Saturday, October 17, 2009

Gold is Money - Part 1


Does this strike you as a curious title for an FOFOA blog post? I'll bet some of you are saying yes while others are thinking "huh? What kind of a stupid question is that?" Onward...

One of the greatest compliments I receive is when people say that I write in a way that anyone can understand. But one of the reasons my posts come across this way is that I really try to avoid stereotypical and dogmatic words. I especially try to avoid words deeply embedded in our elite academia. The problem is that these words carry so much baggage. They carry a standardized mental picture that is often wrong. In fact, some words carry multiple images specific to different factions of belief.

This "word problem" creates confusion and often stirs misguided debate founded on different definitions. "Inflation" versus "deflation" is a perfect example. So to avoid misunderstandings, I try to explain my Thoughts through descriptions rather than dogmatic words.

Hyperinflation, however, is one word I do use, because I think it portrays the best visualization I can deliver as to how the dollar's collapse will unfold. At the same time, I am careful to explain that I believe gold's price explosion is a totally separate event that is coming. It is not DEPENDENT on hyperinflation. In fact, hyperinflation could theoretically be avoided while gold's price explosion cannot.

Along these same lines, explaining myself descriptively, I state that my position is "deflation in real terms"... in terms of gold! What makes it so difficult for traditional "deflationists" to grasp this concept is that deflation (my description of deflation) will end in hyperinflation! "Hyperinflation", as I have shown, has much more in common with their understanding of "deflation" than it does with the common understanding of "inflation". As I like to say, the only thing hyperinflation and inflation have in common is nine letters. And I also like to say that in the end we will have hyper-DE-flation in all things measured against gold, and hyper-IN-flation in all things measured against dollars.

I am opening with this long prelude only to demonstrate my "descriptive" intentions as I now tackle the most dogmatic and divisive word of all... MONEY! What is money? Answer this question honestly and I think a lot of what I write may suddenly come into clearer focus.

Gold is Money

This is the dogma among most in our crowd, is it not? Gold is money! Who on earth can dispute this (practically) divine statement? Well, I'm not here to stir up trouble, so I will leave this one alone for the moment. But I hope we can all agree on at least one thing for the moment. How about this one?... "Gold is a form of wealth!" Hopefully we can at least agree on this statement as we proceed. Gold is a form of wealth.

Functions of Money

"Money", as it is understood today, has three main roles. The late Dr. Willem F. Duisenberg, former President of the ECB, in his famous acceptance speech for the International Charlemagne Prize in 2002 stated it well...
What is money? Economists know that money is defined by the functions it performs, as a means of exchange, a unit of account and a store of value.

Our modern understanding of money is that it has three roles or functions: 1) A medium of exchange, our TRANSACTIONAL currency, 2) a unit of account, a "number" used for comparing relative values, held in each person's memory AND on paper for bookkeeping (and legerdemain), and 3) a store of value, or wealth.

What I would like to do now is to take a broader view of money. A thought experiment that will transcend the last 38 years of our monetary experience. I hope to transcend even the last century, the last 233 years of our United States, perhaps even the last millennium. Let us think about money in terms of the last 2,500 years. And perhaps then we can gain a new perspective that yields a fresh understanding of what the heck is going on right now!

Etymology

Etymology is the study of the history of words. Now I am no expert, but I would like to point out what the dictionary says about 'money' and 'currency'. From my post, On Hyperinflation:
Two definitions are important in this discussion. These are from Webster’s Dictionary:

Currency (1699) 1 a: circulation as a medium of exchange b: general use, acceptance, or prevalence 2 a: something (as coins, government notes, and bank notes) that is in circulation as a medium of exchange b: paper money in circulation c: a common article for bartering d: a medium of verbal or intellectual expression

Money (13c) 1 : something generally accepted as a medium of exchange, a measure of value, or a means of payment

Note that the first known use of the word Money in the English language was in the 13th century. The word Currency didn't make it into the English language until more than 400 years later.

Note also that the appearance of the word 'money' in the English language came 800 years after the fall of the Roman Empire.

Thought Experiment

Now on to our Thought experiment. This comes to us courtesy of FOA on The Gold Trail. I have edited the length of FOA's presentation for the purpose of this post, but will keep it in blue to differentiate the source. The entire post can be found at the link above.

Owning wealth aside from official money units is nothing new. Building up one's storehouse of a wealth of things is the way societies have advanced their kind from the beginning. What is new is that this is the first time we have used a non wealth fiat for so long without destroying it through price inflation. Again, a process of using an unbacked fiat to function as money and building up real assets on the side. Almost as if two forms of wealth were circulating next to each other; one in the concept of money and the other in the concept of real wealth.

This trend is intact today and I doubt mankind will ever pull back from fiat use again. Fiat used solely in the function of a money concept that I will explain in a moment.

Understanding all of this money evolution, in its correct context, is vital to grasping gold's eventual place in the world. A place where it once proudly stood long ago.

All of this transition is killing off our Gold Bug dream of official governments declaring gold to be money again and reinstitution some arbitrary gold price. Most of the death, on that hand, is in the form of leveraged bets on gold's price as the evolution of gold from official money to a wealth holding bleeds away any credible currency pricing of gold's value in the short run.

To understand gold we must understand money in its purest form; apart from its manmade convoluted function of being something you save. Money in its purest form is a mental association of values in trade; a concept in memory, not a real item. In proper vernacular; a 1930's style US gold coin was stamped in the act of applying the money concept to a real piece of tradable wealth. Not the best way to use gold, considering our human nature.

By accepting and using dollars today that have no inherent value, we are reverting to simple barter by value association. Assigning value to dollar units that can only have worth in what we can complete a trade for. In effect, refining modern man's sophisticated money thoughts back into the plain money concept as it first began; a value stored in your head!

So you think we have come a long way from the ancient barter system? Where uneducated peoples simply traded different items of value for what they thought they were worth? Crude, slow and demanding, these forms of commerce would never work today because we are just too busy, right? Think again!

Lean back and think of all the items you can remember the dollar price for. Quite a few, yes? Now, run through your mind every item in your house; wall pictures, clothes, pots and pans, furniture, TVs, etc... Mechanics can think about all the things in the garage, tools, oil, mowers. If one thinks hard enough they can remember quite well what they paid for each of these. Even think of things you used at work. Now try harder; think of every item you can remember and try to guess the dollar value of it within, say, 30%. Wow, that is a bunch to remember, but we all do it!

I have seen studies where, on average, a person can associate the value of over 1,000 items between unlike kinds by simply equating the dollar price per unit. Some people can even do two or three thousand items. The very best were some construction cost estimators that could reach 10,000 or more price associations!

Still think we have come a long way from trading a gallon of milk for two loves of bread? In function, yes; in thought no! Aside from the saving/investing aspects of money, our process of buying and selling daily use items hasn't changed all that much. You use the currency as a unit to value associate the worth of everything. Not far from rating everything between a value of one to ten; only our currency numbers are infinite! Now, those numbers between one and ten have no value, do they? That's right, the value is in your association abilities. This is the money concept, my friends.

Unlike the efficient market theory that was jammed down our throats in school, we all still use value associations to grasp what things are worth to us. Yes, the market may dictate a different price, but we use our own associations to judge whether something is trading too high or too low for our terms. We then choose to buy or sell at market anyway, if we want to.

In this, we have moved little from basic barter. In this, we are understanding that an unbacked fiat works because we are returning to mostly bartering with one another. A fiat trading unit works today because we make it take on the associated value of what we trade it for; it becomes the very money concept that always resided in our brains from the beginnings of time.

In this, a controlled fiat unit works as a trading medium; even as it fails miserably as the retainer of wealth the bankers and lenders so want it to be.


So how did your Thought experiment go? Did you come to the conclusion that the concept of "money" in its most pure and primal form is the mental association of values in trade? That it is the actual thought process inside of our minds that we use to associate the relative value of real things? "Money is just a book keeping accounting of real wealth!" "Why do we need to save this stuff anyway?"

So, to assign this concept to one of the three "functions" of modern money, the pure money concept fits best within the unit of account function.


Modern fiat currency, our modern physical transactional medium fits best in the means of exchange function. And real wealth, with gold as the most liquid, durable and portable example par excellence, fits best in the store of value function.

History

Now let us take our Thought experiment back in time, before the words money and currency entered the lexicon. In those times, gold was just another form of wealth that was traded in simple barter. But gold had certain qualities that made it especially convenient to trade. And it also had qualities that made it especially good to hold as wealth! For one thing, it was not needed for other functions, so one could hold as much as possible without infringing on anyone else!

A hat was also wealth. So was a pig. A hat could be traded for a pig just as easily as a piece of gold. But pigs were for eating and hats were for wearing. And if one man became wealthy enough to hoard all the hats, there might have been an outbreak of sunburned heads! :)

The point is that gold was not "the pure concept of money" any more than hats were, or any more than paper dollars are "the pure concept of wealth"! When the ancients stamped gold into coins, they were simply making a true barter item, a wealth item more recognizable and easier to use. Even without any legal tender laws, this barter item, coined or not, still carried its value in its weight.

