Sunday, August 9, 2009

Brown's Bottom

The day after Brown's announcement...

FOA (5/8/99; 20:16:12MDT - Msg ID:5772)

Well, by now everyone must be aware of the "open management" of the gold price. "Another" had been bringing this picture to light long ago. In puzzle form, he offered ideas, Thoughts and directions for consideration. Only a short time ago most analysts completely wrote off such "thinking" as being absolutely "on the fringe of reality"! Today, the "absolute fact" is that gold is used and managed as a "world currency" of major importance. After the BOE announcement on Friday, currency traders are grasping the concept that gold is, as never before "at the center of reality"!

Many different factions are maneuvering gold these days, and each has their own agenda. The IMF / dollar faction, many years ago, went along with Europe in lowering the gold price in dollar terms. It made the dollar look stable and enforced its continued use as the "currency of settlement" for strategic commodities. Any country running a balance of trade surplus of dollars, was free to buy gold at a stable to lower price, and partially replace the paper dollar reserves. Because the dollar is the "world reserve currency" many countries ran dollar surpluses with trading partners outside of the US. In this light we can see how the integrity of the dollar was expanded, even in countries of nonnative dollar origin!

Not only was physical gold purchased, but paper gold with distant CB backing was also accepted. Ever wonder how all of this gold was placed? You see, over the last many years, there has been a quiet boom going on in gold ownership. The sheer number of world gold buyers has more than doubled, along with the amount of gold owned! The problem is that the amount of physical gold in existence has not doubled, only the warehouse receipts.

Most of it never, ever left the vaults, as the true placement was done in receipt form. Yes, slowly, over the years, even major private bullion holders offered up their physical for "convoluted, future delivered, leased and released gold". Much of what is now held is little more than a form of gold options for "future deposit". Not unlike the "cash dollar that is supposed to be in your bank", but really isn't? As the bank only holds your deposit as a "credit" to your account, so is much of the world traded gold "only a credit of account"!

When Central Banks (mostly the European, at first) began to lease / lend gold, they were beginning what was to become "the master plan". The creation of a broad, liquid paper gold market that would ultimately undermine the dollar, in time. As I said above, initially it was offered as an "appeasement" for continued dollar use. However, even the IMF / dollar faction never expected the successful creation of another competing reserve currency, the Euro! Right up to its offering, the political money was on the side of a complete failure, 100% with ten to one odds.

Not only did they lose, the Euro even accepted a percentage of gold as Euro reserves. If that wasn't enough, the ECB also instituted a policy of "marking to the market" its gold reserves and effectively blocking any new sales or leases. These actions, as subtle and misunderstood as they were have had the effect of officially making gold money again. Yes, this new broadly traded paper gold market, standing side by side with the physical market has become a world currency.

The problem this creates for the IMF / dollar is that most, if not all of this new gold market is settled in dollars! Dollars that broke a contract with the world in 1971 and went off the "gold exchange standard" at $41 to the ounce. The same dollar reserve currency that is not supported when the gold price rises. If the ECB does nothing but stand firm by not allowing physical out of its vaults, the dollar will be trapped by gold. The US treasury cannot use gold as a backing reserve as the ECB does, because the BIS would claim it at $41 to settle trade imbalances. They have that authority and as such it leaves the US the only option of outright gold sales. However, with the dollar as "the" reserve currency, we can expect many nations to bid "aggressively" for any US gold. China, among others comes to mind! That is what America found when they tried to auction its gold in 1978. The Euro carries no such baggage.

This all leaves us in the present political situation, where the IMF entity, that was formed to replace the gold standard, is now trying to back the present paper gold with physical to prevent a run on the dollar. It is a futile effort as the ECB / BIS have grown the gold market into massive proportions by encouraging the many year expansion of holders through paper securities. All denominated, ultimately, in dollars. We will see $10,000 gold, count on it! It's the only way this can be resolved. That same figure will create massive backing for the Euro and hasten its journey into world reserve currency status. Expect most of the ECB liability for gold to be easily converted into Euros at the dollars expense.


J said...

"Gold is still the ultimate store of value"

Any idea if Max has read your blog? If you could get his attention it could possibly help spread the word.

Ishkabibble said...

Hi FOFOA and crew,

I have just experienced an OMG moment. For months I've been pondering A/FOA/FOFOA and I've been reluctant to accept that a failure of the USD would mean a rocket for gold... more than, say, life necessities, silver, or palladium. Today I realized my answer. A/FOA/FOFOA are right. We don't need to look to the future to explain this, nor do we need to look at gold's history. We need only look at gold TODAY.

When the US dumped the gold standard in 1971, nations continued to hold gold as a long term store of wealth. Today, nearly 40 years have passed and this is still the case. Nations are felt to be stronger when their percentage of gold holdings is high, relative to debt. For example, it was presented that China needed to increase it's gold holdings for its currency to go international. This shows how strongly gold is recognized today as a store of wealth. We all know this, but it's very important to my arguement.

Quantitative Easing has to end. In truth, it's already drawing to a close in that it can't be sustained and the world knows it. The only solution is to eliminate the debt, either through payment or revaluation of assets. This is to say that your debt is smaller if your assets are more valuable. The asset held in the greatest abundance by nations is gold, and it appears from national statements, that it is the debtor nations that hold the bulk. They stand to gain the most through a revaluation of the metal. It's THE ONLY asset they hold in enough abundance today that they can devalue against that can eliminate the debt.

Today, gold is recognized as an ultimate store of wealth. A demand shock on the metal makes great sense. The price of the dollar needn't fall, only the price of gold must change. If gold rockets up, all the unservicable debt accumulated over these years can be repaid in gold and the debt is gone. All that need be in place is a reasonable cause of the shock (paper gold) and the greatest gold content in CB reserves possible (CBs are selling less and, by their own admission, increasing their gold holdings). One must position for a revaluation before it occurs.

