Tuesday, November 3, 2009

Freegold


Every time gold has a big up day like today I see a lot of forum comments from people that say "you can't eat gold". Or, "I'd rather buy some farm land". Or, "Gold is no different than any other commodity, why not buy silver? Look, in percentage terms silver went up twice as much as gold today!" Or, "Gold is not good for anything. It is useless. Its value is a myth!"

What all these people don't understand is that gold is truly only a wealth asset. It is a tangible, tradable wealth asset that is valued by central banks, by the elite, by the wealth giants of this world, and even by the little guy. Especially in regions outside of the US dollar currency zone. But what is so special about gold's price movement this time around is that this is the very beginning of a functional transformation for gold. Gold is right now in the process of complete demonetization. It is being set free from the dollar which has held it captive in a monetized (controlled parity) state for a long, long time. Gold is transforming into a completely demonetized wealth asset. And along with this move will come a whole new level of value, completely detached from any linear analysis of gold's dollar-based price history over the past century or two, or three.

People seem to have the most difficulty understanding how gold will have a much higher value as a pure wealth asset than it had as a medium of exchange or unit of account. As a currency circulates through the economy, productive participants squirrel away a little wealth each time the currency passes through their grasp. They do this by purchasing whatever they perceive to be the best wealth asset at that time. This wealth asset accumulation grows, over time, to be much greater in size than the whole of the circulating transactional currency. For example, the global money supply (monetary base) is around US$5 trillion. [1] Yet the global stock and bond markets are currently valued at around US$120 trillion and all the markets combined (stocks, bonds, forex, credit derivatives, hybrid securities, options, futures, forwards, swaps, OTC derivative, real estate, etc...) are currently valued at well over US$1,000 trillion. [2] [3]

Even though gold is no longer used as money, it was still confined in a pseudo-monetized state for the last few decades through the dollar system's paper gold market, which intentionally inflates the supply of paper gold beyond its underlying physical backing in order to keep the much smaller physical gold market locked in a relative parity with the dollar. Consider that all known above-ground gold (approx. 5 billion ounces) is worth only about US$5.4 trillion at today's prices. Does this sound like gold is trading at par with wealth, or with transactional currency?

What Another and FOA came forward to tell us back in 1997 was that the European architects of a new regional currency had already thought this whole debt accumulation process through to the end, and were preparing for just such an unavoidable eventuality. That structurally, the new Euro monetary system had been designed to withstand this single, inevitable event; the complete demonetization of physical gold!

Another and FOA revealed their knowledge under the cover of anonymity on an Internet forum over a period spanning four years. But other clues to this underlying design were also released through official public statements over the past decade. Please compare and contrast these statements with what you get from CNBC, the Fed, the Treasury, and everyone else who speaks on behalf of the dollar.

In July of 1998 the brand new ECB announced that gold would be included as 15% of the required foreign reserve assets behind its new currency and that the gold asset would be marked to the market price each quarter, a decidedly NON-monetary thing to do! You don't mark your "cash" to market, but you do mark your ASSETS to market.

In September of 1999 the European central banks met in Washington DC and signed "The Washington Agreement on Gold". Here was their press release after the meeting:
Press Communique - 26 September 1999
Statement on Gold

Oesterreichische Nationalbank
Banca d'Italia
Banque de France
Banco do Portugal
Schweizerische Nationalbank
Banque Nationale de Belgique
Banque Centrale du Luxembourg
Deutsche Bundesbank
Banco de España
Bank of England
Suomen Pankki
De Nederlandsche Bank
Central Bank of Ireland
Sveriges Riksbank
European Central Bank

In the interest of clarifying their intentions with respect to their gold holdings, the above institutions make the following statement:

1. Gold will remain an important element of global monetary reserves.
2. The above institutions will not enter the market as sellers, with the exception of already decided sales.
3. The gold sales already decided will be achieved through a concerted programme of sales over the next five years. Annual sales will not exceed approximately 400 tonnes and total sales over this period will not exceed 2,000 tonnes.
4. The signatories to this agreement have agreed not to expand their gold leasings and their use of gold futures and options over this period.
5. This agreement will be reviewed after five years.

It is believed by some that while this Washington Agreement was a uniquely positive event for the gold market, that the real purpose of this agreement and its public statements on CB gold sales was the cooperative and coordinated redistribution of publicly held gold in preparation for the coming revaluation that I call Freegold. That the purpose was to use market-priced transfers of gold between central banks, in broad daylight, to create a careful distribution of gold, proportional in size to other reserves held by each central bank, before the inevitable reset the entire financial system.

In 2002 in his acceptance speech for the International Charlemagne Prize which was awarded to "the Euro" that year, ECB president, the late Willem F. Duisenberg had this to say:
The euro, probably more than any other currency, represents the mutual confidence at the heart of our community. It 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. Indeed, what Sir Thomas More said of gold five hundred years ago – that it was made for men and that it had its value by them – applies very well to the euro.

Why would he say it was the FIRST CURRENCY to sever its link to gold? Hadn't the dollar done that in 1971?? Perhaps he meant something deeper!


In 2004 the European central banks renewed the Washington Agreement and this was their press release:
ECB Press release
Joint Statement on Gold
8 March 2004
European Central Bank

Banca d'Italia
Banco de España
Banco de Portugal
Bank of Greece
Banque Centrale du Luxembourg
Banque de France
Banque Nationale de Belgique
Central Bank & Financial Services Authority of Ireland
De Nederlandsche Bank
Deutsche Bundesbank
Oesterreichische Nationalbank
Suomen Pankki
Schweizerische Nationalbank
Sveriges Riksbank

In the interest of clarifying their intentions with respect to their gold holdings, the undersigned institutions make the following statement:

Gold will remain an important element of global monetary reserves.

The gold sales already decided and to be decided by the undersigned institutions will be achieved through a concerted programme of sales over a period of five years, starting on 27 September 2004, just after the end of the previous agreement. Annual sales will not exceed 500 tons and total sales over this period will not exceed 2,500 tons.

Over this period, the signatories to this agreement have agreed that the total amount of their gold leasings and the total amount of their use of gold futures and options will not exceed the amounts prevailing at the date of the signature of the previous agreement.

This agreement will be reviewed after five years.

During the next five years to 2009 the central bank gold sales gradually dwindled, not reaching their prescribed limit, until finally in 2009 the central banks, as a community whole, actually became net BUYERS of gold rather than sellers! [4] [5] [6] And when the central bank gold agreement (CBGA is the same as the WA) was renewed this past August, the ceiling was lowered from 500 tonnes to 400 tonnes per year. Not that it mattered anymore with the banks being net buyers now. It was simply a formality this time. Here is the latest CBGA press release, again reaffirming the importance of gold:
PRESS RELEASE
7 August 2009 - Joint Statement on Gold
European Central Bank

Nationale Bank van België/Banque Nationale de Belgique
Deutsche Bundesbank
Central Bank and Financial Services Authority of Ireland
Bank of Greece
Banco de España
Banque de France
Banca d’Italia
Central Bank of Cyprus
Banque centrale du Luxembourg
Bank Ċentrali ta’ Malta/Central Bank of Malta
De Nederlandsche Bank
Oesterreichische Nationalbank
Banco de Portugal
Banka Slovenije
Národná banka Slovenska
Suomen Pankki – Finlands Bank
Sveriges Riksbank
Swiss National Bank

In the interest of clarifying their intentions with respect to their gold holdings the undersigned institutions make the following statement:

1. Gold remains an important element of global monetary reserves.

2. The gold sales already decided and to be decided by the undersigned institutions will be achieved through a concerted programme of sales over a period of five years, starting on
27 September 2009, immediately after the end of the previous agreement. Annual sales will not exceed 400 tonnes and total sales over this period will not exceed 2,000 tonnes.

3. The signatories recognize the intention of the IMF to sell 403 tonnes of gold and noted that such sales can be accommodated within the above ceilings.

4. This agreement will be reviewed after five years.

European Central Bank
Directorate Communications
Press and Information Division
Kaiserstrasse 29, D-60311 Frankfurt am Main
Tel.: +49 69 1344 7455, Fax: +49 69 1344 7404
Internet: http://www.ecb.europa.eu

And just yesterday, during the LMBA conference in Edinburgh, Scotland, keynote speaker Paul Mercier, 'Principal Adviser in Market Operations' and 'Chairman of the Working Group on Monetary and Exchange Rate Policy Instruments and Procedures' for the ECB said, "gold is no longer important from a monetary point, but is important as an asset."!!!

Did you catch that? Here it is again...
...gold is no longer important from a monetary point, but is important as an asset.


Here is a little more context from Dow Jones:
Gold To Remain Important Asset Of European Central Banks-ECB

EDINBURGH -(Dow Jones)- Gold will remain an important asset for European central banks as risk diversification becomes a more significant issue, the European Central Bank said Monday.

