Wednesday, December 9, 2009

Gold: The Ultimate Un-Bubble


**Newsflash**

The gold bubble has not popped! ...because gold is not in a bubble. There is no gold bubble. There is no such thing as a gold bubble. Never has been. Never will be. 1980 was not a gold bubble. And anyway, today's situation is entirely different.

In fact, gold is the opposite of bubbles. It is the inverse, the recipient, the beneficiary of "frothy air" that escapes at lightning speeds when bubbles pop. It has already capitalized on the demise two bubbles this decade. And it is now about to absorb the froth spontaneously expelled by two more, the two biggest bubbles the world has ever seen.

For all you technical analysts out there plotting and planning your eventual exit from gold before the blow off phase, I have a new pattern to introduce to you. I call it the Orbital Launch Pattern, or the Inverted Waterfall. In this pattern there is no blow off! It looks something like this...


As you can see, it is the inverse of The Waterfall Effect [1]:


Think about what happens when a rocket shoots for space. Its fuel is consumed in the heat of fire, it sheds its extraneous dead weight which falls back to earth and burns up on reentry, and its underlying asset, a satellite, stays up in perpetual orbit.

What causes bubbles to form?

The answer to this question lies in a simple comparison of a few actual bubbles. Most recently there was "the Housing Bubble" and before that, "the Tech Bubble" or "Dot Com Bubble". In 1929 we had "the Stock Market Bubble". There were the concurrent bubbles in 1720, the British "South Seas Bubble" and the French "Mississippi Company Bubble". And of course there was "the Tulip Bubble" of 1637 in Holland.

In all of these bubbles demand quickly overwhelmed supply in a feedback loop whereby new demand joined the stampeding herd causing the price to rise, causing more new demand to join the stampede and so on. A self-reinforcing feedback loop. Then leverage or credit was added to the rocket-fuel mixture boosting prices to even higher stratospheric levels. With cheap credit even the shoeshine boy could get in on the action!

And with the shoeshine boy in, new and improved Ponzi-paper derivative financial trading products were created allowing the hyper-acceleration of speculative trading. Accelerated paper trading created shortages in the underlying object of desire which in all the above cases was something that could be produced to meet demand. But these temporary shortages blasted the price even higher drawing more lemmings into the stampede.

At this stage euphoria, greed, delusion and mania took over. This was when, in most cases, over-supply had been stockpiled to meet the delusional demand and the true insiders took their profits and got the heck out. Cheap credit was then cut off and the weakest players were forced to sell causing a panic in the herd of lemmings who promptly ran straight off the cliff.

Of course there were subtle differences in each bubble. But the commonality was that the underlying object of desire in each case could either be easily ramped up to meet demand through a little extra human effort [2], or it could at least be valued objectively through common metrics like income, rent, earnings, interest or through careful valuation of its component elements.

The true fair value of the underlying object of desire became obscured by frantic greed-driven trading of, in most cases, its paper equivalent. Then, with leveraged profits driving the paper trade and ramped-up production of the physical object, separation between paper and physical was imminent.

Separation of paper and physical. Sound familiar? Well it's not the same as gold. It is the opposite.

Take the tulip craze. In the early 1600's a rare tulip virus was identified which made tulips bloom in a brilliant mosaic of colors. These rare flowers soon became a status symbol. Then in 1625 an especially rare "mosaic virus"-infected tulip bulb was found which rose in price to around $25,000 in today's dollars. The trading of "paper tulips" went delusional and by 1627 one of these rare bulbs sold for the equivalent of $75K! This price caused speculators to quickly cultivate this rare breed of tulip proliferating its valuable offspring. As the offspring multiplied the rare bulb became much less rare. Then, "one day in Haarlem a buyer failed to show up and pay for his bulb purchase... within days tulip bulbs were worth only a hundredth of their former prices. The tulip bubble had burst." [3] Can you see the difference yet?

In 2000 the Dot Com Bubble ended with a wave of dubious IPO's for tech and Internet companies with little more than a clever idea. The Housing Bubble ended with a rash of ridiculous condo conversions (old apartment buildings flipped into condos) and a giant inventory of new homes that could not clear at even half the price.

To make matters worse, the easy credit that had fueled the Housing Bubble became a drain on the real economy and when it was cut off, the Ponzi financing available to individuals came to an abrupt end.

Pop Goes the Bubble

So as we can see, one of two fundamental things causes bubbles to pop, and sometimes both. In one case, frenetic delusional demand outpaces supply until malinvestment delivers a surplus supply and then the bubble is done. In the other case, frenetic delusional over-valuations outpace rational objective metrics until easy credit must be cut off to save the banks and insiders and then the bubble is done.

Post-Pop

Normally bubbles stay popped for a generation or more, at least until the pain of spontaneous impoverishment is forgotten. Of course, once the underlying object of repulsion undershoots a fair valuation the forces of currency inflation resume a gradual ascent. But this phenomenon is anything but bubble re inflation.

In some cases post-pop bubble froth appears to flow directly into new bubbles, as in the case of the Housing Bubble following the Tech Bubble. From this perspective, we are living in a "bubble economy", which is actually true. But these serial bubbles are really just the result of Central Bank inflationary policy meant to dull the pain of newfound poverty like a shot of heroin, and not a flight of real, hard-earned capital.

The flight of hard-earned, highly valued capital always flows down the inverse pyramid directly to the safety of its solid foundation. (Please see: All Paper is STILL a Short Position on Gold)


Golden Receivership

In 1971 we could say that the high value of the US dollar was actually in a bubble. The clearest sign that this bubble was about to pop was Charles de Gaulle's demand of US Treasury gold as France expressed its desire to end the dollar's wealth reserve function. In pure desperation, the gold window was closed and boarded up like a bungalow in the Keys before a hurricane. This display of pure weakness and fright was like a pitchfork impaling the dollar bubble and gold promptly rose 2300%.

In 1929 the Stock Market Bubble burst and even though gold was under strict parity rules, severe pressure had to be released by raising its price 70%. But even this wasn't enough to contain the panicked flight of capital so domestic gold possession had to be outlawed as well.

In 1720 France, John Law's paper currency and "Mississippi Company" bubble popped. The entire capital flow went right into gold and silver. A frantic Law first limited the amount of gold that could be redeemed to stem the flow, then attempted to turn his company stock into actual currency, doubling the money supply and further impaling his bubble. Ultimately he outlawed the ownership of gold in a desperate and feeble attempt to save his dying bubble. But this only made things much worse for him and he was finally forced by the King to flee France for Venice where he died penniless eight years later. [4]

Lastly, from the day the Dot Com Bubble popped until the Housing Bubble popped (7 years later) gold rose 140%. Then, again, from the Housing Bubble implosion until today (a little more than 2 years), gold has risen another 70%.

Two Historic, World-Class Bubbles are About to Pop

Bubble #1: Government Debt (with a nominal value in the tens of TRILLIONS)

Bubble #2: Perceived Wealth, denominated in purely symbolic, un backed, unsustainable-Ponzi-debt-based currency (with a nominal value in the HUNDREDS of trillions)

Darryl Robert Schoon writes:
In the early stages of capitalist systems, interest and principal can be serviced out of the debtor’s cash flow. In the final stage of “mature capitalist systems”, they cannot.

Capitalism’s final stage is what Minsky calls “ponzi-financing”, when debt payments can only be made by additional borrowing. This is what the US, the UK and Japan are doing today, having to borrow against tomorrow in order to pay yesterday’s bills.

For 50 years, not one Dollar of new debt created by the US government to fund the activities it does not wish to tax for has been repaid. The debt has simply been “re-financed” with new debt being sold to retire the existing debt.
(www.the-privateer.com)

At some point, the end finally arrives. Ponzi-financing cannot service debt forever. Investing in unhedged paper assets is the bet that it can. Gold is the bet that it cannot. [5]

Amazingly the mathematical upper limit of Ponzi-finance coincides perfectly with the mathematical limit of the 28-year rise in past-issued bond valuations!

It is the 28-year hyperinflation of the US$-denominated debt asset bubble that is about to pop. When interest rates are falling (like they have been for the past 28 years), the value of past-issued debt assets rise. Anyone who has been playing the bond market since 1981 has made a "gross" killing! (Please see: Bill Gross):


Bill Gross buys $23M mansion in Newport
Friday, August 14, 2009 10:20 PM PDT


Here is the chart of interest rates since 1981:


Flip it over and you will see the chart of Bill Gross' profits during that same time frame:


Of course the inflation of this 28 year mega-bubble was given an assist by the systematic suppression of gold prices beginning with Barrick in 1983 and accelerated by Rubin and Summers in the early 90's with their Gibson's Paradox scheme and Strong Dollar Policy.

But the thing about THIS bubble's rise that is so different from any rise in gold is that the price of past issued debt has a natural upper limit. And the "lowering of interest rates scheme" has a physical floor, an inevitable and unavoidable dead end... call it ZERO.

Yes, we have seen a couple ventures into negative interest rate territory lately. But this is simply anathema to the very concept of money, period. It is the ultimate froth, the last breath of air you can blow in before a bubble pops. It is the sure signal that the end is nigh.

When interest rates hit ZERO, they only have one way to go. And that means that the value of past issued debt, the very kind of TRASH that China is sitting on a land-fill mountain of, only has one way to go... DOWN. This is the very definition of a bubble that is about to pop. As Peter Schiff calls it, this is The Mother of All Bubbles! [6]

There is no such thing as a Gold Bubble, Never was, Never will be

Investment demand, the kind of demand that uses any object of desire as an investment rather than a useful commodity, can obviously flow into almost anything; Tulip bulbs, stocks, bonds, real estate, computer geeks working out of their garage, etc... And as investment demand exceeds utility demand, malinvestment occurs producing the object of desire beyond its commodity demand, creating an inventory surplus.

But changes in the gold price are mostly driven only by investment demand. Industrial supply and demand in gold is very stable relative to investment supply and demand. So any significant rise in the price of gold is a clear indication of growing investment demand and is also a positive confirmation of the premise behind that demand, that gold will rise. This creates a self-affirming feedback loop of positive reinforcement.

And since gold production cannot be ramped up to meet demand like it can in bubblicious items, there is no reason for gold to fall back. Gold mining does not debase gold in the same way that dollars, tulips, homes, Dot Com IPO's or government bonds are debased through production. Mine production is taken from known reserves that are already valued, owned and traded, and all gold on the planet Earth is a fixed amount, the same fixed amount it was a million years ago. All we do is move it around, like poker chips on a table, to those savers that value it the most.

Furthermore, the price of gold is arbitrary. This means that gold can go as high as the people of Earth want to take it without EVER exceeding objective valuations by common metrics like earnings, interest or the sum value of its component elements. Gold IS the element. It cannot be broken down further, except perhaps by the LHC.

One of the most common criticisms of gold's use as an investment is that it cannot be valued the way stocks, bonds and real estate can. They are all commonly valued by their yields, and gold has no yield, therefore it cannot be fairly valued, or so the argument goes. But if we invert this argument then gold can never be OVERvalued either, whilst those other things can, and are... in a bubble!

The price of gold is arbitrary, ergo, there is no such thing as a gold bubble.

And finally, as gold's role in the world evolves from barter item to pure numéraire, to transactional currency, to simple commodity, and ultimately to wealth reserve par excellence, its value relative to the rest of the world can (and has) shifted both up and down by as much as two orders of magnitude. Such phase transitions in the functional value of gold completely invalidate "fair value" methodologies like that used by Paul van Eeden.

1980? This Time is Different!

The only way for a purely symbolic fiat currency to survive the sudden, self-reinforcing and complete coup de grâce (death blow) from its nemesis, gold, is for the central banker to get ahead of spontaneously exploding interest rates without completely demolishing the economy on which it feeds like a mutant parasite.

In 1980 this was possible, but only barely, through a drastic rate increase to 20%, and only because the economy and the national debt load was much different at the time. If the same thing was tried today the economy and the government would come to a standstill, followed by a complete and utter collapse. For this reason it is not only unlikely, it is impossible.

In 1980, the US was a net creditor nation with a balance-of-payments surplus. The financial industry was small and stable. And the US was not subservient to foreign creditors. Today the national debt is over $12 Trillion, the US Treasury Secretary must kowtow to the Chinese, and the financial industry is a brittle behemoth built on derivative quicksand. [7]

Because of these fundamental differences in 1980, Paul Volcker was able to successfully defend the dollar against the same existential threat which WILL take it down this time. That threat is capital flow into the dollar's lifelong nemesis, gold!

You can thank all the players and their activities as identified by GATA for making this time different. You can thank the mining giants that sold forward paper contracts for their future gold. You can thank our Central Bankers who leased half of their gold into the market to squash their foe. You can thank Rubin and Summers for their "Strong Dollar Policy". You can thank Alan Greenspan for the easy green. You can thank them all for making damn sure that this time there is absolutely nothing the Fed will be able to do, nor will it want to!

Interest rates will rise with a vengeance, and soon. And the Fed will have no way to get out in front of them, and no desire to do so either, which would make the Fed look like the entity that single handedly destroyed the economy and the government's golden egg-laying goose. No, the Fed will prefer to let Mr. Market destroy its Ponzi currency scam with the Chairman's remote aspiration of avoiding the hangman's noose-wielding angry mob outside with nothing left to lose.

Unlike 1980, this time gold will go up and stay up! I'm not saying there will not be a temporary overshoot in actual purchasing power. But with the specter of hyperinflation looming, it will not be worth the attempt to capture the overshoot. An exit from gold may just capture YOU in the wrong paper at the most wrong time in all of history!