The asset revalued must be in the nation's holdings. CBs hold gold and foreign currencies as their main stores of wealth. Playing with the foreign currencies is of little point; they don't hold enough of them to become solvent through that manipulation. That leaves gold. There are other metals they hold, but gold is the ONLY recognized store of wealth that they hold in enough abundance to recover through.

One of the reasons I felt this could be flawed is that developing nations may not want the gold if it were revalued. But then I realized IT DOESN'T MATTER. In a revaluation due to a demand shock, the new price is the price. It may fluctuate, and it's likely to peak and fall a bit to stabilize, but the point is that you just have to accept the price. Holders of US debt will still have all their dollars, and they'll still be as sound as they once were. They will buy goods as they did before; they'll just buy less gold.

"In the end, It's not what you own, it's what you hold in your possession that will matter." CBs hold gold... and the debtor nations hold the most. That is what matters. TODAY. They grasp for gold today, not as a hedge, but as a means to benefit from the upcoming revaluation.

So much seems clear now... I see why silver and not gold, and why it is gold that will rocket. There is always the possibility that some national gold stores are gone (no audits in about 60yrs), but this won't prevent gold's revaluation. The only risk in this is that nations that let their gold slip away will benefit less when it occurs. And if the stores of gold nations claim to have are in fact gone, it will only serve to further spike gold's price.

Suddenly, Armstrong's numbers make sense. Anyone care to debunk me? I'm a little freaked out by how obvious this now seems to be.

Ishkabibble said...


"I see why silver and not gold"

should read

"I see why silver is a false hedge and gold is sound"

Ishkabibble said...

Assuming the revaluation occurs, we can determine the world's new powers. Simply redistribute revalued gold to eliminate the debt. It isn't China that sits on top. It's the IMF.

Country Tonnes Percent of Reserves
1 United States 8,133.50 77.30%
2 Germany 3,413.10 66.40%
3 IMF 3,217.30 XX.XX
4 France 2,540.90 57.80%
5 Italy 2,451.80 67.00%
6 Switzerland 1,064.10 38.10%
7 Japan 765.2 2.10%
8 Netherlands 621.4 59.90%
9 China 600 0.90%
10 ECB 533.6 23.00%
11 Russia 472.6 2.10%
12 Taiwan 422.4 3.80%
13 Portugal 382.5 85.50%
14 India 357.7 3.10%
15 Venezuela 2) 356.8 29.30%
16 United Kingdom 310.3 15.40%
17 Lebanon 286.8 33.50%
18 Spain 281.6 39.00%
19 Austria 280 40.40%
20 Belgium 227.6 37.30%

FOFOA said...

An epiphany (from the ancient Greek "ἐπιφάνεια", epiphaneia, “manifestation, striking appearance”) is the sudden realization or comprehension of the (larger) essence or meaning of something. The term is used in either a philosophical or literal sense to signify that the claimant has "found the last piece of the puzzle and now sees the whole picture," or has new information or experience, often insignificant by itself, that illuminates a deeper or numinous foundational frame of reference.


Welcome to my world! Everything seems clear when the light bulb is turned on, doesn't it?


FOFOA said...


I don't know whether Max has ever visited. I suspect he has. But he is doing a fine job himself. Solid gold Thoughts are certainly blowing in the wind.


Shanti said...

Seems my feelings are still mixed as well a bit contrarian, even more if PH said it has to do with the €.

In the case looking for the bottom Brown could push as muche GOLD into the new €-pool re-distribution system and that would turn his case 180 % as the master of timing.

The thing is we will only discover the rality after the final transition.

FOFOA said...

Hi Shanti,

I had that same thought. It is certainly interesting to think about. But can you reconcile that view with everything that has transpired since? Does the Brown of the past year seem like a Freegold advocate?


Ender said...

Hi Ishkabibble @8:48 above

When you have a willingness to accept the simple solutions, most everything seems like a move in a great game.

Continue to ponder your statements and dig deeper into the accounting. Always remember that bankers, have for centuries, held only a fraction of the gold on reserve in order to support normal banking functions and their number one function is to keep confidence in the currency.

If, at one time, the safest place to store your gold was in New York wouldn’t it make sense that these bankers would only hold a fraction of it – or – they would allow multiple counting of the same gold? It was not long ago that we heard a couple countries wanting to ‘withdraw’ their gold from the current location (in America) – yet the noise quickly subsided. Why?

When gold is held tight by bankers, the world will never know how much there really is! As it stands right now, there is just enough gold to hold confidence in the current system together. If any big player were to actually get delivery of their holdings and lock it away, the fragility of the system would be exposed for the fractional reserve that it is.

No one wants that.

Ultimately, the gold holding only matter enough to gain confidence in the paper currency which is the treasure of the bankers. All else is second fiddle.

My advice is to be wary of the numbers. GLD claims to have acquired hundreds of tonnes of gold, yet the custodians are bankers. Countries claim to hold tonnes of gold, yet the custodians are bankers. I claim to hold gold and I am not a banker!

As the dollar system implodes, it will be obvious for all to see who is really holding the gold.

Anonymous said...

Chinas wealth is in its productive capacity.if trade were settled in gold china would quickly amass most of the gold also!

Anonymous said...

CB goldsales !? How untransparent are these -so called- sales !?

In other words : How much goldmetal (out of these sales) has been physically "delivered" ? How much has been sold by contracts that (can be) are being rolled over (permanently) ?

What role soes the BIS (global gold clearder) plays in this gold-sales scheme ? Who receives how much physical goldmetal delivered (allocated) ?

That's why I always called this "gold-action"...and not gold sales/buys . Because, for the time being, we know very, very little about what really happened/happens.

The gold-action makes one thing clear to me : Gold is now being demonetized at a much faster/broader speed than the decades before. GOLD IS BECOMING A STORE OF WEALTH...A WEALTH STANDARD UNDER A FREEGOLD REGIME !

If Gordon sold gold regardless under what form,...he has been selling at market prices and not at the fixed prices dating from the gold standard (gold exchange)!

Anonymous said...