Speaking at the London Bullion Market Association conference, Paul Mercier, deputy director general of market operations at the European Central Bank, said gold is no longer important from a monetary point, but is important as an asset.

"Gold makes sense as a contributor to risk diversification," Mercier said. " Even if some central banks continue to sell and there is a new potential seller with the IMF, I wouldn't conclude that gold holdings in central banks will decline in the coming years."

He said the Eurosystem holds 10,800 metric tons of gold, roughly one third of world gold reserves.

-By Devon Maylie, Dow Jones Newswires

And then of course, today we learned that the IMF has "redistributed" 200 tonnes of gold to India! Surprise surprise!! One can only wonder what message was intended with this sale. The message I take is that there is a new floor under gold now! A new put. A new bid. And clearly more than just the Chinese want it!


Nov. 3 (Bloomberg) -- The International Monetary Fund said it is selling 200 metric tons of gold to the Reserve Bank of India for about $6.7 billion...

The transaction, which involved daily sales from Oct. 19-30 at market prices, is in the process of being settled, the IMF said in the statement. The average price in the transaction with India was about $1,045 an ounce...

The lender has said it is ready to sell directly to central banks and later make transactions on the open market if necessary. The IMF official declined to say whether other central banks have expressed interest in purchases.

But what is most significant about this ongoing redistribution of gold, the "important element of global monetary reserves", in preparation for the Freegold value reset, is that in countries like India, China and in the Eurozone this redistribution is even inclusive of us little people, not just the central banks, elites and giants! In China, the government is encouraging its citizens to buy gold and silver. In fact, it only recently opened up this market! And in India the State Bank of India recently announced in its annual report:
The number of branches for retail sale of gold coins has increased from 250 in 2008 to 518 in 2009. The Scheme will be extended to cover all important centres of the country in 2009-10 by increasing the number of branches selling gold coins to about 1100.

They are trying to make buying gold coins EASIER for the people in India! And so it is in Europe as well! In the Euro currency zone, the VAT (value added tax) was removed from gold but not from silver (or anything else for that matter), and gold is now sold to the public right through the commercial banking system!

It is only here inside the wonderful dollar currency zone that we are "sheltered" and "protected" from the truth about gold! Did you notice that the UK central bank, The Bank of England signed the first Washington Agreement but not the second or third? The BOE is a staunch supporter of the Fed and the dollar system.

But outside of the dollar faction, serious preparations are underway for the end of dollar supremacy and the emergence of the completely demonetized gold wealth asset, and all that it will mean! And it will mean and reveal a whole lot of truth about the world we live in! It will reveal the end of dollar and US hegemony. And it will reveal the emergence of a de facto worldwide meritocracy. It will reveal that most of what we thought was real wealth based on an unsustainable debt pyramid was just an illusion of wealth! Gone... to where all illusions eventually go.

I read where some of you say I am wrong about Freegold. That it won't or can't happen because country A isn't ready for it, or country B doesn't want it. Or that "the elite" will never allow it. Etc... etc... Blah blah blah...

Well, Freegold, or whatever you want to call it, is kind of like a runaway freight train coming right at us. It is not stoppable and it is not controllable. It has a mind of its own and too much momentum to do anything but prepare for its arrival. It is not for any elite or any country to decide when and if it happens. It is only for them and us to be as prepared as possible when it does.

Here is one more interesting story from this week:

Saudi: dollar role 'confused' in oil pricing

KUWAIT - Saudi Arabia's top monetary official said denominating oil sales in dollars does not necessarily mean that payments from those sales are received in dollars or that investments would be done in dollars either.

"The pricing issue has no relationship with the payment issue and doesn't have a relationship with the investment issue," said Muhammad al-Jasser, Governor of the Saudi Arabian Monetary Agency, at a financial conference. "There is a big mixup between the three roles for any currency."

"The dollar is the most used currency in pricing all imports and exports, especially for commodities and not only in the Gulf -- even the Europeans still price in dollar," Jasser told reporters.

"But pricing in dollar does not necessarily mean that you receive in dollar and does not necessarily mean that you will invest in dollar," he said

"That's why I think that it is important not to confuse between the three roles for any currency, whether it is the dollar, sterling, the yen or the euro," Jasser said.

Allow me to translate this for you:
"For the time being, we will continue using the dollar in FOFOA's "pure concept of money" function, the mental unit of account, because that is what the world is used to. But soon we will no longer be using the dollar in its other functions vital to US hegemony. We are already phasing out the transactional function, the medium of exchange role, and we are no longer using the dollar in the store of value function for our wealth."

Does it strike any of you as much as it does me, how insignificant another $6.7 billion in the IMF coffers seems when compared to the quite significant 200 metric tonnes of physical gold being transferred from one single entity to another? This is the largest single publicized gold purchase in at least 30 years! When you think about the Fed literally PRINTING $300 billion for the US Treasury over the last 6 months, or the $500 billion in currency swaps, or the unknown $trillions in Fed quantitative easing, it really makes you wonder if this was the best way for the IMF to raise another $6.7 billion.

This striking paradox WILL be corrected, by the way, through Freegold.

For a bit of perspective on India's score, the heaviest load ever carried by the largest airplane in the world was 253.82 tonnes, but that was a short, low altitude test flight exceeding its rated capacity by 4 tonnes. The heaviest single job this flying behemoth has ever been hired for was a generator weighing 187.6 tonnes. It has also carried train locomotives that weighed less than India's new gold. So India's gold would certainly be considered a "full payload" for the largest plane in the world. And there is only one of them! With any other plane it would take several trips. This is the Ukraine-based Antonov An-225, which can be hired for a job like this through a broker in Beverly Hills.



So India, if you would like some help bringing your gold home, let me know. My fee will be modest. I actually have hired this plane before. It is true! Although it was not for transporting gold. So what do you say? Let's make some history, set a world record for the most gold transported on one plane, and avoid that Somali coastline in the process! You can find my email address, India, by clicking on the donate button to the right. ;)

Sincerely,
FOFOA

116 comments:

The Mad Scientist said...

Are your writing full time now :) ?
Poor India, they were able to purchase so little Gold. With the Gold price taking off like that, I doubt they will ever be able to buy at those prices again.
Then again we should feel a bit more sorry for those 400,000 short contracts on the Comex who got their asses handed to them.
Right?

Anonymous said...

Speaking about the coming of free gold, you wrote, "It is only for them and us to be as prepared as possible when it does."

My question is, what all does "prepared" mean in practical terms?

Anonymous said...

Really enjoyed that one.

Anyone know where Ron Paul is at on his 'Audit the Fed' bill?

What will happen when that is done?

SatyaPranava said...

@anon 9:47, acc2 this article, Rep. Ron Paul's Bill to Audit the Federal Reserve 'Gutted' in Committee

SatyaPranava said...

since this sale to india caused such an increase in gold and silver prices today, you think they wanna announce the other half of the sale?

Anonymous said...

We at Seeking Alpha think your blog is great and would love to have you join our team. Please contact me at contributors@seekingalpha.com.

Thanks,
Becci

Anonymous said...

About Us
Seeking Alpha (www.seekingalpha.com) is the premier financial website for actionable stock market opinion and analysis. Handpicked from the world's top blogs, money managers, financial experts and investment newsletters, Seeking Alpha publishes more than 250 articles daily. Seeking Alpha gives a voice to over 2500 contributors, providing access to the nation's most savvy and inquisitive investors. The award-winning site is the only free, online source for over 3,000 companies' quarterly earnings call transcripts including all of the Russell 3000 Index. Seeking Alpha has 40 million page views each month and combined with their distribution partners (Yahoo Finance, Google Finance, Reuters, Bnet, Etrade and others) has a total reach of 50 million unique monthly readers. Seeking Alpha was named the Most Informative Website by Kiplinger's Magazine and received Forbes Magazine's 'Best of the Web' Award.

J said...

Anon @ 8:20

Here is a quote from ANOTHER

ANOTHER (THOUGHTS!) ID#60253:

Many wait for the next great bull market in gold to begin before they buy. Why buy now and lose interest or stock market gains? They will miss the greatest investment ever to come in ones lifetime! The powers of this world have already begun this motion. People of simple thought have but to buy physical gold and make low as the financial wars begin! You see, gold was cornered this year. It is done. No Central Bank will sell it's 50, 100, 200 million ozs gold when 600 million is needed! 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!

"When a thousand hungry lions fight over one scrap of food, small dogs should hide with whats in their belly".

A world waits for something to happen that is done.


India's purchase may be a signal that the lions have begun their epic battle for Gold

Anonymous said...

Hate to nitpick an excellent article, but you mangled Duisenberg for a point not necessary to the thrust of your exposition. By removing the "not only" from his quote, you project an inference that wasn't necessarily there. His point of severance from the nation-state was being emphasized.

