of your savings in order to avoid diminishment or disappearance. It is such a simple concept, which is why the paper financial industry constantly marginalizes gold.

If you are not FORCED to loan out your savings, it is far less likely that people that cannot repay will ever get a loan. This is the connection between gold and the physical world. Risk is properly priced when it is not compulsory!

FOFOA

Anonymous said...

A very familiar sound (scenario) at Goldonomics :

The Gold capping by Authorities is visible for the naked eye and it starts to fail...got some? "One day there will be an uncontained financial accident. Within hours credit facilities will be withdrawn, and there will be forced derivative position liquidations at organizations around the world. Modern derivatives will be the brokers’ loans of 1929, resulting in margin calls, liquidations, the evaporation of confidence, spectacular losses, a credit squeeze and financial chaos. The liquidations of assorted off-balance sheet positions will cause the realization of big losses in many highly geared positions. This will in turn cause dramatic re-ratings of the creditworthiness of many borrowers..." The current lull in gold prices offers a good opportunity to defend yourself before the real trouble begins!

>>> Those who think (are convinced) that another bank-holiday is impossible,... have zero arguments left for this conviction.

Everything is in place for a domino crack up. Simply a matter of time.

The thicker the smokescreen is organized,...the closer we are.

The stockmarkets cannot be pushed higher for positive sentiment when the economic fundamentals are failing. And the economies are stagnating everywhere !

Fighting this systemic (structural) stagnation with continued $-expansion is throwing oil on the fire.

Siege said...

"If the 'savings function' of money is taken away from paper, then the financial industry can no longer survive."

Today a few realize they're worth will never be safe as FRNs, but many more are starting to wonder. When the masses realize savings must be tangible to be real, we'll have the hyperinflation we fear. MOPE holds hyperinflation back, and MOPE is rapidly losing ground.

Money never was a store of value, not in the valid sense. People just percieved that because they could spend it, they could store it. Nothing could be further from the truth.

I loved the views bankers presented to me in my early 20s. We'll all be millionaires, they said. People called me a fool for not believing them and investing. They didn't realize that the dollars chase a finite number of goods. More dollars = higher priced goods. Inflation.

FOFOA said...

@ ANON : Goldonomics

And on this day... when all of this happens... how many of the GUARANTEES that were never supposed to be actually used (like Paulson's Bazooka) will be used in a last ditch effort to hold it all together?

Every guarantee that is used, adds to the MONETARY BASE. How much is actually GUARANTEED right now?? I don't think ANYONE knows. Not Geithner Not Bernanke. They have virtually... implicitly guaranteed everything! I think we'll soon find out just how DEEP the guarantees go! Every dollar in every checking and savings account will become part of the MONETARY BASE..... OVERNIGHT! From "fractional reserves" to 100% RESERVES! Just like Gono!

Even if my new theory is wrong (that the GUARANTEES THEMSELVES can cause hyperinflation), it won't matter on this day. Because they will no longer be guarantees. They will be new M0!

There will be two FRANTIC - PANICKED >>opposing<< forces. The FRANTIC - PANICKED market VERSUS the FRANTIC - PANICKED Government (FED/Treasury).

It will be a 100 yard dash between Zimbabwe and TOTAL FINANCIAL COLLAPSE!

A bank holiday is the ONLY alternative to the above. It is the ONE way TPTB can release some pressure from the system by STEALING 90% from every dollar-holder in the world! And using this theft to forgive all debts. Forced JUBILEE for the debtors, DEATH for the savers and pensioners and retirees and grandmas and widows.......

This is the INSANITY in which we live!

"Goldman is a no brainer! Very bullish on that one."

FOFOA said...

@ Martijn,

"Some guys bring rather reasonable tv these days."

Very good. Watched both parts. Highly recommended!

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SatyaPranava said...

wow, FOFOA, i guess i didn't realize what you meant when you said "open forum" :)

FOFOA said...

Yeah, I'm getting a lot of spam lately, especially in the open forums. It's like playing whack-a-mole to delete them all. I'm not even sure where they come from. They appear but my stats say that no one has visited that post. Somehow, they are just cruising through blogger comment pages spamming. Sounds like fun!

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