But as "the pure money concept" (the unit of account function) crept in and attached itself to the numbers stamped on gold coins, the door was opened to the debasing of wealth and public theft through the clipping and diluting the metal content of the coins. Enter the appearance of Gresham's Law!

Even still, was gold really what we think of as "money" back then? According to FOA, the answer may well be no:

We were first alerted to the "gold is money" flaw years ago. When considering the many references to gold being money in ancient texts, several things stood out. We began to suspect that those translations were somewhat slanted. I saw many areas in old texts where gold was actually referenced more in a context of; "his money was in account of gold", or; "the money account was gold", or; "traded his money in gold". The more one searches the more one finds that in ancient times gold was simply one item that could account for your money values. To expand the reality of this thought; everything we trade is in account of associated money values; nothing we trade is money!

Well, I put it off at the beginning of this post, but I'll ask it again now... Gold is money! Who on earth can dispute this (practically) divine statement?

I ask this again only as a rhetorical question. Because as I pointed out in my long prelude, this post is all about confusing and misleading dogma presented through the use of stereotyped words. Money being the worst of all!

Are we using Wim Duisenberg's definition of money, consisting of three roles? Or are we using our own newly discovered "pure concept of money" definition, consisting of only one of those roles? Or are we suggesting, when we say "gold is money", some NEW definition based on a hybrid role assignment? What is "honest money"? And what does someone mean when they say "gold is money"?

Can you see how common words that different people define differently can cause great confusion and disagreement, even when it is not really warranted?

And can we now agree on these three statements at least? 1) Gold is a form of wealth. 2) The pure concept of money fits best within the unit of account function. 3) The word currency best describes what we currently use in the medium of exchange role.

Okay, with this newfound partial agreement in place, let us take a look at where we are heading. And let's see if we have gained any new understanding. Here is a little more from FOA:

Today's talk is, once again, a more detailed continuation of our theme: the evolving message of gold. I'll begin now.

Our modern gold market price illusion is little more than a product of the fiat dollar system; a design that denominates gold credits in a contract form. Is it a free market? Why yes, very free. But... TOO free, in the sense that contract supply is totally unlimited. Investors bought into this market even though they fully well knew 90% of the volume was represented by only cash equity on the other side. Knowing that, they somehow expected that those contracts were limited in creation by the fixed amount of gold in the world. Their mistake, not the market's.

Clearly, anyone schooled in classic hard money Thought should have known that this was just another gold inflation; a transitory era between money systems. This was a time to gather gold over the years, not invest in the leveraged aspects of gold's new fiat versions. Nor, to buy into the gold industry that owed its life and cash profits to the maintenance of such a system; transitory as it was. The expanding fiat universe was best used to gather real wealth each time the transactional fiat currency cycled through your domain.

Anyone that understood this knew that this is how you handle an evolving process. For myself and others, knowing that gold's inherent value could not change much and was historically undervalued in its comparative value to all things, we bought gold in quantity. We tossed aside Western concerns about shifting currency prices of gold.

This entire paper-gold trading realm represents the conclusion of a convoluted, decades long attempt by mankind to tie his fiat money concepts to physical gold. These centuries of gold/money tie-ins will end in a colossal breakup of the entire fiat money-plus-gold concept; leaving gold and fiat to trade independently of each other.

Unfortunately, it's on the dollar's watch this will all end as this gold failure is running in parallel to the dollar ending its position as a world reserve currency.

The above is a good summary of FOA's message. I am sure that some of you have read The Gold Trail, but I'm curious if you felt a slightly deeper meaning in it now that we have discussed the pure concept of money. And if so, you should try reading the whole of A/FOA again! It can be found at the top of my favorite links to the right.

You know, I often visit websites and forums that proclaim, "Gold is Money!" I have no argument with them. Obviously they are talking about the store of value function in Wim Duisenberg's definition of money. I mean, clearly gold is not our currency nor unit of account. And sometimes I visit sites that proclaim "We must return to honest money!" And again I have no argument. I understand that they are simply fed up with the built-in inflation in our modern medium of exchange that infringes on their store of value concept. I couldn't agree more.

Yet here I am to tell you that gold is now becoming completely demonetized! That the odds of us going back on the old gold standard are right around zero! That the inflating paper gold contract market has kept gold in a monetized state, even though we left the gold standard. But that is now coming to an abrupt end. I am here to tell you that even if we get some sort of new super sovereign global reserve currency with a certain "portion" held in gold, this will not mean the remonetization of gold!

Look no further than the political stylings of the Euro to see how this new super sovereign currency would work. Gold may be a portion of its reserves, just like the Euro. But also, just like the Euro, that gold will be marked to market! (See: Your Own, Personal, Freegold)

Indeed, Duisenberg also had this to say in his famous speech:
[The Euro] is the first currency that has not only severed its link to gold, but also its link to the nation-state. It is not backed by the durability of the metal or by the authority of the state.

Yet somehow its required 15% gold reserves have risen to 55.6% in ten years! And for some reason its gold reserves are still on LINE 1 of its financial statement! Hmm...

But current global confidence is too shaken for a new reserve currency to work just yet. Gold may end up being the single object that restores confidence enough for a new reserve system shared by many nations, but not at today's gold price. Not anywhere even close to it!

The human concept of money is changing whether we like it or not. It is being torn apart. Gold, as a wealth reserve and wealth asset, will exist and trade parallel to the world of fiat, the world of credit and debt. Producers and savers will finally have the option to switch tracks so to speak. To get on a parallel track that avoids the inevitable collision with the debt-hungry collective their savings have always faced.

And as we pass through this phase transition, as gold switches from the transactional track to the wealth-reserve track, it will take on a whole new meaning... and a whole new value! The non-dollar part of the world already knows this. This is why they are buying gold now! You see, as a truly demonetized wealth asset, gold has a much much higher value to mankind than it does as a transactional money. To get an idea of the difference, just compare the basic transactional money supply with the vast quantity of so-called "paper wealth dollar derivatives". This should give you an idea of what is coming!

Sincerely,
FOFOA

84 comments:

Anonymous said...

I like your articles ;)
Keep'em coming. You really help me think outside of the box.

The sad thing is that the majority of the world is gullible enough and I think once again they will be made to believe the new and improved SDR + some new mumbo-jumbo is the end of their worries about the current fiat currencies.
Most of ppl are not willing to understand how money and fractional banking system works (steal their savings and productivity).

Will we be ever able to learn on a world wide scale ? :) - rhetorical question.
Can we invent a monetary/currency+banking system that will act more like a truly real time voting system and weed out the bureaucracy and corruption.

I've lived both in socialist/communist and capitalist societies and can say both steal from the hardworking ppl w/o them knowing. And from experience I can say that the majority are not willing to learn, even that will probably take them 1-2 hours watching couple of videos on youtube to understand the basic concepts.

wish you luck

FOFOA said...

Hello Anonymous,

You say, "The sad thing is that the majority of the world is gullible enough and I think once again they will be made to believe the new and improved SDR + some new mumbo-jumbo is the end of their worries about the current fiat currencies."

The majority that you are so worried about understanding your point of view don't have the power of The Judgement of Value that is necessary to affect change. As your mother says, "you worry too much".

"I've lived both in socialist/communist and capitalist societies and can say both steal from the hardworking ppl w/o them knowing."

This power they have comes from the producers and savers saving their excess within the same system of credit and debt that must, by its very nature, debase their savings. This is what is ending, including the power they have. All of their plans of world domination or whatever depend on the dollar's survival. In the case of the dollar's collapse, their "plan B" is a scorched earth escape with only personal wealth.

"And from experience I can say that the majority are not willing to learn,"

The sheeple do not matter as much as you think. They will in the end, to the extent that Freegold will take hold and work. But the transition to get there is not being driven by the sheep. Here is a quote from a recent response I made...

"It is an economically Darwinian feature of evolution that drives BIG money to safety when threatened.

No I don't have that kind of money. But it was precisely this trait that directed me to the golden path. So I do know something of what I speak.

Again, it is the GIANTS that will drive this bus. Not all the morons and lemmings that you worry about. They'll learn by witnessing, whilst the giants will learn through necessity, lest they become poor lemmings themselves!"

Sincerely,
FOFOA

Shanti said...

FOFOA,
Compliments for the brilliant explanation !

Media should put that on theire frontpage.

Ivo Cerckel said...

http://twitter.com/IvoCerckel/status/4966504466
Money is fundamentally about politics. Required moral training arises only if one spent years considering what justice & virtue consist in.

More from Socrates later ...

Anonymous said...

FOFOA great post. Just for fun, I have always wondered if the LT relative values of the USD and the Euro would track closer to the relative gold holdings of the US Treasury and the ECB.

Anonymous said...

"This power they have comes from the producers and savers saving their excess within the same system of credit and debt that must, by its very nature, debase their savings. This is what is ending, including the power they have. All of their plans of world domination or whatever depend on the dollar's survival. In the case of the dollar's collapse, their "plan B" is a scorched earth escape with only personal wealth."