S said...

Don;t go to seekingalpha..keep it unique

Martijn said...

On safe deposit boxes. Quite shocking.

ephemeron said...

FOFOA,

Many thanks for your reposting of Money Talk.

As the depression progresses, I believe there will be a dramatic shift in mental value associations as well as wealth assets. For example, I would suggest that food and energy will go up the list, furniture and real estate will go down. I believe that the re-ordering of mental value associations will be the cause of the greatest disruption, since it not only applies to asset values but also to occupations. Do you have any comment?

Ender said...

Here is a little tidbit that seems to fit the latest conversations here.

http://www.usagold.com/cpmforum/?p=173945

ephemeron said...

FOFOA

I like this quote from Gary North

"Gold is sometimes said to be a store of value. This should be worded differently. Gold is a valuable thing to store.

When someone says that gold is a store of value, the imagery is that of an item whose value does not fluctuate. Value is somehow poured into gold, and uniquely so. But there is no such process of pouring value into gold. Gold is poured into castings, and these shape it. Its value comes from people's quest for a reliable means of exchange. This is no longer true. Gold is no longer a means of exchange. It is no longer money, except among central bankers. But it is still a valuable thing to store."

Quoted from

http://www.lewrockwell.com/north/north772.html

MichaelB said...

Check out Bob Chapman's latest.
Great summary of events and even has some important news about IMF gold and India that'll surprise you, in the final paragraphs.

http://news.goldseek.com/InternationalForecaster/1257359192.php

FOFOA said...

Hello S,

I also received an email from Seeking Alpha. From what I can tell, all they want is permission to repost some of my past articles, and the right to repost future ones. They have an editor that decides which articles they will post. They get them from an RSS feed. Its not like I would move my blog or even change anything. Heck, some other sites already repost my articles without even asking. So it was nice to be asked!

It's not like I would even hang out at S.A. in the comments. I don't like the way their pages load in my browser. People would have to come here if they want to chat with us.

This could bring the A/FOA message of gold to a wider audience. Do you still think that diminishes this blog?

Anyone else think S.A. is a bad idea?

Sincerely,
FOFOA

FOFOA said...

Hello Anonymous (5:28),

I do see your point and it is a common one about this particular statement he made. Especially among those that don't believe the Euro architects were positioning the Euro to benefit from a huge rise in the value of gold as its function changed with the end of the dollar reserve.

By the way, I didn't remove the "not only". It is there in the quote. I simply highlighted the part about gold. Isn't it interesting that he included gold in that statement about the nation-state? Did he need to, in order to make his point about the nation-state? And why did he continue yapping on about gold? Why that bit about Sir Thomas More, if his main emphasis was the nation-state?

I propose to you that his speech was carefully written ahead of its actual delivery. And here are a few snips from the paragraph preceding the one I posted:

"What is money?
using money as the means of exchange...
we offer our labour in exchange for money, which, in itself, has no value...
the confidence that we place in money itself...
Hence, money is, in essence, a social contract"


And then in the next paragraph he mentions, and I paraphrase, "the severed link", "the durability of gold", and "the value of gold". Granted, not in precisely those words.

So reading between the lines, one could say he was talking about a "severed link", with confidence on one side, and durability and value on the other. Perhaps the severed link of monetary functions?

And then in the very next paragraph, he uses the word symbol twice, in reference to the Euro fiat:

Every currency is a symbol of the community it serves. It is a symbol of the society as a whole..."

This is a word that I use a lot when describing fiat currencies. I took it from Daniel Amerman. "The dollar is a purely symbolic currency!"

I further propose to you that Duisenberg's "emphasis" in that (Social Contract) portion of his speech was at least as much on the separation of currency from the function of gold as a wealth asset, as it was on the separation from the nation-state, which he only mentioned twice.

Indeed, he was comparing the Euro to gold in this section, but also stating that its relationship to gold is different than those in the past. And he strongly suggested that this was a "first".

Sincerely,
FOFOA

SatyaPranava said...

i must admit, i'm a little confused by the statement "severing it's link to gold" (paraphrased, referring to the Euro). Since the Euro has a (floating, some odd) 15% backing in gold, how is that severed from gold, exactly? i think i see where he's going, but am just not sure. I would love some clarification, please.

FOFOA said...

Hello Ephemeron,

I like Gary's comment as well. But I would add that gold is THE MOST valuable thing to store, at this particular point in history. (Except for perhaps some backup food and water, enough for several weeks at a minimum)

Our modern landscape is fraught with bubbles and malinvestment which has caused many unstable valuations. Bubbles (or unstable pricing) come largely from leverage (or credit) on the upside, and fractional reserve trading on the downside. Malinvestment comes from government and CB intrusion into the supposedly free markets. All combined, this has left us with a mistaken sense of value on almost everything.

But gold stands out because of its monetary qualities and history. As the bubbles and malinvestment blow up in the face of traders and investors all over the world, gold will resume a very basic function which has been suppressed for centuries. Gold will begin trading as a physical-only wealth reserve, without any fractional reserve or leveraged distortions. Also without the burden of circulating as a medium of exchange on par with anything else.

I have made many personal preparations for a SHTF scenario. But I have also said in the past, on this blog, that it is very expensive and troublesome to prepare for every possible scenario. So aside from the absolute life necessities, gold offers the greatest future value appreciation that will come in very handy once the future unfolds and we find out WHICH preparations would have been best. At that point, if you have some gold, there is a high probability you will actually be able to equip yourself for optimum survival AFTER THE FACT.

This goes for occupations as well. Nobody knows what will emerge as the ideal business after the fact. But a little gold may enable you to start just such a business once the answer is revealed!

Survivalblog.com is an excellent source for survival tips and serious preparations. But as I say, it can take years and years of preparation and hundreds of thousands of dollars, not to mention thousands of man-hours to do everything you read about on that excellent blog. Or, if you are just starting now, you can buy some gold. It is the FUNGIBLE (interchangeable) survival prep item. With its extreme appreciation it will leave you in a good position to play catch-up once the future is revealed!

"Sir, the world is going to change, and the rules of engagement will also change. Gold will be repriced, once! It will be enough for your time of life." -ANOTHER

Sincerely,
FOFOA

FOFOA said...

Hello Satya,

I'm going to have to let someone else answer that question for you as I feel I have exhausted my efforts with tens of thousands of words already on just that "link".

I think "marked to market" explains it best. Link = locked parity. Marked to market = unlocked float.

Sincerely,
FOFOA

Martijn said...

@Fofoa,

Have them repost. You've got your gold already. What else is there to protect?

Martijn said...

@Fofoa,

Just reassuring your thoughts about SA. I feel the same.. about your blog.

Smiley

FOFOA said...

Satya,

Here is a simple explanation. Until 1971 the dollar was "backed" by gold. This meant that certain entities could exchange their dollars for gold from the US Treasury. This forced parity (LINK) caused the stockpile of official gold to disappear.

From 1980 until 2001, these same entities could exchange their dollars for gold from the gold market, within a controlled price range. This caused the stockpiles of physical gold available IN THIS MARKET to disappear. This went on until (in the mid-90's) the CB's themselves had to once again become primary suppliers, just like before 1971!

The Washington Agreement in 1999 finally put a cap on this, right after Brown donked off half of England's gold. And for the next decade to present, the price began to rise.

Any controlled parity "link" causes stockpiles of physical to disappear!!

If you want to create a currency where your CB gold reserves will NOT disappear, you simply let the price of gold float freely against your currency! This will make it so that anyone anywhere can always exchange their fiat for gold because the price will be such that the market supply always meets the market demand. No need to EVER tap into the official stockpile! The severed LINK!

An additional benefit (if you have a 15% gold reserve to start) is that as the price of gold rises, so does the value of your reserves sitting behind your currency! This acts as a levered balance which protects the value of your currency. (See my post Your Own Personal Freegold)

Allowing gold to float freely against fiat currency is the way to make fiat sustainable once again! Anyone, anywhere, will always be able to exit their fiat position for the durability and value of physical gold! Freegold! Just like pre-1933, only SUSTAINABLE!

Sincerely,
FOFOA

FOFOA said...

Martijn,

Thank you!

Ender said...

@ SatyaPranava’s 2:21 post.

The only thing that I’d add to FOFOA’s reply is that historically, a hoard of gold would empower a currency, because the currencies always started out as a receipt against the gold. Thus, the traditional view of a gold backed currency is one that is receipt based.

The Euro is not a receipt. You cannot exchange it at the bank for the bank’s gold.

Thus, the gold held by the bank is an asset that it can use any way it deems necessary. At the same time, the value of the asset (gold) held by the bank is determined by the supply and demand fundamentals of gold trading in the market. It is in the banks best interest to make sure there is a strong market for it’s asset.

SatyaPranava said...