A Functional Change for Gold

Some people call it the spontaneous re-monetization of gold. [7] They mean that gold will resume one of the three basic monetary functions under the common concept of money. I, on the other hand, call it the complete and final demonetization of gold, meaning gold finally breaks all parity with paper equivalents and trades only in its physical form, trading as the inverse of paper. These re/de-monetization differences are only semantic. We are talking about the same thing. See my three part series titled Gold Is Money for more. [8][9][10]

As gold exchanges its commodity label for that of wealth reserve par excellence, it will mainly replace the debt-asset trade, not the equity or stock trade. But the equity trade will fall by a significant margin as well, in relation to gold, because the frothy debt trade has pushed far too many conservative investors into the risky equity market.

Orbit = Perpetual Levitation

Just as when bubbles pop they stay popped, so too when the ultimate Un-bubble Un-pops it will stay Un-popped!






Probability Distribution

So how much of your perceived wealth have you locked into a real, solid, "good as gold" wealth reserve? I shouldn't have to say this because it is so obvious, but it is clearly better to "cash out" of the paper game and "lock in" your profits BEFORE the two biggest bubbles in history pop. That way you beat the rush, so to speak.

As for the coming rush, by my back of the toilet paper calculation I figure we will soon witness somewhere between $XXT and $XXXT of perceived 2009 dollar "wealth" capital flow into roughly $XT worth of gold on a global scale. For this reason I created my probability distribution curve:


And for those of you that don't yet understand the difference between Freegold and Hyperinflation (which is apparent through statements like "what good is $100K gold if a roll of toilet paper costs me $100?"), I created this second "purchasing power" distribution curve to clarify my position:


A Final Note

For you new readers and those who are reading this post on other websites, I would like to state for the record that my thoughts are not original. My blog now has 90 original articles written by me dating back to August 23, 2008. They are a record of my journey understanding the writings of the enigmatic Another and FOA, and how they relate to our current crisis. It is to these two anonymous messengers that my blog is a humble tribute.

Sincerely,
FOFOA

[1] The Waterfall Effect
[2] Gold Price is No Bubble by James West
[3] The Dutch Tulip Bubble of 1637
[4] That's Not How Bubbles Work
[5] 2010 READY OR NOT HERE IT COMES Constant prosperity through credit is no more possible than constant peace through heroin
[6] The Mother of all Bubbles by Peter Schiff 2008
[7] Why the Global Financial System is About to Collapse
by "John Law" 2006
[8] Gold is Money - Part 1
[9] Gold is Money - Part 2
[10] Gold is Money - Part 3

228 comments:

1 – 200 of 228   Newer›   Newest»
costata said...

Brilliant essay FOFOA.

Thank you once again.

Martijn said...

Nice post indeed.

Lemmings migrate in large numbers across the landscape, stopping for nobody. When they have to cross a river of some size, some lemmings will die. Every few years so many lemmings die this way that drinking the water from the streams becomes a health hazard to people hiking in the mountains. Like this one.

Martijn said...

Christmas is coming.

To say that today is a reason to worry, well, that’s an understatement. The 10 year auction indicated something that many blew off as “year end” nonsense. I view it as something dangerous and different that the Treasury and Fed will never admit to publicly:

That the world is tired of investing in a loser and the process of rotation out of the long end and into the short term has accelerated.


Perhaps the waterfall is beginning to gain momentum...

More

Martijn said...

Is this the beginning of a huge bubble getting popped?

Dec. 10 (Bloomberg) -- Barclays Plc’s Indian unit was ordered to stop selling or trading offshore derivatives by the country’s capital markets regulator.

The Securities & Exchange Board of India said Barclays Bank Plc must show it has adequate controls in place before it can resume selling the instruments. Barclays, which received an initial inquiry from the regulator on Sept. 24 and said it is cooperating, was given until Dec. 18 to respond.


India did buy gold, Marc Faber commented a while ago that the Indian central bank was perhaps the only cb with a perhaps little decency.

Fauvi said...

"I love Israel. I have lived in Israel. I go back and visit every chance I can. I consider it part of my heart. And because I love it so much, I want to see it safe and secure and free and democratic and living safely."

Shouldn't we ask them what they prefer?

Read "Ha' aretz" and educate yourself - says prof. Stephen Walt, Harvard.
Eventually we can talk finance.
Good post, Fofoa. Daily Bell today has a similar concept.

Martijn said...

Some people say that a decrease in lending is deflationary.

I would argue it's hoarding cash, which mean people are reluctant to move their wealth up the pyramid. Rising gold prices indicate the same.

Martijn said...

Highly speculative and mildly relevant at this point, but still:

somewhere between $100T and $400T of perceived 2009 dollar "wealth" capital

And perceived it is. The majority of those dollars sits in the paper world being traded but doing nothing. That is not real wealth, but hot air. Most of it will evaporate never to return again, and not flow into gold.

Martijn said...

Sometimes I run into an old thought that seemed gone: the collapse of the upper layers of the inverted pyramid is a flight to safety, nothing more. It is basically inflationary as the foundation of safety is gold and other tangibles.
However, while watching this flight take place, those that still regard the upper layers as money tend to perceive a shrinkage of those as deflation.
In reality it is the reverse.

Martijn said...

On bubbles:

Both China and America are addressing bubbles by creating more bubbles and we’re just taking advantage of that. So we can’t lose.

-Lou Jiwei, Chairman & CEO, China Investment Corporation (China’s sovereign wealth fund)

Jimmy said...

Very very nice post again...

I see you use some graphs of Armstrong's essays. Great idea to reverse the graphs to get better overlook...


So I've some interesting links here:

top 10 international catastrophes

food stamps are rising...

Volcker: Financial Innovation is Worthless, and Banks Should Be Limited to Traditional Depository Functions

Finally a good analysis about interest rates and Grandpa Volcker on debtorsprisonblog (my favorite blog of all)

Grandpa Volcker see no value in derivatives...

GOLD IS NOT GOING UP – PAPER MONEY IS
GOING DOWN by Egon Von Greyerz


Gerald Celente bashing Ben Bernanke

Maybe Chineses are afraid of vampires, so they buy garlic, the new gold...

Why did India really buy gold of IMF?

Jimmy said...

New post of Armstrong: The Dow and the future


So you have enough articles to read... :o)

Martijn said...

The German public does not mind high jewelry prices.

Martijn said...

We are not going to see inflation or deflation again. What we are now seeing is the "destruction" of our paper monetary system.

..the collapse of the upper layers of the inverted pyramid is a flight to safety, nothing more. It is basically inflationary as the foundation of safety is gold and other tangibles.
However, while watching this flight take place, those that still regard the upper layers as money tend to perceive a shrinkage of those as deflation.
In reality it is the reverse.

Martijn said...

At this moment in time and space, the price of oil in US$ terms is about to roar! It will crush the Pacific Rim and South America. It will drive the US$ sky high in terms of other major currencies but the dollar will collapse in terms of gold! Short term interest rates in the USA will be driven thru the floor much the way they have been in Japan from the early 90s. This will be done to combat a imploding equity market. Long government bonds will almost stop trading as their yield soars from the oil price fears of "inflation"! Because of todays "new digital paper markets" this entire act will be played out in 30 days or less. Yes, you are right! During that time we will have inflation and deflation.

We are seeing some of that. Not all. Yet.

Yesterday the 10y action did not go too well as I've posted above somewhere.

Desperado said...

Bravo FOFOA! Just when doubts about the short term character of the dollars recent rise were settling into my mind, you blow the greenback completely out of the pond!

Too bad the treasury can't find any physical to mint more gold Buffaloes, I really like that coin! Unfortunately, I can't find it anywhere here in Switzerland!

Jimmy said...

The history of gold (very useful data

Jimmy said...

He said it, Humpy Rumpy (Herman Van Rompuy, our European President) wants have a global governence (NWO)

Martijn said...

FOFOA

If you were banana Ben, Obama, or whomsoever and were thinking about revaluing gold on it's way to freegold, how would you do so while trying to minimize negative economical and societal impact.

Jimmy said...

@Martijn:

Obama: Yes, we can!

Bernanke: I see nothing, we could print more...

Schwarzenegger: I'll be back... Maybe...

:o)

I really don't know how they would minimize it. Maybe relating with the climate hoax, make war in Iran (to legalise the rise of goldprice) or somewhat...

Martijn said...

I thought it would be printed, but they've decided to honestly borrow it.

Guess the troubles will be over soon...

Martijn said...

30 year action closed at 4.52

They will be shifting into shorter term debt soon, as was predicted before.

Shifting into shorter maturity while expanding borrowing is not a sign of financial strength, should anyone be wondering.

idi said...

FOFOA; nice job grazie. have you seen Kirby's latest on gold:silver ratio which is 65:1 (vs. what historically 16:1?)?

Analysis of silver futures reveals that "silver price suppression is 10 times more egregious than that of gold." Given that, what is your Gaussian numerical projection for silver instead of gold in the above analysis?

And how do you see silver performing? Will its current industrial uses be "totally" subsumed by coming monetary uses? Thank you.

Martijn said...

In a revaluation of gold the g/s ratio might not be the most important factor. People might chose gold to be the wealth reserve and keep silver a commodity, there is no telling in that.

For those that like some positive news: it does exist.

idi said...

Perhaps "John Law" answered part of my question asked of FOFOA;

"Over time, the Mengerian process of standardization will tend to reduce the number of monetized commodities, possibly to one. Standardization favors the leader, and it is an unstable game: since losers by definition delevitate, it makes sense to flee them as soon as possible. Since gold, just for historical reasons, is the leader, it may be the only survivor."

Martijn said...

Please notice the Carib banking centers.

Quite interesting, not?

raptor said...

http://www.debtorsprisonblog.org/journal/2009/11/24/count-the-money-v20.html

Though the USD is the world’s reserve currency of choice, we see that EUR-denominated bonds are actually significantly more prevalent in international markets than USD-denominated ones.


Is this pro stronger Euro or weaker Euro ?
If you can elaborate, what are your thoughts.

Joseph said...

FOFOA,

I truly appreciate the work that you are doing to bring these teachings to us. I look forward to every post.

I have one question: What happens to those of us with significant credit card debt like me when the bubble pops? Right now I am putting a portion of each paycheck towards silver or gold and then a much larger portion towards debt retirement. At this rate, it will still take me 18 months to retire all my credit card debt.

Baerchild said...

Let's face it...we need a new monetary system: A system which prices goods and services in terms of silver and gold weight. Until then we're going to be faced with all sorts of controls, regulations, and a monstrous effort to limit freedom...and I suspect there will be an effort to confiscate all hard assets.

WalterW said...

Looks like there is some deep natural/mathematical force underpinning the Inverse Waterfall Effect chart shape - which literally surfaces on a humongous scale in the coastal line of Europe: from Calais/Dunkerque (FR) to Bremen/Hamburg (D), that's just one massively large Inverse Waterfall Effect shape. Including the North Sea dipping down right on cue after the blowoff landmass just north of Amsterdam. And if it wasn't for Denmark one could argue the shape even runs from Brest at the western tip of France, all the way up to the east coast of Lithuania.

Soe powerful force indeed.

http://maps.google.nl/?ie=UTF8&ll=52.402419,5.350342&spn=3.559355,7.349854&z=7

Calum said...

Excellent article. Your up-side-down graphs towards the end didn't work. Can't even make out what they're supposed to be of. So turn them the other way up and improve the res if you want us to make sense of the up-side-down version.

Wish silver wouldn't be left out of these 'gold' articles. Little sister will soon be worth more than gold - simple supply and demand.

The Mad Scientist said...

FOFOA,
I love your work but I think your Gold Oil won't ever come close to being true. I will put up my thoughts later but think about what that ratio would mean in terms of how much oil is out there, how much gold is out there and how much of each is produced annually.
I saw a short term possibility of it some time back
http://ispeakofpeak.blogspot.com/2009/05/best-of-both-worlds.html

but I think the chances of even approaching a ratio of 100 are now zero.

robert said...

FOFOA,

Back to real estate again.

Do you know what ultimately happened to real estate prices during both the 1920s hyperinflation in Germany and the 1990s hyperinflation in Argentina?

If not, can anyone cite some good books that can provide me with that information?

Thank you.

Robert Campbell

JR said...

Hi The Mad Scientist,

"I will put up my thoughts later but think about what that ratio would mean in terms of how much oil is out there, how much gold is out there and how much of each is produced annually."

consider:

"I will put up my thoughts later but think about what that ratio would mean in terms of how much oil is out there, how many dollars are out there and how much of each is produced annually."

There is something on the order of 50-100 times yearly gold production already in existence. The existing stock is of much more significance in any gold analysis.
here

Martijn said...

Developments like these might buy Banana Ben some time.

Martijn said...

Contango is not the word here...

Kewl said...

Dunno about Argentina but during hyperinflation in Germany you could have bought a house with just one ounce of gold. I don't know if it was because eveyone wanted to leave the country, or were out of savings to feed themselves.

Martijn said...

As for bubbles: this site is quite informative from an academic perspective.

The Mad Scientist said...

JR,
That is what I meant by "out there". Sorry end of really long day and was quite sleepy.In any case the existing amounts of Gold to oil do play a role in what I had thought out. Will write it up in detail at some point.

Tekin said...

@ robert December 10, 2009 9:58 PM;

The following site gives interesting info on weimar although house prices were not charted.

http://www.nowandfutures.com/weimar.html

Interesting is the household expenditures table from that site:

http://www.nowandfutures.com/weimar.html

During 1912-13, both rent and food were approximately 30% of household expenditures. During 1920-23, rent fluctuated between 4.3% and 0.2% of expenditures. Food, during the same period increased from 58% to 91%.

"Store food and gold" should be the motto!