Are you kidding? Hell hath no fury like an elitist scorned.

You are 100% incorrect. The dollar's survival has nothing to do with their plans. TPTB will not go away when the dollar does. C'mon.

Anonymous said...

"A financial coup d'etat!"

Watch this video.

Then ask yourself "why didn't they discuss the death of the dollar?"

It is because THAT is the dividing line, the pivot point, and the fulcrum between everything they are worried about, and everything FOFOA focuses on. If the dollar remains the reserve currency, if it doesn't collapse in value, then everything they fear will come to pass.

But if the dollar loses its grip, then the outcome is totally different. It is different for who pays for all the past sins. It is different for who has the new power. It is a totally different paradigm. The best they can hope for is to make off with some loot. Probably gold loot.

Your "elites" power is given to them by the willing sheople. It is not taken by force.

"Hell hath no fury like an elitist scorned." Ridiculous!

More like "Even cockroaches don't scurry under rocks as fast as an exposed, neutered elitist".

Your fear of the elite is irrational. They are big pussies with money.

Anonymous said...

Hell hath no fury like a scorned public!

Hell hath no fury like a scorned and ripped-off 75% of the world!

Hell hath no fury like a scorned lynch mob!

Hell hath no fury like a suppressed, explosive wealth asset!

Anonymous said...

The dollar and gold cartels are COOKED! Powerful circumstantial evidence is unfolding!

Brand new Fekete!
He addresses Rob Kirby's "Blight on Humanity" as well as other rumors floating around.

Also related-->>Dear Mr. Murphy!

In yesterday's Midas you reported something about "doctored gold bars".

I posted it on my gold website Hartgeld.com

Shortly thereafter I received a message from a well established tungsten dealer in Germany:

He stated that recently strange enquires for large quantities of pure tungsten came to him from Asia. The people making these enquiries are not known in the industry. He thinks they buy for someone else. Maybe it has something to do with these "doctored gold bars", or not.

If it is the case, it must be a large scale operation. They seem to look in the whole world for tungsten. Maybe it is to exchange the contents of gold stores (like GLD) and make them "audit proof". It is not easy to find out, if a "gold bar" has a tungsten core or not - except by melting it. Which financial auditor would do it? probably none, because it is too much effort and they believe in the LGD-system.

Bringing such bars onto the market is another thing, because the buyer might test them. The gold cartel would do this only in the most dire emergency, because it the fraud becomes open, almost nobody would trust the LGD-system anymore. It probably has already happened. If these bars mentioned in Midas show a paper trail back to a cartel bank, bad for this bank. Is their situation already this bad?

Besides, making tungsten "gold bars" requires a quite sophisticated operation, this metal has a very high melting point, but is the only one with the same density as gold. Also, forging the necessary paper trail is not easy for the common criminal, but easy for a bank.

Most gold refineries in Europe trust nobody and no gold coming in. They melt, test and re-refine everything. Imagine, a lot of tungsten cores showing up in London Good Delivery bars. Maybe a large number of doctored bars is already out, but nobody has tested them?

As it looks, the gold cartel is on its last legs.

Best Regards from Vienna, Austria
Walter Eichelburg

Ivo Cerckel said...

Let the Greater Depression now start!

From The Times
October 19, 2009
Discovering if we learnt the lessons of Black Monday
Gerard Lyons: Economic view
http://business.timesonline.co.uk/tol/business/columnists/article6880225.ece

As Sathnam Sanghera puts it today, the fact is there are situations where complaining is pointless and inadvisable. I was born 1962. As far, as I, Ivo, can remember, that is the 1973 oil crisis, following Nixon breaking Bretton Woods, "we" have always been in crisis. Later I learnt to call this a "-ession"-thing. "Rec-ession", they said. Let the real, and indeed the Greater, D-thing now start.

From The Times
October 19, 2009
A national need to whinge is cause for complaint for any right-thinking person
Sathnam Sanghera: Business Life
http://business.timesonline.co.uk/tol/business/columnists/article6880002.ece

Men of Athens, I honor and love you; but I shall obey God rather than you, and while I have life and strength I shall never cease from the practice and teaching of philosophy, exhorting anyone whom I meet after my manner, and convincing him, saying: O my friend, why do you who are a citizen of the great and mighty and wise city of Athens, care so much about laying up the greatest amount of MONEY and honor and reputation, and so LITTLE ABOUT WISDOM AND TRUTH AND THE GREATEST IMPROVEMENT OF THE SOUL, which you never regard or heed at all? Are you not ashamed of this?, asked Socrates in Plato’s Apology.

The Men of Athens were not interested in what money is. Only in grabbing the paper.

Owning wealth aside from official money units is nothing new. Building up one's storehouse of a wealth of things is the way societies have advanced their kind from the beginning, says the Gold Trail.

The Men of Athens were not interested in owning wealth aside from official money units.

The unexamined life is however not worth living, so concluded Socrates.

The English word "money" dates to c.1290, "coinage, metal currency," from old French moneie, from Latin monēta "mint, coinage," from Monēta = "she who warns", a title of the Roman goddess Juno, as money was coined in or near the Capitoline Temple of Juno in Rome.
http://en.wikipedia.org/wiki/History_of_money#Etymology

Juno Moneta warned of instability.
http://en.wikipedia.org/wiki/Moneta

And she was the guardian not only of money and but also of wealth.
http://irelandsown.net/june.html

Sounds familiar?

Ivo Cerckel

OLD.FRT said...

A tour de force!
Thank you.

You neglected to say that Fiat Currency is required to pay your taxes.
So, no matter what one might think of this currency's inherent qualities, the "voluntary" act of tax payment in it, validates the State, which in *its* inscrutable wisdom provides us all with more and more paper.
This will end in a gigantic disaster for the world economy.

Anonymous said...

It seems to me that the old USA will default on its debt at some stage in the future....it may print a bit - but in the end it may turn out to be a cheaper option to simply default.

What happens to Gold then?

Anonymous said...

Thank you for the Fekete link to the one who posted this. Love Fekete, he is brilliant. I have been pondering this rumour running around the web. FOFOA do you have any comments on the Kirby article/Yamashita's treasure angle?? Thanks to FOFOA for your brilliant work. You and Jim Sinclair are my nightly homework!!

Anonymous said...

Where will Gold be in dollars in 2014?

SatyaPranava said...

anon 10:14

hopefully gold won't be in dollars in 2014 :)

Anonymous said...

More anecdotal intrigue from Hartgeld:

Bill,
This is interesting

http://www.roskill.com/report.html?id=82

QUOTE

There have been very few new applications for tungsten in recent years and most end use markets are relatively mature. This means that average growth rates tend to be generally in line with cyclical economic activity. However, global demand rose from 45,100tW in 2002 to 60,500tW in 2005, an average of 10%py. Demand for tungsten is forecast to grow by an average 3%py to 2010, when it will reach 68,250t.

END

So there were no new uses for tungsten yet there was a sudden spike in demand where the annual growth rate tripled from 2002-2005. I calculate the anomalous extra demand to equal 21,000 t. That is certainly a very provocative number after my recent article!! This is by no means proof of anything but a sudden massive increase in demand for a metal that has no new applications and is in a mature market is difficult to explain away. Perhaps there WAS a new use for tungsten that very few people know about…like making fake LGD gold bars!

Most LGD bars will be kept in vaults in London and not be re-assayed if they don’t leave the vault. An almost water tight fraud once they are accepted in to the vault that even auditors could not detect. The plot thickens!


Auditors will need to be armed with equipment to make electrical resistivity tests!

BTW tungsten is about $100 per mt compared to gold at 32 million dollars per mt!
Adrian

-------------

Is that all a scandal maker? NO, not yet anyway. But it is very worth sending this input to gold holders all over the world. EH … as our friends up north might say? No harm no foul there. For sure, it adds potential fuel to a growing fire to the growing stink in the gold market that something is seriously wrong about gold inventories. SMOKE? It is more like the worst smoke-filled fire California’s experience after a dry season and the Santa Anna winds kick into high gear.

It certainly ought to make gold owners take notice about the status of gold in GLD, or other suspect depositories, and it certainly ought to want to make them read Adrian’s two latest…

10/16 Adrian Douglas - HOW MUCH GOLD HAS BEEN SOLD THAT DOESN’T EXIST?

------------

Was my reply to Bill Murphy, the trigger for this Sunday Midas?

The investigation conducted by Adrian Douglas has shown that the tungsten demand is massively increased in recent years, but there are no new applications for this metal. Was the new application "Gold Bars"?

And - no auditor would be a LGD to test bars, which is already stored.

Let's wait and see what comes out as yet.

Anonymous said...

How do they test for the tungsten?

FOFOA said...

FYI, this story is about 400 oz bars, not Krugers.

And if there is any truth to this story, then it is as explosive as you can possibly imagine. Potentially lights out overnight. I am paying attention because this has caught the attention of some very powerful physical gold advocates like Bill Murphy, Adrian Douglas, Antal Fekete, Rob Kirby and Walter Eichelburg. Which means it is being closely followed by some very powerful gold OWNERS!

