Tuesday, January 19, 2010

Gold: The Ultimate Hedge Fund

For the FOFOA noobs, I'm talking about a >>personal "hedge fund"<<, as in physical gold in your own physical possession. Not a monthly paper statement that comes in the mail saying "John Doe owns x shares in the Acme Gold Hedge Fund in New Haven, Ct." I just wanted to clarify this right at the top because this is a long post and I know some of you will give up once you realize there aren't any more cool pictures. Also for the uninitiated, length and repetition on this blog are completely intentional.


hedge vb hedged; hedging vt (14c) 1: to enclose or protect : encircle 2: to protect oneself from losing by a counterbalancing transaction (a bet) 3: to evade the risk of commitment esp. by leaving open a way of retreat 4: to protect oneself financially: as - a: to buy or sell commodity futures as a protection against loss due to price fluctuation - b: to minimize the risk of a bet

hedge fund n (1967) : an investing group usu. in the form of a limited partnership that employs speculative techniques in the hope of obtaining large capital gains

hedge hog n (15c) : an Old World, spiny, well fortified mammal

The dollar is the most fundamental of all markets because of the size and desire for a means of diversification.

All you need to do is to keep a weekly record of what China is spending on energy and materials to know dollar diversification is a simple business tactic for nations lacking debt.

-Jim Sinclair (today)

Our whole paradigm is about to change. It will feel like a tidal wave when it finally hits, and it will not be slow and measured. Literally everything today is completely unsustainable and one day soon, just when you least expect it, the marketplace will rise up and suddenly sieze reality. Prepare now because when the wave rises it will be too late for preparations.

The Dying Dollar

Today's dying dollar, in all of its incarnations, is a mind boggling web of contradictions. Massively inconsistent demands push and pull on an aged and crippled debt system. Inside versus outside the US are vastly different in their needs from the dollar. Wall Street versus Main Street require opposing strategies. Even the needs of the US Treasury and the Fed are not aligned. Push pull, tug of war, this is the life of a dying currency.

In its younger years the dollar had a wide berth in which to find its place, plenty of wiggle-room, a large margin for error. And yes, many errors occured, testing the limits of that margin several times along the way. This dollar is not a senior citizen that lived an easy life.

But today there is no more wiggle-room. Every error has the potential for instant death. And every crisis today requires the most extreme measures imaginable, both overt and covert, just to keep blood circulating in the patient for one more round of chemotherapy.


Truly, debt is the very essence of the dollar. The whole game has become "we must hold every debtor to his debts, in real terms, denominated in a dollar that can be expanded with ease." What a contradiction. What a hipocrisy. Every debtor but the biggest of them all, the dollar's own creator.

The dollar desperately needs a much higher gold price, denominated in dollars. It needs this so that the debt of the world CAN be serviced in real terms. It needs a very high priced gold so that it can service its own debts, with credibility. Shipping large weights of gold at low prices is not a sustainable activity for anyone. And these days, everyone seems to want the physical stuff rather than empty promises.

But for the financial industry that has sold forward into the low price of gold this would be catastrophic. And the dollar must save Wall Street in order to save the debt which is its very essence. So there will ultimately be a break between the Wall Street pricing of gold and the price paid for the physical stuff that everyone seems to want. This is inevitable, unavoidable.

Pretend and Extend

The how and why of gold suppression over the past 22-30 years is only one small piece of the pie that makes up the endgame of the dollar's timeline. One very small piece, albeit a key one for those who hope to sail through shifting paradigms, and of course a very important one to us physical gold advocates. But just like today's web of contradictions, the dollar's long path to its own end was a hodgepodge of contradictory missteps, fraud and false signals, some done for personal gain and other's with sincere intentions.

Here is another piece of the pie, presented only to add scope and perspective to our limited focus on gold:
...as far back as 1993, Fannie and Freddie were buying risky subprime and Alt-A loans, but routinely misrepresenting them as prime... I warned in the 1980s that government involvement in the housing market would inevitably produce catastrophe. Even Republicans attacked me as an enemy of home ownership.
-Fannie, Freddie, Fraud

The point is, that the dollar has been going to one extraordinary length after another, for decades now, in order to extent its timeline just a little bit farther. Talk about near-death experiences; there was 1970, 1980, 1990, 2000 and then today. And trust me when I say the dollar does not have nine lives.

But don't be too impressed with the dollar's talent for survival. None of these sequences of events requires a mastermind theory to explain it in the simplest way. It was a structural advantage that was built into the Bretton Woods system that gave the dollar its advantage that has carried it all the way to the present. An advantage that was plundered for profit along the way, but one that has always had a definite timeline, an inevitable end.

Hard Currency

The dollar's secret during the Bretton Woods years was that internationally it was considered to be as good as gold. Foreign businessmen, bankers and even central bankers held dollars as a hedge against their own currency. Holding dollars was just like holding gold, since the price of gold in dollars was fixed at $35. So as their own local currency devalued against a basket of consumer goods, their hedge, the dollar, took up the slack.

This international demand for dollars in turn kept the dollar strong and kept price inflation on the home turf of the dollar in check. As long as foreign economies were experiencing price inflation faster than the US, their products would be relatively cheap inside the US, masking the massive monetary inflation of the dollar.

And then, surprisingly, this masking effect accelerated after 1971, after gold backing was removed from the dollar. The world was now on a floating exchange rate system whereby every central banker in the world had to inflate just to keep up with the dollar if they wanted to seem economically competitive in international trade. This local inflation kept international goods ever competitive within the dollar's own currency zone and continued to conceal the dollar currency inflation that was underway, at least in the US it did.

Of course there was price inflation for everyone during the 1970's. But as the reserve currency of the world and the transactional currency for international gold and oil, the dollar's true printing volume was hidden well within a volatile global supply and demand dynamic.

And ever since the 1970's the US has enjoyed relatively falling prices on foreign-made goods. From French wine to German cars, to Italian leather, to Asian pianos, Korean TV's and cell phones, Chinese furniture, Japanese personal computers, even Arabian oil... the list goes on and on. Goods made overseas for American consumption have been relatively falling in price for Americans for decades due to the masking effect of true US monetary inflation. Meanwhile these laboring currency zones experienced higher price inflation than the US! What an illusion! What a contradiction!

The amount of dollars and dollar denominated paper assets that exist today has no correlation to the real US economy or its ability to trade goods in exchange for those dollars at current prices. This reality will soon wash over the world like a tidal wave.


According to Wikipedia the first hedge fund was created in 1949 when Alfred W. Jones formulated a method for going long certain securities while shorting others in order to neutralize the risk of movements in the overall market. He was balancing his exposure to uncontrollable but inevitable cycles.

Today, the big money is all hedged. Almost no one with a sizable account holds only long position bets. The market isn't balanced by 50% betting on one side and 50% betting on the other. It is balanced within each portfolio through leveraged hedges. And it is the evolution of these hedging instruments that has both extended the life of the dollar like a steroid injection and at the same time, sealed its fate.

During Bretton Woods, foreigners held "good as gold" dollars, "the hard currency", as a hedge against their local currency risks. But once those paper gold derivatives we like to call FRNs grew too numerous, all bets were canceled, conversion denied, and those who still held the paper lost out in the immediate devaluation. The same thing happened 38 years earlier... and the same thing is happening 38 years later!

In the 1970's the liberated physical gold market proved to be an excellent hedge against both currency and default risk. Then in the 1980's we were treated to an amazing growth spurt in electronic exchange traded futures and new global exchanges trading these derivative hedges, ultimately netting more than 90 different futures and futures options exchanges worldwide.

In the early 90's, the dollar saw its match as the Euro was taking shape. To counter this threat it promoted derivative hedges as a way of insuring dollar dominance. These hedges, including gold derivatives, only served to leverage the entire dollar system beyond its ability to serve as a real fiat money system. The whole dollar landscape become just a trading asset arena, evolving away from any meaningful currency use to trade for real goods. It can head in no other direction now because our local economy, the US economic base, cannot possibly service even a tiny fraction of the purchasing power currently held in dollars worldwide.

We are now at the "end time run" in fiat dollar production that will soon crush all hedging vehicles. One item alone, physical gold, because it is the main wealth asset behind the next currency system (see: Central Banks), will outrun everything by a wide margin. No matter the derivative's hold on it! Just like gold to the pre-'71 dollar, paper and physical will soon blast off in opposite directions.