The information is from the book The Economics of Inflation, by Constantino Bresciani Turroni. I believe, Mark Faber also speaks highly of this book and recommends it. I have not read this book. It seems to be quite expensive ( ~240 dollars!).

Martijn said...

Qualitative
easing

Jimmy said...

Wow, your work is published on GATA...

My felicitations...

Jimmy

Joshua Kane said...

Masterful job as always FOFOA!!! Thank you. Things have been ridiculously hectic for me lately, but I am hoping to return to my A, FOA, and FOFOA back-reading over the holidays. I'll be in touch early next year with questions no doubt. Until then, Happy Holidays FOFOA, and all the very best to you and yours.
Sincerely,
Joshua Kane
http://thesystemisblinkingred.blogspot.com/

mortymer said...

Notes:
- If Yen & Yuan are pegged artificially and manipulated down the only other main currency - the Euro as a main competitor of dollar goes up/down with moves on gold, to keep dollar up is partly done by keeping gold down. Simple, cheap. Somebody finally found out that it is easy to boost dollar by supressing gold.

- Keep eye on deliveries for retailers, some again drained. Premium high.

KeepPosting|Enjoy

MortymerWholeDecemberOnHoliday

FOFOA said...

Quite a few people stopped by yesterday to find out why there is no such thing as a gold bubble.

Friday_Stats.jpg

Jimmy said...

@FOFOA: So your site is going parabolic... It's going to be a bubble... :o)

Martijn said...

John Stewart on Glenn Beck's gold fever.

Didn't even know Beck was at it so much.

FOFOA said...

Rick Ackerman has posted John Williams' updated Hyperinflation Special Report (that is still only available to subscribers on the SGS website). I highly recommend it, but you might want to save it to your hard drive in case the link disappears. Here is the link on Ackerman's site. Hyperinflation Special Report (Update 2010). And here is Ackerman's rebuttal.

Snip from Williams' report:
"High Risk of Ultimate Dollar Crisis Unfolding in Year Ahead...

Back in 2005, I raised the issue of a then-inevitable U.S. hyperinflation with an advisor to both the Bush Administration and Fed Chairman Greenspan. I was told simply that "It's too far into the future to worry about."

Indeed, pushing the big problems into the future appears to have been the working strategy for both the Fed and recent Administrations. Yet, the U.S. dollar and the budget deficit do matter, and the future is at hand. The day of ultimate financial reckoning has arrived, and it is playing out.

Saving the System at Any Cost. The Federal Reserve and the U.S. Treasury moved early in the current solvency crisis to prevent a collapse of the banking system, at any cost...

Hyperinflation Nears. Before the systemic solvency crisis began to unfold in 2007, the U.S. government already had condemned the U.S. dollar to a hyperinflationary grave by taking on debt and obligations that never could be covered through raising taxes and/or by severely slashing government spending that had become politically untouchable...

The U.S. government and Federal Reserve already have committed the system to this course through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, gross mismanagement, and a deliberate and ongoing effort to debase the U.S. currency. Accordingly, risks are particularly high of the hyperinflation crisis breaking within the next year..."

FOFOA said...

Nice video Martijn. How dare Glenn Beck talk about such things on television? Truly irresponsible! It's certainly not nice to wake people up from a peaceful slumber. And if he's selling parachutes to lemmings that are about to follow their leader off a cliff, well then he must just be in it for the easy parachute money.

Museice said...

Roubini on why gold bugs expectations will soon be dashed:

"Thus, the gold bugs are wrong—or at least very, very premature—in justifying buying gold as an attack on fiat currency. The velocity of money is still low or falling—the opposite of a currency crisis or run on the dollar."

FOFOA said...

Roubini: "The velocity of money is still low or falling—the opposite of a currency crisis or run on the dollar."

Maybury: "The biggest problem with velocity and money demand is they can turn 180 degrees overnight..." Link

Museice said...

From the above Roubini Article:
"Investors should thus be wary of getting the gold bug and being stuck with this barbarous relic. The recent swings in gold price—up 10 percent one month, down 10 percent the next—prove the point that gold has little intrinsic value and that most of its price movements are based on beliefs and bubbles. As an insurance policy against the tail risk of eventual inflation, it may be useful to hold a small amount of gold in one’s portfolio, but stocking up portfolios with a fiat currency that has marginal practical use, a zero nominal interest rate, high storage costs, and the price of which is subject to volatile whims and bubbles is totally irrational. If you want to hedge against inflation, stock up on Spam or other canned food or buy futures on commodities that have more physical uses and consumer demand."

I like this quote because he called gold "a fiat currency". I didn't know gold had transmuted into worthless paper!

FOFOA said...

Jimmy,

You were right! My bubble has popped. Of course there are still 9 more hours left in Saturday and anything could happen.

costata said...

FOFOA,

Thanks for introducing me to Harvey Organ's blog.

Do you think this battle in the Crimex will lead to the CFTC washing out the longs with position limits to save the bullion banks as Another (or FOA?) predicted?

Museice said...

I think we should all print out a sign and hang it over our desk that says:
"Gold: The Barbarous Relic. You Can't Eat It. You Can't Burn It."

FOFOA said...

Hello Costata,

Just remember that the COMEX and all paper gold trading is THE barbarous relic. The fact that the cash market is still priced by the leveraged, fractional reserve paper market (with an unknown fraction and unknown leverage) is the magician's levitation act. Levitating paper to the exalted position of physical gold.

They could certainly change the margin requirements, but why limit the paper longs and send all that "demand" into the cash market as long as they are prepared to settle with paper in a pinch? I just don't see it.

Can you give me the A/FOA statements you are referring to?

By the way, I added Harvey Organ, Topaz - Time Currency, and Mencius Moldbug to the links at the right.

Sincerely,
FOFOA

costata said...

FOFOA,

I will try to find the reference in the FOA archive in the next day or two.

Time is a bit constrained between Christmas functions and finalising a few tasks at work before the holidays.

From memory FOA was replying to a suggestion that the bullion banks would be over-run and suffer large losses in their short positions.

Perhaps I did not express it very well. FOA's response indicated that he thought that the bullion banks would be protected by the exchange.

Cheers!

costata said...

FOFOA,

Found it.

http://www.usagold.com/goldtrail/archives/goldtrailfour.html

FOA
"But, eventually (perhaps over only one day!) the outside the exchange demand for physical and it's escalating premium, will most likely see legal force from their physical buyers driving long players to demand delivery.

Even if it cannot be delivered. Long,,,,,, longggggg,,,, before these delivery demands ever fully surface, comex will state position limits, cash settlement and trade for liquidation only. For you new people, this is exactly what they did during the Hunt silver fiasco. They have to do this because the articles these exchanges were created under manifest these trading places as price setting and price hedging establishments. Where the greatest majority of their trading is meant for cash contract settlement, not physical delivery settlement.

In this light, only Gold Advocates understand that default on Comex is really the forced non metal settlement of a contract at a contrived paper price. A price far below the physical traded price. Most likely a last day of trading price that settles out hundreds of percent below the world price for physical metal trading,,,,,, as it appears the very next day."

costata said...

FOFOA,

From FOA above:
".......will most likely see legal force from their physical buyers driving long players to demand delivery."

FOFOA, do you think the idea of legal force on longs to demand delivery dovetail with this anonymous tip off to Bill Murphy?

ie. Vendors that have pre-sold physical that they "hedged" in paper being forced to demand delivery in order to cover their pre-sales.

Harvey Organ
"We now have confirmation as to why the mints have eliminated the minting of gold and silver coins.

You will be fascinated with this story by a mint official himself incognito:

Bill Murphy,
I must remain anonymous on this one.

I want to try to explain why the US Mint can't find enough blanks to make Silver and Gold Eagles.

There are three suppliers that I know of: N-- Mint, S--sh--- Mint, P---- Mint. All three of those mints have had excessive back orders stretching beyond 6 months, I know that is a fact, because I've had such customers complain to me, or the mints themselves have admitted such delays to me directly. Since 1000 oz. bars can be delivered in about 1-3 weeks, and since new product can be minted in about 1 week, that means they are floating on customer money. They are using customer orders like "free" credit cards. They delay one customer after another, like a credit card junkie will roll over a higher interest card onto a low interest card. They are "operating bankrupt"; like walking zombies. They all stand to go out of business. They are all short the metals--the metals they owe their unpaid customers. As metal prices rise, their debts of silver grow exponentially harder to pay back.

I believe this is why we saw shortages of Mint coins last year, starting around when silver hit new highs. This is why we are seeing shortages of mint coins now, as gold and silver are hitting new highs again. The new orders from higher interest in silver and gold are not enough to help them pay back their silver debts.

I suspect that they are making 3-4%, or less, on the supply of the blanks, but they are losing 50% on their silver short position (customer delayed orders) as silver doubles in price!

To claim outright that another business is bankrupt, when they have not declared bankrupt is "slander", so I can't state this as fact, and thus, I must remain anonymous, and thus, I've blurred the names of the bad mints.

I don't know if the major mints got into trouble from delayed payment from the US Mint, or what.

Implications: With the major mints unable to expand due to their precious metals debts hanging like a millstone around their necks, don't expect them to be able to crank out other investable products with rapidity or regularity. Thus, premiums on nearly all other silver products may begin to rise as you may begin to see shortages.

Other major mints that are being used are also running well behind on orders, which is often reflected in statements such as "these products are delayed until". Any dealer that takes money for products that they don't have in stock is suspect. Don't send money for gold that they don't yet have. Nobody can predict with accuracy when they will get silver and gold in this market.

I know of only one mint that is reliable. There may be others. I'll not mention any good names either, to remain fair, but let reputation and speed speak for itself.

Today, because many mints, and the coin dealers they supply, are short, you hae to be careful!

What's good about money is that you can divide it up. Therefore, only spend a small portion when going to buy precious metals now. If there is a delay, search for another dealer. If you get it fast, such as shipped within 1-2 days, and if it arrives in 1 week, order again."

costata said...

FOFOA,

Putting the previous two comments together I wonder if the rising premiums on retail physical gold indicates that supply is becoming an issue now.

Is crunch time for the Comex looming?

FOFOA said...

Hi Costata,

"Long,,,,,, longggggg,,,, before these delivery demands ever fully surface, comex will state position limits, cash settlement and trade for liquidation only."

I think this is already happening minus the position limits. Perhaps some day it will make the news. My guess is that the mints are not going through Comex as much these days since they can't really melt down GLD shares. So that might explain why they are having trouble sourcing new raw material.

I believe you are correct that the rising premium says a lot. But remember that retail has flexibility on the supply side because it can draw supply from both the public and from commercial suppliers that melt the large bars.

Premiums don't seem that high to me yet, but the buy price tells me more. When it rises above spot it signals that they need inventory from the public.

Here is a dealer that lists them side by side. (Scroll down)

It is hard to predict what we will see first. Will it be a news story about a big player, perhaps a mint bidding openly for physical above spot when the IMF announces its next sale below spot? Will it be a giant bidding openly above spot because he can't get exactly what he wants from any official source? Will it be a complete stoppage of supply from wholesale to retail sellers driving the "from the public" buy price higher and higher at the same time as the comex price is falling? Or will it be a delivery "event" gone bad at the public exchanges?

By slowly converting Comex into a paper-only market they may have redirected the serious physical accumulators elsewhere. So it's hard to predict from where we will hear the first howl.

FOFOA

costata said...

FOFOA,

Thanks for sharing your thoughts on this.

"My guess is that the mints are not going through Comex as much these days since they can't really melt down GLD shares."

I needed a laugh. Thank you again.

BTW At least one of the mints that supplies our coin dealer (in Australia) gets most of its wholesale supply direct from a refinery the Mint part-owns.

So LBMA and Comex probably don't factor into their supply chain to any great extent. As of a few weeks ago 1oz .9999 coin premiums were still around 6% here and no issues with supply.

"But remember that retail has flexibility on the supply side because it can draw supply from both the public and from commercial suppliers that melt the large bars."

I recently read a piece that claimed that customer traffic (sellers) into US coin dealers was tracking property tax and other local tax deadlines. At the moment I cannot remember where it was posted.

If true, this fits with my longheld expectation that local and State Governments would resist any cutbacks in their budgets and try to make up shortfalls by increasing the tax burden on citizens regardless of their capacity to pay.

Any increase in supply from private holders who are going under will also muddy the waters I suppose.

Dave Hawkins said...

I have a question about bonds (since bonds and Pimco were mentioned) ... Turk and Rubino recommend 25% of your portfolio to be in foreign bonds (Conservative portfolio) ... does anyone here know why 2 gold advocates like Turk and Rubino would suggest this?

Gody said...

FOFOA

I am new to this I have one very simple question as I am indeed a very simple person.

Why would "they" allow the selling of physical gold to the masses at all if they knew that freegold was inevitable? Why not just control it as they have done everything else? This is too complex for me.

Kewl said...

Probably because 'they' have more than enough of it already. Plus what is the point to gather all the gold, as if others don't have any it, they won't find it valuable anymore IMHO.

FOFOA said...

A White Paper on Oil versus Gold
by Ron Holland

CliffsNotes:
"Is oil as good an investment as gold? There have been many who have argued in recent decades that the West is verging on an energy scarcity known in aggregate as “Peak Oil” and that with oil running out, there is nothing much better in the world to own than black gold.

Peak Oil proponents believe the world is running out of oil because the available supplies have been depleted and what is left is very difficult to extract. This has proven to be a popular concept for numerous reasons, and there are many web sites devoted to Peak Oil. But is oil really as good an investment as gold, or even silver? The purpose of this White Paper is to answer that question...