This is a must read!
SNIP:
"There are two foreign depositories for gold:

1. Bank of England

2. Bank of NY

There is no doubt that the source of the "tungsten" is the Bank of England...

In summary, we have learned that the Bank of England had three types of gold in its foreign depository

1. London Good Deilvery bars

2. Gold of Coin Melt (.90000 gold ) received no doubt from Fort Knox

3. Gold bars filled with Tungsten and not .999 gold.(discovered by Chinese owners of gold at a foreign depository)

I can see gold auditors descending both of our foreign depositories and I can assure you that French authorities are now descending into their vaults beneath the Seine River to conduct assays on every gold brick that they have received in trade with other nations.

Rob Kirby is as sharp as they come. His sources are impeccable. Stay tuned to this story!!!...

We also know that China has publicly announced that they are recalling ALL gold being safekept in London and other cities and moving it to Hong Kong. If there is a game of musical chairs being played with 400 oz. bullion bars, that may be related to the China situation...

It now seems that the Chinese asked for an assay on some of their bricks and lo and behold, some were filled with Tungsten. You can imagine the nightmare that this presents itself...."


The new Fekete is also a must-read!

FOFOA said...

On testing for Tungsten. Translated from German...

Readers letter-NZ - gold bars with tungsten core test methods:

As a mechanical engineer, I have taken a few thoughts on the fake gold bars with a tungsten core.

The discussion is in my opinion, missing an important point.

If the problem is known, that at least one of such bars has appeared to be, then be exercised pressure on the auditors to examine the stock on these forgeries, and to document these tests according to publicly. Audits only make sense if they are safe and glaugwuerdig, otherwise you can also save these audits altogether. Therefore, it is also important that you, GATA, Midas ... strongly point out the problem. It could also be Pruefungen publicly questioned, which is not evident that a Check for took place on tungsten nuclei.

For known problems there are also (almost) always solutions. Develop-Destructive Testing, for a nucleus in gold bullion with fundamentally different physical properties than gold is not difficult, and determining a test is not smaller than exact weight and volume. An ultrasonic methods have already been mentioned on your page.

Because tungsten has a Elastizitaetsmodul of 411kN/mm2, and gold only 79kN/mm2, is a simple, non-destructive bending test possible. The gold bar is in the elastic range (the tiller bounces after the examination is its original shape) over a defined and measured force deforms the deformation / deflection. The manipulated gold bullion has a much stiffer, bends at the same load so much less. The measurement method does not have to be very accurate, since the material characteristics have extreme differences. Almost every old is better hardness tester, the better in every Industiebetrieb found, could be converted to such a test machine.

Other methods such as sound samples, or based on the different thermal conductivity or Warmekapazitaet can develop easily.

The point is, being forced to carry out the auditors corresponding Pruefungen! A failure of such tests so would be a strong indication for Manupulation!

As Godhaendler could such an audit as a service offering / service. Simply an appropriate Haerepruefmaschine on Ebay bid to rebuild from mechanical engineering students, and the customer is satisfied. Thus, could never get manipulated bullion in the market.

Jimmpy said...

Some usefull info to detect the Tungsten Gold Fraud :

http://reactor-core.org/~djw/myblog/archives/2008/10/24/T12_14_56/

Damn. I knew I've should have stayed awake in physics class.
I'm more worried though about the paranoia this story will create among potential physical gold buyers.

Anonymous said...

Gold coins are a totally different concern than gold bars. They can't be filled and the best ones can't be counterfeited. Tungsten is too brittle. You would have to make thousands and thousands of coins to make a good counterfeiting effort pay off. Most of the counterfeits that show up are the wrong weight or size. Very poor quality. If thousands and thousands of quality counterfeit coins were circulating, you would know. Just because it is possible, doesn't mean it is cost effective.

Bars, and especially this Kirby story, are a totally different thing. This news, if real, is bigger than freegold for the price of physical. If this story is true, it doesn't matter if the little people stop buying coins. Gold will rocket to outer space without them. Coins will have a huge premium if all gold bars must be assayed. Physical will separate from paper and we're off. Comex and GLD will drop to unimaginable depths and physical gold in your possession will become priceless overnight.

The existence of counterfeit gold does not make real gold less valuable, it makes it much more valuable. Especially in forms that are easily recognizable and difficult to fake!

Martijn said...

Leap2020

Anonymous said...

* Melt Up * !

http://www.cnbc.com/id/33375999#

B.

Anonymous said...

Can each bar be trailed from its manufacturer and serial number to who brought it into the depository? If so you can hold the depositor responsible. I can't imagine people dealing with large, valuable bars of gold without some safeguards and certification.

Anonymous said...

Your "elites" power is given to them by the willing sheople. It is not taken by force.

"Hell hath no fury like an elitist scorned." Ridiculous!

More like "Even cockroaches don't scurry under rocks as fast as an exposed, neutered elitist".

Your fear of the elite is irrational. They are big pussies with money.

Hey 3:40. When do the sheeple wake up, they won't. This is a global elite, not an American elite.

Who is gonna expose them, you? he media? Wake up man.

Not discuss the dollar collapse. WHY would THEY do that, so the sheeple could have a clue? It will happen suddenly when the time is right. Ever hear of front running market. Welcome to Vegas if you think this is a free market.

Re: force. They, the elites, or progressives have been in control for 80-90 years. What makes you think it is gonna stop? It isn't.
Prepare for global rule by the elites. Oh yeah, and they won't take it by force then either.

If you can please tell me who or what is gonna stop them, I am all ears.

Tekin said...

@ Anon October 19, 2009 9:48 AM

This is a global elite, not an American elite.

This is interesting. Do the Russian, Chinese Indian and Western elite work in unison? Is the Western elite homogeneous or are there warring factions?

Could you expand on that?

Thanks in advance.

Anonymous said...

Tekin,

Where did central banking start? It started with one bank, then they helped or forced other countries to set up their central banks and so on. Maybe with the help of IMF or World Bank, but whats the diff.

Im sure after seting up all these central banks around the world, the original central bankers just walked away and let those new central banks operate on their own with no interference.

Anonymous said...

But all this banking elite talk is just conspiracy talk for tinfoil hat wearers.

I mean if I was a banking elite and could print as much paper money as I wanted, and manipulate world markets more then theyve ever been manipulated in history; I sure wouldnt try to take over the world and set up a police state dictatorship. I would just let my 100+ year system collapse and allow freegold to set the sheeple and Lemmings free from my tyranical grip.

S said...

Great post. The ZH article on CME taking margin in gold is a great tell - I suppose they are reiterating your position.


The geopolitical side is also noteworthy - per Leap 20/20. note the Baluch attack this weekend whcih ocmes on heels of similiar attacks over past few years. Recall a year or so ahgo Amhedn. canceled a trip there due to violence and threats. Regardless, the IRG is npw explsicitly threatening the US/UK. Indeed BBC now declaring Karzai has't won the election and will be forced to a runoff against his will. The Pakistanis jusyt launched into Wazirirstan. What will Israeli do?

I don't know why, but the Leap story keeps me thinking about the Japanese bond fraud story. Seems pretty amazing that the Japanese are indicating that they are moving in a totally different direction as confirmed by non intervention and the move to China export and internal model. Could it blow up - sure. Will it, hard to tell. japan is clearly cozing up to China despite protestations about the importance of the US alliance.

But the bond story remains top of mind. Could this be another shot fired in the shadows? The gold/bond frauds are interesting for only one reason - both were of such sophistication that it points to major players. Think North Korea and $100 dollar bills.

The dollar crisis is really about how the $ block losses are absorbed. No one debates where the growth is in the future so it is really a question of how quickly we get there. All of these stories scream that a new "dirty war" is underway

Anonymous said...

Anon 10:57

Your post is like an alloy.

50% serious, 50% sarcastic.

I sure wouldn't try to take over the world and set up a police state dictatorship. I would just let my 100+ year system collapse and allow freegold to set the sheeple and Lemmings free from my tyranical grip.

Are you kidding? If that is not sarcastic, that is the silliest thing I have read on this blog. You will see the state before you see the dictator. Heck, you might see the state start this year.
If I were them, that is exactly what I would do. Milk everyone. Then when everyone needs something else, show them what is behind door #2.

You are a fool if you don't see it. Freegold ONLY happens if it benefits the giants. If there is too much benefit to the sheeple, then the regional currencies will change to one currency when the hammer comes down.

Anon 10:10
Do the Russian, Chinese Indian and Western elite work in unison?

Sure, look at history. Who do you think made China what is it today? You guessed it, us. The elites have always been close to communism. I think I read on here about how these elites "hate competition".

With regards to "warring factions", it used to be a USa/Euro union. But not Asia is player in the game. All this talk about the Chinese dollar bound is a joke. I think Jim Sinclair is right on that. Don't think China is as pissed off as you think they are. They just have to do a better job of keeping the sheeple happy, hence get them the gold now.

So no, history tells me the elites are global and if you "warring" with them you are not of them.