FOFOA, i'm pretty sure i have it now. your simple explanation was perfect; your longer one, even moreso. I just needed a reminder as to what the term specifically referred to. thanks.

this is what it also means to be truly demonetized, then yes? not linked to a currency, but marked to market, or floating in value?

Satya

Anonymous said...

Gold floating in value - won't it just keep rising and rising as more and more currency is made....

until a pallet of cash on a forklift is able to buy a single pure ounce?

Anonymous said...

My thought too. And since this is what will keep happening, then the currency isn't going to be held, velocity goes to infinity and demand goes to zero, dragging with it the value of a currency down to nothing.

If you attempt to use such a currency as a unit of accounting for pricing, then you would have to rewrite your quotes twice in an hour.

To make sure this doesn't happen, then CB will have to make sure it doesn't even start to inflate the currency.

Well then, how is CB supposed to steal from the people and give to the congress? CB can't make gold!

What is it supposed to do to make sure every politician is living lavish lifestyle, every war is fought, every stupid project is funded? "Tax the mass"?

But the tax payers do not like the taxes. At least those they can perceive.

So, then, how is government supposed to "thrive" with such a currency?

Anonymous said...

"until a pallet of cash on a forklift is able to buy a single pure ounce?"

Or perhaps more realistic to say "...cash on a forklift is unable to buy a single pure ounce?"

Museice said...

Definitely say yes to Seeking Alpha. They're part of my daily read along with Jim Sinclair, Market-Ticker, UrbanSurvival, SilverBearCafe, MarketOracle,and DailyReckoning. However your writing is by far the best and when a new post appears I know it's time for me to once again try and learn a new way of thinking about money, gold, assets, and value.

Thanks for helping me adjust my financial strategy. Seeking Alpha is just another forum for your (and Another & FOA) words to spread.

Anonymous said...

I suggested repricing Gold to $250,000 plus an oz so all US debts are paid and Gold can float on top of that.

Then the debt slave system can be reset - because it has to be

but Gold out of reach of the common man - FOFOA said i was a cynic.

Gee i don't know...

Anonymous said...

Doesn't Gold at the US Treasury have a written value on of only
$42oz?

Przemek said...

FOFOA, you're awesome!

The more people that your blog can help to wake up the masses from their government induced hypnotic trance, the sooner all the ugly truths will emerge, and in the words of JFK:

"...man will be what he was born to be, free and independent."

FOFOA said...

@ Anonymous November 4, 2009 8:28 PM :

What I said was, "Your understanding is hampered by your cynicism."

That was because your comment sounded awful cynical. Perhaps I misread you.

Here is your comment for others to judge.

If I did misread you, then you might be interested in the writings of one Mr. Stephen M. Hickel:

Link 1 ($156,128.78/oz)(follow GATA's link to gold-eagle.com for Steve's article)
Link 2 ($500,000/oz)
Link 3 ($468,750/oz)

The links above are from 2008. I also have some of his older writings from 1999 and 2000 linked here: Freegold Archaeology

They are all worth reading!

And Steve's current blog is here.

Sincerely,
FOFOA

SatyaPranava said...

@MichaelB:
I read Chapman today, and his line of thinking and understanding is right along what I have learned over the last 13 years or so. trying to reconcile his understanding of how things are going down with FOFOA's is at times difficult.

As always, I have to continually ask myself: are the elites losing control? Chapman believes yes. FOFOA believes yes. I'm still unsure, and I think Martijn may still be unsure (unless playing devil's advocate all the time).

But it's interesting to contemplate a world of freegold. and the reason I'm so skeptical is that they have me programmed pretty well. I believe (quite mistakenly at times) they are so powerful and i get into defeatist attitudes and words. But ultimately, I believe their system will come down because of simple physics. From my phyiscs professors, to Mandelbrot & Taleb, something this unsustainable will eventually fall.

anyway, FOFOA, the only reason I can think of for you not to write at SA, is a purely egotistical one, and one that I don't support at all: namely, that it's been a good ride while this has been a relatively quiet blog, with just a few of us posting. the ego loves feeling special. I'm glad to trade that feeling for the greater feeling of knowing we can help many more people protect themselves and bring this unjust system down.

chai b'ahava!

Gesher Satya

Przemek said...

@SatyaPranava:

Who says there is no factions within TPTB which are at war with each other? One wants dollar to deflate, the other to hyperinflate for the betterment of all man kind.. I don't truly believe they are all evil..

Yes, the ego caused all the world's problems to begin with. All knowledge should be shared.

Anonymous said...

Thanks FOFOA

i like the way Stephen M. Hickel thinks.....

a sudden overnight HUGE revaluation of Gold (they can use the debt as the reason) would be something to see!

Imagine the media! A Worldwide Atomic explosion!

Imagine the mania of people selling their rings!

Anonymous said...

I read about 2 to 4 hours a day, every day. I've been doing this for about 2 years. I am trying to prepare if possible for the future. I am hoping to protect at least some (all) of what I have set aside. I don't want to be one of those without a chair when the music stops.

I hate to be dense, but what do you see gold's function becoming?

How will gold function differently from paper currency if allowed to float freely?

Won't the richest and fastest just hoard the gold before the masses get an opportunity?

Once it is hoarded by all, won't it effectively leave circulation entirely?

Simply, what is the purpose of Gold in the future?

Why are eastern and European countries (aside from England) promoting the sale of gold to the masses?

Why is America and England not supporting such? Is it simply because it removes the ability to quickly and freely wage war, dominate the world, and control everyone and every thing?

Please explain this if you would.

Anonymous said...

FOFOA said: Anyone, anywhere, will always be able to exit their fiat position for the durability and value of physical gold! Freegold!

Must say, I like the current system better. Now I can exchange my fiat currency for real gold at continuous supressed prices. More gold for my buck.

kodiak said...

I found this blog in the first place from a repost on the Dollar Collapse site {I hope they got your permission first}.
Alot of Gold and Silver advocates do not fully appreciate what is taking place. Exposure to your blog would be helpful to so many.
Continued success!

J said...

Go for SA FOFOA. More eyes and minds on your blog helps us all understand the current situation better. It may also help you stockpile some more Gold.

Spread the word. Help others see the freight train that is coming down the tracks.

SatyaPranava said...

@Przemek:

you seem to be right on. and i'm slowly beginning not only to see there's two factions, but to also see a bit that they might be even more balanced than i thought, OR, that the side of freegold might be even stronger because it fall under the evolution of how this is playing out.

yet, at the same time, i'm 12 years into this paradigm, so full realization for what this means for mew in the past 10 mos or so, is still slow...i'm just beginning to take my first steps...FOFOA steps :)

i'm sure i'll be runinng and crashing into things in no time :)

FOFOA said...

Hello Anonymous (9:52PM),

"Please explain this if you would."

Like you, I have been reading about 8 to 10 hours a day for two years now trying to do the same thing. And for the last year, I have been writing about my thoughts on what I have found. The answers (as I see them) to all of your questions are contained within this blog, or if not, then at the links found on this blog. I will give you some quick answers, but the truth is, I have been writing for over a year now to answer those questions.

Q. I hate to be dense, but what do you see gold's function becoming?
A. Wealth reserve par excellence.

Q. How will gold function differently from paper currency if allowed to float freely?
A. Gold will fill the store of value monetary role, paper currencies will fill the medium of exchange role. Ponzi paper wealth reserves will burn and disappear. New credit-based paper wealth reserves will be gone until such time that they once again prove their merit.

Q. Won't the richest and fastest just hoard the gold before the masses get an opportunity?
A. That is happening right now. So don't delay! But once the Freegold equilibrium is reached, gold will be readily available to all. It is in the transition to Freegold where unimaginable, life-changing gains will be made.

Q. Once it is hoarded by all, won't it effectively leave circulation entirely?
A. No. It will go into hiding for a brief time as the world digests the extreme jump in value. But then it will find its market and reemerge.

Q. Simply, what is the purpose of Gold in the future?
A. To protect your hard earned savings (production minus consumption) from the hungry collective.

Q. Why are eastern and European countries (aside from England) promoting the sale of gold to the masses?
A. Because they know that it is of the utmost importance that as many people as possible within any currency zone profit from this transfer of wealth. It is a survival instinct!

Q. Why is America and England not supporting such? Is it simply because it removes the ability to quickly and freely wage war, dominate the world, and control everyone and every thing?
A. Good question!

Sincerely,
FOFOA

FOFOA said...

@ Anonymous (10:15PM) :

Spoken like a true Giant!

Martijn said...

Freegold would be a new paradigm. Interesting article - though not on freegold - in the WSJ

The pain of the financial crisis has economists striving to understand precisely why it happened and how to prevent a repeat. For that task, John Geanakoplos of Yale University takes inspiration from Shakespeare's "Merchant of Venice."