Paper Promise Hedges

The purpose of modern paper hedging instruments is no longer to simply balance a portfolio with opposing bets, but it has instead evolved into a risk dispersion game. Like an insurance company, the writers of these instruments issue highly leveraged promises of protection from the risks inherent (and inevitable) in an unstable and unsustainable system.

The two main risks that are hedged today are default and currency risk. The primary instruments for hedging these risks are credit default swaps (CDS) for the former and interest rate swaps (IRS) for the latter. But the sheer number of promises that have been issued (for a fee) has become so large that it has now become the market driving force.

Think about this. The hedges are now guiding the markets. What do you think will happen when they all of a sudden fail to function? The financial world today turns on dollar assets that are all hedged, not just pure bare holdings! Block the hedge markets from performing and the dollar itself is unseated.

Today's Fed policy of saving Wall Street at all costs is in direct opposition to the risk transferring dynamic of derivatives that has kept the dollar alive. Contradictory forces! Of course the alternative would have been almost as devastating, but that's the problem with Catch-22's.

The dollar's structural support system, its very skeleton, its integrated hedging operation has failed. It is no longer a matter of time, it is only a matter of recognition.

Please read the following story about Harvard University's experience with derivatives, and note the key players who were true believers in this structural system as they led their own institution down this poisoned path. I realize it is long, but I have provided an excerpted, abbreviated version.
Harvard Swaps Are So Toxic Even Summers Won't Explain

Harvard was so strapped for cash that it asked Massachusetts for fast-track approval to borrow $2.5 billion. Almost $500 million was used within days to exit agreements known as interest-rate swaps.

Harvard panicked, paying a penalty to get out of the swaps at the worst possible time. While the university’s misfortunes were repeated across the country last year, with nonprofits, municipalities and school districts spending billions of dollars on money-losing swaps, Harvard’s losses dwarfed those of other borrowers.

Borrowers use swaps to match the type of interest rates on their debt with the rates on their income, which can help reduce borrowing costs. Lenders and speculators use swaps to profit from changes in the direction of interest rates. A bet on higher rates, for example, means paying fixed rates and receiving variable. At Harvard, nobody anticipated some interest rates going to zero, making the university’s financing a speculative disaster. [Note that they were "betting" on something controlled by Central Bankers, not by market forces]

Harvard’s failed bet helped plunge the school into a liquidity crisis in late 2008. Concerned that its losses might worsen, the school borrowed money to terminate the swaps at the nadir of their value, only to see the market for such agreements begin to recover weeks later.

Harvard would have avoided paying the costs of its swap obligations by waiting. Its banks, including JPMorgan Chase & Co., headed by James Dimon, were demanding cash collateral payments -- ultimately totaling almost $1 billion -- that Harvard in 2004 had agreed to pay if the value of the swaps fell. At least $1.8 billion of the swaps the school held were with JPMorgan, said a person familiar with the agreements. Dimon, a 1982 Harvard Business School alumnus, declined to comment.

Summers became [Harvard] president in July 2001, after serving as U.S. Treasury Secretary. He earned a Ph.D. in economics from Harvard, and became a tenured professor there at age 28. He served from 1991 to 1993 as chief economist at the World Bank, which initiated the first interest-rate swap with IBM in 1981. As president and as a member of the Harvard Corp., Summers approved the decision to use the swaps. Summers, who left Harvard in 2006, declined to comment.

When the plan was made public in 2005, Harvard’s financial team had been busy for more than a year behind the scenes, devising a financing strategy for the project using interest-rate swaps. These derivatives enable borrowers to exchange their periodic interest payments. They typically involve the exchange of variable-rate payments on a set amount of money for another borrower’s fixed-rate payments.

The agreements were so-called forward swaps, providing a fixed rate before the bonds were actually sold. Harvard was betting in 2004 that interest rates would rise by the time it needed to borrow.

While the university could have paid banks for options on the borrowing rates, the swaps required no money up front.

“There have been lots of forward swaps, but out longer than three years is relatively rare,” Shapiro said in a telephone interview. That duration increases the risk, because the longer the term of the contract, the more volatile the value of the swap, he said.

Corporations might use derivatives to lower their borrowing costs as many as four years before a bond sale, according to bankers who sell derivatives. Anadarko Petroleum Corp. used the swap market in December 2008 and January 2009 to secure rates for $3 billion it plans to refinance in October 2011 and October 2012

Other members of Harvard Corp. in 2004 and 2005, who served with Summers and Rothenberg, were former U.S. Treasury Secretary Robert Rubin, Summers’s previous boss and predecessor at the U.S. Treasury, who was an instrumental supporter of his bid for the Harvard presidency

All except Rothenberg declined to comment or didn't return telephone calls.

Harvard University’s finance staff worked with JPMorgan to develop the size and the length of the forward-swap agreements.

For more than 20 years, investment banks such as Goldman Sachs Group Inc., JPMorgan, and Citigroup Inc., all based in New York, have been selling swaps as a way for schools, towns and nonprofits to reduce interest costs and protect against rising interest payments on variable-rate debt. The swap agreements can be terminated if either the bank or the issuer is willing to pay a fee, which varies with interest rates.

Swaps have become widely accepted by the rating agencies [Think of them as an "FDIC sticker"] as an appropriate financial tool,” according to a slide entitled “Swaps Can Be Beneficial” that was used in a 2007 Citigroup presentation to the Florida Government Finance Officers Association. Debt issuers can “easily unwind the swap for a market-based termination payment/receipt,” the slide said.

‘Rapid Meltdown’

The problem resulted from the rapid meltdown in the markets, which culminated in November when short-term interest rates and swaps rates collapsed.”

After credit markets seized up in 2007, central banks worldwide pushed some bank lending rates to zero in their effort to rescue the financial system.

‘Structural Problem’

Harvard not only lost money on the swaps last year. The value of its endowment tumbled a record 30 percent to $26 billion from its peak of $36.9 billion in June 2008, and its cash account lost $1.8 billion, according to Harvard’s most recent annual report. [They lost $11 billion in a year... that's some fancy Ivy League PhD hedging, eh?]

“They have a structural problem,” [Is he talking about the entire dollar financial system?] Lewis said in a telephone interview. “There’s something systemically wrong with [the dollar?] Harvard Corp. It’s too small, too secretive, too closed and not supported by enough eyeballs looking at the risks they are taking.” [Who's that? The Fed you say?]

By June 2005, the value of the swaps tied to Harvard’s debt was negative $460.8 million, meaning that’s how much it would have to pay the banks to terminate the agreements, according to the school’s annual report that year. [This was one freakin' year after the swaps were created!]

By 2008, Harvard had 19 swap contracts on $3.5 billion of debt with JPMorgan, Goldman Sachs, New York-based Morgan Stanley, and Charlotte, North Carolina-based Bank of America Corp., including the swaps for Allston, according to a bond- ratings report by Standard & Poor’s released on Jan. 18, 2008.

Financial Burden

The swaps became a financial burden [That is, the dollar's support structure became a burden...] last year as their value fell and collateral postings rose. In a contract with Goldman Sachs, the school agreed to post cash if the swaps’ value fell below $5 million, according to a copy obtained by Bloomberg News. The collateral postings with the banks approached $1 billion late last year as central banks slashed their target rates, according to people familiar with the situation.

The value of Harvard’s swaps plunged and its need for cash soared. Under contracts signed in 2004, Harvard had to post larger and larger amounts of collateral to cover the negative value of the swaps; the total amount would approach $1 billion.

Tumbling Index

On Nov. 13, the index used to value the agreements, the U.S. dollar 30-year swap rate, closed at 4.247 percent. By the time Harvard held its bond sale Dec. 8, the swap index had tumbled to 2.7575 percent. Harvard exited three of its swaps tied to $431 million debt on Dec. 9, when the benchmark fell again to 2.6885 percent. The interest-rate swap market reached a record low of 2.363 percent on Dec. 18.

Harvard’s decision to borrow money came at a time when the difference, or spread, between yields on corporate and U.S. Treasury securities was the widest since at least 1990, according to data from Barclays Plc. That meant AAA-rated Harvard was selling bonds when the market was demanding the biggest premium in at least 18 years.