@ Anon - 2:56 pm : Gold is NOT a currency. One does NOT settle a trade with physical gold ! One stores the wealth earned with trade in gold-wealth (real money-not currency)

Anonymous said...

When the world finally tires of the dollar there must be a settlment. If not I guess they just keeo accepting dollars.china will want something of value not more paper the debt must be settled.

Shanti said...

@FOFOA 12:29

Well i could imagine that it was Brown who pushed finaly the button, but in advice of his CB.

If you think aboud it, how could an entity enter at the bottom. That rather, is strange as for a CB whith all the knowlegde.

And remember what did ANOTHER mentioned: things does not seems what they are....

Again we will only know after the facts, but as Brown is still running the show, there is certainly more behind the screen as we could see.

Anonymous said...

FOFOA- Thank you for your charity in sharing yours and others insights into the muddied waters. One emerges with clarity. The veil has been removed. The curtain pulled back to see the chicanery and machinations. On a practical note, what of paper investments in companies that mine gold? Would the shares of such companies also benefit from a revaluation of gold?

Anon, an Au neophyte...

FOFOA said...

Gold mining shares are for speculating. They are a form of paper gold. You should not consider them the same as physical. The people that expect mining shares to pay off big are expecting a replay of the 70's. This may happen as long as gold trades as a commodity. But we cannot know when this will end. It could end this fall!

FOA (5/8/99; 20:58:58MDT - Msg ID:5778)

Yes, many who invest in the gold "industry" [mining shares] are upset with this current state of affairs. However, investors that buy gold as a dollar replacement find this action much to their liking. For them gold is a currency that can not be purchased too cheaply. You see, it all depends how you view gold?
Is it a commodity or is it money? FOA

FOA (5/8/99; 21:29:28MDT - Msg ID:5782)

Hello St. George,
Good Idea! What really allowed this "master plan" of gold manipulation to work was investors putting their money into the gold industry, not physical gold. Far too many entities purchased paper gold in one form or another (most mutual funds included). This action became an accelerating trend that the BIS acted upon. They played the gold market for their own purpose. In the process they did give many people an avenue of escape in physical gold. Let's face it, buying gold in the $380 to $280 range was and still is an incredible deal, considering it's history. Now, for reasons I have laid out in the past, any paper gold may have a problem of "perceived value". If the crisis is as bad as the BOE action indicates, the very world currency system will need real gold to survive. Holders of "gold in the ground" [mining shares] will be fighting an accelerating public outcry for the government to do something! [nationalize gold mines or else tax them excessively] Know what I mean? FOA


Anonymous said...

From GFMS :

French central bank is the biggest gold seller: GFMS | 10 August 2009 |

And, 2010 the dollar will rise and euro down, ...thanks to the IR differentials !?

Isn't it wonderfull that members of the $-bank-kartel give us free advice to make money. Why do we still work for our salt ?

>>> At a time when CBs in Euroland MUST stand guarantee for TRILLIONS,...they are selling gold for a fistfull of dollars ?????

One can't even fill a tooth with this gold-currency. How could it possibly help to fill the gigantic state deficit hole ?

But as Krugman says : Smarties can still make a lot of money during this Crisis. In the mean time Krugman suggest a stimulus round II. What a farce.

FOFOA said...

FOA (5/9/99; 19:11:04MDT - Msg ID:5826)

As for $10,000 gold, does this sound strange? If it does you have probably been listening to the advocates of "gold the commodity". This group of educated investors usually "voice" their beliefs in an endearing, logical light that shines from the "pocketbook". How else can one view gold when all of their money is in the mining industry? As present events demonstrate, the use of gold as a currency subjects it to wide value swings, outside its most recent history. Truly, "gold the money" is bad business for industry investors. Gold's downside bankrupts them and it's upside negates them to mining taxes for the state! BC, all present gold operations have bet on gold maintaining a stable value, ($500??) in the realm of it's commodity function. That is why they cannot and do not want to discuss gold in a currency mode. None of them are prepared for that occurrence. However, history shows that gold is valued far higher as a currency medium than a jewelry item. Please read my FOA (5/9/99; 15:40:38MDT - Msg ID:5814). There you will find the same relationship of oil to gold as we find gold to currencies today.

Gold does not presently register it's true value in terms of things. That is because it still valued as a "backup / insurance" currency against the world paper reserve system. Yes, most of the wealth holders, today would like to see the dollar system operate, as is. For them it still offers the best of all worlds. In that environment, three fourths of humanity work to service the one fourth.

Were gold allowed to trade in the open as a currency value regulator, it's benefit to the vast majority of working people would create a "human" premium. That premium would price gold out of its "store it in the back room insurance" value and into it's historic place as "the asset that represents my life's work and dreams". A premium that says, "My families efforts are worth more than a paper account in the bank that is lent out for the use of entities I do not know"!

Yes, BC, the change from this present system of debtors will bring $10,000 gold, at the least.

thanks for reading FOA

All comments are from the days right after Brown's announcement.


FOFOA said...

Is Wall Street Ready for Obama’s Fall?
by Rick Ackerman

"The stock market’s powerful bear rally, now five month’s old, has fed on false hopes and delusional thinking, but it is unlikely to survive the coming collapse of the Obama presidency. Mr. Obama’s once-overwhelming popularity, though ebbing, has so far survived the voters’ growing discontent with his policies. However, disapproval is mounting, even on the political left, and it’s going to reach critical mass once the president’s ill-conceived plan for a government takeover of the healthcare system has gone down in flames. He will become a lame-duck president after less than a year in office, leaving the country rudderless at a time when the economy and financial system are desperately in need of a firm hand or at least the appearance that someone is in command. Investors had better prepare for the inevitable darkening of America’s mood, since its effect on the stock market will not be pretty. It is often said that Wall Street abhors nothing so much as uncertainty, but this will be far worse - a plunge into despair or even chaos that will make the nation’s depressing wallow during the Carter years seem sunny in comparison..."

Anonymous said...

" In perspective "

Today, we are getting used to talk in $ TRILLIONS.