Selector said...

you actually have to have possesion of gold to own it that is why it precious. otherwise, it's just a promise to deliver gold. even if you dont have a ton of money, its worth going to the pawn shop and buying a few rings. you can research articles on what argentinians did when their economy fell apart. . .

Tekin said...

Iran Warns U.S., U.K. of Retaliation After Attack

http://www.foxnews.com/story/0,2933,568482,00.html

Russia ready to join Iran anti-terror fight

http://www.presstv.ir/detail.aspx?id=109060&sectionid=351020101

from another forum:

"Wonder what Mossad and CIA are up to this week? Now that they definitely have their obvious scapegoat and that scapegoat has motive?

yep the Dollar is crashing. gotta get the War started!"

Anonymous said...

Ok
so what do we need now?

A video doc revealing how 2 nice huge bricks of Gold look like Gold, heavy & expensive.

However - this one here - although looks just like its twin AND weighs the same - is filled with a metal called tungsten....see - we will cut it in half for you.

You can see the tungsten metal here....oh and bullion banks most likely have hundred if not thousands of these!

Imagine THAT on the nightly news...THAT is what we need NOW!

Martijn said...

Good article from zerohedge.

Martijn said...

And some more gold criticism for those interested: click

The rise in gold is primarily the result of speculation and a falling U.S. dollar. These are exactly the “untenable” forces that contribute to a Bubble, not a genuine Bull market. The difference is only a matter of time.

SatyaPranava said...

i think there have been several articles re: gold looking strong in numerous currencies beside the dollar.

i figure you're playing devil's advocate, martijn, and keep that up. but the only currencies i've looked at that don't look quite strong are the australian and new zealand dollars, hardly, at this time, anything to be concerned about.

Martijn said...

Although it might be looking strong, gold in Euro's is nowhere near its high, which was around 780 (vs 710 now).

Another interesting article can be found here. It's called "Yamashita's gold" and argues that there might be some more gold around than most people think.

Martijn said...

In spite of the links I posted above, Market Skeptics is featuring some "bullish" articles on gold.

Martijn said...

The Market Skeptics article is on the Yamashita article I linked above.

Both are suggested reads.

FOFOA said...

Martijn,

Just for balance it should be noted that "Option 2" in your first link relies heavily on a foundation set in place by Sterling and Peggy Seagrave ("the Seagraves") in their book Gold Warriors.

From your Thunder Road link, "An almost forensic explanation of this subject was written in 2003 by Sterling and Penny Seagrave in “Gold Warriors – America’s Secret Recovery of Yamashita’s Gold”.

“As a precaution, should anything odd happen, we have arranged for this book and all its documentation to be put up on the Internet at a number of sites. If we are murdered readers will have no difficulty figuring out who ‘they’ are.”

In an interview in 2003, Penny Seagrave was asked why she and her husband avoid travelling to the UK and US:

“We have been warned repeatedly that something will be planted in our luggage, so we can be arrested and salted away. Neither one of us wants to be a permanent guest at Guantanamo... The collaboration of Bush and Blair in lying about Iraq makes us wary of both regimes.”


Here is one criticism of the Seagrave's book posted on Amazon.com by someone who did some digging... for balance, of course:

"Many of the earlier reviewers of "Gold Warriors" have admired the voluminous references presented by the Seagraves to support their incredible assertions. However, I'd like to point out that my personal investigations into a sample of their sources have exposed the Seagraves' quite cynical "research" methods. They are prepared to use sources that are laughably insubstantial, and then present these sources as if they are highly credible. The Seagraves also deliberately misrepresent the words of a source to make it fit the story that they wish to convey.

The whole of page 62 of "Gold Warriors" is given over to the Seagraves' theorising that nearly 400 Allied Prisoners of War were massacred after stowing gold bullion in a mine on Sado Island, Japan. This is outrageous. The source that they use, "Betrayal in High Places", is a book that looks extremely unreliable when first picked up, and its claims fail to be confirmed by any other historical source. In any case, "Betrayal in High Places" does not actually claim that any stolen gold was stored by the POWs!

I am one of the authors of a recent historical paper, published in the Journal of Military History, which has proven the Sado Island Massacre story to be pure fiction. The Seagraves are smart enough to have worked this out for themselves, but they have chosen to legitimise this fantasy in order to sell their books and CDs.

The Seagraves further illustrate their manipulative ways when they cite an innocent travel book as the source of their further assertion,
"more than a thousand Korean slave laborers ... on Sado Island also vanished without a trace" (bottom of p62).

This is just another dishonest misquote. The travel book (Waycott: "Sado: Japan's Island of Exile") actually says, "...During these years, forced labor was certainly used: of the tens of thousands of Koreans imported to work for Imperial Japan, more than 1,000 are known to have been sent to Sado. Of these, 145 are said to have 'escaped' (but where to?) and a dozen or so - surely a low estimate - were killed. Their existence became public knowledge in 1991, after records were released of Mitsubishi's distribution of cigarette rations to its workers."

Westcott's travel book is actually quite pleasant and informative, and there is nothing dishonest about his speculation - but it's only a travel book! Historically, it's clear from post-war Korean records that many "escapes" were indeed successful (often into the local community, or by fishing boat back to nearby Korea). It's also true that a relatively small number of Koreans were killed in mining accidents, and that no "massacre" occurred. Waycott doesn't allege a massacre in any case - but the Seagraves do!
(Page 62 of "Gold Warriors" can be previewed online here on Amazon, for those who would care to check for themselves...)


...

FOFOA said...

...

The Seagraves are obviously misusing these sources quite deliberately. I think it's very reprehensible for modern authors to push this type of mean deception masquerading as history. This is not a victimless crime. (My mum's brother died as a prisoner of the Japanese in WW2, and it is upsetting to see authors such as the Seagraves take these liberties with the emotions of dead POWs' families.)

Not content with pocketing their customers' money for this book, the Seagraves also use their book to continually push their privately-sold CDs, which they claim contain the "evidence" to back up their assertions. In fact, most of the documents on the CDs are just correspondence between "treasure hunters" - who also make their money by selling their Treasure Maps to the gullible... These are hardly independent or authoritative people! Many of the "certificates", which have been laboriously translated (possibly to tire out the reader) can easily be seen to be fakes once you look at images of the "originals". They have cut-and-pasted values for the gold on deposit!

The CDs even torpedo the Seagraves' own assertions in some places. On CD#1 (Jones.PDF file, page 65), a 1997 letter from "R. A. Medland, Senior Manager, Commonwealth Bank Group Investigations/Security Dept." [Melbourne, Australia] says that the gold deposit certificates are, "utter rubbish"! There's also a scary-looking photo of a sleazy Indonesian "lawyer" displaying the "certificates", and a hilarious document very reminiscent of a "Nigerian Letter", purportedly from President Suharto of Indonesia, on the same CD.

Gee, it's a pity these Certificates are rubbish - they were for 420 tonnes and 120 tonnes of Gold !
(US total annual production in 1940 was 155 tonnes, just to show how incredibly unrealistic these numbers are.) "

FOFOA said...

Martijn,

You said, "Although it might be looking strong, gold in Euro's is nowhere near its high, which was around 780 (vs 710 now)."

700 was the euro ceiling that was breached. It is arguably more significant than the $1000 ceiling. "Nowhere near its high" is almost as misleading of a statement as articles like this one from TODAY, which says,

"Oct. 19 (Bloomberg) -- Gold fell, extending its decline from a record last week, as a rising dollar and falling equities weighed on investor confidence..."

I realize you are playing the devil's advocate, but you are starting to sound like CNBC.

Anonymous said...

What do you guys think about this idea I posted here :
http://www.chrismartenson.com/blog/exponential-money-finite-world/29744?page=8#comment-54580

FOFOA said...

Hello Raptor,

It agree that you are thinking along the right lines here. But I would ask you to give some serious consideration to a naturally evolving, elegant system I like to call Freegold.

Your system requires a great deal of agreement and cooperation between peoples who don't agree very much. I think if you give some thought to Freegold, you will find that it has the same effect that you propose, but within the existing structure, so no need for global planning of a whole new, complex system. The elegance of this idea comes from it being the natural direction that monetary and economic evolution is already taking us.

The current trend as I see it will be for regional currencies. Probably something like Latin America, GCC, Asia, Euro, etc... I doubt the SDR will flourish and become the new dollar as some people think. In fact, I think there is a good chance we will revert back to national currencies after a period of regional ones. But this is all a non-factor in what is coming. Anyway...

It is often said that there is not enough gold in the world to back all the currency, let alone all the perceived paper wealth. But that is only a function of gold's price. At a high enough price there is plenty of gold.

The euro has "printed" over the last decade, making its outstanding liabilities (currency ++) increase faster than the value of its gold. If the gold market was free, meaning price discovery came from the physical market, this would not happen. The euro's gold as a fraction of its reserves has risen from 15% to 55%, yet as a fraction of its total liabilities it has fallen from 15% to 12%. The difference between these two perspectives is wholly related to the reserve dollar and the fractional paper gold market.