The play's focus is collateral, with the money lender Shylock demanding a particularly onerous form of recompense if his loan wasn't repaid: a pound of flesh. Mr. Geanakoplos, too, finds danger lurking in the assets that back loans. For him, the risk is that investors who can borrow too freely against those assets drive their prices far too high, setting up a bust that reverberates through the economy.


Collateral is the word. Freegold is collateral par excellence.

Anonymous said...

FOFOA,
Isnt this how you get a one world money system?

Demonetize Gold.

I wont take Gold to the supermarket to buy food and I also wont be exchanging it for different fiat currencies while I travel from country to country. It would just be to messing and dangerous.

Gold will be controlled by no one country, so why not make a one world currency thats electronic so I can easily enter into the currency/Gold and exit the currency/Gold when I need to. Whether Im buying groceries or traveling from country to country? It would work something like Goldmoney.com but it would be for the whole world.

To me this solves many of the problems that there would be if every country kept their floating currencies.

Sorry tin-foil hat wearers, the elites are still in control. But I think you will have a nice place at their table if you participate with freegold now;-)

Anonymous said...

To the commenter above that suggested a two tier system of 'money', one gold and one fiat.

'Good money always drives out bad'...nuff said.

Anonymous said...

Nice initiative !

http://www.globalresearch.ca/index.php?context=va&aid=15922

B.

Anonymous said...

Subtle shifts :

Central banks are also turning to gold, which Wells Fargo global economist Jay Bryson said may partly explain gold's surge to record highs.

Taiwan, the fourth largest reserve holder, has said it is considering buying more gold, while China said in April it had increased gold holdings by 75 percent since 2003. This week, India bought 200 tones of gold from the IMF for $6.7 billion.

B.

Anonymous said...

fofoa will do what fofoa will do vis a vis dissemination of his blogspot. Let us not deceive ourselves, the story has been out for years for those not blind or deaf to it.

That said, I believe I arrived many moons ago on a link from dollar collapse or 24h gold (both excellent sites). do they have permission? should they require it? the idea of formal permission/sanction for posting of a link seems unnecessarily prissy and legalistic. more so given the utter speed and profound gravity of the unfolding events we witness and seek to understand.

formal recognition/permission may also offer false respectability to another site with the implicit condoning of its contents.

I believe that seeking alpha is a third rate "alternative media clone" site... MSM proxy/false prophet if you will. Its contents are glib and misleading... WSJ lite flavor. There are many such sites to entrap the unwary. Go and peruse SA and see for yourselves. whats next, fofoa on msn or yahoo business?

I am amused/suspicious to see the couple of positive reviews. the risk of formal recognition/linkage by fofoa to inferior sites therefore is the tarnishing of his rather special brand.

FOFOA; Avoid implied "entangling alliances" etc, flattery by poor imitators, and concentrate solely on what you do best! apologies for the length of this post.


BB

Anonymous said...

PS. Bob Moriarty/321 gold, Jim Willie/golden jackass are also top notch and worthy of mention. Jim Sinclair, Bob Chapman have already been mentioned and also belong in this select pantheon of truth seekers.

BB

Anonymous said...

A first reaction :

BEIJING (Reuters) - It would be cheaper for China to buy domestically mined gold than purchase bullion the International Monetary Fund is seeking to sell, a former adviser to the People's Bank of China said on Thursday.

Asked whether China should emulate India, which last month bought 200 tonnes of IMF gold at an average price of $1,045 an ounce, Li Yang told reporters on the sidelines of a financial forum: "China's gold is much cheaper than that."

B.

Anonymous said...

Anon 2:40,

Its not a two tier money system that I was alluding to. Gold is not money anymore. FOFOA has done a fine job explaining that Gold is now demonetized and is a wealth asset now. So currencies and cash will still exist in some form, they just wont be considered an asset class like they are now.

The way I see it, like I said above is that demonetizing Gold and ushering in Freegold will naturally bring a One World currency. There wont be any reason for there to be nation state currencies anymore. Wealth wont be stored in the currency.

A One World electronic currency similar to Goldmoney.com would be the currency and you would just trade in and out of the currency at Gold/Currency kiosks in your neighborhood.

Its either this scenario, or all the Gold that is being distributed into the "little" peoples hands right now will go into permanent hiding. And a One World money system without Gold as an asset class will be thrust upon the people of the world out of necessity.

Can anyone tell me if theres any other scenarios Im missing here?

Anonymous said...

Roubini and Rogers are both wrong. Once you understand the Freegold concept you first understand that its not going to take ten years. More like 2 years max. Second, Golds not in a bubble, paper money is in a bubble.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aOfwpkHV2clM&pos=5

So much disinformation in the
media, the average person doesnt even have a chance when this
tsunami hits.

Anonymous said...

Fofoa,

the new CBGA misses the statement of gold leasing being restricted to the prevailing level at the start of the agreement.

At least in Germany gold is sold by every Credit Union (Sparkasse) and commercial banks too since many years. The main hurdle to get gold, ask at your local bank and convince the teller that you really want that shiny stuff instead of the heavily-advised bank products.
There are several bullion dealers around too.
Gunther

Anonymous said...

Anon 6:18 AM

Gold is not demonetized YET.
Its link to the $ is not yet SEVERED, but it's on the way.
There always will be currencies!
And there you have all your savings in Krugers.
And when you want to buy something in Brazil or Mexico or Ghana or Australia or Belgium or Ukraine or Taiwan, you go to a local bank with your Kruger and they will give you local currencie in exchange for it.

My definition of "severed link":
When the $ goes up, gold goes down.
In Freegold however a currency can go up WITHOUT devalue-ing the currency.
But gold cannot be demonetized as long it is linked to the $ because gold valued at 1100$ means gold is still valued around 0.

Krach

Anonymous said...

I meant that in Freegold a currency goes up WITHOUT devalu-ing GOLD.

SatyaPranava said...

@anon 5:49 - that article in reuters, and the comments of the former advisor, seem to be disengenuous.

If this were true, it would suggest that the "China Put" is utter BS and all they want is what they can extract at $200/oz (or whatever price they extract it for, maybe less).

But that's not the case, it seems. china has been buying up gold like nobody's business, and now even encouraging their own populace to hold it.

My speculation is that China was denied somehow. this comment was like a little kid who wants a toy, and when his parents say no, replies "well i didn't want it anyway!!" i don't know...something is amiss here, but i can't put my finger on it.

Both chapman and powell gave interesting reasons in the past few days for the why india question. Chapman speculates that gold did not change hands and was really short covering while Powell suggests it might be for future intervention (FX, gold, other?).

did this sale cause the market to spike BECAUSE some CBs realize it was a ruse and that no gold changed hands? something else? again, something doesn't seem right intuitively...jujst can't put my finger on it.

satya

Anonymous said...

Three times is right ;--)

Otherwise said, in Freegold free valued Gold prices a currency and not the other way around.

Krach

Steve B said...

FOFOA,
Isn't this how you get a one world money system?

Demonetize Gold.

I wont take Gold to the supermarket to buy food and I also wont be exchanging it for different fiat currencies while I travel from country to country. It would just be to messing and dangerous.

Gold will be controlled by no one country, so why not make a one world currency that's electronic so I can easily enter into the currency/Gold and exit the currency/Gold when I need to. Whether I'm buying groceries or traveling from country to country? It would work something like Goldmoney.com but it would be for the whole world.

To me this solves many of the problems that there would be if every country kept their floating currencies.

Sorry tin-foil hat wearers, the elites are still in control. But I think you will have a nice place at their table if you participate with freegold now;-)

Boy I wish I wrote that. I KNOW one world currency is coming, that is what the folks in charge have been saying for years. So we know that is coming.

I am convinced a process is going to take place that moves us from the current USD world to a regional currency/freegold world to a one world currency. I just don't know enough to know what the process will be to break down freegold. WHY would the elite want to do that is what I want to know. What will the breakdown of freegold look like? Is it the below which is more process based?


Its not a two tier money system that I was alluding to. Gold is not money anymore. FOFOA has done a fine job explaining that Gold is now demonetized and is a wealth asset now. So currencies and cash will still exist in some form, they just wont be considered an asset class like they are now.

The way I see it, like I said above is that demonetizing Gold and ushering in Freegold will naturally bring a One World currency. There wont be any reason for there to be nation state currencies anymore. Wealth wont be stored in the currency.

A One World electronic currency similar to Goldmoney.com would be the currency and you would just trade in and out of the currency at Gold/Currency kiosks in your neighborhood.

Its either this scenario, or all the Gold that is being distributed into the "little" peoples hands right now will go into permanent hiding. And a One World money system without Gold as an asset class will be thrust upon the people of the world out of necessity.

Can anyone tell me if there's any other scenarios I'm missing here?

Exactly, what is missing? Does all the gold, after a massive pop get sold to the giants and then there is no value since "they" have it all?