Then we have CB (CBGA/WAG) and IMF gold-sales . 400 tonnes !

400 tonnes gold = $ 12 Billion

China and Rio have an espionage problem. China says it has costed them : $ 100 Billion.

$ 100 Billion = 3,000 tonnes gold (3-thousand - !)

The perspective : CBs guarantee/stimulate with XX TRILLIONS !!!

WHAT ARE THESE GOLD SALES ( $ 12 Billion ) FOR ???

Shanti said...

Smart conclusion Anon. And it is even getting more transparant by the day.

Certainly this is 'not' adding any confidence at all.

Get your asperin ready...

Anonymous said...

Report European Commission :

Euroland has given the green light for total bank-support with guarantee of --- 3 TRILLION euro --( 30% EU GDP)

3 Trillion € = 150,000 tonnes of gold (one hundred fifty thousand)
Is the total amount of aboveground gold.

The demonetization of gold still has a longggggggggg way to go...;)))

Anonymous said...

Nice gold-conclusion in Business Times :

FOFOA said...

Another and FOA envisioned a repricing of gold on the order of between 30x and 100x based on the paper inflation "baked in" at the time (1997-1999). But with the 2001/2002 "profligate monetary response by the US Federal Reserve" and today's "green light for total bank-support with guarantee of --- 3 TRILLION euro" it makes one wonder what A/FOA would envision if they were around today. Would it be 10x to 30x, taking into account the gold-price action of the last 8 years? Or would it still be 30x to 100x taking into account the paper action of the past 8 years? Or would it be something even more extreme? Hello? FOA?

FOFOA said...

We are all aware of the external problems the dollar has--who's gonna keep buying Washington's debt? And who's gonna keep using a currency that enables such profligacy?--but the dollar has some even bigger internal problems. Too many of them have been promised! The dollar-denominated promises are not commensurate with the value the real economy is capable of delivering!

Amid cost cutting, L.A. city pensions continue to soar

"Collecting nearly $318,000 a year, the former head of Los Angeles' Department of Water and Power tops a list of 841 city pension recipients paid six-figure benefits, according to newly obtained records.

And, like many of the retirees, former DWP General Manager Ronald Deaton will be paid more beginning this summer -- boosting his annual retirement pay to more than $327,000 -- because of annual cost-of-living increases, records and interviews show...

The Times previously reported that nearly 600 pensioners received $100,000 a year from the city's police, fire and general government retirement plans...

Former DWP Assistant General Manager Frank Salas ranks second on the list, receiving about $290,000 a year...

The Times reported in May that Parks, 65, who has publicly warned about soaring payroll and pension costs, received $265,000 a year in retirement payments on top of his $178,789 council salary.

With a cost-of-living adjustment that took effect this month, Parks' pension has grown to $273,000 annually, roughly 10% more than his final pay as police chief, records show..."

Cities Turn to State for Pension Relief

"CHARLESTON -- City officials from around the state say their communities can no longer afford to cover the benefits of retired police officers and firefighters, so they are asking the state Legislature for help...

If nothing changes, cities such as Huntington could have fewer police officers and firefighters on the streets as they are forced to cut back staffs because of increasing pension obligations. The city’s last six police and fire department retirees will likely draw $1.5 million each in pension benefits over the course of their retirements, even though each person made less than $900,000 during his or her career, according to Deputy Mayor Tom Bell said..."

These are two small examples. The promises extend far far beyond this, at a time when the real economy is shrinking. The real economy cannot afford to deliver this much real economic goods to all the pensioners. Something has to give. This internal imbalance is now at the breaking point. The solution MUST be the devaluation of the dollar. These pension promises (nominal dollar amounts) cannot legally or socially be broken. Only the value they actually deliver can be broken. In Zimbabwe, there are still pensioners receiving Z$2,500 per month. Unfortunately a loaf of bread now costs something like Z$1,000,000,000,000.


Anonymous said...

In this 1/2 hour video, Larouche gives an historical perspective of the present Crisis.

TOTAL SYSTEM COLLAPSE is inevitable ! The argumentation therefore is (imvho) waterproof.

The fact that all nations who suffer from $-imperialism have (are) continued accumulating gold,...speaks for itself.

The insights are worth your precious time. Because we are living interesting (dangerous) times !

FOFOA said...

How do I know the breaking point is finally here? Los Angeles is a perfect example. LA cannot print its own money. And it cannot borrow its way out of this hole either. And the real economy has spoken loud and clear that it is incapable of providing the money LA needs to pay its promises. Something has to give, and soon.

Anonymous said...

Germany still in credit crunch ‘danger’
By James Wilson in Frankfurt

Published: August 10 2009 15:26 | Last updated: August 10 2009 17:30

Two years after the financial crisis began, Germany is still at risk of a credit crunch as banks face a wave of corporate downgrades, the head of the country’s main banking association has warned.

>>> Soooooohhhh, what exactly have we been solving, already ?

The answer is to be found in Larouche's *tripple curve* theort...

Anonymous said...

FOFOA :...Something has to give, and soon...

Watch the $-IRs. The enormous catch-22 bubble is close to a breaking point !

Listen to the propagandists' rattle. They are getting desperate, a subtle way, though.

Keep the gold-actions of the past decade in mind and realize how dis-proportionate everything has become in the entire UN-balance.


Anonymous said...

Facts and arguments :

FOFOA said...


Good video. We are definitely at the breaking point. Monetary aggregates parabolic. Financial paper and real economy failing. Debt mountain collapsing. Perhaps LaRouche and Rick Ackerman are correct that Obama is a short-timer. We need some hope and change.


Jr Deputy Accountant said...

$10,000 gold! FOFOA, let the record reflect that I admire your large cojones.

This question popped up in my mind over the weekend and this post only makes me ask it again: is there a gold bubble? Have the swaps and the ETFs and all the other shenanigans (as you so astutely pointed out, manipulation at the hand of the central bankers and other such sins) fluffed this thing up to the breaking point? Well yes. Does that qualify as a bubble in the sense that we are used to referring to excessively lathered-up markets as? That's the question.