Unwinding Swap

The school on Dec. 12 paid JPMorgan $34.5 million from the tax-exempt bond proceeds to unwind a swap tied to $205.9 million of variable-rate bonds it sold for capital projects, according to documents obtained from the Massachusetts financing authority. It also paid Goldman Sachs $41.6 million on Dec. 9 and $23.2 million on Dec. 11 to end agreements on another $226.8 million of existing debt. Harvard didn't disclose recipients of the other termination payments because it paid them from the taxable bonds.

Stability, Safety

“In evaluating our liquidity position, we wanted to get ourselves some stability and some safety,” he said in an Oct. 16 interview this year at Harvard. “It was to take the losses now rather than run the risk of having further losses if we continued to hold on to the positions.”

Opposing Regulation

Summers, along with Rubin and Greenspan opposed the U.S. Commodity Futures Trading Commission’s attempt in 1998 to regulate so-called over-the-counter derivatives, which included agreements like interest rate swaps. At the time, Summers was Rubin’s deputy secretary.

Now Summers is leading the Obama administration’s effort to write stricter rules for the derivatives market “to protect the American people,” he said in October at a conference in New York sponsored by The Economist magazine.

Harvard might have considered it a conservative step to lock in rates when they were low, said Shapiro, the New Jersey- based swap adviser.

You can be very big and very rich and very smart and still get things wrong,” Shapiro said.

Please don't miss the point here. Harvard's story is not part of the cause of the ongoing systemic collapse, but it is a visible symptom of the rot which has permeated the dollar's structural skeleton. Today's dollar is so brittle that it requires a hedging mega-structure so leveraged, so large, and so unstable that it must... MUST collapse under its own weight. Some of it will be replaced with titanium implants (monetized) in an effort to save the banks, much like AIG was "rescued". Other parts will be dumped into a market that wants nothing to do with them in an effort to extract pennies on the dollar. Net effect -- dollar disintegration.

A fiat system cannot exist without a functioning counterweight, and today's mountain of derivatives is failing at this task.

So where does gold fit into all of this?

Well, the gold market is part of this massive derivative complex that is currently counterbalancing and supporting the dollar.

Today, countless gold analysts around the world acknowledge that gold is a manipulated item. While being on the right track, they are still using the wrong perception to grasp the dynamics of these markets. This lack of perception is what keeps them from positioning themselves and other gold people correctly: positioned to gain wealth when a stake is finally driven through the heart of this paper beast.

The efforts of most goldbugs are focused in one direction; to once again make our paper gold markets reflect the true rarity and actual fundamental value of physical gold bullion. I borrow a line from Mr. Moldbug to describe this position: "They are aware that this system does not work at all, but this does not lead them to question the entire tradition. Indeed, since their mind exists inside that tradition, they interpret it as mere reality." In other words, the chances of "gold to the moon" on the COMEX are the same as the US government returning to a gold standard: exactly zero!

FOA: Lost in all the confusion is the distinction between investing in the price of gold and investing in gold itself. Perhaps 90% of all the investing in today's worldwide, dollar settled, gold market is done in this first way mentioned. Yes, the market is structured contractually, to settle in gold. However, in practice, in norm, and in past legal precedent, it is accepted that paper gold trading is meant to only capture the price movements in gold while ceding, what could be, controlling physical trades and their price setting function to other market areas.

Obviously, this is the way it all started years ago, with the physical trading and its fundamentals dominating the lesser paper trading. But the market evolved with the paper contractual trading becoming 100 or more times the size of the physical side. But everyone already knows all this, right?

What doesn't seem to be obvious is the "why for" the paper market grew so large. It grew to dominate because world wide dollar expansion reached its "non hedged" peak. In other words, the dollar's timeline was ending as its ability to produce non price inflationary economic gains came into sight.

In order to push dollar holdings further, international players needed and purchased "paper financial hedges" to balance their risk. Within their total mix of derivative hedges were found "paper gold price hedges"; modern gold derivatives. The important thing to remember is that these positions are not and never will be used to demand physical gold. They are held to buffer financial and currency risk associated with holding any form of dollar based asset. To work, these items don't need to really perform "dollar price movements" in the holders favor as much as they need to be present in the portfolio to act as insurance stickers. In that truth, these paper gold positions act like FDIC insurance at our banks.

While so many of our gold bulls salivate at the prospects of some player calling for delivery and driving the gold derivatives market to the moon; it ain't gonna happen! Our world of dollar based gold derivatives has grown so large and become so integrated into supporting (hedging) international dollar assets, the central banks will band together to crush any delivery drive.

This is in the ECBs interest as I will explain in a moment.

If some big player said he was going to take 100 million ozs out of the paper gold market, the Central Bank systems would just order him to trade out for liquidation only and go to the cash market to buy his gold. Don't think I'm confusing Comex positions and their rules as being different from the rest of the world gold market. What works on comex works everywhere when the system is at risk. The controlling governments, who's domain Bullion Banks reside in, would, could and will force those holders of bank busting positions to simply cash out for the good of their system.

How many postulated, even just a few years ago, that with the fed expanding the money supply by a year to date "one trillion"; that paper gold could not reflect this inflation? This only further confirms that this form of market "hedge" is failing to function for its owners.

Paper gold derivatives became a major force in allowing this last, end time demand for dollars and subsequent surge in its value. This is why Another said it would run way up, even while being inflated, before the end would come.

The leverage today will be in a physical gold position, not any other form of gold ownership. By accumulating physical gold today, we are truly walking in the footsteps of giants; advancing with them as they work thru this singular, long term political move.

You know, modern financial engineering incorporates all the physical factors of "just in time delivery" management, and labels it "just in time dispersion of risk". In other words: they try to take all the perfect workings of a mechanical operation and replicate it into financial dealings. But, financial instruments, while understood by us as being paper bonds, stocks and bank accounts, are actually completely organic! They are, like money, really just concepts of value we hold in our head; not oil filters or fuel pumps we hold in our hands. The "worth" of things is a "value" we mentally create thru countless interactions with each other as we go thru the day: interactions we call "the markets".

It's no accident of nature that our world monetary structure embraced derivative expansion as it has over the last ten or twelve years. I think we can say that this modern creation of risk management began around 1988 or so. (It's funny, but I remember living in San Diego and reading a paper about a gold company called Barrick that just started only a few years earlier?)

The record of derivative evolution meshes seamlessly with the recent need for supportive dollar currency measures; a strategy of maintaining a failing system that was ending earlier than expected. Truly, in 1990 no one was going to carry the dollar any further, waiting on the endless delays of Euro creation, without some way to hedge risk. We had hit the end of the dollar's timeline too early; we had missed the mark.

The US could not physically save the dollar then, neither with gold backing nor the production and sale of real goods. The only answer was to let the dollar kill itself while you create an illusion of risk dispersion in the form of derivative protection; a form of backing if you will. With this "illusion of risk dispersion" in hand, called a derivative hedge, the world currency system and its denominated assets, continued on. This "just in time risk management" was and is adopted into every present day currency that carried the dollar as reserve backing.

It's no wonder that Alan Greenspan has commented so often on the need to control derivatives yet has no workable plan to counter their function. Truly this dynamic was created to counter his function and few can understand this! In effect, the dollar was placed on a one way street that required it to be inflated into infinity. All as a means of protecting dollar originators; the US banking system. Dollar leverage, that is actually US liabilities, is now built up endlessly. This all points to a nonstop, end time need for an uncontrollable inflationary expansion by our fed.

In our first real test of "just in time risk management" our Fed is and will provide buying power to gobble up any and all risk, "just in time" and without end. It seems that when our "free market" created assets are threatened to be exposed as an illusion of value, Americans embrace any and every form of government socialistic bailout known to man. Perhaps, our much exampled form of a "free market driven economy" was little more than "free as long as derivative risk is covered with social money"... "just in time".

Now, we will follow this trend in an accelerated fashion, until all derivative process is exposed as nonfunctional outside a massive hyperinflationary policy. Our wealth is and was nothing but an illusion of safety and created in our own minds. Within this mix is contained all the various gold derivatives we have come to love so well. The future failure of a gold contract does not mean that the long holder gets his price or his underlying good; it means his derivative fails to shelter his exposure by matching his other loses. In terms closer to a gold bug's heart; paper gold in any form will not match up anywhere near the price of free traded physical gold.