Anonymous said...

So it is said China wanted to acquire the IMF-gold at a discount only.

India however was a bit more alert and snapped the gold just in front of them. China is a bit pissed-of, so it seems :--)

Krach

SatyaPranava said...

Krach - is there a link to what you're referring to?

i just found this via adrian ash:
"China's gold is much cheaper" than IMF gold, however, notes Li Yang, a former member of the Chinese central bank's monetary policy committee, and now a senior researcher at the Chinese Academy of Social Sciences, speaking to Reuters.

The world No.1 producer since 2008, China is now also the world No.1 private gold consumer market.

"It's cheaper for us to buy gold from the Chinese market," agreed an un-named People's Bank official, "but it doesn't help diversify our huge foreign exchange reserves."

"Even if China bought half the world's annual gold supply, it would only cost a few tens of billions of dollars, which is tiny compared to China's huge reserves.

"Even if it's sold at a market price, we should still buy," counters Xia Bin, head of a key Beijing think tank advising the State Council cabinet, making plain that his was a personal view.

"India's okay with it, why shouldn't we be? What's the use for so many dollars, whose purchasing power is weakening anyway? With so many foreign reserves in hand, I think China should buy, without doubt."

seems that there's disunity in the chinese position.

all so very interesting.

Anonymous said...

http://www.merkfunds.com/merk-perspective/insights/2009-11-05.html

Axel Merk said so, but maybe it was only his opinion.

Meanwhile I understand better that India is an US-partner, while Pakistan is a China-partner.

Probably the answer on why India got the gold, and not china, is to find right there.

Martijn said...

@Anon

China is a bit pissed-of, so it seems

Why do you think that?

SatyaPranava said...

anon 9:02 - thanks for the link to merck. it at least gives me a frame of reference, context, etc.

as for indian/china, that is much to what i've been alluding when speaking of india being more cooperative toward the western elite.

but one thing that puzzles me about the simple india/pakistan, west/china alliances, is that the US had a significant say in the breakdown of Pakistan. Unless we are to believe that Bhutto was a Chinese hit to destabilize pakistan to increase their influence, while mitigating the Anglo/American influence.

But I suspect that the sale to india has more geopolitical motives than first in line, smallest amount of reserves, purchasing at market price (i would think anyone holding dollars would want gold at even slightly above market prices, but then again, i'm biased toward precious metals and real assets).

What i hadn't expected is what i had mentioned above from chapman and powell, that it was just a ruse, or to be used in future Forex manipulations.

Anonymous said...

@Martijn

Because India got the gold and they didn't.
Chinese spokesman said China could get its gold cheaper within chinese borders: A bit a strange reaction given the fact it is well known China wants every ounce it can get.

J said...

Sri Lanka follows Indian move to buy gold

By Joe Leahy in Mumbai

Published: November 5 2009 16:04 | Last updated: November 5 2009 16:04

The Sri Lankan central bank is buying gold to diversify its reserves and smooth out periods of dollar volatility, Ajith Nivard Cabraal, central bank governor, said.

The move, which follows India’s gold purchase, is part of a policy change on the part of the bank.


“We did experience this huge currency volatility during the time of the crisis that gave us the feeling that we need to save in something more solid,” Mr Cabraal told the Financial Times. “Naturally gold crops up as the more logical item.”

He did not reveal the size of the purchases, which analysts said were about five tonnes, far below India’s 200-tonne purchase.

Mr Cabraal described the buying as “fairly substantial . . . We have not stopped accumulating it”.

Jonathan Spall, a director at Barclays Capital, said: that, while Sri Lanka might be a minnow in terms of the gold it may buy, it was another argument “in the case being built for gold”.


Sri Lanka buys Gold

SatyaPranava said...

seems FOFOA and others are correct in saying the giants will move this. not that I would consider Sri Lanka a giant, but they're a giant relative to we americans and little guys buying coins and bars.

MichaelB said...

There are many sources of information on the faction promoting positive change and reform in the world's financial system and governance. Before next summer, it is likely TPTB will be ousted IMO.
As for the gold makeup of countries like Malaysia, it hasn't been necessary for them to convert their reserves into gold as long as they are under the umbrella of a larger organization such as ASEAN, NATO or the Alliance of South American States. This may mean integration or merger with other states politically, economically and monetarily especially with the current global prevalence of transnational conglomerates, offshoring, outsourcing, free trade agreements such as Nafta, Cafta and GATT, and immigration.
In as much as that groundwork laid in the past is irreversible, like post WWII border changes and the growth of cities, and the future will evolve partly in reaction to that, most of the blowback and negative feedback loops have been hidden up to now.

Anonymous said...

If it is true that Indians got the gold because they were willing to pay more than Chinese, then something is out of place.

- India can not outbid China in pricing. Yet, supposedly, it did!

- Everything is cheaper in China, not only gold but, only acquisitions of foreign wealth will make China richer. Which is why they are buying every resource they can. And yet, China supposedly doesn't want gold at market prices?

- China let it be known that they will buy all 400 tons long ago, and yet, we are to believe that suddenly China got a lot dumber?

- As it is becoming known, the explanation that there was a bidding war for gold, is bullish for gold. No CB would want that to be poured on public ears. And yet, we just heard exactly that?

All this leads me to believe that there was no 200 tons of gold. There was a word, but no act. The word was let out to serve as a bearish sign for gold, but as it turned out, there were bidders at market prices!

So, an exit needed to be found, in order to escape the revelation of the fact that there is no gold for sale. A partner country was found to agree to show their own reserves as "purchased from IMF just now", and the compensation was obviously made.

The reason this was India, is because it is extremely friendly to US (who is the U.N. and the I.M.F. in disguise), and because India probably had more gold than it was willing to admit to before. Trying to be a US partner was a conflict to their natural affection with gold.

I think the whole sale was a scam. It had backfired, but in current conditions, it was decided to swallow the bulled of making a bullish statement for gold, rather than not "completing the threat" and making that super bullish for gold.

MichaelB said...

@SatyaPranava
Re: "But it's interesting to contemplate a world of freegold. and the reason I'm so skeptical is that they have me programmed pretty well. I believe (quite mistakenly at times) they are so powerful and i get into defeatist attitudes and words. But ultimately, I believe their system will come down because of simple physics. From my phyiscs [physics]professors, to Mandelbrot & Taleb, something this unsustainable will eventually fall."

Yes, like a rubber band that's stretched and STRETCHED, and THEN, out of 'necessity' during the banker-dominated, Wall Street coordinated Obama administration and with simple mathematical certainty SSTTRREETTCCHHHEEEEEEEED to the Nth power, and to unimaginable orders of magnitude for good measure.
Either total failure ensues such that an immediate replacement monetary system and concomitant process of thinking is warranted or the rubber band returns to earth with the force of a large asteroid.

Jennifer said...

Why is there a mad rush to the dollar right now?
http://www.bloomberg.com/apps/news?pid=20601087&sid=aU_VL3lDpwig&pos=6

Strange days...

Stephen said...

This blog attracts intellectual commentary, and respect. Once you publish at SA and others you will be overrun with infantiles, chickens and ducks squawking without portfolio. This is difficult material for Philistines. Save yourself the grief.

Ender said...

IMF gold being to expensive for the Chinese.

Another taught us long ago that a little bit of gold bought oil backing for the dollar. Arabia politically sided with the dollar, as the currency of function for its oil, while having worked out a deal to get gold in the background. This has been HUGE support for the dollar! That little bit of gold has bought years worth of function for the dollar.

When we now here that some Chinese official says that the IMF gold is too expensive, it must be that in order to get this gold you have to trade SOMETHING+CURRENCY to get the GOLD. What is the value of that something? What did India have to trade in order to secure its right to purchase 200 tons gold at this cheap dollar denominated price?

When the value of that SOMETHING is exposed, I’m sure we’ll see that the deal was structured similar to the deals that were made with oil. That something must be very valuable!

DiverCity said...

FOFOA, what Stephen said is absolutely correct. But I suspect you've read articles there regarding gold and already realize that many commenters seem to have nothing better to do than make those infantile and inane comments about the metal. I think I'm of the mind like SatyaPranava, who I believe it was who said above that we would like to keep your thoughts amongst ourselves but realize that they could assist potential fellow travelers if available on a more widely available forum.

SatyaPranava said...

@ ender:
or anonymous and my hypothesis is correct and they just made it that high for china knowing they never intended to sell the gold. i'm leaning more toward this thesis at the moment, but very open to something else that makes sense of the puzzle pieces.

also, i do agree withi stephen and divercity as well. i think that's part of what i felt intuitively when i posted about it. the juvenile noobs that jim sinclair obviously deals with (as judged by his frustration), are probably not worth the worry.

if anything, i'd write a second article once a month on their site and post under a nome d'guere.

even though I consider myself on the lower end of the experience and background on this blog, i've been on others that are just horrific, and have caused me to leave. but again, consider the above to get the word out.