It is fair to say that gold and silver prices have suffered from the treatment they have received from governments around the world. Governments may have helped manipulate oil and oil byproducts to enhance both scarcity and prices, but a case can be made that the war on gold and silver has been both energetic and unrelenting...

It is popular these days to conclude that increasingly scarce oil and oil byproducts constitute a store of value that will appreciate far beyond gold and silver. The conclusion of this White Paper would be that such an assumption is untested historically and not necessarily valid.

In fact, as we have seen above, gold and silver have been stores of value for thousands of years and have maintained their value even in the face of worldwide government attacks...

At the same time, a case can be made that the value of oil and oil byproducts has been advanced by industry manipulations that, while effective in the short term, are not able to provide value much above historical averages for oil prices...

It is of course possible that oil and oil byproducts are really running out. But it does not follow that oil’s value will then increase at a dramatic and ever-expanding rate. Oil’s value is dependent on its utility...

Ultimately, oil is a commodity but gold and silver are MONEY METALS. This means that historically, gold and silver have been valued for their intrinsic worth. Oil has never been valued for itself, only for its utility...

If an investor does wish to make the “oil bet,” he or she is endorsing the concept of Peak Oil – one that this White Paper has attempted to show is controversial at best – and ignoring the history of gold (and silver’s) historically consistent valuations..."

FOFOA said...

Gody,

As Kewl says, gold is most valuable in its widest distribution. If you had all the gold in the world it would be pretty worthless. As a thought experiment, imagine the central bankers of the world trying to increase their stash from 20% of the world's gold to 100% in order to corner the market on money. Do you think it could work? What are the various things they might try? What effect would each of those things have on the value of gold versus the value of their currency?

Sincerely,
FOFOA

Gody said...

Kewl

Thanks for that. But it still doesn't add up. "Big Trader" broke the earlier deal as I understand it. If that be the case, I can appreciate the rest of the story. The only bit that doesn't add up is why allow "no ones" to own Gold other than Jewellery when this will strain the system further even break it? This is what I cannot make out. The Gov'ts have in the past outlawed Gold ownership and now we have even so called communist China encouraging it's citizens to break the system?

Like I said I am too simple. I still can't get it.

Gody said...

FOFOA,

I can appreciate that bit. The price of Gold would soar and their currency would devalue but is that not exactly what allowing citizens to own physical Gold leads to anyhow in the long run?

FOFOA said...

Gody,

Understand that "they" in your first question are not a cohesive unit. Do you think that China, or Europe for that matter, profits from printing currency in the same way that Washington DC does? Could it be that "they" stand to gain more from a transition to freegold?

FOFOA

FOFOA said...

Joseph,

"What happens to those of us with significant credit card debt like me when the bubble pops? Right now I am putting a portion of each paycheck towards silver or gold and then a much larger portion towards debt retirement. At this rate, it will still take me 18 months to retire all my credit card debt."

If "the bubble pops" in less than 18 months you'll retire your debt with a tiny amount of your gold savings. If it takes more than 18 months then you'll be debt free and you'll enjoy it all! It sounds to me like you are doing the right thing. Keep it up.

Sincerely,
FOFOA

Gody said...

FOFOA,

True "they" are not one unit.

But the 3rd world gov'ts do not own much Gold compared to their counterparts who would actually profit multiple more times over if the system converted to freegold.

So, why short squeeze the physical gold market even more by allowing "no ones" to buy and compete with them?

I am sure you see my question and it may have an easy answer like we allow "no ones" to buy since we cannot suppress the "no ones" in the 3rd world from buying and if we banned it in the west, that would send a message to the 3rd world to stop trading and hoard.

Gody said...

But having said the above, why actually encourage thye "no one" to actually be buyers.

FOFOA said...

Gody,

I think you are on the right track. But you must understand that the system "they" want so much to preserve is based on confidence, not "hot lead". They need us to "save" willingly in the currency, not just use it for earning and spending (which they can easily force). They need us to WANT to save in their currency and its denominated products. Confidence! Simply outlawing gold does not solve this problem. It might make things much worse for "them". Then we'd move to silver? So outlaw silver? Then we'd save baseball cards. You gonna outlaw everything? You will see a flight of capital like never before!

It is better to work WITH the rising tide than to try and stop it from rising. That means "they" buy gold and also talk smack about it at the same time. Hedging their bets. Thus we have MOPE, as Jim Sinclair says.

And the ones encouraging gold ownership are not the ones in Washington DC. There is a big difference.

FOFOA

FOFOA said...

Gody,

You must separate the monetary functions. Govt can control what you earn and spend through legal tender laws. It gets its piece through taxes:

Medium of Exchange = Income tax (earn) and Sales tax (spend)

But it makes its biggest skim when the world willingly saves in paper debt... ITS debt. This is how the DEFICIT is paid for. The funded budget is funded through transactional currency taxes. The deficit is funded through debt issuance. It is also how the BANKER BONUSES are funded.

Store of Value = Inflation tax, Devaluation tax and Banker skim

This second method is the real prize "they" are after. And it requires confidence. If their CON is exposed then they might as well own a lot of the new "store of value". It is the second-best outcome. The backup. If they outlaw gold and silver and we all buy platinum instead, then they lose. This is why they will not go after gold. It is their "ace in the hole" so to speak. They already have a lot of it.

FOFOA

Gody said...

FOFOA,

Be a bit patient with me.

So, the western side want confidence in paper; agreed. They still largely have it, why alert the sleeping "no ones" by running out of coins all the time? further, since the confiscation laws are still in place what will stop them doing it again.

Now from Asia, why squeeze themselves out of gold by encouraging citizens to buy, thereby competing with them?

FOFOA said...

Have you read Confiscation Anatomy - A Different View?

Gody said...

FOFOA,

Your last post runs right smack into my dilemma.

By allowing "no ones" to own gold, they are practically exposing the CON.

Could they be preparing the people for the paradigm shift by letting them be familiar with the new system. It would be a shock if the change happened without allowing some "no ones" to know and support it.

Gody said...

No and I am reading it now

FOFOA said...

"By allowing "no ones" to own gold, they are practically exposing the CON."

And by outlawing or confiscating gold they are dooming the con. It's a damn Catch-22, huh?

Gody said...

Yes FOFOA. but in this catch-22 what is the default gov't modus operandi? why allow some "no ones" any comfort? Gov'ts don't do that hence my dilemma. But I have also read you piece and it is very compelling. It can actually explain why they are "nice" this time.

Now, if I may be bold, could you help me out with my Asian side of the equation; encouraging competition on gold with their citizens?

Martijn said...

States really are cracking

I wonder how they will solve this, as financial conditions continue to worsen on all sorts of municipal communities.

Martijn said...

Growing numbers of "unbanked people"

Here is the evidence. The Federal Deposit Insurance Corp. (FDIC) released a report last week concluding that 7.7 percent of U.S. households, containing at least 17 million adults, are unbanked (i.e. those who do not have bank accounts), and an "estimated 17.9 percent of U.S. households, roughly 21 million, are underbanked" (i.e., those who rely heavily on nonbank institutions, such as check cashing and money transmitting services). As an economy becomes richer and incomes rise, the normal expectation is that the proportion of the unbanked population falls and does not rise as is now happening in the United States.

Martijn said...

China and gold

Gold and money

Killing the currency, mentions the Amero again.

Schiff sees gold at USD 5000

And pressure on real estate continues to mount as commercial properties are declining faster.

Martijn said...

And off course pressure on sovereign debt is growing.

Looks like it's winter in the financial world as well, and so far no Christmas presents...

Kewl said...

Gody,

By talking about Asia I assume you mean mostly China. In my opinion they try to avoid possible social unrest should (when) anything happens to the dollar. When citizens benefit big time from the collapse, leaders can sleep well. Moreover precious metals do not leave the country as it's forbidden to export them, meaning government can seize everything back if they want to.

SatyaPranava said...

gody, my take is slightly different, but similar. I believe China is doing this to hedge the dollar. i believe they will leave their currency pegged to the dollar and piss on the US's leg all the way down, debasing teir own currency all the way. having their populace invested in gold/silver suggests they'll be less inclined for revolution. i think the chinese know where the dollar is going and plan to keep exports moving strong until the collapse. Erick De Carbonnel has also suggested (correctly or not we don't know) that inflation might be exported to china first.

Martijn said...

i believe they will leave their currency pegged to the dollar and piss on the US's leg all the way down, debasing teir own currency all the way.

As I've posted above China is beginning to experience inflation. This might be quite relevant as might increase social unrest and public gold acquisition. Too much inflation will increase food prices to fast, which I do not believe would be a healthy thing for the Chinese officials trying to manage potential population unrests.

At some point China will have to change its course.

Jimmy said...

Just readed out the Rothschild book of Niall Ferguson. Mindblowing, just always thought in my life and it's revealing the real history...

One chapter about the Great Depression is very interesting to know how the market works...


"The crash"

It is usual, though slightly misleading, to regard Wall Street's "Black Thursday, October 24, 1929" as marking the start of the Great Depression. In fact, there had been signs of declining economic activity in Europe for over a year. On the other hand, it is hard to overstate the knock-on effects of the unprecedented collapse of the American stock market, which wiped $30 billion off stocks worth $80 billion in the space of a month and drove the Dow Jones Industrials Index from its peak of 381 on September 1929 to a final trough of 50 in May 1932. This asset-price DEFLATION led to immense flows of American capital out of Europe. This in turn led to a generalised monetary contraction which central banks and governments worsened by trying to hang on to their gold exchange rates. One way of doing this was to INCREASE interest rates; another was to CUT public spending or to PUT UP taxes; a third was to RAISE tariffs in an effort to reduce imports...

The principal effect of such policies was to push up unemployment to undreamt of heights, as firms laid off workers, invesstors fled into liquidity, consumers tightened their belts and international trade tried up. This turn generated a political reaction - sometimes violent - against the whole complex of instutions which seemed to be blamed...


And a pikant detail: Venal parliaments and gold-hoarding central banks bear at least some of the blame for the 1929-32 world crisis...

Then they returned to gold standard... In September 1932, a run on the Bank of England ended the pound's brief return to the gold standard...


And I remember FOFOA wrote this: here he wrote it…

"Isn't it interesting that NM Rothschild & Co. left the paper gold casino operating business in 2004?!"


Sincerly,

Jimmy

Jimmy said...

@FOFOA December 12, 2009 2:56 PM:


Very funny... :o)

Well I didn't know that I'm a good contrarian/predictor, only what a pity that I've not shorted on your site... :o)


Always a nice site/forum, keep it up!

Sincerly

Jimmy

Jimmy said...

@Martijn:

Yes right, China is expecting inflation or hyperinflation. Eric DeCarbonnel (www.marketskeptics.com) always warned for this case...

Now it's garlic prices, 40-fold rise... Shocking... (I posted a link about this above on December 10, 2009 3:43 AM)

Be aware...

Greetz

Jimmy

Jimmy said...

The Rothshilds books are also on amazon:

Rothschild part one

Rothschild part two

Martijn said...

Austria might cause some pressure on the Euro.

Jimmy said...

Ireland and Greece may leave Euro, says an analyst Dan Weil

Greece Defies European Union?

Another movie to watch...

Ender said...

@Gody 7:54 (and others above)

Then looking at a picture of boats in a marina, one man may see dirty water, other may see rental income, yet another may see the freedom they ships represent. When looking at the Freegold Concept, the same occurs.

You write “Why would "they" allow the selling of physical gold to the masses at all if they knew that freegold was inevitable? Why not just control it as they have done everything else? This is too complex for me.” Thus I have to ask, is freegold dirty water or freedom on that water?

It may be helpful to break down your “They” and “It” so as to reduce the complexity of confusing what could be multiple players. Also, it may be worth visiting the Concept of Freegold and what it represents to different classes of people.

The tone of your question leads me to believe that the selling of gold to ‘natural’ people is a bad thing and the Freegold Concept would be bad for those (secretly) running the system. If my guess is correct, there are many early days worth of content in this forum that could be visited.

One aspect of the Freegold Concept is that it will exist hand in hand with the concept of fiat currencies. Fiat currencies are not going away and gold as ‘currency’ is not coming into play. Thus those that print currencies will continue to do so and the function of the currency will continue to be a major part of its value.

Another aspect is that physical gold must be valued by people (or will be valued by people). Just like rare paintings of dead artists are valued, so will be the association man makes with gold. Just like when FOFOA says that the people might simply switch to using baseball cards as ‘money’, the people will use what they perceive to have a large collection of ‘money’ attributes. (Salt and dates make a better example for they have a bit more intrinsic value – to humans.) In the case of gold, it has the attributes that man desires as his store of wealth.

Looking at this another way, ‘who’ stands to gain from an economy that functions with the Freegold Concept at its backbone? Likewise, ‘who’ stands to gain with the dollar as the backbone of the system?

And welcome. May you have a good day.
Ender

Jimmy said...

Also Sprott goes physical

Jimmy said...

Wanna know more about Rothschild Bank? Click on me, Fitch...

Gody said...

Ender,

Thank you very much for response and welcome. I most probably will be a lurker as I don't have much to offer.

you wrote "The tone of your question leads me to believe that the selling of gold to ‘natural’ people is a bad thing and the Freegold Concept would be bad for those (secretly) running the system. If my guess is correct, there are many early days worth of content in this forum that could be visited."

A word of caution, it is indeed very hard to anticipate one's motives in writing. You have completely misunderstood me.

I am taking the perspective of gov't. Everything they have done when they can get away with has always been against the people. Is this a fair comment? Therefore from their perspective what benefit do they gain by allowing the "no ones" to immensely benefit from gold? That is the crux of my question.

Like I said earlier, everything else makes sense including freegold benefits to gov'ts, if they are smart. But why not allow the use of gold to "no ones" after the once off revaluation and not before? This is just contrary to everything they do hence my dilemma you see.