This, obviously, is a different beast.

A $10,000 beast by your estimate.

I guess I'll be meeting you in the bunker when all hell breaks loose.
Until then, I guess all we can do is watch and wait.

Also, not sure if you read him but Skeptical CPA has a hilarious insult that might be appropriately aimed at the IMF PTB right about now. "may you only own 30-year Treasury bonds and hold them to maturity."

Ouch, that's a burn!

I've said it before but I'll say it again... hope you're buckled in tight, I believe we're about to hit some turbulence...

Jr Deputy Accountant said...

Also to Ishkabibble up there ^^ where did you get those numbers from?

China has nearly double what you listed in gold holdings, and even that number is likely to be a lowball figure (I'm in accounting, trust me, I'm used to this):

and as for US gold, how much of that has been swapped away by more of that magical central bank accounting wonder? That number seems off to me.

anyway, even if the other numbers besides China are correct, that would put it closer to #5 though I'm happy to strap on my tin foil hat and say they are positioned even higher than that *in real life*

and that's what's important, right?

or am I totally whacked out?

Anonymous said...

■IMF puts cost of global financial crisis/crime at $12 trillion !

The staggering total is is equivalent to around a fifth of the entire globe’s annual economic output and includes capital injections pumped into banks in order to prevent them from collapse, the cost of soaking up so-called toxic assets, guarantees over debt and liquidity support from central banks. Although much of the total may never be called on, the potential outlay still dwarfs any previous repair bill for the global economy.

$ 12 TRILLION is the equivalent of 400,000 tonnes gold.

FOFOA said...

Hello Junior,

$10,000/oz. gold??? Pffffft! You have >>obviously<< not read my entire blog from start to finish.

I realize it is not quite the anniversary yet, but one of my first posts from almost a year ago (last September), in the heat of the SHTISTROM... was called Freegold.

I was just a young buck then, and I didn't give the concept proper treatment, but it is still worth a read if you find yourself impressed by a mere $10,000 gold.

You don't want to miss the sage teachings of Ender underneath the post either.


ps. You DO realize the above post was written in 1999, don't you? Before Quantitative Sleazing.

pps. I agree with you, the strawberry shortcake comment takes the cake!

S said...


Interesting was perousing trough the HSBC SEC filings and was looking at mundane depoisit trends. So went over to the site and was combing through the premiere acocunt requirements. noticed they offer multicurrency depoist accounts - but interestingly not availobale in the US. While regulations etc are sure to be blamed and there is an easy workaround for owning fx denominated assets (although the mutual complex makes it as difficult as possible to transact that way) it is fascinating that a multicurrency option is not available

FOFOA said...


Here is your answer.

FOFOA said...

The Sting

FOFOA said...

Was this request related to The Sting?

J said...

Good to see. Your Blog is starting to spread like fire.

Anonymous said...


You foresee atleast 10,000/oz for gold. Jim Sinclair on the other hand says "Gold is going to $1224 and $1650".

How does one reconcile these numbers? There's a big difference between 10,000 and 1650.


J said...

He says on to Alfs numbers which is $10,000 plus and I believe he also said over $17000 in a conference but I cannot track that down at the moment.

FOFOA thinks Gold is going way higher than $10,000

Here is a quote from ANOTHER

"I ask you, how can currency price gold? Indeed, no price will work! You think any form of "paper gold" will stand this fire? Can we do battle with lions? When oil will not take currency without gold the havenots will not sit still!"

FOFOA said...


Here is a recent link to Jim Sinclair. And here is a snip:

"Gold is headed to $1224 on its way to $1650 and Alf’s numbers."

Here's another. And another snip:

"I have no doubt that the gold price is going to and through $1000 here on its way to $1224 and $1650. Following that it will move on to Alf’s numbers via its normal drama."

What do you think "Alf's numbers" are?

If you don't know, you can find them here.


FOFOA said...


You beat me to it J.

I think Jim's $17K target was somewhere in Axstones thread.

Anonymous said...

" The Sting " !?

Now we can look back a decade at this schocking view and conclude that the pro forma (temporary) $-stability (US$-index maginot 80) is still in place and the many "unwindings" (panic) not materialized, yet.

But it is not only the yen/gold carry that has to unwind, but also the incredible debts and deficits.

But the writer forgot to bring "China" into the equation : I don't see China/Japan ever coordinate (act in concert) ! That's the purpose of the G2 idea (Brezinsky). China wants to crash Japan in the process and come out as the sole "winner" ???

Anonymous said...

A " yellow " collateral !?

Aug. 12 (Bloomberg) -- The vaults of Credito Emiliano SpA hold the pungent gold prized by gourmands around the world -- 17,000 tons of parmesan cheese.

The regional bank accepts parmesan as collateral for loans, helping it to keep financing cheesemakers in northern Italy amid the worst recession since World War II. Emilia Romagna-based Credito Emiliano’s two climate-controlled warehouses hold about 440,000 wheels worth 132 million euros ($187 million).

“This mechanism is our life blood,” said Giuseppe Montanari, 65, a cheese producer and dealer who uses the loans to buy milk. “It’s a great way to finance our expenses at convenient rates, and the bank doesn’t risk much because they can always sell the cheese.”

Anonymous said...

Another " sting-like " view :

US >>> China . G2 paradox !?

Anonymous said...

Another " sting-like " view :

US >>> China . G2 paradox !?

alex berre said...


I deeply appreciate all the work being done to inform the public of the real value of gold. I read your blog every day since a few months. We need more people like you in this injured planet.

I can’t ask any friends or business partners as their knowledge and comprehension on this delicate matter is way underground.

Please allow me the opportunity to be the devil’s advocate for one second:

“We are all aware of the external problems the dollar has--who's gonna keep buying Washington”

They don’t need anyone to continue buying dollars. The dollar’s value will soar when they finally make public the news that there are 1 trillion new barrels of oil in their strategic, untapped reserves inside the USA:

Paraphrasing Martijn from a month ago, “what is it that we are missing?”