Satya.

SatyaPranava said...

@MichaelB:
i've used the metaphor of rubber band before...only for mine, it's an industrial rubber band the size of a football field that's been stretched to the very creatively worded degree you describe :)

but in my scenario, it's been cracking (or already broke), and they've got hundreds of people trying to grab onto whatever they can to stop the rubber band from snappign back, and they've got a pretty good grasp. but instead of taking steps to slowly let it dissipate its stretched potential energy, they're INCREASING its potential energy with many of the steps they're taking. this is likely to lead this industrial rubber band to break again.

ecologically, physically, we're still under the same natural laws, no matter how much MOPE tells us otherwise.

Anonymous said...

@ Ender : Already gold-rich India received the $-IMF gold in exchange for $-regime loyalty on the geopolitical (strategic) chessbord. Consider all the $$$ the US poures into archrival Pakistan.

These 200 tonnes of gold are a permanent present at ever rising goldprices.

China and Russia, the other gold accumulators, are much less $-loyal. Why should the $-IMF "buy" them with the gold present ?

Imagine China's reaction if (!?) South Korea gets the other 200 tonnes ?

The 400 tonnes IMF gold are peanuts at present prices,...but function as a political weapon (threat-warning) to $-disloyal states. Cfr. the petro-$ loyalty for so many decades.

Unfortunately, the EU/EMU never discloses its goldsales as the IMF does. What support has EU-gold (CBGA) been buying in the East (China) ?

Maybe India promissed to cooperate with the $-regime on goldprice governance to counter the China gold-put ?

Let us wait and see who gets the other 200 tonnes. Maybe we can adjust our guesses a bit :)))

B.

Anonymous said...

Regarding the meaning of the sale to India, here is what Harvey Organ had to say on his blog (http://harveyorgan.blogspot.com/):

The news from the Bank of India surely scared our banking cartel. The volume on the comex gold yesterday turned out to be
around 190,000 contracts and this is without switches. This is a massive volume of contracts and yet the OI rose by only 13888.
It is for this reason that I believe that the weaker commercials bailed as the rumours spread that the long speculators are in essence
mainland China.

This is going to shape up to a monumental battle for control of whatever physical gold bricks are around.
First day notice on a December contract is Dec 1.09 and that day will be quite interesting to watch.

There is no doubt that the big story of the year is the Indian purchase of 200 tonnes. I believe that they did not
purchase any physical but paper gold.

We will know shortly. If we do not hear of any purchases from China then you know for sure that the IMF did not
have any gold.

If you hear that IMF gold is purchased by one of:

1.Bank of France
2. Bank of NY
3. Bank of England.

then you know that the gold purchased is to replace gold already lent out from one of the IMF's foreign depositories,
and the replaced gold is nothing but paper gold.

If there is physical gold, then China will announce the purchase of the entire 203 tonnes.


Here is a comment from Rob Kirby on the same blog:

[...]

One of my subscribers e-mailed me earlier today to ask me what "my take" was on this transaction. I responded,

"My take on this is that it almost certainly was NOT a vanilla sale as advertised. If you really believe the IMF cares about "low income countries" you probably also believe that Santa Claus really keeps a list and checks it twice. I can imagine that there might have been a quid-pro-quo involved here – quite possibly involving some "physical silver bullion" – all at market rates too, of course – not publicized – coming back the other way [India is known to have LARGE sovereign silver reserves] to try and help alleviate EVEN MORE CHRONIC silver bullion shortages in the WEST."

Interestingly, I checked the closing prices of gold and silver on Oct. 19 at Kitco: 17.82 per ounce.

And the price of gold on Oct. 19 at Kitco: 1,063.50

Look what has happened in the ensuing 10 days: gold today: 1,066 silver: 16.67

I know I'm not off base here. How do you spell TRANSPARENCY?
Best,
Rob Kirby

Anonymous said...

@BB and fofoa

regarding Seeking Alpha, i agree with BB's opinion. fofoa's works are much better quality than the ones i see at Seeking Alpha. why give your implicit endorsement to them?

of course, unless they offer you "big money", then it might be worth the effort. at least fofoa will get some monetary benefits for his great effort. :)

FOFOA said...

Have any of you heard rumors that India paid for the gold with SDR's, not with dollars?

I'm not sure I understand how this would have been done. First of all, the IMF seems to report India's SDR quota at just over 4 billion SDRs [1] which would be worth about US$6.6 billion [2]. Not quite enough to pay for the 200 tonnes.

Also, since the gold supposedly came from the IMF, who can print SDR's from thin air, and who was recently authorized to increase the money supply of SDR's (out of thin air), this sale does not appear to be about money or market bidding. It seems to be either about redistribution/rebalancing of the gold landscape, or about a necessary transfer of the paper ownership title of some gold that was previously held under a custodial agreement of some sort.

But how to do the math if it was paid with SDR's?

Obviously there must be a quid pro quo other than money, as Ender says. But I am having difficulty connecting the dots from the initial request by the IMF to sell some gold (reasoning being to raise funds), to the G20 authorization to increase the money supply of SDR's, to Congress approving the gold sale, to India getting the gold in exchange for something they a) didn't have enough of, and b) the IMF did not really need.

India's reported foreign reserves (including SDR's) prior to the announcement of the sale (notice that the US$6.6 billion worth of SDR's are reported in two separate amounts, one being "reserve position in the IMF")

Any thoughts on this?

Martijn said...

Dollar rebound: Nov. 5 (Bloomberg) -- The PowerShares DB US Dollar Index Bullish Fund ran out of shares and trading of the security was halted for about 45 minutes amid increased bets that the currency will rebound.

Combination of the carry trade, the dollar being drastically oversold and some chance of renewed banking panic. Panic will drive banks to sell of paper in order to fulfill their (paper) dollar obligations, which would be (short term) bullish for the dollar (and probably gold).

Anonymous said...

FOFOA,

What do you think about Kirby's guess that this deal involves the transfer of some silver from India to the Western banks? (see my 2:09 post). It's clear that the IMF does not care about getting more SDR or US$ so there must be something else.

FOFOA said...

Gold paid for with SDR's:

India Times article...

"This is because these purchases are reckoned to be carried out from the $4.8 billion worth SDR allocation that the RBI had obtained from the Fund earlier this year. The IMF had allocated $4.8 billion by way of general allocation of special drawing rights (SDR) — the reserve currency with the IMF — in August this year as part of its SDR 161.2 billion package allocated to member countries...."

Martijn said...

How irrelevant is this on the Indian story?

FOFOA said...

Hi Anon,

I don't know about silver, but I agree that there is likely something other than just SDR's being tendered. Unless... this was simply a public way of transferring ownership title of some gold that already belonged to India anyway. Or perhaps fulfilling a paper gold position with physical delivered to a giant... to buy a little time before total collapse.

This sale was a two week agreement. Perhaps if it had not been made, that same amount would have been procured on the open market during those two weeks? Collapsing the market before Halloween?

"Sell me your 200 tonnes off market, or I will bid for it myself on the open market!"

FOFOA

Martijn said...

If this gold sale is intended to bring some live into the SDR it is a rather significant choice to trade it for gold.

Martijn said...

"Sell me your 200 tonnes off market, or I will bid for it myself on the open market!"

That's what I thought to have been a scenario as well. These days any country holding significant enough reserves can threaten to do so. If India did, they will not be the last to do so I guess.

Martijn said...

About the dollar going up (short term):

Nov. 4 (Bloomberg) — The U.S. Treasury Department said it plans to sell a record $81 billion in its quarterly auctions of long-term debt next week and will replace the inflation- protected 20-year bond with a reintroduced 30-year security.

They will try drive the dollar, they will manipulate it. But it won't last.

FOFOA said...

Here is a nice, clear Thought posted today by a friend, written by his friend. Perhaps we could call the writer FOFOFOFOA? Unless, of course, he has a shorter handle...

"When you understand how it is that it is economically (and therefore politically) undesirable for other major currencies to appreciate against their peer currencies (which is exactly what would happen to any currency replacing the dollar’s reserve status), you will subsequently know why gold shall continue to emerge as the de facto solution to the international reserve question.

And here I emphasize de facto rather than de jure because this has become a global phenomenon driven by a natural evolution (survival and ascent of the fittest) and does not require any additional international treaty or enabling legislation as a prerequisite or for motivation.

The breeze is fair and the road ahead is clear for the ascent of gold."

Anonymous said...

Now that the world has reach this point in time....

Whatever happens to bulldoze this financial debt mountain....

from here on in......

the solution will be through Gold......nothing else.

Tekin said...