If you see a Lion eating grass you will wonder. No?

Martijn said...

Interesting and relevant remark on yield curves.
Be careful, it's from that source some of you don't like, so feel free not to click it.

costata said...

FOFOA,

Ron Holland's paper is based on a false premise.

"Peak Oil proponents believe the world is running out of oil..."

The Peak Oil proponants whose work I have read don't suggest oil is running out. Their theory is that peak production of oil is either imminent or it has already occurred.

If you insert the word "Cheap" into that phrase (as in Peak Cheap Oil) it is not hard to make a case that we are leaving that era.

costata said...

Gody,

I was a lurker on this site for quite a while before attempting to contribute to the conversation.

I think you will find that you are in a gold mine of information. Welcome.

Ender said...

@Gody 12:12

Can you clarify “But why not allow the use of gold to "no ones" after the once off revaluation and not before?”

golden tube said...

very interesting....

http://www.youtube.com/watch?v=M0-hGHJSgNA&feature=channel

There is no Goldwash in the Gold House!

tdfxman said...

Understand that "they" in your first question are not a cohesive unit.

WOW. I beg to differ. How is the CFr, TC, and the Bilderberg's not one big group.

Also, do some research about how they all tie to the Mason's. That is pretty wild.

They have a USA branch (CFR), the TC (Asia, Europe, USA) and europe with the Bilderbergs.

What makes you think that these guys are not all in it. I think that is crazy. One group wants GLOBAL GOV'T. There ARE NOT factions out there trying to get a global gov't and they are seeing who wins.

They will win.

And then we will see the lion eating grass.

Keep it up Gody. I had thought FOFOA was going to make his next post about why freegold is a lock despite all the political calculations.

MANY anon posters were 100% the other way, no way freegold happens.
Me, I am torn right down the middle, but I used to be in the no way camp.

I hope someone answers your question to your satisfaction.

Gov't will NEVER do anything in our interest, by definition. Gov't = control.

Now, what they might try to say is well they need to throw us a bone so they can be the ones to mess it up and then be the ones to offer a solution, and yeah if you "little ones" had gold you are gonna make out OK. All you other sheep, well you had your chance, you just shouldn't have listened to F-TV and all those guys saying gold was in a bubble.

That is the best I can do. Like FOFOA said, it is confidence. They are loading up on gold to "win" and then gold goes wild they win more. All the while they will leave fiat behind they can still, somehow, still hyper-inflate all over again.

This USA, dollar, meltdown IS NOT the stuff of the 4 horsemen.

Steve B (I hate we can't use what we used to use to post)

costata said...

tdfxman,

"Understand that "they" in your first question are not a cohesive unit."

On the Bilderberg cabal. In the interview below a journalist who has been covering their activities for many years actually mentions that there are "factions".

They do however seem to agree on who the masters should be.

Link to Daniel Estulin
http://www.prisonplanet.com/bilderberg-fears-losing-control-in-chaos-plagued-world.html

Interesting analysis of the GFC as a "Clash of Bankers".

http://www.lewrockwell.com/sardi/sardi138.html
Why Is All This Happening? It’s the War Between Bankers by Bill Sardi

IMHO A few things that have emerged lately lend support to some notions that would have been dismissed as "Conspiracy Theories" a few years.

1. The de-sovereignisation of EU countries through adoption of the Lisbon Treaty.

2. The global carbon tax scheme emerging out of Copenhagen.

3. The open discussion of the SDR as a supra-national reserve currency.

4. The proposed shift in the role of the IMF and the World Bank to a supra-national regulator/Central Bank.

Despite all this I think cratering the first global reserve fiat currency is a risky endeavour even if you are "masters of the Universe".

So I still hold the Freegold theory as a high probability.

SatyaPranava said...

to those opposed to the FG idea happening, i.e. believe TPTB will not allow it (one faction or many). I actually share some of your concerns, and, along with others who've been here for a long time. But I am not able to see a way to solve the debate. it seems that time will tell. the behavior of the chinese and european nations selling gold everywhere, seem to tip the scales, however, toward at least widespread gold distribution. and distribution is much of the problem, would you not agree?

but i am curious, since you're here, and open to other ideas, do you see an idea that is better than holding gold? (palladium, platinum)? i'm curious to hear other ideas. or do you merely propose holding gold and if the titanic goes down, so does the best shot you had?

Satya

Gody said...

Ender,

In order to allow a free float / freegold, would a revaluation not have to happen first? Would this not be a one off event and then allow gold to float against the currencies as it does now? This is if things happen quickly which is what I think might happen. OTOH, we may continue as we are right now, with a managed upward price ascension in a controlled fashion. But this again will act as the canary in the mine as the saying goes, which is why I do not see it taking years to happen. But then again what would I know

To all the others - please understand me. I am not against anything. Mine is to understand or "watch" what is happening. Say what you will, a one world economic and spiritual world government is on its way. And indeed Gold is at the heart of it.

Gody said...

And yet my question is still niggling in the back; as concerns the "no ones". Whether "they" be united or disjointed (For the sake of simplicity), is neither here nor there in my mind because what outcome "they" seek for each locality/ domain/ country etc is the same regardless of the gov't: Control and taxation of the citizens (including hidden taxation aka inflation). So, why allow the "no ones" any leeway? This is where I see the Lion already eating grass. No?

tdfxman said...

3 key links from article

http://www.thenewamerican.com/economy/commentary-mainmenu-43/766

http://www.clubconspiracy.com/forum/f29/coming-soon-global-central-bank-global-10292.html

http://canadafreepress.com/index.php/article/9454

Yes that "
Why Is All This Happening? It’s the War Between Bankers"

by Bill Sardi

is unreal.

For FOFOA to say they are not one well oiled machine takes away from his otherwise keen insight.

I have not decided yet, but I think, MAYBE, A and FOA had it right at the time but TPTB keep moving the goal posts. Maybe it was a conclusion that could have been drawn 10 years ago. I don't think A saw this coming, the degree of engineering that is going on.

COST - Of course there are factions, as in departments of the same beast. My left hand is a faction of my body the same as the right hand.

Satya - Yes to me gold wasn't made by human hands and if I am going down in this world, from a monetary standpoint, I want to go down with gold.

I just do not see anyone on this blog, EVER, refute why freegold is not a lock.

Like I have posted before, I have seen FOFOA mock folks who say it is not a lock and promise his next post would be about why he is so sure and he would address those issues. I can't wait to hear his thoughts but his next post was not on that subject, I don't think.

These guys have complete and utter control of world finance. Is anyone posting on here doubting that? I agree, it is what do we do about it to protect your family.

I agree their risk is that events spiral out of control in such a way that they loose control of the reins. I do not think that happens.

Again, as I have posted, I am just coming into this, not knowing much about economics, watching with wonder as biblical prophecy matches up PERFECTLY with what I am seeing daily unfold in the world around me. I don't hold gold as an investment, I hold it as possible insurance and a hope I can provide for others. http://www.survivalblog.com/prayer.html

I see where we are, know the end, and so it's get out of dollars since I KNOW the dollar is toast. To my eyes we are assured of one world gov't and one world currency, and that was written about over 2000 years ago.

Big events just feel close to happening.

In the OT there is no Hebrew word for "money", it was "gold" and "silver". If it was good enough for them, gold and silver are good enough for me. I just sit back and learn.

I agree with SAT. We might not know about how gold fares until it happens.
But I think there is a chance it will work out since this is not the global meltdown of Revelation. This is (or will be), among other things, a judgment on the USA.

Gody said...

tdfxman

I tend to avoid spiritual things in blogs; they seem to irritate people but allow me to indulge you this once.

since this is not the global meltdown of Revelation

Are you sure? This is the beginning of it and it shall end in "And that no man might buy or sell". What do you think the beast that "had 2 horns like a lamb but spake as a dragon" is?

I leave you with this; scripture is compounded with natural and spiritual meanings. Consider this, "and when you see the abomination that causes desolation ..." Is yet to be fulfilled and yet is fulfilled. No offence to any Muslim but that is the Mosque of Omar standing in the Holiest of Holies right now in Palestine and yet it shall again be set up once the Jews start again the offering of the daily sacrifice at exactly that same spot when the Temple is rebuild and that same sacrifice is stopped through the setting up the "abomination that causes desolation".

Consider further when God said "out of Egypt I called my Son"; Israel from Bondage and Jesus Christ when He was young.

golden tube said...

The IMF sold Gold plated tungsten bars to India ?!?!?!

30 mins long, well worth a listen The Tungsten issue has been around for years ! & as for paper gold, well, scary!

http://www.youtube.com/watch?v=M0-hGHJSgNA&feature=channel

The Real endgame, are the factions at "war" with each other ?

http://www.rebelnews.org/opinion/editorial/137558-the-real-endgame


new model army marches on?

http://www.dailymail.co.uk/femail/article-1213903/Agent-Provocateur-models-march-Selfridges-launch-new-lingerie-line.html

Jimmpy said...

Gody,

Seems to me you cannot picture any government leaving their population the tiniest crumbs to live off. I would say, even the dumbest parasite feels it when his host is dying. Monetary history teaches us that a pure fiat monetary system has NEVER survived till now. I think the previous decades will be remembered as another experiment to keep a fiat system alive. As politicians are feeling the current system crumbling they will grasp this freegold concept with both hands hoping it will keep their financial system (taxing mechanism) afloat.
Just my 2cents

Gody said...

Jimmpy,

When have they ever, particularly something of this magnitude.

There are places you go and get Gold immediately on your person and it isn't very much above spot. Like in Australia.

Jimmy said...

Well, here are free links/books for all conspiracicy-believers:

List of Knights of Malta

Germany and the holy Roman empire

The secret history of jesuits, Edmond Paris

Plot to take over USA, Hughes

Vatican holocaust, Avro Manhattan

The vatican in world politics, Avro Manhattan

The Vatican Mafia

the Antlantean conspiracy

And many free books on scribd (tags: knights of malta, vatican world, NWO, Vatican mafia, muslim mafia/brotherhood, Rothschild,... and be creative with tags, if you find a good book, post it...)

And some interesting sites:

The real history: Hitler vs Amin El Husseini

Soros is infidel

Deep black lies

Bibliotheca de pleyades

Secret gold treaty


And don't ask me if I believe it or not... You decide...

I promised FOFOA to not comment more on these conspiracies, only on gold and economics. There are enough sites to talk about conspiracies. Thank you...

Sincerly

Jimmy

Martijn said...

I didn't feel like listening those 30 mins to that vid on tungsten. Just gut feeling, but I did not believe it would shine much more light on the case.

We already know that there is a possible fraud with tungsten going on.

Some unverifiable guy talking into a web camera does not change that by so much I believe, especially not if it takes him over 30 minutes to make his point.

We can off course speculate on the newly bought Indian gold being fake. Personally I wonder whether it would be such a clever move selling the Indians fake gold. Now that the story is out, it was a sure thing they would check. Now that would really play in the cards of the possible counter fitters (e.g. Banana Ben).

Martijn said...

Shadowstats' John Williams: Prepare For The Hyperinflationary Great Depression

That is news...

Martijn said...

@Jimmy

What is "The Secret Gold Treaty" about? Did you read it?

Martijn said...

From "The Secret Gold Treaty":

The answer to this enigma appears to reside in a secret meeting held in 1972 in which 48 nations (or representatives from 48 nations) participated that formalised an earlier informal agreement (dare I say a "Secret Treaty?") to control and "use" the metal plundered during World War II. By all accounts, bullion banks, central banks, and also refineries have since joined in this arrangement and have formed an unofficial "club" to police and control the black gold that they henceforward designated as being on "vacation." This appears to imply that gold plundered during World War II, whether it is kept in bank vaults beneath Zurich Airport or concealed in burial sites in the Philippines or Indonesia makes little real difference to those who are pulling the strings. In any event this ratification remains "unofficial."

Would it be worth reading?

Jimmy said...

@Martijn:


It's a conspiracy that tells: there is more gold than official figures. For example: 500,000 metric tonnes (or more)... I don't know if it's real... But it's always interesting to read many sounds to have an open vision on the world...

But don't waste your time if conspiracies don't interest you...

Gody said...

Jimmy,

I do not call conspiracy what others call conspiracy.

The outcome either confirms or denies the so called conspiracy.

Is gold price suppression/ or whatever you want to call it that keeps gold cheap compared to paper, a conspiracy? Is gold cheap in paper terms? If so, how come? Can this occur in a free market?

The fact that gold is cheap in paper terms is enough proof for me that something is going on there. Whatever that something maybe. Can there be multiple conspiracies that claim to explain what is going on? maybe. Could they be wrong? maybe. Which ever one(s) are true, the effect/ outcomes will reveal in time.

Martijn said...

From that John Williams article:

Back in 2005, I raised the issue of a then-inevitable U.S. hyperinflation with an advisor to both the Bush Administration and Fed Chairman Greenspan. I was told simply that "It's too far into the future to worry about."

Jimmy said...

@Martijn: And about shadowstats:

you can find his pdf here.

But I've my reservations:

On the graphs, there are two remarkably contradictory, only one may be right in the future:

1) oilprice: The top half shows oil prices are falling relative to the first, this is a scenario of falling demand, declining economic activity, falling wages ... a deflationary scenario. (shrinking M3). If you would have economic recovery: the oilprice must be average 30$ a barrel... (Mish has right...)

2) goldprice: The rising gold price shows top half versus the first... an inflationary scenario. (FOFOA has right...)

Martijn said...