In Freegold, a currency will be backed by gold and exchangeable with gold automatically, but not through the CB like the old gold standard. Instead, through the free market floating goldprice. Right now it is an illusion that the $ is exchangeable with gold at $1065 because of the paper gold market, and because of suppressed demand through the MSM/Fed/WallSt. et al. If everyone tried to cash in their dollars for gold, guess what would happen.

...

FOFOA said...

...

The CB's FX (gold) reserves will lend each CB credibility. Each CB can use these reserves to increase its credibility on the global stage if it wishes, by selling or buying gold. Imagine that at SOME price, all of the ECB's liabilities would be covered by its gold reserves. Then if it wishes to print some more, the gold price will simply rise in Euros as demand to exit Euros and enter gold increases.

The currency zone as a whole will be automatically judged on the world stage by the net flow of gold in or out of the zone, as measured by currency flow through the central currency exchange, since there will not be a $ reserve currency. Imbalances will be automatically righted through arbitrage if gold becomes "cheap" in any particular currency zone.

A productive (properly managed currency) zone will have a net inflow of gold, a strong and stable currency, and an inflow of capital for business! (See my currency flow chart in Bondage or Freegold) The key here is that all imports will be purchased in the local currency of the exporting country. This is what will naturally happen as the dollar loses its reserve status.

The concept of money is something personal we all hold in our minds. Some will end up using their currency, others will use gold. This will be the difference between the pay-as-you-go crowd and the credit card crowd. The official concept of money (the collective's unit of account) on paper will be the currency for the purpose of collecting taxes.

So we aren't really messing with the "unit of account" function as it already exists. Officially that will remain the same, unofficially people will be free to associate the values of all real things (even gold)!

Fiat currency and gold are both stores of value for different durations. Fiats work well on a very short timeline. Gold works brilliantly on any timeline, even multi-generational.

Okay. I am getting carried away here. I did like your post. But I try to focus on what IS happening, not what I think we should MAKE to happen. I think this is the best way to protect our savings now and to profit as we pass through the inevitable change that is coming.

Sincerely,
FOFOA

Anonymous said...

hi FOFOA,
raptor here... OK, I tend to agree with you flow of thoughts.. but then here is a practical problem.
As this devaluation of currency happens in real-time, I think most of the governments in the world and the banks will try to fight it either trough confiscation or trough taxes. Let's say 50% on selling gold.

How do we solve this problem ?

FOFOA said...

Hi Raptor,

First of all, it is clear that the dollar faction WANTS a controlled devaluation right now. One that cannot necessarily be traced back to them. It appears they may be sabotaging their own currency right now through the price of oil (and possibly through gold as well). It is when things get out of control that they may start to panic. But then it will be too late. That Rubicon may have already been crossed in any case.

As you study the Freegold concept through the writings of FOA and Another (and also through my blog and Ender's contributions), you will learn that as things unfold the governments of the world will actually ENCOURAGE their citizens to hold gold as the better alternative to them holding foreign currency and foreign assets. This can already be seen in China and in the Eurozone, where gold can be purchased tax free from your bank teller.

As gold rises in value, governments WILL levy heavy taxes, but not on the sale of gold. The heavy taxes will be on the introduction of NEW gold... the mining industry. The alternative (which is also possible) will be the nationalization of gold mines as a national treasure, an in-ground store of wealth, much like oil is an in-ground store of energy. They may tax gold mining at high rates like 80% or even 90% or more, but still the mining industry will be more profitable than it is today... even with those high taxes!

The reason they cannot tax the sale of gold is that the basis of a physical wealth item like that will be impossible to track. Sure they can tax it like any other sales tax. But the huge gain in purchasing power I talk about will be a one time event. After that, gold will simply follow inflation. So how will the govt. be able to tell the difference between someone who bought gold today at $1,060 and sold it at $80K, between someone who bought it at $79,500 and sold it at $80,000?

Once we start down the waterfall (see my The Waterfall Effect), the governmental analysis of the next best move will not be considering things that you fear right now, like confiscation from us little shrimpy goldbugs. (Also see my Confiscation Anatomy - A Different View post for more on this)

Sure they will fight. But the fight will have to be within the new paradigm the world has entered. And their moves will certainly be to the benefit of producers and savers in the world, because that will be in their own best interest. There comes a point where a country is only as strong as its producing class. I call that point "the meritocracy". It is the new paradigm we are entering where the natural division of power will be based on merit and credibility. (See my post The Judgement of Value).

Does any of this answer your question?

Sincerely,
FOFOA

Anonymous said...

(raptor): Thanx alot... I found your blog very recently.. and i'm reading from now backward in time ..
There is so many gems ;) I don't want to miss anything.. the ""WORSE"" thing is the discussions are also very resourceful ... so it takes more time :) (not complaining the opposite).
Let me read the link you gave me.. to get full idea about the whole picture.

Martijn said...

@Fofoa,

On the raptor article: perhaps something is going on in the gold market indeed. On the gold price in euro's: a little bit of both, it did broke through that ceiling, but it is not at its previous high yet. And in case you were wondering: I have not sold any of my gold nor am I planning to do so in the foreseeable future.

FOFOA said...

"And in case you were wondering: I have not sold any of my gold nor am I planning to do so in the foreseeable future."

Martijn - I am happy to learn that your self-imposed role of devil's obedient servant has not penetrated your greater sense of self-preservation!

Martijn said...

This is an interesting story on the dollar. Did you guys read it yet?

Martijn said...
This comment has been removed by the author.
Anonymous said...

any reports of whether tungsten "contamination has spread to bars of lower denomination, 1kg for example?

SatyaPranava said...

@raptor: and to think, i thought that was a daunting task some 7-8 months ago, when I first came...the discussions are much more in depth now, but trust me, you'll get to read so many amazing articles and discussions! though i must say i went back to the beginning, and read forward, so i could relive so many great moments during the past year plus.

enjoy and best of luck with it!

Martijn said...

Another nice one on credit, China, paper money and the rest.

click

Smack MacDougal said...

Your etymological description of the words money and currency suffer defect.

Men can attest the word money to 1290 from Old French, 'moneie' meaning "coinage, metal currency", which comes from Latin, 'moneta' meaning "mint, coinage". Moneta is a title of the Roman goddess Juno, in or near whose temple money was coined.

Thus, always, the word money has meant minted coins used in circulation (currency).

During the early 19th century, men extended the use of the word money to include paper money, mostly owing to ignorance over bank notes.

As to the word currency, John Locke first used the word for circulation of money in 1699. Men can attest the word itself to 1657 from the Latin 'currentum' meaning "condition of flowing".

To get what money is, everyone ought to read the best mind on money, William Brough. [You can download his free works from http://books.google.com ]

Here's what Brough had to say (paraphrased):

Money is a commodity.

Money arises because of fitness for medium of swaps.

Money exchange takes place through individuals acting naturally -- separately and independently
each man to his own wants.

Money must render most efficient service.

Money of superior efficiency ... has highest degree of steadiness and has swap factor.

Money is a never a thing other than medium of exchange and store of time spent getting it.

False legislation leads to government regulating the value thereof and lessens the efficiency of money.

Debasement arises from the legal tender quality of money only.

Read some quotes from Brough. They'll amaze you.

"...but having adopted one commodity as the measure (the money) for all other commodities, we become accustomed to regard that measure as constant and unvarying in value, and to the common mind it seems to be only the other commodities that rise and fall in price. This being the case, it is obviously of first importance that money should have a steady value, for if it lack this quality, such persons as do not perceive its fluctuations (and they are the great mass of producers) are constantly exposed in their trading to loss of property and to consequent discouragement; the ultimate effect of these fluctuations being to aggregate into few hands an undue proportion of wealth produced."

"Cease to make coin a legal tender at a value which it does not posses intrinsically, and the chance for profit making by "shoving" our bad money on our neighbors will cease also."

"Search history, and it will be found that the people are always the first to protest against a deterioration of the currency, while it is generally the Sovereign or the Government that causes the deterioration either by direct spoliation or by false monetary legislation."

Also, read Henry Dunning MacLeod, a brilliant man on money and the guy who coined the phrase "Gresham's Law".

Here's what MacLeod had to say abot money.

Money is good only in so far as things of goods exist that holders of money want to buy.

When no goods exist that others want, the money becomes worthless as it loses its power of being titles to wanted goods.

Things of goods wanted must exist for money to have worth.

Money rests upon the belief that any man will take it in a swap.

Money becomes wealth only where folks will swap for it.

Where money from one folk cannot buy swapped things of another folk, money is not wealth.

Money is the highest form of credit.

Credit is an order for money and money is an order for goods.

Money represents debts owned by another and credit given to all for uneven swaps.

Money is a right or title to call for wanted goods from another in any future.

Money shows that a man has given service to his folk without taking from them in return, a sacrifice that shows his trust in others.

Money gets accepted because men believe that money represents the universal merchandise for swaps.

Martijn said...

"Cease to make coin a legal tender at a value which it does not posses intrinsically, and the chance for profit making by "shoving" our bad money on our neighbors will cease also."