We are on the road to high priced gold and under priced derivatives. The same thrust will be apparent in all financial derivatives. Further, we are on the road to a fully "cash settled" contract market for gold; here in the US and abroad. In the time ahead, just before serious real price inflation rears its head, look for most all dollar based contract commodities markets to be restructured into pure "undeliverable" cash settlement markets. Markets that, also, many gold producers will be forced to use. The day of big premiums on gold coins and bullion is coming and coming fast.

Implore your minds to hearken back to what is real and alive in our world. While standing here among the mountains and trees, our financial perceptions begin a change; recasting our thoughts of accounts and credits into hazy feelings of virtual wealth we never really knew. Suddenly, bonds, stocks and paper investments descend to lower levels of importance.

It was as true yesterday as it is today, and will again be so tomorrow; that the touchable things in life are what make us whole as much as they make us wealthy. Our bodies are real, so too is the earth and all upon it: is it such an unreason that our wealth should not be real also?

For myself and many others that hear our message, the answer is no. No, it is not unreasonable to clearly own and touch what our efforts in life have brought us. I suspect that during this era, within this moment in time, events will eventually define such logic more clearly and prove it to be sound beyond any doubt.

Times change, my friends, history moves on and so too will mankind's perception of wealth. Our perceptions will evolve, not in a forward matter, but rather in an ages old oscillation that returns us back to saving wealth itself; instead of a paper promise of wealth. With a regularity of seasons, as sure as the phases of moons, a changing of "political will" is once again about to redefine what our virtual written worth really is. In response to these changes, often made with little more than the stroke of a pen, mankind will seek a secure position. A position that will more so value an ancient wealth: a golden savings that no politicians could ever write the value of.

What "IS" firmly grasped by every major player in this market is: -- If at any time a majority in the market were to attempt to use these paper markets to extract a gross amount of physical product, the rules would not be changed! Rather, the rules would be enforced and the players would be cashed out and sent into the real physical markets to do their deals. Only then would fundamental supply and demand, based on gross dollar liquidity, create a "non virtual" real price for the product.

We wanted a free market and a free market is what we got: -- but it doesn't move the virtual price toward the gold bull's favor. Now they are mad because their bets are countered while physical gold advocates scoop up an almost free metal: -- using the liquidity that dollar inflation is producing. Truly, if ever there was a way to profit from gold mining, today, it's by buying this almost free physical gold the mines are producing; while mine players and paper gamblers pound their wealth into the dirt. This is what PGAs call benefiting from the leverage in mining (smile).

In a convoluted stretch of reason, "virtual" gold bulls wanted these markets to be regulated so the supply side of these paper creations would pay off on their bets. The bulls wanted to be able to create all the buying leverage they wanted while the bears would be locked into delivering a metal who's total world amounts are fixed. The bulls wanted free leverage without the using full amounts of real cash but wanted the bears to mark to the market with real gold buying power for every wager they made. If there is manipulation in our paper gold arena, it's in this area of investor understanding. What these markets "truly represent" is the misconception about gold in our time.

Western paper gold bulls fueled the creation of these markets by supplying the demand for such gold vehicles and governments helped their currencies by using these same as FDIC-like "insurance stickers" on their reserve positions. They all wanted a place where they could bet on gold, using maximum leverage, and not have to fully fund the physical delivery of bullion if it came to that.

Somehow in the process, everyone was thinking they were doing an end run around the slow thinking, stupid gold advocates the world over. Hoping that coin and bullion buyers, who were creating the physical demand, would one day feed the leveraged paper profits of paper players. Hoping that the rules would be changed just enough so gold could be kept in a nice tight range.

We are seeing the results today of this fraud of a paper game as it comes to an end. It's not nice to watch. Busting not only the dollar factions that played this sector for their best interest, but also denying any profits to the whole gold industry that chose to ignore the long term best interest of gold's market value. The same industry that decided to cater to the singular greed of a small group by sacrificing high gold prices so that leveraged plays would work. In the process they played a political game to limit gold prices from getting too high and will now suffer on the altar of a "gold price without a range".

They can call the outcome anything they want: "bullion at a premium to comex" or "comex at a discount to bullion". Either way the whole system is destined to split and leave the paper players holding an incredible bag as bullion runs away with the help of fundamental gold factions in Europe.

Many of you are just now having that "a-ha" moment, when the light bulb goes off and you finally realize just how the dollar is doomed and gold will be set free. But then many of you "newly enlightened" ones say "ahh, but this could take decades to unfold." What you don't understand is that it isn't beginning now simply because your understanding is. No, it began 40 years ago and more, and we are right now knee-deep in the final end game.

More from Wikipedia: "As the name implies, hedge funds often seek to hedge some of the risks inherent in their investments using a variety of methods, most notably short selling and derivatives. However, the term "hedge fund" has also come to be applied to certain funds that do not hedge their investments, and in particular to funds using "hedging" methods to increase rather than reduce risk, with the expectation of increasing the return on their investment.

Hedge funds are typically open only to a limited range of professional or wealthy investors."

But right now, for perhaps the first time in history, individuals can join central bankers and the true Giants of the world by participating in the ultimate hedge fund. One that, like modern hedge funds, focuses on the hedge itself as the key investment with the most leverage, with the expectation of life-changing returns. And the main differences between this and traditional hedge funds are 1) much less risk, and 2) it is open to ALL individuals, including you!

I'll leave you now with this poignant message from the Tower...
[article] ...Even in light of all of this shifting by central banks into other currencies, the dollar still comprises 2/3 of global reserves and attempts to shift away from the dollar would destroy the value of central banks’ portfolios.

Randy's Comment: Although I should be well used to it by now, it still amazes me every time I see comments like the final remark here regarding any significant shift from dollars will lead to the destruction of central banks’ portfolios. It’s almost as if the commentator is trying to help indoctrinate a paralyzing fear as a means to prevent any such attempt on the part of the CBs, and to also create enough grass-roots doubt against such an attempt ever being made that we the people won’t perceive any benefit in trying to front-run with our own flight out of dollars and into gold...

It is an error in thought or judgement, however, to believe that a “destruction” of the dollar portion of the portfolio would therefore proportionately destroy the portfolio as a whole. That would only be the case if all other things remained unchanged, but life seldom works out so neatly as that. Sometimes an action can set forth an immediate chain reaction that literally changes EVERYTHING you thought you knew about the situation!...

In the world of the “new normal,” it is indeed possible (and someday soon desirable) to let the fuse be lit and allow the CB store of dollars be consumed. And to be sure, it is singularly the latent potential energy of the gold component that allows us to make this analogy with gunpowder. The natural chain reaction in the tiny open market for physical gold would immediately bring to bear massive “heat” and “pressure” upon its price… **POW** thus swelling the “volume” of its value relative to all other things. So even without radical changes to the quantity of physical holdings, a simple expansion in golden value will more than compensate the average portfolio of the central banks against the destruction of the dollar component.

Still can’t wrap your head around it? Bear in mind that the gold price is not a simple one-to-one inverse relationship with the dollar. There is a great leverage lurking in there, but it has been largely masked by the artificial abundance of paper gold which weighs down upon the equilibrium price. And even so, since 2002 the dollar value has decline by just 20% on a trade-weighted basis, whereas the gold price has responded with a 300% gain. And the moreso that the public and private parties of the world rightly gravitate toward physical gold instead of the illusion of paper derivative gold as the solid foundation of their savings and diversifications, the moreso you will see this price leverage grow in favor of larger multiples of gold price gains against modest dollar losses....

Central bankers will increasingly prefer gold reserves over the paper reserves created by other countries. Not only for the reasons of reliability/trust as cited in this article, but moreso because in choosing predominantly gold over foreign paper for central banking reserves will give those various national monetary officials an improved degree of latitude in their pursuit of an independent monetary policy.

WITH gold reserves, a central banker in a vibrant national economy can choose to enjoy a strong currency relative to gold, but, importantly, it can still alternatively choose to exercise loose monetary policy (for economic or political reasons) in which its currency is made weak as measured relative to gold. But regardless of choice for the relative strength or weakness of the national currency, the abiding benefit of choosing gold reserves is the superior stability — the systemic strength against procyclicality — that gold offers to the asset side central banking balance sheet.