The magicians at the Fed and USTreasury must sure have an ace under their sleeve, something like a last resort solution. It sure might be this new oil reserves. Notice how the MSM never mentions them.

As a great chess player, they are probably thinking 5 steps ahead of us.

Enough oil for the next 2000 years. The dollar will skyrocket. Gold will be placed on the sidelines once again.

J said...

In the first article it says up to 4.3 Billion barrels. Where did the 2nd article get 2 Trillion from? It says to reference the first article for verification but nowhere in the first article do I see anything even close to 2 Trillion barrels

alex berre said...

Hi J,

There are probably 2 answers:

- figures are estimates, and various companies have given them different estimates based on the technology used, and

- wrong figures are purposefully given out for the same old purpose of confusing us

Mantis said...

Vast, untapped oil reserves do indeed exist throughout North America. I do not know when they will come online, but assuming they will, I suspect it will be after the dollar as we know it has collapsed.

I do not believe they plan to support the dollar indefinitely. The ace up their sleeve is confiscation of wealth via a dollar devaluation or collapse. They want to own everything. Oil is their defense mechanism.

Gold is the nexus of oil, fiat money, labor, and food. Because of its strategic importance, the truth of gold, as partly revealed by ANOTHER and FOA, has been deliberately hidden.

FOFOA said...

Hello Alex!

Good comment Mantis!

I agree. I do not think this is negative for gold. I believe that oil is there, and more. If that is the case, then the US has an incredible REAL wealth reserve. Article 2 suggested (?) the oil represents a resource base of $5.3 trillion. If the US also has its stated gold, that might be another resource base of $20 trillion after the dollar collapses.

So for the sake of the mathletes out there, let's say this is a wealth reserve of $25 trillion combined (in a Freegold world). Well, the US is already in the hole of debt for $12 trillion, or maybe it's $24 trillion after the bailouts, or even $100 trillion if you count all the liabilities. This is in today's dollar world. So a reset of the monetary structure is still in order. That will crush all the debt down to what it is really worth, and raise the REAL resources to their proper value.

If you were a million dollars in debt, headed to bankruptcy to get your creditors off your back, would you reveal your new $750K inheritance before or after bankruptcy?

Here is another post from FOA, not exactly addressing your question, but I think there is an important truth at the end of the post:

FOA (5/9/99; 15:40:38MDT - Msg ID:5814)
el St.One (5/9/99; 3:31:32MDT - Msg ID:5795)
I know well your thought on Gold stocks, do you hold the same opinion about stocks of USA oil producers?

el St.One,
That is a good question. I have thought about this for some time. Of all the world corporate citizens, oil companies will have the worst time of it. The 1970s oil shock was induced by the US taking the dollar off the gold standard. It had nothing to do with supply and demand or the world running out of oil. Plainly, it was a shock of "pricing" oil to allow for the depreciation of the currency. Some said oil rose far too much to have represented the resulting depreciation. Nonsense! Oil was priced far to low, at the time, because it was expected that the dollar would honor gold conversion at $41+/- and then slowly depreciate by changing the rate to $500+ over time. A form of official, sliding devaluation against gold, while maintaining international convertibility. It was then, just as today, that the "expectation" of receiving gold at a bargain rate that allowed for cheap oil. When the dollar broke from gold, it's oil conversion rate (oil price) had to make for "past lost value" first, then rise to equate "current value". Nothing has changed, as oil has come down over these past years because official gold was made liquid through a paper exchange. The only difference is that gold is off the official exchange standard and trades in an open, highly liquid market, LBMA. No one has to set a rate, you just buy it. Of course, all of this is yesterdays news, as the entire system is in evolution.

What does this have to do with oil stocks? The second oil shock is coming, and this one will not be about the dollar going off the gold standard. The shock will arrive in the form of world oil no longer being traded in dollars as the major settlement. If you think nations will run to grab "gold in the ground" during a currency crisis, wait till we see how they grab "oil in the ground" during a "REAL" oil crisis.

A country can operate without gold during a hyperinflation for some time, but they cannot even defend themselves without oil. Think about it? FOA

They won't want to OWE all that oil to an external world in exchange for past debts. Nor will they want to ship that oil out of America in return for their own paper! They will want to OWN that oil outright, keep it for their own defense, and receive something of REAL value for any small amount of oil that leaves America's shores.

Think of it as a role-reversal between the US and the Saudis. What the Saudis wanted then, the US will want now.


Anonymous said...

Well, that's a very sad outlook for the world and a good one for US.
For gold advocates may become a Black Swan event.
What I do not understand is why was/is Iraq/Iran so important yet?
Why should they manipulate the world on the edge of the cliffs if the outlooks are that good? Just greed?
Anyway it's not pleasant waiting for their coup in the meanwhile. I am not sure they would not rig gold once more, even if it's not logical. Very sad seeing these psychopaths in power able to destroy the world for ever and ever! Even the Russian have been a bunch of innocent children compared to these WORLD FASCISTS! And I most certainly don't love the Russian either.
BTW: who knows this isn't one more lie?

Anonymous said...

Dollar doomed or ready to boom?

"The Dollar Sentiment Index for the Dollar Index reports just 3% bulls among traders, an extreme level only five times in the past 20 years, usually near an important low," Prechter wrote on Aug. 5. "The last time we saw readings like this was March-July 2008, just before the dollar soared."

Deflation or inflation?

"Two men enter, one man leaves" - Auntie Entity -Thunderdome (1985)

But who leaves?

FOFOA said...

ANON: "Dollar doomed or ready to boom? -- Deflation or inflation?"

Two different things.

This brought to me the image of a man drowning who cannot swim. If someone tries to save him, he will push them down faster than himself and possibly drown them as well on his way down.

There is a tactic I saw in a TV show where a lifeguard found herself in this position. The tactic is to let the panicking drowner take you down. You stay calm and hold your breath. He will actually drown before you because he is panicked. Then you can bring his limp body to the surface and attempt to revive him.