What helped to enable the evolution of the Zimbabwe monetary excesses over the years, while still having something of a functioning economy, was the back-up of a well functioning black market in U.S. dollars. The United States has no such backup system, however, with implications for a more rapid and disruptive hyperinflation than seen in Zimbabwe, when it hits.

Perhaps there is a reason for government to encourage gold ownership...

Martijn said...

I'll look into those graphs and the pdf later...

Jimmy said...

@Gody: The short positions/manipulations on gold is proven, other conspiracies not... (9/11 is also proven in my eyes: an inside job...)

Only I hope, the others conspiracies are not true... If it could be very ugly...

Martijn said...

Btw: I tend to believe in inflation and deflation at the same time.

More bad debts, derivatives and the like will continue to be written off, which those that include these instruments to the monetary base look upon as deflationary.

At the same time more money will be printed to fill the black hole, and as even sovereign debt begins to default people will flee into safety (first the dollar, then gold).

What I see is that the upper layers of Exters pyramid are collapsing (deflationary) while people try to move their wealth down the pyramid, creating inflation on lower layers.

golden tube said...

Martijn

"I didn't feel like listening those 30 mins to that vid on tungsten. Just gut feeling, but I did not believe it would shine much more light on the case"

IT would, it did for me plus its not just about Tunsten, way way more than that. just the two guys talking, very informative

Gody said...

Jimmy,

You miss my point. The short positions/manipulations on gold is proven

Would the lack of proof invalidate the manipulation?

I try to operate on truth and not perception. To me if a wealthy man commits murder and is able to escape legal justice by whatever means, that does not invalidate his guilt. So, whether gold manipulation was proven or not, to me, something not quite legit is going on as I can see the effect(s); gold being cheap in paper terms. So, the next step is to try and understand why. The "conspiracies" offer the how. To some that is important but to me not as important as the what and the why.

Martijn said...

I believe the why lies partly in the conspiracy as well.

In your example, you say gold is "cheap" in paper terms, so that is the indication that something is going on. As "cheap" is but a subjective valuation, it might as well be that you're off and the market is right.

In order to make the case more credible, you would - as you say - need a why. That why is often part of some form of conspiracy (or cartel for my part).

Martijn said...

That why is often part of some form of conspiracy (or cartel for my part).

As in: they are doing it because...

And that is the beginning of a "conspiracy" or whatever you want to call it.

Gody said...

Martijn,

For someone whose intention is to lurk I sure have said a mouthful. So, pardon me if I am hogging the bandwidth with trivia.

I believe the why lies partly in the conspiracy as well.

Could be. Lets see

Gold has been cheap in paper terms. Why lets start with the basics how can it be running out without the price going to the stratosphere? As a commodity, gold's paper price should be managed by the market. No? Therefore, since this is not happening with the reverse sometimes happening; backwardation then something is not quite right. Therefore, the only other conclusion must be gold is not only a commodity. No?

To conspiracies, Lets roughly look at the why?

Gold stops gov'ts from practising hidden taxation aka inflation and hence must be allowed only to trade as a commodity
Gold is the ultimate store of value and hence some entities are manipulating the price to load up
Gold is secretly being used to pay for oil thus making oil cheap therefore must be made cheap
Gold ................

You get my drift. Could all of them be true? maybe some? maybe. Now, could all of them be interconnected and interrelated? certainly.

Now the conspiracies will be around mostly how and yes granted with some whys in there. But is it possible that misinformation could be included in the conspiracy? To me yes

So, the why aids me in weeding out what is most plausible?

Hence my question. Why allow "no ones" to own gold even encouraging them.

FOFOA - did give me a link on confiscation. I am still considering it. The only problem I have is that the US is already an outlaw yet BIS done nothing. What is one extra act of "outlaw" behaviour particularly if it is against "no ones". And what real benefit is there for China if its citizens buy gold now? You see Why is very important.

Martijn said...

I agree that it is highly possible that gold is intentionally undervalued.

However, I wonder whether such a thing can be concluded from watching market behavior alone.

Therefore, since this is not happening with the reverse sometimes happening; backwardation then something is not quite right. Therefore, the only other conclusion must be gold is not only a commodity.

Incidentally, other commodities have been in backwardation. To me that fact alone does not stand out as being extremely rare, or proof of something not being a commodity.

For the record: I do agree that gold is not a commodity, but I do not believe we can base this assumption on the mere fact that gold has occasionally been in backwardation alone. If we can, we should also conclude that other commodities are not commodities as they have too experienced backwardation.

Hence my question. Why allow "no ones" to own gold even encouraging them.

How about: What helped to enable the evolution of the Zimbabwe monetary excesses over the years, while still having something of a functioning economy, was the back-up of a well functioning black market in U.S. dollars. The United States has no such backup system, however, with implications for a more rapid and disruptive hyperinflation than seen in Zimbabwe, when it hits.

Kewl said...

Some amero photos
Quite interesting that spanish language appears only on 1 unit (un, uno), but not on the rest. Apparently Mexicans won't need larger bills than 'uno' :)

Gody said...

Martijn,

Incidentally, other commodities have been in backwardation

Now, this is interesting isn't it. To me an easy answer. The commodity future market is manipulated. Backwardation says so. Remember for me backwardation is the effect of some cause. There is nothing in nature that cause this phenomenon. You may disagree and that is alright. For me that is settled; manipulation is in play. Unless some can prove otherwise.

The Zim story is nice with a few flaws in this case.

Gold is not a currency. So, some "no ones" owning some does not help in velocity. It is like returning to barter trading. No?
Secondly, how much of the population in percentage would have any gold? You see in ZIM, dollars could be smuggled in. but in US, the US will have to make do with whatever gold they have.No?

So, with just this 2, I can make a case that ZIM situation cannot be replicated in the US. No?

Gody said...

Martijn,

Forgot important point about other commodities.

They are not like gold in that they are consumed whether through industry, eaten, corroded, destroyed, decayed etc. Most of mined gold is still around, with already mined gold dwarfing production. No? Therefore backwardation should not be possible, you should reasonably expect. No?

Martijn said...

In general backwardation says something about the time preference of market players. Although I can follow your line of reasoning, I do not believe that the occurrence of backwardation by itself is enough to prove that a market it rigged. Time preference might shift from other reasons.

As I've indicated before I do however believe that the gold market is manipulated, as are many other markets in my opinion. I even think it is only natural behavior for market participants to try and manipulate markets.

The funny thing is that information on that manipulation generally is available for interested players, at least since the introduction of the internet. Anyone interested in the gold market for instance is free to read GATA or FOFOA or any other source.

Therefore I tend to believe that most players until now did not care too much about manipulation in the gold markets as they were making enough money anyway, in either the gold market or elsewhere. So backwardation might indeed by quite relevant.

Jimmy said...

Wow this is world news about fake tungsten goldbars in Ethiopia

Now I'm very occupied to react on other comments. Maybe tonight, sorry...

Jimmy said...

Manufacturers index crashes

What is manufacturing?

Martijn said...

DeCarbonnel might have been right

Martijn said...

Here is an article arguing that there is no real recovery.

1. Who really believes that wars and natural disasters are good for the economy?
2. Massive Government programs -- like Social Security, Medicare, Medicaid, and farm subsidies, just to name a few in the innumerable list of value-destroying components in our economy -- are already insolvent.
3. There has been a lot of talk about the role of mal-investment -- in the context of the economic collapse we’re enduring. But nobody’s getting it! When the government creates cheap, or even free money (even though it's neither "cheap" nor "free"), it encourages people to invest. And because people are investing in things they wouldn't normally consider, the investments they make are almost certain to be bad.
4. In 1971, Richard Nixon took the United States off the gold standard. That means the dollar is now fiat -- that is to say, it is backed by nothing more tangible than the "full faith and credit" of the United States government.
5. The government and the media are trying to make you believe that we are in a deflationary environment, and that simply is not true. The government is printing prodigious sums of currency right now, and that, as I pointed out, is inflationary.

Here’s another thing to remember: when the Dow Jones Industrial Average first crossed 10,000, gold was at about $250 an ounce. Today (ten years later), the Dow is hovering in a trading range between 10,000 and 10,500, and gold is over $1100 an ounce. What does this mean?


We pretty much knew all that already, but some might consider it a good read.

Martijn said...

Interestingly, Iraq's oil auction hits the jackpot

tdfxman said...

Gody - 11:24 PM

yes I am sure. 100%.

First, the the massive worldwide inflation that will occur is with the global currency. The 3rd horseman in Revelation is coming, the pale green horse, massive inflation. Folks will work all day to BARELY EAT for that day. One days wage will barely feed you.
Unless the Rapture is now, wouldn't that be nice, we need minimum of 3.5 years out before it gets dicey. So this is easy to determine this is not the Revelation sequence yet.

So this event coming is going to be a precursor to what is going to happen later, just it will affect EVERYONE's currency, not just holders of US currency.

Also I don't think gold is confiscated since folks will have it in the end but it won't save them. Hint they will throw it into the street in disgust.

I don't want to make it a bible study here and quote all kids of verses but yeah I am sure this isn't it, as I said before.

When the pain is bad enough the "little ones" will say make it go away and poof world currency, or at least regional ones, which would be a BIG step to world digital currency. Once you get the US out of the way the world will become very pliable very quickly.

Good call, the Temple will be rebuilt but I don't know if I will be around for that one. My guess is it is rebuilt in the first 3.5 years of the bad guys, little horn's, rule. The 3.5 years ends with the "abomination that causes desolation" but that kicks off the REALLY bad last 3.5 years. So no it has not been fulfilled yet.

You can email me if you want to take this offline, add yahoo.com to this posting name.

Martijn said...

Trouble in Euroland.

Jimmy said...

unbelievable opportunity in gold, SmartknowledgeU Investments

@Martijn thx for the links. Today very busy...

Gody said...

Martijn,

In general backwardation says something about the time preference of market players. Although I can follow your line of reasoning, I do not believe that the occurrence of backwardation by itself is enough to prove that a market it rigged.

Could be, but what exactly is this time preference? What is it about and why? Articulate this and I will consider. Without this, the simplest answer is correct. In free markets backwardation does not happen. At the very least you get like for like;supply and demand.

and in my view what you wrote is relevantSo backwardation might indeed by quite relevant.

Now, remember I also asked a simple question. How can gold keep running out of stock with no corresponding increase in price? How is this possible? The opposite is actually happening; delivery delays in some countries for weeks yet the price goes down? I am a simple man, give me a simple answer and you will have no more questions from me.

why is that lion eating grass?

And like I said to jimmy lack of proof of manipulation cannot invalidate it if the effects of manipulation are there for all to see. What could break what others call economics 101; supply and demand. If it's not manipulation then lets redefine the new economic laws around supply and demand. No?

Gody said...

tdfxman,

We shall take it offline.

Martijn said...

Could be, but what exactly is this time preference? What is it about and why? Articulate this and I will consider. Without this, the simplest answer is correct. In free markets backwardation does not happen. At the very least you get like for like;supply and demand.

As I indicated above I also believe that there is something going on in gold.
From a logical perspective I do however tend to believe that I am not all knowing at that the fact that I cannot come up with an explanation for the time preference does not mean that I have crossed off an exhaustive list and can be sure that market fraud is the only possible explanation. We seem to differ in logical approach here, although we do agree on the outcome were gold is concerned.

How can gold keep running out of stock with no corresponding increase in price? How is this possible?
Generally you are correct there. We should however not forget that the gold market spans the world and that delivery problems if only local might not be relevant.
For instance, in my country there are no delivery problems for physical.

But if the problem is global the explanation does lie in the paper market being a fraud, which it is.

The scenario has long been expected, but personally I wouldn't vouch for it having arrived already, although it does seem to come closer every day.

Martijn said...

The case for inflation

Martijn said...

Will the COMEX Silver Market Be Closed?

@Gody
U.S. Mint to Resume Sales of Gold Bullion Coins
Backwardation and the end of the COMEX have been called for countless times in the past. As long as physical delivery is not halted on a large scale world wide, the US mint problem could be a logistic one.

Don't get me wrong however, I would not be surprised by an implosion of the COMEX and every time it's called for it might come in my view.

However, certainty is the rarest commodity in this game.

Martijn said...

@FOFOA

As markets always have a tendency of surprising their players, perhaps a silver default will be the surprise to those watching gold.

Off course gold would follow silver, and vice versa, so for those well positioned it wouldn't matter much in the end, but still...

Gody said...

Martijn,

From a logical perspective I do however tend to believe that I am not all knowing at that the fact that I cannot come up with an explanation for the time preference does not mean that I have crossed off an exhaustive list

Excellent. I could not agree more. Now, this is not a rebuke but personal. I do not speculate. What could be has many many possibilities. I could even be completely wrong in my premise you see, but I need something to hold on to. Otherwise where does one stop? Hence, although I can see what you are saying and actually say yes it is possible, I need the what and the why. I did not know anything about freegold until FOFOA. and my only question now lies with "no ones". I may have other questions but even I don't know it yet, if I do. I am exploring the concept (which has a lot of merit; very plausible)

Gody said...

US mint problem could be a logistic one.

Very hard for me to accept that one. There are no logistic problems with oil. A far more harder substance to handle. No? What about food, other than severe hurricanes, all types of food are available and even in that hurricane time, only short disruptions may occur.

One could argue don't compare food or oil with gold. gold is inert and does nothing. Point taken, but have logistics problems of this magnitude? In the US? Over and over again? You see I am too simple. To my mind this cannot be. Something doesn't quite fit that explanation. No?

Martijn said...

@Gody

I do agree that in real life one does need a practical approach and somewhere to start. As long as one is aware of the limitations and the corresponding lack of certainty (which, luckily, we find everywhere in life) I do value your approach.

Martijn said...