On China & India

http://www.ca-c.org/online/2006/journal_eng/cac-05/07.yazeng.shtml

--quote--
"At the end of 2005, the U.S. changed its approach toward Central Asia as a region. Until very recently, in keeping with current practice, the White House administration looked at Central Asia as a separate region related to Russia and the CIS countries and consisting of five former Soviet republics: Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. But in the new approach lobbied by the U.S. State Department and based on an essentially new regional conception, Central Asia is part of South Asia as a single super region we are calling Greater South Asia."...

"The Greater South Asia project allots the Central Asian countries the role of energy resource and raw material suppliers to South Asia and the world markets, as well as consumers of goods from South Asia and the world markets."...

"The next aspect is related to the fact that the Greater South Asia project is based on creating transportation and energy corridors passing through Afghanistan. It is presumed that the Central Asian states will be able to export their energy resources, raw materials, and commodities to the markets of India and Pakistan, as well as to the world markets. In this respect, it would be expedient to take a closer look at the three main aspects of the mentioned corridors: oil and gas pipelines, high-voltage power transmission lines, and motor roads.

At present, Kazakhstan, Turkmenistan, and Uzbekistan possess the main oil and gas reserves in Central Asia, so they should become the key hydrocarbon suppliers in the southerly direction."...

"According to the Greater South Asia project, India and Pakistan should become the main consumers of Central Asian energy resources in South Asia. "...

"A geopolitical consequence of successful implementation of the Greater South Asia project was to make the U.S.’s position in the region stronger and Russia’s and China’s weaker."...

---end of quote----

Martijn said...

Good post on Federal reserve policy!

Martijn said...

Aside from the Fed threatening to step back, a second wave of mortgage resets coming up.

Interesting mix...

Martijn said...

Did you guys know that Warren Buffet is known to have said he'd prefer owning a toll bridge during periods of inflation?

The bridge is build with old dollars, requires little maintenance, and when inflation strikes prices can be raised fairly easily.

He now bought a railroad company. Isn't that the same as a toll bridge?

Anonymous said...

Fofoa, Martinj, Ender, S-Pranava,
Hi, I am Mortymer,

Tell me what do you think about this, comments please:

The other part/level of the message (Do not concentrate, specualte about the 400 anymore, not soo relevant), but -> THERE WILL BE ANOTHER 2000t IN TIME.
Conclusion:
- No more gold to throw to the market NOW, they were forced to use this new tool, unusual step.
- Only the IMF gold left, no more weak CBs with gold left to pray on.
- The other 203t were most likely sold secretly already (Remember the shortage few weeks ago?)

Ps: These in need of reading your blog read it already. Thing twice.

Anonymous said...

2 Ender:
Mortymer again,

Your conclusion seems correct, business is more than just a barter, it becomes personal.

What do you think? Could that be more credit for US?
(Traditional buyers do not/can not buy more/anymore of US debt).

Anonymous said...

Hi 2 All,
Mortymer again with a question...
Interest rates & Buffet.

Preconditions/statement: When you have many investments/loans which depend on the credit isnt it better to refinance under one roof?
Could Buffet´s move be seen also from this point of view? (among other).

At which time will interest rates will be thrown again into the Game? Could the aussie up be just a check? How will market & gold react to higher interest rates?

Anonymous said...

"China's gold is much cheaper than that."

B.

if the crap&traders get their way, not for much longer.

Anonymous said...

food for thought:
reuters mentioned 'hard currency'.
decipher that code & we'll have our answer.

Anonymous said...

"Whatever happens to bulldoze this financial debt mountain...."

Debt is trash... something to be defaulted on, not something to squander your gold to get rid of.

Anonymous said...

Ladies/gents; Trying to position oneself for survivable is commendable and common sense as we enter these terrible, epic dark years. Lets not forget, however, the appalling magnitude of suffering experienced by those not as fortunate! And we have not even reached the end of the beginning...

The seeking alpha blurb above is unseemly in the extreme, as it crows about seeking profit etc. I can only hope that others find this shameless exercise in self-promotion as revolting as I do.

SatyaPranava said...

@anon 10:05

as someone trying to help communities transition into what the elites desire to be more of a plebian economy, I very much appreciate your words of keeping people aware of those who are going to get slammed by this (i.e. those less fortunate).

Also a very good critique for some of these websites as well. These communities might very well soon need to learn how to grow their own food, remediate their soil and water, and recycle in a way that most can't even currently begin to imagine the definition.

Permaculture can help everyone plant a self-sustaining food forest for about 60-100 man hours on a 2 acre plot of land.


@Mortymer:

Though I am no doubt honored to be included in the question address, I believe there is a huge gap in knowledge (and intelligence?), and experience in understanding what's going down, from the other 3 you named in your questions. Thus, I in no way feel qualified to answer them, sorry. I will leave it to Martijn, Ender, FOFOA, or some of the other very wonderful and knowledgeable people we have on this beautiful forum.

best of luck,

Satya

Ender said...

@Mortymer

That SOMETHING could very well be credit. We may find out if India is the one that steps in to buy during the dollar bond auctions. If you spend 7 billion picking up metal at the spot price, but have to commit to buying 70 billion in worthless bonds, the dollar will have found a little support. Oil supported the dollar this way, why can’t a little gold sold to someone that has dollar reserves?

As posted above (Anon 2:09), the notion of a metal swap is also very interesting. But in order for that to work, there must be adequate amounts of both metals that can keep the market liquid. A metal swap would imply that the IMF holds gold metal. It is my belief that the IMF holds gold promises. But, if it really does hold gold, we may find that the CBs of the Euro system have already redistributed their share of metal. This source of known metal may simply dry up.

Also, the idea of a China put in the gold market seems a little shaky. Another taught us a long time ago that Big Trader did not shop for metal in the futures markets. If anything, China would sell paper gold to help suppress the price so as to keeps its supply lines flowing. As long as the frog doesn’t get wind of the temperature changes, he’ll just sit there like he’s always done. Same goes for the dollar hoarders.

In any case, time will tell. We can watch the situation unfold together.

MichaelB said...

@Mortymer
Re: Higher interest rates and gold

There are few things sustainable left in economics as currently practiced by the Treasury Dept and the Central Banks that cooperate with it to debase currencies and provide liquidity and leverage at greater and greater multiples like dope to an increasingly tolerant addict.
As I've said many times, ANYTHING the Fed does, or does not do, has grave implications. It is truly between a rock and a hard place.
They have recklessly indulged in creating previously inconceivable policies, not unlike the way Congress taxed and spent us into default and bankrupted the social swecvurity Trust Fund in the process.
Everything they do now molds the perception and practice of politics, diplomacy and ecomomics into a gold wealth reserve cauldron.

Anonymous said...

appreciate the somber note by anon 10.05. all this excitement as gold takes off. but as someone once said, imagine how terrible the world will look when dow/gold is 1, or au 10,000 etc. if you have no trepidation or fear concerning what is unfolding, you are really naive, blind, or stupid.

Anonymous said...

The sheep will go to the slaughter. Try to save as many as you can now, but in the end sheep have always been for the slaughter.

Anonymous said...

@ anon 12.20; fair enough, well said, biblical statement in its simple self-serving logic. trouble is many who wield such "sheep to the slaughter" platitudes feel that they are destined to be spared the butcher's knife. they may be surprised to find themselves so vulnerable in the cold, flat light of one day soon. I have a sneaking suspicion that what passes for ovine and hapless in the financial sense today is about to grow exponentially in the months to come. So beware, gloat at your peril..

Anonymous said...

Not gloating friend, very well aware of whats to come. Thats why I sleep with my running shoes on and my finger on the trigger.

Anonymous said...

understood mate... my apologies for misunderstanding your comment. Good Luck!

MichaelB said...

Few here are "celebrating" the misfortunes of others. But look just about anywhere, and there's abundance of "fear", "naivete", suspicion and denial. Anytime they come across someone with conviction who doesn't conform to their dogma of nihilism of submission, is castigated and accused of insensitivity. Their speeches resemble those of fatalistic, sanctimonious judges, politicians, priests and preachers self-righteously insisting on dogma, statism, genuflection, tithes, taxes and unquestioning regimentation to the grave.
Their shallow and shadowy ceremonies, formalities, oaths and rituals reek of pretension, insanity, hypocricy and self-dissolution.

Steve B said...

Amen MichaelB

SatyaPranava said...

michaelB and SteveB, are you guys brothers...along with Sloop John B? :)

Anonymous said...

satya, any 'permaculture for dummies' books/websites to recommend?

Wendy said...

@SirEnder

I have to take a stab here. The only thing I can think of that China has (90% world researves) that the US (IMF) might want in addition to currency for gold is REMs. Can't blame China for flippin them the bird on that one considering their stragic importance

Motley Fool said...

Seeing the reference to Freegold flowing around quite often, I sought to understand your conceptualization.

I's just like to say that I like your optimism. :)

The Fool

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