Anonymous said...


I have been enjoying your blog. I have a question ( naive it may be).

You mentioned in your blog that when the systemic "rubber band" snaps and resets itself gold will seek its own freedom. But I suppose this snapping back event will have its own severe consequences on the USD. My question is when the USD finally bites the dust what will be the effect on other economies - especially the BRIC econnomies? (I mention BRIC because I belong to a BRIC nation).

I would like to understand what the snapping back event will mean to the average Sally in a BRIC nation and how should she protect herself from what ever bursts forth?

(a worried and concerned BRIC Sally)

FOFOA said...

Hello Sally,

Generally speaking, the BRICs are net-producers of real economic goods and real commodities, as opposed to the West which are net-consumers. The consumers are the debtors, and the producers are generally their creditors.

In the reset, the creditors will lose much of their bad investment in the West. The West as it turns out, was not such a good credit risk. But going forward, the reset will be a very positive event for the BRICs.

The dollar is everywhere. So it is impossible to know all the consequences of a dollar collapse. Any paper promise, including other currencies, could be in danger.

Physical gold will be a safe haven no matter where you live. And a stockpile of food is also a good idea. Think real possessions rather than paper promises of future claims. Many promises will be broken, everywhere.

Right now, 75% of the world (including the BRICs) are basically indentured to (enslaved to, working for) the financial and monetary wizardry of the other 25%. The snapping back event will even things out once again. Put things back in balance. Restore equilibrium.

It may not bring heaven on earth, and it may not bring everything you hope and dream for, but in my opinion, you cannot go wrong by holding some physical gold right now.


FOFOA said...

Denninger on the SP500 P/E ratio...

"Nobody talks about risk and reward on Fall Street, because that would force them to talk about valuations. You know, that pesky thing that S&P tabulates? Let's have a look.

One hundred and forty-three?!


Don't worry, its time to "buy buy buy" (snicker), even though the P/E on the S&P 500 has never been this high. In fact, its more than double its all-time high print, which incidentally happened as the 00/01 train wreck began.

Is it different this time? I guess it could be.

But what about the probability that it's different this time? If you've got 100+ years of history on valuations and over time they tend to correct back to the mean, what sort of growth is implied by a P/E of 143.95, and what are the odds that this growth in earnings (and GDP) will be realized?"

Me: I like to think about the P/E ratio as a way to calculate the right price when buying a business, something I have done before. A P/E of 143 means you are paying for a business, let's say a Bed & Breakfast, a price that will take you 143 years JUST TO BREAK EVEN!!!... based on the current earnings. Hmmm....


Anonymous said...


Thanks for the guidance. One more (naive?) question.
You mentioned holding some gold. For a Sally in the real world with real world constraints in daily life how much gold would you think is a decent amount to hold.

I know the answer is based on an individual's personal parameters but any indicative figure (like atleast xx ounces)would be appreciated.

Thanks again,

FOFOA said...

Hi Sally,

How's this for an answer? At least one ounce!

It all depends on your savings, and how soon you will need it.

Whatever part of your savings you don't need in the foreseeable future, that is your wealth reserve. Do with that what you would do with the Mona Lisa if she were your's.


Anonymous said...

"We are on the verge of a global transformation. All we need is the right major crisis and the nations will accept the New World Order. "

--David Rockefeller

Don't know if Rockefeller ever said this and in what context . But the "idea" on itself is frighthening.

FOFOA said...

The Motivation Behind The Countdown

Dear Comrades In Golden Arms,

85 days to go!

Today's incoming emails exceeded the 1200 mark, a great degree of which are asking me what is the motivation behind a countdown of days for the USDX.

There are various answers to this question of which TA is the least important.

The primary reason for this "out on the limb statement" is that the recent China/US financial Summit meeting in Washington which was requested by China, was not significantly pre-planned.

As I understand it there are two things wanted and one thing disapproved of.

The US financial leadership wants, but more so needs, Chinese buying of US Treasury offerings to remain at these levels but more so to increase to offset the wholly unavoidable increase in offering of US Federal Debt.

The Chinese wish to see the USA support the creation of a Super Sovereign Currency as an offset to dependence on the dollar for international settlements and national reserves.

The Chinese rightly feel that the greatest risk to their present dollar position's valuation is quantitative easing. or simply put, the monetization of one's own debt by the electronic creation of money for funding yourself.

I am informed that Chinese interests want to see both in 2009.

You will note that the QE program was extended until October, particularly the end of October. This is what Bernanke would like to see, hoping the Management of Perspective Economics will succeed. The Chairman as the academic he is really believes it is possible.

As market related, I know MOPE works only when it has the wind at its back such as from 1981 until 2001. After that it loses it strength until it evaporates into reality and the law of economics such as now.

Quantitative easing cannot be curtailed in 2009 or 2010. To curtail QE as the US Federal Deficit explodes would be to release interest rates to the marketplace that could easily take them to late 1979 early 1980s levels due to a currency event.

The USA cannot support a Super Sovereign Currency. To do so would be to disavow the US dollar as the universal reserve currency which the financial leadership of the USA still adheres to, seeing this period as only an aberration in the constant.

The USA, due to market considerations, cannot yield to Asia and China as spokesperson for the BRIC on the two criteria required to remain as purchasers of the US Treasury instruments, which is the only real support the dollar presently has.

I have given you two tools for timing as well as other resources like Martin Armstrong who was at one time nearly unknown in our crowd.

Tools of timing, some I have not shared with you, indicate a major potential turning point that could easily see a break below .7600 or .7200 coming in the final quarter of this year.

Add this all together and you get a November bull's eye for a loss of confidence in the US dollar internally as well as externally. That will end the misguided belief that MOPE, via its tool SPIN, defeats economic law.

Van Mises, Ricardo and Adam Smith have not been laid to rest by market manipulation. The wind is in the face of business now as a long-term trend. We are returning to basics and moving away from the fancy, complex and fraudulent.