WITHOUT gold reserves, pursuit of a national currency policy that is (according to their preference) generally strong OR generally weak is made less expedient either way because the health of the central bank’s balance sheet is subordinated to the quality of its foreign paper reserves which are themselves subordinated to the particular monetary policies being pursued by those foreign governments. Generally this structure of foreign paper reserves offers only the option for national monetary weakness built upon other international weaknesses, and worst of all it exposes the national monetary balance sheet to procyclical systemic failure — a domino whose fate is written largely in the hand of its neighbors.

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

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

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



Martijn said...

Nice one FOFOA.

The dollar's structural support system, its very skeleton, its integrated hedging operation has failed. It is no longer a matter of time, it is only a matter of recognition.

Yes, but the human mind - especially when aged in a narrow set of specific circumstances - can be a rather sturdy accessory.

Martijn said...

Our bodies are real, so too is the earth and all upon it: is it such an unreason that our wealth should not be real also?

Some wealth can however be in the mind itself. Not in concepts of value or anything the like, but in e.g. a flexible and open mind, as opposed to one described above.

In the very that might still be ones greatest asset, and I believe many on this blog to be filthy rich in that perspective.


Martijn said...

As for the sturdiness of many an investors mind, it will require extra pressure to mold.

Therefore I would not bet my shirt on the predicted changes happening this year or the next already, although I wouldn't rule that out either.

But If I would have to give a time-line I'd say approximately two years from now. It will be when they totally run out of tricks, and I believe the end of their sleeves not to be in sight yet.

However, timing the event is a pure gamble in my opinion; one should not worry about taking precautions too timely.

Martijn said...

Are you guys familiar with the day the dollar died series?

Martijn said...

And as for paper gold:

“Welcome to the hotel California
Such a lovely place
Such a lovely face
Plenty of room at the hotel california
Any time of year, you can find it here

You can checkout any time you like,
But you can never leave!”

stibot said...

Thank you FOFOA,

I'm wondering you are able to bring a bit of new view each time -- on topic, which is generally still the same.

Now dollar is shining, something i was unable to imagine month ago. I feel i should reread Martin's writings, since he predicted dollar's gains again if i'm correct.

I'm curious into your opinion about big investment banks. Those are entities which lives on providing hedges you mentioned. Supposing buyers realize losses on hedges, issuers make a lot of profit. What do you believe is current condition of those banks? Do you have an idea about their position during meltdown and in Afterworld?

Tekin said...

@ Martijn;

...one should not worry about taking precautions too timely...

Yea; after distilling today's experience of rallying dollar and falling gold, I decided to insure the house after the fire.

Callistenes said...

"It's no wonder that Alan Greenspan has commented so often on the need to control derivatives yet has no workable plan to counter their function."

No he and Summers,Rubin bitterly opposed it.
Ask Brooksley Born

FOFOA said...

1/20/10 - 11:00AM
Lance Lewis - Minyanville

The 1M and 3M GOFO continue to collapse this morning, with the 1M rate falling to 0.1717%. That’s the lowest rate since the low in gold back in November of 2008 when the physical market became so tight that gold actually briefly went into backwardation when the 1M GOFO went negative for a few days as gold hit its nadir (see the chart of gold vs. 1M GOFO) before then turning to rally by over 30 percent over the next 3 months.

So, we have the GOFO confirming that the physical gold market is becoming the tightest that its been since the panic to buy physical in 2008 and gold is refusing to trade down to its December lows at the same time that the dollar index is trading back up to its December highs? That’s a huge positive divergence that is also being confirmed by tightness in the physical gold market, just as we also saw to a lesser degree in November of 2008.

Toss in the fact that this rally in the dollar index is literally on currency “breadth” of ONE currency (i.e. – the euro is the only major currency taking out its December lows this morning), and it doesn’t take a rocket scientist to see that we’re approaching a setup for meltup in gold.

And why shouldn’t we be seeing tightness in the physical gold market if the euro is “going to zero,” as the market appears to be betting at the moment? The dollar still has the same problems that the euro does (I would argue they're even worse). If one is fleeing the euro, the dollar is merely a “less bad” choice, while gold has no sovereign debt issues or central bankers to print up trillions in new currency.

My bet is still that any rally that occurs in the yellow metal is likely going to come off the Fed moving to expand and extend its MBS monetization program next week, which means gold could weaken further over the next 4 trading days potentially until we get to the FOMC. But then again, it may not.

In short, it’s time to sit up and pay attention in my opinion because there are a lot of market signals suggesting that we’re quickly approaching a BIG inflection point for the shiny yellow metal.

Joshua Kane said...

Ah, the ultimate hedge-fund indeed, and with very little administrative overhead to boot! :)

Hello FOFOA - I finally posted another essay at TSIBR and I do think you will enjoy it (mostly ;). I'd love to hear your thoughts! Its entitled: The 21st Century Battle For 22nd Century Liberty:

Keep on keepin it real FOFOA!
Joshua Kane

GOLD FREAK said...

Russia's Central Bank is still buying. 800,000 ounces added in December..largest monthly increase since Harvey Organ has been tracking them

Martijn said...


On the timing question: did you ever consider that the system can only fall if sufficient people/players have built up an alternative?

Without an alternative, one is condemned to using the current system I believe.

As the system will only break if sufficient people let it, it will only happen as soon as sufficient people are confident of their position within the new system.

Martijn said...

Did you read this one?

It argues that on a fiat money standard, a growing government (or public debt) vs a shrinking private sector (or private debt) is essentially inflation as the government grows vs the private sector.

Martijn said...

Here we go hitting the mines as per A/FOA.

S said...


Agree with your call on alternative. It is very conssitent with the Obama comments today re the banks/brokers and imposition of limits. Clearly this has been well tread among the fraternity.

As for the derivatives siphoning off flows to cushion the system it still misses I think the inherent game theory that takes priority. The China default on MS derivatives was a siren sound to the rest of the world. The ECB language re Greece is also intiguing as is China posture on rates. This is a game of mutually assure docnfidence and gold ogf course is time tested through the ages. Seems to me the derivatives ocmplex is just a stepchild of the confidence gaming spectable. the moment the confidence wanes (hence Obamas populist talk today to try and ventilate some of the anger) the game ends with an overnight devaluation/other. The entire Terrorism mantra is as much about control (fear) as it is about real risk (which is not to deny they exist). I think we have been in agreement that the change will have to be fast as is the case with almost any devaluation/disassembly throughout time.

Someone over at ZH made an interesting comment that be very careful of information that is logical and fits your paradigm/perspective that trickles out. often times the intent is not as it would seem.

Vince said...

"This is why Another said it would run way up, even while being inflated, before the end would come."

Does anyone have a link to this? I agree, but I'm interested in reading his take on it.

frycook said...

There's one ref to this in a comment made on Sun Nov 02 1997 ID#57232 in an answer Another gave to a poster JTF who had said that he couldn't believe there will be no inflation or deflation. Another 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 through the floor much the way they have been in Japan from the early 90's. 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."

frycook said...

Then on Mon Nov 03 1997 in an answer to Reify he said " ... the price of metal in currency terms will be made for all to see as it moves quickly upward for a very short period of time (30 days). After that only black market traders and third world noones will understand its price! When is this going to happen? I have no idea. Is there anything to look for that will tell us when the problems have started? At first the US$ and gold will go up together against all other assets!

frycook said...

And then on Fri Nov 07 1997 in answer to Golden Cheesehead he said "Turn slowly now and view in all directions. The wealth that was had was not real. The Pacific Rim started, now South America. Next will be Europe closely followed by the US. Remember, all currencies are the same now as they are "digital paper"! Nations will defend the system at all cost. They will never sell the US$ treasury debt as that debt is their currency! The dollar will soar as a final defense! As part of this defense they will allow oil to rise as priced in dollars. How do you get oil to rise? Today, we stop our CB's from selling gold."

frycook said...

sorry I'm a little confused about ID#'s and only posted one above since I was cutting and pasting back in those days and I'm working from a bound hard copy which I noticed has ID#'s of massively different ranges, so I'm not sure if some of it was from Kitco and the other from USAGold which is probably the case. So it might take you some digging to get to the exact quotes but a good deal of what I have here is from Another (THOUGHTS!) which I think is archived at USAGold. Anyway, the dates will help zero you in.

frycook said...