As for the US mint the discussion above comes into play again.

Off course it strongly suggests backwardation and delivery problems, but one should notice that it is not the only possibility and that there have been delivery problems in the past. Even in my country.

And some point those problems might (will) go global, but before I would conclude a development as an indication of such, I would prefer seeing some more evidence.

Martijn said...

Excuse my sloppy English btw, I am apparently multitasking (or trying to) a bit too much at the moment.

FOFOA said...

Martijn,

Backwardation in the monetary metals is different than other commodities. "Fekete says that backwardation in the monetary metals market will usher in hyperinflation."

Fekete:
"It appears to be a theoretical impossibility for the gold and silver market to be in backwardation for any extended period of time. Such a situation would guarantee unlimited and riskless profits for all those holding gold and silver. They could replace their cash holdings with futures at a lower price. When their futures contract matured, they could take delivery and repeat the procedure. The mere possibility of unlimited and riskless profits suggests that there is an error in the calculation. And indeed, there is. The profits are not riskless. As the ancient adage says: “A bird in hand is worth a dozen in the bush”. When cash gold or silver is replaced with futures, a risk is created, namely, the risk that it may not be possible to convert the futures contracts back into cash gold or silver at maturity. There is the risk of default in the futures markets.

As the regime of irredeemable currency threatens to crumble under the weight of the inordinate debt tower of Babel, people increasingly take flight to gold. Supplies will get tight and the gold basis will fall. The gold futures market may even go to backwardation briefly at the triple-witching hour, i.e., the hour when gold futures, as well as call and put options on them expire together. Later, flirtation with backwardation may occur even more often, at the end of every month when gold futures expire. Gold will get caught up in a storm.

Backwardation in gold has a perverse effect. In the case of agricultural commodities backwardation provides a most powerful incentive for traders to sell the cash commodity and buy the futures. Not so in the case of gold. Rather than bringing out deliverable supplies of gold, backwardation tends to remove them. The more the gold basis falls the less likely it becomes that owners will exchange their cash gold for futures. Please remember that you have seen it here first. This perversion of the gold basis constitutes the self-destroying mechanism of the regime of irredeemable currency...

My description of hyperinflation is not in terms of the quantity theory of money, but in terms of a model where the relentlessly declining gold basis leads to backwardation destroying the gold futures market. When all offers to sell cash gold are withdrawn, producers of essential commodities such as grains and crude oil refuse payments in dollars, and demand gold in exchange for their product. The dollar and other irredeemable currencies will go the way of the assignat.

Backwardation in gold should therefore be considered the self-destroying mechanism for the regime of irredeemable currency that “only one man in a million may identify and understand” (my thanks to Keynes for the felicitous phrase). This is where supply/demand analysis is utterly useless. The huge stocks of monetary gold are still in existence, yet zero supply confronts infinite demand."


Backwardation (My first of several posts on backwardation last year)

Jimmy said...

Some good blogs to read:

goldforecast 2010, Scotiamocatta

What's really in Fort Knox

Full Circle Of Govt Debt Default, Jim Willie CB

He talks also about "the waterfall effect"

Gody said...

FOFOA,

Thank you on backwardation and quoting Fekete. I make a poor advocate for it. Thanks for the help.

Museice said...

This is one of the best pieces I have recently read.

Full Circle of Government Debt Default

"When that historic event occurs, essentially the revival of the Deutsche Mark, the USDollar will resume its decline in a powerful manner. Gold will then rise in response powerfully in US$ terms. During the monetary earthquake with European government defaults, the gold price will rise powerfully in Euro terms. After the introduction of the new Core Euro currency, the gold price in Core Euro terms will stabilize, with a handoff given to the gold rally in US$ terms. Such will be the nature of the rotation phenomenon. Mainstream analysts will make errors all along the way to promote the false notion of flight to US$ safety and security, when none exists. A flight out of paper fiat currency is the key, and flight into Gold is the major mega-trend that has begun to occur and will continue to occur."

Jimmy said...

last post this evening, go to sleep.

Revealed: the 250% tax on pension contributions


Goodnight all

Jimmy

Fauvi said...

@ tdfxman

Those articles from Bruce Wiseman are
just mindboggling.

I always wonder how positive Fofoa thinks about BIS. How that, Fofoa?

Bis ist the EVIL and has always been.

I also wonder how most of the gold advocates can only discuss gold/currencies/finance without considering "conspiracies" against humanity. Because there is really a conspiracy ongoing.But it seems preferable to ignore it.

Viel Glück

FOFOA said...

Dave Hawkins (December 13, 2009 6:24 PM),

Rather than guessing Rubino and Turk's reasoning, I emailed your comment to John Rubino. Here is his reply:

Hi FOFOA,

Sorry to take so long to respond...crazy couple of days.

Your question is a good one: Why would anyone who understands the fiat currency dynamic buy bonds denominated in any fiat currency? The answer is that in the short run some fiat currencies fall faster than others. So foreign bonds will tend to outperform dollar-denominated bonds if the dollar is falling faster than the euro, yen, etc. In other words, they're a good way to diversify a dollar-based portfolio.

That's a short-run strategy, though. As we note in the book, eventually the dollar disease will spread to the rest of the world, making virtually all major country bonds a disastrous investment. But we're not there yet. In the past year, euro and yen denominated bonds have done pretty well in dollar terms.

Regards,

John

FOFOA said...

Fauvi,

Back in the day FOA was bombarded with comments similar to yours. This was his simple reply with which I agree...

FOA: "Sir, This is your perception and perhaps that of a few others. I and many other readers do not accept your big brother scare innuendoes and feel the prudent allocation of wealth assets will see us thru most of this."

You may find some more of my reasoning in my reply to Steve B's comment dated November 30, 2009.

In my Internet travels I have come across many sites and forums that discuss in great depth "the evil conspiracy against humanity" as you put it. Some are even gold advocates! So why are you here and not there? And why does it trouble you so that I do not employ this particular meme in the foundational, fundamental paradigm on which I build my macroeconomic analysis?

I do understand that you and others find this to be an absolutely unassailable meme. I do not, and therefore I seek an analysis that I deem to be even deeper. A meme within which all other memes must play themselves out.

Steve B asks, "These guys have complete and utter control of world finance. Is anyone posting on here doubting that?"

Yes, Steve, I doubt that.

But at the same time I have no desire to waste valuable energy in a debate about the veracity of the myriad memes circulating on the internet. Instead I prefer to lay out in great detail the position from which I, myself am analyzing. This should be clear from the subtitle of my blog to my hundreds of posts, right on down to the thousands of comments. Yet I still struggle to understand why this is so disconcerting to you and a few others.

Sincerely,
FOFOA

Gody said...

FOFOA,

I just read you link on Steve B and your comments.

First let us start on who or what is man. A very key question since analysis can be distorted if we neglect this as modern man has. Modern man analyses at the most primitive level and thinks that he is at the most highest.

Please don't misunderstand me but consider what I say.

Man uses science and material things to make his judgement; in simple terms the 5 senses.

Now, let me ask a question. Does anyone here ever get angry? as an example. Please measure and quantify your anger. Emotions are not material, they are spiritual. Now just like the body has five senses, the spirit has 5 gates; emotions/ feelings, memory, imagination, reasoning/ thinking, and conscience.

Yet spiritual things are derided as "non events" yet everything is a part of it. I can mention an emotion like anger and yet everyone here understands me, though we have never met. What does that? Some say humanity. Well does a deer fear a lion? is that still humanity? Some will say it is life.

If I am at a low point of my life why not sell me some life bottled in a jar to invigorate me. Not to push further on this as it would require a blog of it's own. Yet I am always fascinated at how spiritual things are derided.

Gody said...

FOFOA,

I have just read your piece "The call of the century". Fascinating.

Do you have any idea what motivated ANOTHER to do this?

raptor said...

http://www.zerohedge.com/sites/default/files/QBAssetManagement-12-14-2009.pdf

Reading this got me to figure out why gold holds better during deflation periods rather than in a normal-inflation periods (not talking about high/hyper).

And the reason is that during deflation periods the economy is weak (fractional banking system predisposes money to grow constantly -> economy to grow, until ..), so deflation periods predisposes the gov. to intervene, which smart investors take as devaluation of the currencies... and that is why GOLD behaves so well during deflationary periods and fiat-fractional system.


comments welcome...

raptor said...

forgot...I mean to imply that smart investors seeing gov actions move to gold...later followed by the others..

But the gov actions are a consequence of the deflationary forces...

which are caused by long term slow monetary inflation .....

caused by fractional banking system (where banks have "big-time" short term incentive to create more and more money...)

....and the base reason for this is that in fractional banking system money have to increase in quantity because interest can be paid only with the creation of new money....

and that is why even a GOLD-based/backed fractional reserve system is prone to fail...

The way to prolong the life of such system is to allow constant defaults on small scale, so that someone eats the losses of inability of the system to pay the interest w/o creating oversupply of money

FOFOA said...

Gody,

I do not know Another's true motivation, although I have seen speculation on it. If you read his postings you will get a good feel for his intentions.

You might find this interesting. It was written by the one person who had the closest contact with Another and his friend...

"I would like to deal with the question of ANOTHERs identity from the outset. At all costs, ANOTHER wishes to remain anonymous. His contact with me has been through a third party who describes himself as "the firewall that breaks the electronic connection from the source." I have made no attempt to find out who ANOTHER is, nor do I want to know who he is. After long consideration of this situation, I have come to the rock-solid conclusion that it is not only in ANOTHER's best interest to remain anonymous; it is in our best interest as well. So, please, in your liaison with ANOTHER (which will be offered below) and with USAGOLD, do not waste your time or ours by making inquiries as to his identity, country of origin, etc. We simply do not know, nor do we want to know."

This was from Michael Kosares in April of 1998 and you can find it here.

Gody said...

FOFOA,

Thank you. Although that is not what I was looking for. I am not interested on who he is just what motivated him to do this. Why do this? Since now you have seen a bit about me you can appreciate why I would look for the why in ANOTHER doing this. No?

tdfxman said...

FOFOA 3:47

"feel the prudent allocation of wealth assets will see us thru most of this".

I do not disagree with that. That is possible. However, TPTB control the tides, to use your metaphor. They control the "what can see your through." I now understand how that falls outside of the scope of your analysis.

Why am I here? This site discusses "money" like no other. As you said, when I came here I was woefully not up to speed on the functional roles of money. You changed that, thanks.
What I don't see, however, is YOUR consideration to the other side of the equation. These other sites can cover both sides of it. This site seems one dimensional, to me.

To say TPTB are not one well oiled machine that control global finance is to sport a lack of fundamental basics on the subject of these organizations. Have you done reading on the subject? If so, how did that inform your conclusions? Have you traced the similar threads by which these organizations are related? It is ALL there in black and white. Forget conspiracy, I don't even know what that means, it is simply reality. If you have not taken the info that is out there into account, doesn't that put risk into your conclusion?

Again. forget conspiracy, this is how these organizations interact.

So to end this whole point I guess you are saying "my position is X (FG)". We are asking, on this site, "don't you care to show us how you came to that conclusion by mitigating risk Y(BIS/CFR/TC/IMF/BG/Council Of Rome) etc".
You seem to say no thanks to that request. If you have ventilated this issue in detail, please point me in that direction.

I guess that is where it's at.

Like I said I am around 40-60 on FG. One thing that keeps sticking in my mind I think I read here. Back in the 1700's I think it was some elite guy was trying to get out of France, or some other country. What was hidden and loading down his stagecoach? Gold.

These guys know what money is, of that I have not doubt. So do we. That is your whole point. I get it.

It is just will they let us have some to? I guess to that you say simply "they have to". That level of response simply doesn't fit with your normal way of addressing issues.

Sorry if you feel I, we few, are pushing you to answer questions you might not know the answer to or if you do you aren't telling us in a way I, we, understand.

Great Blog FOFOA.

PS Gody

The call of the century is what got me started on here in the first place when someone posted a link somewhere else that I read. I will be back to your emails soon, I see you got my first reply.

Martijn said...

FOFOA, Gody,

Thanks for the discussion on backwardation.

1. Backwardation is a preference in time, measured by the dollar (it involves contracts denominated in dollars at various prices at various times).
2. Not that we are experiencing it now, but could not deflation (in the dollar supply, causing price decreases) also trigger backwardation?
3. Discussion as to whether we are experiencing backwardation right now remains open as far as I am concerned. As I've indicated above, it has been called for multiple times in the past, and yet Feteke's scenario has still not played out. Evidence is building that is might not be long, but it certainly is not for certain yet.

Martijn said...

On second thought, (expected) deflation might not trigger backwardation as it would be safe to sell now and hold the extra cash over time through a deflation instead of selling later.

So backwardation most likely is a clear signal that something is going on.

It remains open to see if we really are in backwardation already.

Martijn said...

@Gody

Gold is not a currency. So, some "no ones" owning some does not help in velocity. It is like returning to barter trading. No?
Secondly, how much of the population in percentage would have any gold? You see in ZIM, dollars could be smuggled in. but in US, the US will have to make do with whatever gold they have.No?

So, with just this 2, I can make a case that ZIM situation cannot be replicated in the US. No?


I don't know. A few people holding gold might at some point need food or other stuff and trade their gold. As that begins, gold might start circulating and become a currency, even if it is not in large supply.

However, instead of gold someting else could be chosen off course.

@FOFOA
How would freegold play out in a hyperinflation?

Freegold would mean a decoupling of the value store function from a currency (USD).

That would most likely result in a drastic increase in gold prices while other prices remain fairly constant in their relation and the currency would continue its function.

In a hyperinflation that would not be the case, or would it?

Gody said...