Correct. Bad money will only drive out good money under legal tender laws. In absence of those good money will drive out bad money.

Martijn said...

How do you guys like Mike Whitney?

James said...

Mike Whitney = meh

FOFOA said...

Good money drives out bad... unless a false par is set by the system. Otherwise stated, bad money drives out good under legal tender laws.

So is our present gold market acting like a de facto legal tender law on gold? Is it setting a false par between dollars and gold at $1,055?

"People faced with a choice of two currencies of the same nominal value, one of which is preferable to the other because of metal content, will hoard the good money and spend the bad money, thereby driving the good money out of circulation." [Driving it out of its pseudo-monetized state and into a wealth reserve role?]

FOA (09/03/00; 16:27:20MD - usagold.com msg#34)
Of Currency Wars

Is Gresham's law no longer a law? You know, the one that say's good money will drive out bad money. One may look at our modern gold markets and say "help, it's not working". Indeed, if gold is the good money and dollars are the bad money, how come gold has gone down for all these recent years? Worse yet,,,,,, aside from price considerations, gold does not seem to drive out the bad money as people accumulate more of the yellow stuff!

Well, in truth gold can't compete because our modern world of gold mostly consists of the same bad money paper that currencies are made of. That's right, this modern world of paper gold very much functions as the same IOUs that currency is based on,,,,,, not much different from fractional reserve dollars.

So this is the same failing gold markets and resulting prices we all hear and read about. The same markets gold bugs watch with increasing despair as Gresham's law works its will. By saying "paper gold cannot drive out paper currency" this law is proving that hard money investors have hitched their wagon to the wrong horse. A paper horse! Today, more than ever, investing in an industry or paper vehicle that requires a functioning gold banking (paper) intermediary will be devastating as this modern gold market evaporates.

Make no mistake, physical gold already contains many times the value these paper markets have established for it. When the price of physical traded gold runs far away from this imploding paper gold arena, the value of real money will then truly reflect where our bad money exists today. Obviously, we are talking about dollars.

True, gold will reset itself in value compared to all world fiat currencies. But, that percentage reset will be viewed in a different context than when gold money was ordained by governments. Gresham's understanding applied more to gold as a bankable currency, not an asset holding "in and of itself". This is the future of "freegold" in our time. It will be much like comparing an advancing stock to the currency it's denominated in, a rising asset,,,, not a competing money!

Anonymous said...

raptor:
I read some stuff ;).. my next question would be.. I got the understanding of using the gold as a measuring stick instead of fiat, which is fascinating and so simple concept. And also why
in general it is preferable and needed
for ppl to figure this out.
Why I think it is important is that the idea of freeGold gives the ppl the power to have a "say" i.e. to allow the world economies to correct themselves based on the economic activities of the world citizens... not by some oligarhy trying to program the economic activities.. etc..

Had a discussion with a friends and they still can't grasp this idea, no problem with that but what this shows to me is that the majority of the people (including the deflationists for their reasons) has the imprinted pattern of using the paper money as the unit of account.

Also I understand that the power players will probably decide at the end which is the measuring stick - fiat,gold or SDR ;)

But here is finally my question : Fed is currently in a tug of war to devalue the dollar slowly helped by CB of the world including even China.
Everyone of them wants slow depreciation.
Then my "worry" in a sense is that they may succeed and restore the faith in fiat and prolong the agony say another 5-10y or even more with SDR help.

If this happens freeGold like system will be postponed by several decades and for most ppl this is too long time horizon (the Another discussion was in 1997 ...i.e. 12y later and it still didn't happen, just some initial cracks).
I dont think the final outcome will be fiat,but I just would like for you to elaborate what are the opposing forces doing and how many more ammunition they had left..



Also if you can give a link to a more detailed explanation about the differences between IMF and BIS and why would they be friction between them ?
From what I understand they could be a major deciding factor.

Anonymous said...

The time frame for me is also a concern....in that i have my savings in Gold and Silver and no debt!

But will i live to see it return to power in my lifetime?

The whole system is so corrupt and there seems to be no way to clean it out. All the people in charge have no balls.

I guess it is a waiting game...

Anonymous said...

Raptor,
This is the problem with the free gold concept. Greshams Law is pretty simple, Bad money chases good money out. Period. Whether "money" or "wealth asset". Gold has not only been chased out of the system its been chased out of peoples consiousness.

Fakete said, Gold is going to go into hiding. It went into hiding for hundreds of years after the collapse of Rome.

Like you have found out for yourself. People just cant psychologicaly fathom what gold is anymore.

And this is what the elites want. When the system collapses and all hell breaks loose, people wont be thinking about Gold. (In the US alone there is only 3 days worth of food in the supply chain) People will be trying to figure out why Mcdonalds aint open. These same people will be looking for a savior and what ever he/she tells the poor defensless sheeple money is, that is what it will be.

Anonymous said...

Of course if the collapse takes a long time 5 to 10 years. Then yes freegold will happen. More gold vending machines will pop up around the world, and even Walmart will start selling it. But if its a quick collapse like Oct 25 2009, or maybe Sinclaires time frame of November 2009, do you really think people are going to have the time to figure the Freegold concept out? I doubt it.

FOFOA said...

Hello Raptor,

You said, "Also I understand that the power players will probably decide at the end which is the measuring stick - fiat,gold or SDR ;)"

This is true. But as always has been the case, since the beginning of time, they can control through force what we earn, what we spend, and what we pay our taxes in, but they CANNOT force us to SAVE in that same currency! This is very important. They can try to CONVINCE us to save in it, but not force it. Wall Street has failed at its most important job, to make the dollar a believable store of wealth.

You have the freedom to put all your savings into real estate, or collector stamps, or baseball cards. They can outlaw baseball cards, but then you might choose hockey cards. They can destroy all the hockey cards, but then you might just spend your savings on a fancy boat. The point is, they can force the denomination of usage, but not of savings. This is where the power of freegold comes in. And the wealthiest and most powerful among them also use gold for this purpose. And they know that their gold is most valuable when it is spread out, widely held, universally used and highly valued by the most people possible. By the entire planet in fact.

Gold is de facto a claim you can hold on anything you might want, any time, anywhere in the entire world! A dollar is only a de jure claim on anything officially for sale within the legal tender zone of the USA. If any one currency zone, say the USA, were to overtly control gold in this new emergent system, it would seriously disadvantage itself on the world stage. It would suffer a debilitating flight of capital. This is why I say that governments will ultimately, out of necessity, do what is in their own best interest!

The system is now at the pinnacle of a crescendo that has been ongoing for at least 15 years, depending on the scale you choose to view it. The end is near. As I said in The Judgement of Value, it is the producing and wealth-holding people and nations that have the only power to decide how the future unfolds. And they have already decided. It is incorrect to assume that they are in some sort of a dollar trap. They are not.

The dollar system greatly advantages Washington and Wall Street, the two main entities that the global giants of real production and real wealth are completely fed up with. They will not continue to support this built-in advantage, especially as their losses continue to mount, their chance of even getting back their principle vanishes, and while Washington expands itself in-your-face exponentially and Wall Street delivers its biggest bonuses ever.

Besides, if the giants wait too long, the system is going to collapse under its own weight anyway. All they are doing to prop it up right now is expanding the supply of digital credits in key locations. That is doing nothing but painting over wood that is rotten to the core. There is not much time left. I am not worried about another decade of waiting. I'm worried we might see something this week!

Re: the IMF and the BIS; they are in two different power factions. They play nice with each other, but they have different motives and different people behind them. The IMF belongs to the US and the BIS belongs to Europe. There was more about them in my post Confiscation Anatomy.

Be patient. What is coming is worth waiting for, although I don't think we will be waiting long at this point.

Anon - The freegold concept does not need to be figured out, it just happens. That is the elegance in it. The benefit of figuring it out ahead of time, like we are doing, is that it will literally change your life!

Sincerely,
FOFOA

J said...

"John Williams, an economist and the editor of Berkeley, California- based shadowstats.com said "If the methodologies of measuring inflation in 1980 had been kept intact, gold would have to hit $7,150 to be the equivalent of the 1980 record,""

Anonymous said...

Fofoa,
Man, I hope your right! Because Im all in at this point just like many of the other readers. I think this thing is going to happen real soon as well! It just better lead to automatic freegold and not to a tyranical new money system! Either way the Sunami is coming very, very soon.

Martijn said...

Greshams Law is pretty simple, Bad money chases good money out. Period.

If I where you I would think about sticking with a comma instead.

Bad money drives out good money, under legal tender laws. Absence of those laws would imply the opposite, and good money would drive out bad money, the same way that all good products drive out bad ones in a free market.

Martijn said...

Fofoa,

As for those two bits of information: congratulations. I'm sure you have earned the appreciation all the way!

FOFOA said...

Thank you, Martijn.

And you are correct, Gresham's Law is simple, yet sometimes confusing. Just like Freegold. It is essentially this: good money drives the bad out of public use, unless they trade at a fixed, government controlled par, in which case bad money drives the good into hiding until par is broken, at which point the first condition resumes.