One of the things Another said that I'd love to have some clarification on was the following from around the same period - "The BIS will not allow the distribution of all gold to settle claims. The mines of the world will be forced to sell to the BIS at the "locked" existing commodity price of gold. This will happen over many, many years as no other "official" market outside the BIS will exist."

costata said...


Great essay. A clarion call. I hope the people are taking action.

Thank you again.


Agree 100% with A/FOA at some point Govt will take the gold in the ground.

However, the newspaper article that you linked is probably not the beginning of the end game A/FOA described.

There has been debate, in certain quarters, over many years in Australia about the "slice of the pie" going to Australians/Govt from "their" resources.

An evolution to a new resource rent tax regime may not herald a dramatic increase in the take from miners/resource extractors in the short term.

IMHO once Govt revenue starts to drop heavily in Australia A/FOA will be shown to have been prescient yet again.

S said...

dont forget the recent rumor that Newmont was looking at perhaps newcrest, Aussy biggest miner. it was pretty ovious the reaction to china and their RTP bid, but it would be fascinating to see how the Aussie gov handles a "friendly" bid

Martijn said...


Are you in the numismatics game?

Martijn said...

Nice one on gold leasing.

The likes of Professor Antal Fekete, a pro gold-standard monetary economist, meanwhile, claimed it marked the dawn of gold backwardation and the collapse of the world’s fiat monetary system.

The reality was that with Libor sky high, and cash-calls coming at banks left, right, and centre — many banks, with bullion in their coffers, saw sense in lending out gold temporarily in return for much-needed cash. And with cash more sought after than gold in a sharply descending interest-rate environment, institutions were happy to pay counterparties to take their gold in return for cash.

Jeff said...

Devils advocate time: there are loud rumors that Bernanke doesn't have the votes to be confirmed before his term ends Jan 31.

Suppose Bernanke is out and Volcker is back. Will he raise rates? Will the economy collapse under the strain? Will the price of gold?

Interesting times.

Michal said...


Well, do you thing he would fancy being the ultimate scapegoat, "the one who collapsed it all"? (I'm sure there's much more offensive titles to be invented if he actually let the system fail.)
No, I doubt it. If I were him, there are certainly better ways to be remembered in history books :-)

This is a rather cynical view of mine - if there's something I missed please tell me so. Perhaps he could somehow manipulate USA in a much better position that it is now? If he silently audited the FED and tried to reform it à la ECB... Hm, I doubt he'd have that much power. I suppose being a FED chairman nowadays is really just about either letting the system fall (good luck with explaining that) - or trying to shoot it up higher on "dat shit". Do you think there might be a way out for the US with regard to the FED chairman position/FOMC position?

S said...


Be interesting to hear you weight in on the Obama attack on GS/Banks? If there were real commitment to austerity here in the Us starving the beast unleashes the massive pent up deflationary pressure which leads to the inevitable default. If they continue to pump regardless of BB appointment it means inflation and hgiher rates and death by sufffocation. the question is not can someone come in and clean it up. Not possible at this point. Volker might instill confidence for a little while but reality would quickly eclipse the hope now euphoria as jobs continue to wash away with the ushering in of deflation.

Unless and until the US gov selectivily defaults, everything else is just theater.

Watch JPM buying Sempra Commodities business and the sale of the Citi arm to Oxy. Fx or commdities?

Mike said...

FOFOA or anyone else

what are your thoughts on 1000oz Silver and 100oz/400oz Gold bars. If the comex is broken and you want to sell those bars to institutions. will they honor the comex price even if it goes to nothing?

wondering if it is safer to hold coins then large bars like that in the long run.

Aleksandar said...


The sizes you mention are for institutional use. Think about the logistics of taking safe delivery and safe storage of 400oz bars.

With all due respect, but the fact that you ask such a Q on a public place tells me you are not very serious...

Aleksandar said...


Polititians have a short term view on things. They also place carriers and party politics high on their agendas. Do not expect them to act in a manner that fits a 30-year trend, the last explained in FOFOA's excellent elaboration

When things change, polititians will also change their pitch and dictionary to please voters. This applies for everyone that sits in the driver's seat. I even have no faith in former statesmen anymore.

Mike said...

like for instance, a regular joe wins the a large lump sum and decides i want to buy some 1000oz bars because i dont trust my money in the bank and its the best bang for the buck instead of paying higher premiums.....say he purchased this from kitco.

if he wanted to sell it back to kitco, would they honor the comex price?

kitco can also be a bullion bank such as bank of nova scotia or whoever.

the reason why i ask is because last year when silver was tumbling and you couldn't find 1oz/10oz coins/bars the only thing you could get for instant delivery was silver 1000oz bars, kitco for instance was selling it for basically the price that the comex had which was at the time around $11 Canadian at the bottom but you couldn't find those other coins and bars anywhere and if you did it went for much higher prices.

hopefully this makes more sense.

i assume since even minning companies have to use the comex price that the 1000oz bars will go for whatever the price is trading at the time.

Aleksandar said...


About BIS and miners.

I think that the way things will turn out, physical gold will be largely an institutional asset.

Individuals will mostly hold gold remotely (ex. pension accounts, wealth trusts etc.) or indirectly in the country's (or region's) central bank's vaults. The first we already have now, avec the toxic paper, and the second is a fundamental characteristic of the future "system" or Freegold.

Because of the importance of the gold asset, on a CB level concerning many things macro and monetary (think of international settlements, like for example Poland's natgas distributor paying Russia's for received natgas), the BIS will be keyed as a regulator. Kinda what it is now.

What will, in such circumstances, the production of gold be valued at? I can think of two outcomes: 1. a gold cartel, similar to OPEC or 2. a BIS-sanctioned facility for industrial <=> bullion gold conversion where producers and consumers will participate.

Note that all this is already in place more or less. What will change is of course the dollar industry and related paper wealth that must reset to more a natural equilibrium.

Freegold is, IMO, not so much about changing financial mechanisms and good practices we now have, but about wiping the notion of perpetual prosperity by political supremacy. The fall of a debt empire if you will.

Aleksandar said...


Ah, it is an intellectual excercise. Appologies for my rather rude remark in that case. I thought you wanted to buy such bars.

Joe will most likely collect more bussiness cards from financial advisers in a day that I have ever seen in my life. The chances of him reading FOFOA at the same time are lower than a "white socks in sandals" wearing collegue of mine getting laid by a supermodel tonight.

The premiums for smaller denominations come from processing fees and supply-demand mechanics. I believe that in a freegold environment that will be gone since standards will be different (think ~1oz plates etc.). Coins are what paper-pushers apppeal to when they say to us that gold is "a relic of the past".

Topaz said...

Mike -
I feel it boils down to this:- Are you holding it for the Gold? ...or are you holding it for the Price?

There can only be one choice I feel ...and if it's the former, COMEX doesn't matter. If it's the latter, then what are you doing with Metal at all? There are perfectly suitable paper vehicles you can "invest" in to collar price movements ...up OR down!

Mike said...

no its not for price it is for protection.

sorry if i am confusing everyone here but its really important i understand this and i think for everyone else also.

heres the thing, like i gave in my last example, the 1000oz bar always follows the price of the comex or am/pm london fix price.
the smaller denomination coins like 1oz/10oz always seem to have a higher price even when the price of silver went to $8 USD you would be able to buy a 1000oz bar for 8k meanwhile if you wanted 1oz/10oz recognized coins/bars you would probably be paying $16+ so basically premiums rise just like this article mentions.

where i am going with this is say the comex paper exchange does collapse, those coins/bars that i mentioned will have a new price because they aren't traded for on the comex eventhough the silver price might be $8 however mining companies will have to honor that price and of course eventually go bankrupt in the process.

my question is i assume that the 1000oz bars will also be that same price as the comex but meanwhile the coins and bars will have a much higher price.

does that make sense? like it seems that the coins have there own market price and dont care about the actually spot or future price of silver on the comex exchange.

so where i am going here is basically is it wise to hold 1000oz silver bars for that simple reason...because it seems like you will need the future buyer to believe in another price (like the dubai or vietnem exchange price where real gold and silver are traded).
it seems like its better to trade in the 1000oz bar for coins instead.

hopefully everyone gets it now.