All of this could have been fixed prior to the event of Lehman declaring bankruptcy. Now there are no PRACTICAL SOLUTIONS and NO PRACTICAL EXITS FROM CONSTANT QE.

Pandora's Box is open, only to be closed by markets as the downward spiral goes to its practical end, a return to commodity money.

We, here, will be proven correct in time and in price.

Respectfully yours,

Jay Midnyte said...

Kissinger said something close to this also on CNBC this summer. It's on youtube.

And I love this blog. You (FOFOA) add some specifics to the situation worldwide that helps clear it up.

Anonymous said...

The "dramatic" consequences (domino-danger) of fractional reserve banking + unproductive debt building + hyper leverage !

Toxic Loans Topping 5% May Push 150 Banks to Point of No Return

Share | Email | Print | A A A

By Ari Levy

Aug. 14 (Bloomberg) -- More than 150 publicly traded U.S. lenders own nonperforming loans that equal 5 percent or more of their holdings, a level that former regulators say can wipe out a bank’s equity and threaten its survival.

The number of banks exceeding the threshold more than doubled in the year through June, according to data compiled by Bloomberg, as real estate and credit-card defaults surged. Almost 300 reported 3 percent or more of their loans were nonperforming, a term for commercial and consumer debt that has stopped collecting interest or will no longer be paid in full .

>>> China knows that $-QE HAS to go on in substance and time.

Their $-surplusses are in the process of being devalued...destroyed.

Better to act too early than too late...

Anoniem said...

Me: I like to think about the P/E ratio as a way to calculate the right price when buying a business, something I have done before. A P/E of 143 means you are paying for a business, let's say a Bed & Breakfast, a price that will take you 143 years JUST TO BREAK EVEN!!!... based on the current earnings. Hmmm....

That is a bit high indeed.
However, I guess a high p/e ratio is normal for recession rebounds.

As the markets precede main street, a logical sequence could be:
high earnings, high stock price
prices decline, than earnings decline
at the turnaround prices will incline first, followed by earnings.

As for the ratio mentioned above:
143 is way too high.
Either earnings have to rise (not likely)
Or stocks will fall.

Guess we'll be seeing some of the later soon.

FOFOA said...


Don't forget that the forward P/E ratio is around 700!

SP500 PE Ratio is Now at a Mind Blowing 723!
Previous all time high was 46.

Think a correction might be due? I have been saying that the markets have not been forward looking at all for the past year. How can they be when everything is rigged?


Anonymous said...

Hello and Thank You FOFOA from your neighbour to North. How do you think Canada and it's currency will fare during this "reset".


Anonymous said...

Swiss National Bank (SNB) :

In its statement, the bank also announced that it had sold 105 tonnes of gold to private investors for 3 billion francs, thus completing a planned sale of a total of 250 tonnes of gold.

>>> had sold 105 tonnes to PRIVATE INVESTORS...!

>>> ...completing a planned sale...!

Those private investors have certainly NOT been overpaying the precious.

FOFOA said...

Current Franc spot price is 1015. It appears those "private investors" paid about 888 per ounce. That is a 12.5% discount on spot. Hmmm... do I have this right?

Could this be looting by the well-connected? Scorched earth retreat by some bankers? Exchanging those bonuses for something that will hold value through the fall?

Anonymous said...

Who says the stated amount of 3 billion francs is truthful? Who on earth is able to verify what they say?

In other words: can they say whatever they want or not?


FOFOA said...

Hi Bob,

One of the dollar's biggest problems (both internal and external) requiring a reset is that at current prices the US economy is incapable of delivering value to match the outstanding dollars and dollar denominated promises, even at any reasonable fractional rate. Its problem is in delivering real value, not in delivering different colored paper. So the reset will be against real things, not against foreign fiat currencies or financial paper. And remember, they are all fiat currencies, even the ones in commodity zones and net-producer zones.

It is impossible to know how the market and the foreign currency issuing authorities will react. So as I said to Sally, all paper promises are in danger, even foreign currencies.

Perhaps they will not devalue as much as the dollar. But the dollar's demise will unmask the truth about gold, and that event in and of itself will cause a rush into gold from all currencies. This will rocket the price of gold, even in Canada.

So maybe your loonie will buy you more coffee in Seattle after the reset, but I would still be aware of its intrinsic "paper quality" heading into this storm.


Martijn said...


Some appreciation for you and your work is more than justified.

I've been of for a bit, searching for a bigger picture. This crisis is not only about paper and gold as I'm sure we all know, but about something that effects all human beings.

I know I will never be able to find the true essence or the total picture, as there is none. I know that.

What we experience today is the culmination of what we all do. All humans, all religions, all people. As we are all different, and all great individual beings, there is no way for one of us to see it all.

However, I have been greatly moved or touched by seeing how some of us chose to stride for what they feel is right, or needed.

That is a force of great value, and you are truly a part of it.

Therefore, I send you all my respect and appreciation and I want to let you know that I deeply value the purpose you are fulfilling.

I'll be around, enjoying the open and thoughtful atmosphere you have created. I have enjoyed your blog and will continue to do so, as I am sure many others will. The call of the century post was truly great.

Keep up the good work, keep up the atmosphere. It's what matter in times like these!

The invitation for beers remains open.



FOFOA said...


Thank you for your kind words. And keep those beers on ice, you might be needing them soon.


Steve B said...

Just checking in after a busy week.

Jay Midnyte = Well Kissinger is a Trilateral. It all makes sense. They are all coming out of the woodwork. Their baby is about to be born.

Martijn = nice post, I second the motion re: FOFOA. As to your post, I think you touch on the quest for truth. It can be known. I think the big pitcure can be seen, clearly. Me, I have trouble with the details.

FOFOA = I am going to write a big post on my quote when I have time. I haven't even read that thread yet.
I have been reading on gold confiscation. It would help Uncle Sam pay the bills. Physical gold/oil will add up to a lot of bucks.

The market may want to lift gold up, but anything is possible in a crisis. And one is coming. Soon.


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