Martijn said...

And you are correct, Gresham's Law is simple, yet sometimes confusing. Just like Freegold. It is essentially this: good money drives the bad out of public use, unless they trade at a fixed, government controlled par, in which case bad money drives the good into hiding until par is broken, at which point the first condition resumes.

Correctly worded, Sir!

Mantis said...

Tungsten is money!

haha.

Let the audits and assays begin..............


Another spot on article, FOFOA.

Keep up the great work.

Martijn said...

FOFOA,

You'll like this story on paper bugs.

Martijn said...

Btw Fofoa,

If you haven't done so already you should install a feed/RSS reader to browse your favorite blogs. Enables you to browse everything you like on the web through an interface similar to outlook and really saves tons of time.

Martijn said...

"If you don't trust [G]old, do you trust the logic of taking a beautiful pine tree, worth about $4,000 - $5,000, cutting it up, turning it into pulp and then paper, putting some ink on it and then calling it one billion dollars?"

Martijn said...

The paperbugs believe in fairy tales like the fact that the non-federal, for-profit federal reserve corporation is smart and knows what it is doing. The paperbugs believe government apparatchiks know how to "stimulate" an economy. I guess this is because governments have always been the driver behind economic prosperity, growth and innovation in "free" markets, right? This is why communism, fascism and socialism have always produced the strongest and most innovative economies throughout history!

Martijn said...

Russia bought some gold.

Everybody is buying gold. Hope demand doesn't dry up before I've sold mine.

Smiley

Steve B said...

Raptor,
This is the problem with the free gold concept. Greshams Law is pretty simple, Bad money chases good money out. Period. Whether "money" or "wealth asset". Gold has not only been chased out of the system its been chased out of peoples consiousness.

Fakete said, Gold is going to go into hiding. It went into hiding for hundreds of years after the collapse of Rome.

Like you have found out for yourself. People just cant psychologicaly fathom what gold is anymore.

And this is what the elites want. When the system collapses and all hell breaks loose, people wont be thinking about Gold. (In the US alone there is only 3 days worth of food in the supply chain) People will be trying to figure out why Mcdonalds aint open. These same people will be looking for a savior and what ever he/she tells the poor defensless sheeple money is, that is what it will be.

October 20, 2009 11:45 PM

I can not agree with this more.

FOFOA, do you think anything happens naturally when it comes to government and economics?

You talk about baseball cards. Sure you COULD save in that, but not many do to matter. Even if I did agree that they can not control what you save in, it still is measured in units of their choice, the sheeple save in what they are told money is.
The more I read the more sure the global elites are gonna rock everyone's world.

Did you guys see this?
http://www.youtube.com/watch?v=PMe5dOgbu40

I agree gold is the best bet since the casino is rigged, but man even it isn't a sure bet.

Anonymous said...

FOFOA; was your allusion to events happening in the next week or so (10/25/09) based upon the webbot NLP analysis(www.halfpasthuman.com) etc or other sources?

Together with the harry schultz "anecdote", it certainly seems that all lights are blinking red for an october (or Q4) surprise.

Truly extraordinary times with reports of "tungsten alchemy" and fractional reserve-based (multiple ownership) gold "sales" emerging. It does feel as though we have now entered the endgame to me since the corruption is now so overt and shameless. This portends a new era and paradigm shift... to what? we can only speculate. I did not know that Archimedes' principle was commissioned by a royal who wished to rule out alchemy in the creation of his golden crown. The "goldsmiths" then were as fundamentally corrupt as they are now.... some things remain unchanged throughout the mists of time!

Thanks for your continuing gin clear analysis.

MichaelB said...

@Anonymous
Re: "FOFOA; was your allusion to events happening in the next week or so (10/25/09) based upon the webbot NLP analysis(www.halfpasthuman.com) etc or other sources?

Together with the harry schultz "anecdote", it certainly seems that all lights are blinking red for an october (or Q4) surprise.

Truly extraordinary times with reports of "tungsten alchemy" and fractional reserve-based (multiple ownership) gold "sales" emerging. It does feel as though we have now entered the endgame to me since the corruption is now so overt and shameless. This portends a new era and paradigm shift..."

Well said. A "new era" and "paradigm shift" in orders of magnitude amplified and emphasized for our own ultimate good.
I believe the pendulum of greed and corruption has already swung the other way.
All past and future efforts to deny, delay or whitewash the bankruptcies of banks and nations using accounting fraud, bailouts, 'stimulus', rederivativation, monetization, quantitative easing, currency debasement, deficit spending, media obfuscation, market rigging, statistical perjury, offshore plunder, wealth transfer to centralized families, corporations and corporate states, equity nationalization, etc lead to a rubber band effect when natural, fundamental limits are reached.
So there must be an unexpected acceleration of symptoms, responses and retrenchments commensurate with and opposite to the parabolic, exponential increase in these causes as well as all global monetary aggregates, unemployment and foreclosures.
Here and now is just beginning the great unwinding of these imbalances, misperceptions, malfeascence, dislocations and distortions. This means incentives for productive investments of time, effort and money will quickly replace disincentives, in capital projects, manufacturing, infrastructure, research, alternative farming, alternative energy and alternative health care.
This means employing tools which we always had such as honest money and tools such as high technology which we never new we had and some things from out of this world.

Tekin said...

It could be slow, it could fast, it could be in fits and starts. Nema problema. Gold is the only game in the town! What else? It is good for the sleep. It is good for the health. Inducing food storage, it is good for hunger.

Having a double digit "internal rate of return" without huffing, puffing, lifting or running - by simply sitting is somewhat embarrassing to be frank. What? I need not fill a tax form?

I didn't know that life was so simple! Rats! Why did it take me such a long time to figure out the simple ways?

Anonymous said...

I wonder if we'll have enough time to spend any gold. To me it looks like we were going to get to war. The Israelis have ordered food cans in France, 13 warships are in the ME
(Hormuz Straits), I think this time is serious. Nobody seems to care about this impending war...

Jay Midnyte said...

YES. After the dollar collapses within these next 2-3 years, war will be inevitable. Economic collapse of empires leads to war.

Anonymous said...

Excerpt from:

http://harveyorgan.blogspot.com/2009/11/nov-1209-commentaryextremely.html

Good evening to you all:

First of all before going into todays gold and silver trading, Rob Kirby has sent to us more findings on the tungsten "gold" bar
caper.

Kirby's newest commentary is simply earth-shattering.

Here is a summary of his findings. The complete article follows my comments.

1. As I reported to you a few weeks ago, there were reports of 400 0z bars of gold found in the Bank of England filled with tungsten.

It was reported to you that tungsten has the same specific gravity of gold, so it is easy to manufacture a fake brick. Only an electrical test

could determine which bar is real.


2. Kirby also identified that the GLD list in London had the bar list go from 1381 pages to under 200 and then back to 800 pages, even though

the gold inventory of GLD was increasing from 1080 tonnes to gold to its present value of 1118 tonnes.

3. During the week of Oct 1.09, there were irregular physical gold settlements and the Bank of England had to intervene on behalf of JPMorgan and

Deutsche Bank as these two banks did not have the physical gold backing its delivery.

4. China is known as the knock off capital of the world. Everyone thought that they were the manufacturers of these tungsten bricks. The Chinese

were the ultimate buyers of these tungsten bricks and they decided that they needed to get to the bottom of this fiasco. In their interrogation process they found the perpetrators

and put them behind bars and in the process discovered that it was the usa who orchestrated the manufacture of these fake bars

5. The usa manufacturered anywhere btw. 1.3 to 1.5 million bars of 400 0z weight or roughly 16,000 metric tonnes.

The usa holds 8,000 meteric tonnes of gold and the world roughly 30,000 metric tonnes.


6. Approximately 640,000 of these tungsten bricks of 400 oz weight were shipped to Fort Knox. The weight in oz is 256 million oz which is roughly the 8,000 tonnes of gold

that Fort Knox supposedly holds.

7. The remaining 8,000 metric tonnes were shipped to international centres and sold on the international market. Many of thse bars ended up at the GLD.

8. Kirby has documents which show that his folks have copies of original shipping documents with dates and EXACT WEIGHTS OF THE TUNGSTEN BARS

SHI{PPED TO FORT KNOX.


9. This may help explain why Rothschild's left in 2004 as they probably knew that many of the bricks at the B of E were fake.

10. It may help explain why no news came out on the raid at the Nymex in Feb 2004 where the District Attorney was investigating Stuart Smith, VP of

operations at the Nymex. We has issued a search warrant and he abruptly left and to this day has not been heard from.



The above will help explain why I cannot balance supply and demand of gold. We know that demand is somewhere around 4500 tonnes of gold and supply around 2400 tonnes and

thus the deficit was funded with supplies from central banks. The above ground gold supplied by the central banks came through the leasing process.



The leasing of gold started in 1988 and with a deficit of 2000 tonnes per annum, the world should have run out of gold a few years ago. It did not.

Now we know why!!!!!!

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