Mike said...

the exact same thing can be said for 100oz or 400oz gold bars in comparison to 1oz coins....i remember you could get 100oz bars on kitco or comex contract for the price of the comex but the 1oz coins were no where near.

this is what i fear in the future

why hold that bar if it follows the paper price all the time because the exchange represents the prices of these types of bars.

costata said...


This could be important. I was just listening to Max Keiser's On The Edge. In the third segment linked on their website he is talking to a chap named Chris Cook.

If this is the same guy I think it is, he was engaged by the Iranians to help set up the much delayed oil bourse in Kish.

Chris Cook makes some very interesting assertions about the purpose of the "26 miles of oil tankers" leased by so-called oil speculators.

The reference to "26 miles of oil tankers" is a reference to a recent article arguing that this indicates an oversupply in the oil market. IMHO that is probably bulls@#t. Please see below.


The connection between Cook's observations about the manipulation of the oil market and gold will IMHO be obvious to experts in the writings of A/FOA like yourself and even to simpletons like me.

I have been thinking for some time that the overhead of hiring a bulk tanker filled with oil was about the same as custody fees for gold storage.

A Giant might see some merit in having a large mobile wealth repository in International waters that can set down in dozens of locations and be redeemed for most forms of wealth (smile).

My thought are running in a similar vein to my speculations about a multi-purpose rationale for the bullion banks in structuring the GLD. This interview with Cook raises the possibility for a multi-purpose play in the "paper oil" and physical market.

What are your thoughts on this?

Topaz said...

Yes Mike I see your point, the Comex is but one exchange globally (albeit the most dominant nowadays) where Gold/Silver can be traded for "currency" and visa-versa.
There are several which get closer to the Kernel where Physical has a much greater say in things. This Ex-4-Phyz state of affairs is expected to increase as we go forward.
Were a washout to occur, I don't believe it'll last the length of time your - "must I sell my "good delivery" at the Comex price when my neighbour is getting 6 X for his Coins" - scenario, will require to manifest itself.
There are certainly REAL limiting factors in holding "bulk" bullion outside the system Mike, not the least of which is (as we move forward) the increasing reticence of the "Bullion Establishment" to accept it back in, that which has been removed ...and now wants to establish itself as "good" ..think Tungsten wraps.
I can't see a 'prodigal son" situation developing ...even if they're stretched to the max Mike.
If you have an allocated acc't "within" the System ...and you desperately need to trade your Bullion for Currency during the upcoming shock-n-awe ...then I'm afraid all you can expect is the "quoted price" ...probably though you'd expect to deal on the London PM Fix though rather than Comex.

Topaz said...

Hey cos -

You're aware of my particular (perculiar;-) take on PoO as a member of the Bond/DX/Oil trinity ...where it's price (of necessity) is a function of the composite?
By definition the Oil "Price" has to be manipulated to be made "fit the matrix".
What your Oil Speculators/Tanker/Bankers are engaged in is responding to the dynamics required to effectively manage the accord matrix.
Oil ain't Gold though cos ...one flick and it's gone ...poof!

Topaz said...

cos -
Just as a bit of an addition to above, the "contango" in PoO which prompted the "26 miles of Tankers" scenario, has all but fizzled out now ...to the point where it's hardly feasable.
An interesting adjunct to the drop in recent price eh? ..as most of the Oil bedded down when the contango was "ripe" is in fact due for delivery NOW!
How con-venient!

Topaz said...

errata -
I wish the "comments" box was more forgiving in permitting edits (as is the main blog eh FoFOA?)
Mike -
the above should read -
..."Bullion Establishment" to accept back in, that which has been removed ...and now wants to re-establish itself as "good delivery" ..think Tungsten wraps.
Sorry .....:(

Topaz said...

Oh and Mike -
Coins - One of the many benefits of being (as Another put it) a "small dog" and being able to "hide with what's in our stomach"

Mike said...

Topaz -
ya i've always feared that the comex or good delivery bars would become a problem in the long run because of the paper exchanges...its going to remind me of the time in the US (i forget the years but pre 70's i think) where farmers started throwing all their fruit out because the prices they had to sell them at were outrageously below the cost (paper price on the exchange) and it quickly started shortages which started to change the price in the real market.

im starting to feel sorry for even those who are taking out 100oz/400oz gold bars even more now...feeling they are risky for all these reasons and you shouldn't think that way since its gold but it feels that way.

Topaz or anyone else-
if someone had a few 1000oz bars today, you would recommend selling them for silver and perhaps gold coins to benefit from the price issues as already described and liquidity (harder to sell through deflation) etc....???

finally, anyone here believe it is ok to keep some platinum or is it better to trade it in for gold, i am talking about 1oz coins and not comex contracts though.

Topaz said...

Strictly my opinion mind you Mike -
I'm getting the impression you have a foot in both camps ...Left foot is firmly imbedded in the "physical PM's camp" ...and the right one ...in "currency".
Nothing wrong with that mind you, as long as your expectations for each "Boot" is different.
In your right boot it's probably a good idea to keep some Plat/Pal Coins as their "$-Price" MAY benefit from an explosion in demand going forward (China Auto maybe??)...but I'm guessing!
...left Boot is where you keep your "Pysical Au" ...and forget about ALL the monetary implications ...COMPLETELY!
Include whatever you like in your footwear Mike, but DO NOT put your Physical Au ...or Ag for that matter, in your Right boot!

Mike said...

you can say its a 50/50 thing between physical and currency that is.

i've always kept physical pm's based on the fact that it is in insurance to help you through a crisis which of course i believe we are heading into..the mainstream for instance doubts that gold is good for that but thats a different story.

i learned through martin armstrong that in the big picture gold rises due to a loss of confidence in the government. so i bought based on that also.

i also bought just based on cycles.i am quite young and figure i can probably benefit from buying pm's and then exchanging most or all of it for real estate when its at its lowest etc...
similar to the dow/gold ratio
buy stocks when the ratio is low sell when its high etc..

but this time this might be different..this collapse of derivatives/hedges will be huge and will change the normal and that might include the cycles above.

within the 50% or so PM camp i tried my best to break up the portfolio as much as i could..at first i had 0 gold because of all the benefits that silver can have (the reasons you hear from morgan, butler etc) but have a variety of silver coins/bars including comex bars, i then in late 2008 after realizing that gold held up pretty well in comparison to most other assets decided that i should hold some so i now have 40% of that PM camp in gold (0 comex bars)
i then got into platinum when it collapsed from 2500 i believe to a little over 1k because i felt that it was extremely undervalued to gold at the time and was right of course like most would also agree on. but this is a small amount.

this is why i asked about exchanging platinum for gold because platinum is more similar to silver in that its industrial.

the paper collapse is worrying me because i dont know what the future will be for my life tomorrow. i dont know if i will have to sell at some point when i dont want to and if i do sell i will have these comex bars that will have to honor the paper price whereas the other silver/gold/platinum coins will be a black market price.

in a perfect world i wish i could tell you when i wanted to sell and follow the theory(ie dont sell when the paper price collapses), but im just middle class i dont know when i will have no choice and sell to accept currency again for whatever reason. i know what you meant when you say forget all the monetary implications and believe me i do a good job of it i think, but there are scenarios that can happen unexpectedly that you can't avoid and will have to honor the monetary implications.

so if i know this is the case and i can run into a number of variables here i prefer to have the right allocation for even the worst case scenario of the monetary implications.
it doesn't seem like holding comex bars is wise.

believe it or not i first got into this market 5 or 6 years ago via GLD so i have come a long way in understanding the difference...i didn't hold that position for long lmao.

Mike said...

since we are on this topic, i want to add a post by Dave In Denver (http://truthingold.blogspot.com) since it relates to the topic about the paper price of the comex

Dave in Denver said...