Martijn,

Think it through. If 1 out 10,000 (this I think is way off but will suffice for the point) say has "money" (read gold) and the rest don't how could trade proceed?

Gody said...

FOFOA,

Let me represent my question differently. If I am the gov't and I own a lot of gold, I would hasten the revaluation quickly. Why?

Consider that if I do this, then I can lend out currency backed by gold in gold terms and expect to be paid in gold terms. What is the advantage, I can continue to inflate with freegold not affecting me. No? If I lend you 2 ounces @ 100,000 the currency, say and inflate such that in year's time gold is now priced at 101,000, I will still get paid 101,000 or 2 ounces of gold which is equivalent to 101,000 in the open market. If a lot of citizens hold gold before hand I am hobbled in my scheme. No? Unless of course I tax capital gains very highly. No?

Secondly, since the revaluation has given me tonnes of value in gold terms, I can appease the masses by engaging in some social/ community etc projects and hence continue to show how benevolent I am to the community and nation. No?

That lion sure like grass. No?

Martijn said...

Think it through. If 1 out 10,000 (this I think is way off but will suffice for the point) say has "money" (read gold) and the rest don't how could trade proceed?

It does indeed depend on the distribution of gold.

No King But God said...

tdfxman,

You bring up fears many others seem to share as well, even some long acquainted with this blog.

Yet you admit that your journey into monetary and economic matters is just beginning. I think this lack of familiarity with the fundamental laws of economics and human action is the root of your overwhelming fear of what the elites, however you want to term them, can ultimately get away with.

It is a simple law of economics that central planning will eventually fail. The law of unintended consequences will rear its ugly head at some point. The market (i.e., the sum of the actions of all us little people) will not be denied forever.

You act as if they can foresee all things and control all things. Yes, there are undoubtedly people who wield large amounts of power and have been behind many of the atrocious acts of government we have suffered through over the centuries. But they are not all knowing and all powerful. Most importantly, they are not unified.

The existence of factions among them is what will allow Freegold. Would they all like to be the printer of the reserve fiat currency? Yes. But only one can be, and no one will allow another beside himself to enjoy that exorbitant privilege. By default, Freegold will arise out of their (well-deserved) lack of trust.

As for what breadcrumbs will fall to us little people? They cannot indefinitely prevent all progress toward liberty. Does liberty come and go in fits and starts? Yes. But over the course of human history, you do see outbursts of liberty that erupt onto the world scene and leave the world forever changed. Think of the Protestant Reformation, the American Revolution, the Industrial Revolution, etc. Saying that they are powerful enough to forever and always stare down, through mere force of will, all economic progress in the living standards of the masses is to deny many centuries of human history.

By the way, as one Christian to another, I think you might find the following link interesting - Surviving in the Interstices. Christians throughout the ages have survived statism and been a light in the darkness to those around them.

No King But God

FOFOA said...

Gody,

Ender is responsible for much of my "growth" in understanding Freegold. You should listen to him if this subject really interests you. You should start with my 2008 Freegold post and also read all the comments. Then follow the thread to the other Freegold posts. This is the best advice I can give you.

then I can lend out currency backed by gold in gold terms and expect to be paid in gold terms.

The currency won't be backed by gold in Freegold.

What is the advantage, I can continue to inflate with freegold not affecting me. No?

The inflation tax is 90% confidence and 10% hot lead. After fiat implodes, governments are going to have to make do with the 10% or else increase it to the point of diminishing returns. Many are already there.

If I lend you 2 ounces @ 100,000 the currency, say and inflate such that in year's time gold is now priced at 101,000, I will still get paid 101,000 or 2 ounces of gold which is equivalent to 101,000 in the open market.

No, lending will not be in gold terms. It will still be in fiat terms.

If a lot of citizens hold gold before hand I am hobbled in my scheme.

Nope.

Unless of course I tax capital gains very highly. No?

Cap gains will be taxed highly, but not based on the THE TRANSITION. That part will be impossible to identify. Unless of course you are stupid.

Secondly, since the revaluation has given me tonnes of value in gold terms, I can appease the masses by engaging in some social/ community etc projects and hence continue to show how benevolent I am to the community and nation. No?

If this is what you are imagining, then you need to reverse your imagination in my opinion.

That lion sure like grass. No?

I don't understand this analogy.

Sincerely,
FOFOA

FOFOA said...

"It does indeed depend on the distribution of gold."

Is the Mona Lisa going to lose value because everyone doesn't have one? Gold has an advantage over the Mona Lisa. It can be cut up into infinitely small pieces and still hold the same value. The Mona Lisa would lose value if that was done to her.

Martijn said...

It is not the value of gold that depends on it's distribution, but its potential use as money during a hyperinflation period.

While the Mona Lisa is likely to retain it's value, I cannot see hoards of people buying bread with it while using it as money.

FOFOA said...

I expect gold to be wealth, not currency, during hyperinflation. You will want to make other preparations for your food, clothing and shelter during hyperinflation. If gold is all you have you will have a hard time getting full value, although you will get much greater value than now. Silver will come in very handy during hyperinflation, imho.

Martijn said...

I would expect the same. Silver might be handy, but stuff such as toothpaste, cigarettes (though I don't smoke), canned foods, vitamin supplements and whiskey as well.

So far I have not stocked up. I think there will be enough time for a careful observer. I have only planned to make sure I do buy enough once I decide to buy.

FOFOA said...

"I think there will be enough time for a careful observer."

Don't count on it. I have been stocked up for more than a year. I am restocking now. I concentrate on things I will use anyway. ReadyStore has some good stuff for those in the US.

Martijn said...

Perhaps it was posted above already, but I can't seem to find it.

Here is a rather good outlook on government finance.

Martijn said...

Perhaps it is a good idea to stock up on some stuff already.

So far I have not had problems from not doing it, although that does not prove much as predicting the future is always a gamble, and things might have easily ran otherwise.

Gody said...

FOFOA,

Let me try that again and maybe walk slowly with you. I appreciate reading all your previous work and in time will do so, but even as I do that, I have get questions. Remember your journey? Like you said Ender helped you because you could converse. I do understand if you can't answer all the time.

Maybe in my haste I have mixed things up as presented. I will be more careful.

Let us say freegold is now in operation. Let us say 20% of the population was smart enough to have physical gold.

What are you thoughts on gov't hidden taxation aka inflation in this 2 tiered system. Impossible, marginal possible, business as usual? please briefly explain or give a link to read. I think this is a very important question whose answer is vital in this discussion. I am also happy with a 2 tiered response if necessary; e.g. domestic and/ or international.

About the Lion eating grass; Lion do not by their very nature eat grass. They are carnivorous. Gov't and taxation go hand in hand. So, a gov't that somehow seems to allow a free pass on taxation to some citizens (who are not part of the ruling elite) is unheard of. Yet by allowing "no ones" to own gold pre-transition seems to allow this very thing (sort of). What advantage does the gov't gain by allowing that to happen?

Gody said...

In 2 tiered system I mean freegold having gold as the store of wealth and currency as the medium of exchange and completion of transactions or whatever you want to call it

FOFOA said...

Gody,

It sounds like you understand the separation of monetary functions. Transactional versus wealth. Time plays a big role in the gap between the two. The longer you hold transactional the more it acts like wealth.

Government can always control transactional. It has no control over wealth, meaning it has no control over how long you hold the currency or its derivatives. That requires gaining the confidence of the "no ones" that are "superproducers". Wealth is whatever they (we) decide to spend our excess transactional earnings on. Some wealth items hold their value better than others. The inflation tax subtracts from our "wealth savings" as long as it is paper promises denominated in transactional currency, which requires earned confidence.

The govt and the bankers (the $IFI- international financial industry) are losing the confidence game. The only way to regain the confidence they once commanded is to earn it again. Application of force is a self-defeating strategy for something like this.

If enough force is applied to a population then there will be nothing for govt to skim. The people must be productive beyond their daily needs. And in order to have a productive population, they must be willing to work for more than just the bare necessities of life. Of course they will do whatever it takes to survive. But as a govt, you want SUPER-PRODUCERS.

Gold can rebuild confidence and give the superproducers something to save in. For China and Asia, it will give them a trade settlement base that is decentralized and stable. It will give them a real trade advantage when the dollar collapses.

FOFOA

Gody said...

FOFOA,

Thank you for that.

Gold can rebuild confidence and give the superproducers something to save in.

So, now confidence is regained. but how does the gov't get its "cut" back? The super producers are storing their wealth in gold and gov'ts can't survive on taxation alone without inflation. What is the next step for them?

Why do I ask this? from gov't perspective what good am I if they can't steal from me? Even if I am a super producer?

S said...

Check this hit piece ion Bloomberg on central bank buying: "time to sell." Bernanke out with the all too predictable no inflation here. Amazing that a guy can create trillions of dollars nad claim no effect - all optics at this point anyway

FOFOA said...

So, now confidence is regained. but how does the gov't get its "cut" back?

Confidence (in paper) will be regained when it is re earned. This will take quite a while, perhaps a generation.

The super producers are storing their wealth in gold and gov'ts can't survive on taxation alone without inflation. What is the next step for them?

They will continue to inflate the transactional currency. They still get value from it, less and less the shorter the time you hold it. Once you refuse to hold it more than a few days we get hyperinflation.

And yes, gov'ts can survive on taxation alone. This is the future. Your statement that they cannot is pretty limited in scope.

I'm off to bed now and I won't be around much for a couple days. I'll put up a new open forum tomorrow when I get the chance since this one is about to lapse into a second page.

Sincerely,
FOFOA

Gody said...

FOFOA,

Thank you and good sleep.

I saw this from Ender in your piece "FREEGOLD sept 2008"

Well, it takes care of itself (mostly). You see, economies that run a surplus settle for gold which makes extra gold available in that economies currency. As more gold becomes available, it has the tendency to drive down prices. This falling gold price over time will make the people feel that they will be able to get MORE gold for the currency in the future. Thus, a falling gold price will grow the usage of a currency – more people will hold it for future payoff. Any currency that will buy more gold in the future than today will be seen as a strong currency.

Likewise, those that run a deficit will see foreigner bit the price of their gold up as it moves into other economies. As gold gets scarce, it will have the opposite effect on the people’s feelings about holding the currency. Thus, the currency will weaken.


Trade surplus countries = no problem. Trade deficit countries = problems. What makes you, Ender, Another etc so sure that those countries will allow citizens to convert their currencies to gold. If they allow international settlement with gold, what business with the rest of the world have in interfering with internal affairs (read citizens are no longer allowed to buy gold)?

Martijn said...

Now comes the heavy artillery!

Martijn said...

The move will give the hyper-rich club of oil exporters a petro-currency of their own, greatly increasing their influence in the global exchange and capital markets and potentially displacing the US dollar as the pricing currency for oil contracts. Between them they amount to regional superpower with a GDP of $1.2 trillion (£739bn), some 40pc of the world’s proven oil reserves, and financial clout equal to that of China.

That cannot be turned a green shoot!

Martijn said...

Gold CPI adjusted as per shadowstats.

Martijn said...

Guys,

On the "Gulfo" (the new Gulf petro-dollar): if the use the architecture of the Euro, it could be that they will really use oil as a backing.

Now that might have more impact then foreseen, wouldn't you think?

tdfxman said...

No King But God - 12:52 AM

Thanks but I don't fear what they can do to me at all. I worry for others as liberty is lost, big time.
We know how that gets corrected.

It is a simple law of economics that central planning will eventually fail.
I agree, but it won't be yet.


See, this makes NO sense to me... "The existence of factions among them is what will allow Freegold. Would they all like to be the printer of the reserve fiat currency? Yes. But only one can be,"
When there is ONE GLOBAL CURRENCY the ONE will be the printer.

Does a one world currency preclude freegold, I don't know.

They cannot indefinitely prevent all progress toward liberty. When there is a tyrannical one world gov't that does not allow liberty, where are you going to go to find it?

I will check out the link. What I am saying is it is gonna be REAL dark. And the darkness is not going to like that light at all. And then the light will be pulled away. I totally agree, great point. Light is gonna be needed.

I think it is as simple as I don't trust them. Sorry I am distracting to the board. I will slow it down until events warrant. Which I hope we don't see.

GOLD FREAK said...

FOFOA/Ender,
Is there a compilation of Ender's posts anywhere? I do not believe there is but he(you, Ender) always make informative posts on the many blogs you can be found on.

if there is anyway to track his(your) posts I would appreciate it

Jimmy said...

A good article about hyperinflation in Argentina

Fauvi said...

Fofoa,

thank you for your answer. Actually your rebuff. If you lived in Europe, you could understand better how lost of freedom feels like. Everyday a bit more gone. Time is coming for you, Americans, to get to that too.

It will not be gold to save you when your freedom will be lost. I have also seen "real" dictatorship in advanced stadium in my life therefore I am quite aware when negative changes happen. You still enjoy much more freedom than we have left here. 75% of our laws bone In "EU" and not in national countries. How do you think you will like that?

It is really a pity that except your thoughts on gold you have nothing to say. Yes, indeed, it is one-dimesional speaking of gold and not considering its political role and envirenment. History helps too.

As a matter of fact I think you like to convince people, be a tribune whom people hear to. What I also do. But I see how unilateral your thoughts become exactly because you don't go deeper into analysing when answers and questions are badly needed. Yes, even speculations well founded might be better than nothing. Your ideas about freegold are also a godd speculation still.

I expect some day you will think about my thoughts...and that will not be a nice day, by God not!

Viel Glück!

raptor said...

See here, less than 1B increase last month...and the big players are flat or down recently...

http://www.treas.gov/tic/mfh.txt

did it started, i mean shunning of the ty's..!? have to see Nov. data !!

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