This is absolutely brilliant insight from a reader who emailed an analysis of what the CFTC is doing and what they have "up their sleave." It is deadly accurate except that I disagree with the view on mining stocks:

By this statement, it appears that the CFTC is going to limit long positions. As if paper oil, gold or silver in limitless quantities dumped on the spot market is not sufficient to suppress the price, now the U.S. Government is going to limit the amount of buying that can be done. This is what I expected, and it's what we got....This will be expanded to the precious metal markets and put the spot price in lock down...I have been commenting for some time on the expansion of the open interest in precious metals. This OI has not liquidated, and continues to grow, and it must be terrifying Wall St. banks who hold the short side of the OI, but have little actual metal to fulfill their delivery obligations. The new position limits will likely force a liquidation, thereby letting the naked shorts out of their fraudulent positions. This strategy is the only logical strategy for this fraudulent market. The strategy is logical, but underlines how fraudulent the futures markets have become. Remember, futures are what generate the spot price. Here's the problem: silver is already below its total cost of production, and gold is barely above its cost of production. Both are becoming scarce, with production stagnant or declining.

How will the East respond to this farce? My guess is export bans. Position limits also severely limit the amount of gold that can be bought though taking delivery of futures contracts. This puts in question the viability of futures from the long side. I mean, buyers have known the system is a farce, and have been using it to buy cheapened physical. I think that strategy is ending. Gold and silver are entering lock down just before the US dollar hyperinflates. This will destroy the mines, and only fools will trade real metal for paper dollars. What a mess, and it's all so utterly predictable.....! The next step is a black market in gold. The price of real gold and paper gold are about to separate and head in opposite directions. Recall a quote by "Another" in 1998: "You will be at the end of a long line of people selling gold shares." Remember, gold and silver mines are forced to sell real ounces at COMEX spot prices and I predict they are headed for values that won't keep the mines open.....

Meanwhile, lets watch what the new CFTC regualations do to the oil price, and then watch what the world oil exporters do to the Americans for setting this mess up in the first place. Recall that most oil exporters already dislike America......

Topaz said...

Ah Mike -
I'd trade all my PM's for your Youth ...so on that basis you're wealthy beyond your reasoning already.
You must formulate YOUR OWN path Mike, arrived at after ..very little rest assured .. contemplation. You'll find it's much easier to stick to the Freeway as opposed to veering off into the country-side where all manner of contrary signs just add to the confusion.
Good luck to you!

FOFOA said...

Now here's someone who should be reading A/FOA. Anyone out there at Towson University? Send this poor kid an email, for pity's sake!

Mike said...

ya i am thinking of selling the comex bars (maybe not all) but buy a variety of silver coins and gold coins.
appreciate your advice and i have to thank you for all the great articles you put out, your free service to the gold community is what gives us regular joes a better chance in this world dominated by crooks.

im in my mid 20's and believe me i would trade it all to be born again.
if only you can start all over with the knowledge you have today.

so i assume you are saying to not complicate things......i believe in the martin armstrong thinking but like FOFOA says, whatever is reality now might not be so maybe the cycles gets rewritten and the dow/gold for instance is no longer used.
im sticking to it for as long as i can and try to be prepared for worst case scenarios without much issues when the time comes.

Topaz said...

One last point Mike (and thank-you FoFOA for your forebearance ;-)
What lies ahead monetarily hasn't "any" precedent. Do not try and "pre-empt" what might happen based on past outcomes.
We most assuredly are - boldly going where no man has been before...
...and this time WILL be different!

Martijn said...

I do believe that Obama is would prefer for Bernanke to be replaced by Volcker now.

Obama recently started listening to Volcker at least a litte, and he was also not pleased by the supreme court ruling to remove the cap on company campaign contributions. Perhaps he will try to finally get some things done his way for once and make a stance.

Vince said...


thanks for the info.

Jimmy said...

VIX is raising fast this week, maybe next leg is coming (or something bad is happening there)... Watch out!

@Mike: Listen to Topaz on January 22, 2010 10:58 PM If you're not expert in trading PM, go 50/50 and take your hands off for the long term. If yes, go trading, sell Pt, buy Au. Maybe next possible crash would demolish Pt-price and then it will be buytime for Pt after crash (you could buy more with raised Au-price...). (ps this is not advice to invest or trading, only your own risk to take conclusion. Do your homework before trading, you could avoid taking big mistakes and losing much money...)

And something to read about Devil Soros, a gaywhore of the Rothschilds

Martijn said...

Also FWIW, if I were you I would exchange those 1000 oz silver bars for gold coins through Tulving. JMHO.


Shanti said...

@ Martijn 5:40

Although in itself, it would be a positive sign, it's i.m.h.o. already too late.

And beside, stirring in that pot could be quite hazardous. Remember JFK.

SatyaPranava said...

@martijn: "Obama recently started listening to Volcker at least a litte, and he was also not pleased by the supreme court ruling to remove the cap on company campaign contributions. Perhaps he will try to finally get some things done his way for once and make a stance."

whether obama would prefer volcker in there or not is questionable, but i see where you're going with this. remember he also has summers in there.

also you think he's listening to volcker
for substantive reasons (i.e. not for political maneuvering)? also, i personally don't believe obama is upset at all by the move to uncap corporate contributions, as he was financed by those same corporations.

i'm curious to know what you think his way is. I'd also be curious to know why you believe that.



Mike said...


i am 50/50 and don't plan on really moving out of that..i have held this position for a while.

if PT crashes, will you be able to buy it for the going price when the miners can't mine for it and sell it? the scenario is the same for silver but not so much gold.

i find that silver is controlled by main st, the big buyers that gold has comes from cb's, well the regular joe gets the silver. not sure if you are putting this into you equation.

i am thinking of selling those but i am more concerned with the comex bars first.

Martijn said...


I am not so very convinced of it all. The only thing is that I tend to believe that the president of the US is just not as powerfull these days as some believe.

Obama has not really been able to put his stamp on anything yet, and perhaps is getting ready to do so now.

I did make an interesting remark regarding the uncapping, if these are really his words: President Obama called it “a major victory for big oil, Wall Street banks, health insurance companies and the other powerful interests that marshal their power every day in Washington to drown out the voices of everyday Americans.”


Martijn said...

I did make an interesting remark

Should read: he did make...

Topaz said...

President Obama called it “a major victory for big oil, Wall Street banks, health insurance companies and the other powerful interests that marshal their power every day in Washington to drown out the voices of everyday Americans.”

..now there's a double entendre if ever there was one.
Was he smiling ...or frowning ;-)

FOFOA said...


No, I'm not into numismatics. The first reason is that I don't believe the premium associated with the antique or artistic aspect will reset anywhere near the metallic aspect premium. And the second reason is that the numismatics market is a much smaller market than bullion because it requires expertise for a participant to do well. Bullion does not. There are certainly some coins with numismatic potential at little or no premium today. But you must weigh this potential against the fact that these coins are also less recognizable to the average bullion investor.


Mike said...

the only ones i get is pre 1967 canadian silver dollars/halves at pretty much melt value along with morgans and peace dollars also at close to melt value.
just picked up a stack of morgans and peace dollars for $14 each.....

i also get some other canada silver dollars past 1967, you can get 50% silver coins 11.65g silver for under $7 aswell.

i don't care about the dates and all that i just get it for melt value. its been hard to collect what i have because most people sell them at much higher then melt value ie morgans go for minimum $23.
its basically like i have shot 100 times on net but only scored 1 time but that goal goes a long way.

if it wasn't for that i would not be getting any numismatic coins at all.

FOFOA or anyone else - you said get gold coins for the comex bars...any recommendations??..i generally get gold 1oz wafers (PAMP or RCM even JM). as they offer a much less premium to the coins such as Maples or Eagles although you can get Krugerrands for a fair price also.

FOFOA said...

Hello Costata,

I finally watched that Chris Cook interview and I note that Martijn posted Cook's article in the Asia Times referenced in that video a week ago.

I definitely see the connection you made with A/FOA. But I think that, if true, this is an example of the methods learned by the Saudis in the 90's during the oil for gold deal being turned around and used in reverse.

The key is the difference between futures and forwards, and which one is controlling the price of its underlying commodity.

Futures are exchange traded contracts while forwards, or forward sales are direct contracts resulting in a kind of a lease option to buy product direct from the manufacturer at some future point in time. If the futures market is huge and controlling price movements, then forward sales are a good way to take product off the market without driving the price up. Especially if that commodity is not consumed in the heat of fire by its end user. This is the way oil cornered the physical gold market in the 90's without driving up the price.

In the 90's, they leveraged their oil in the ground and exchanged that leverage for gold in the ground. Off-exchange deals which tied up actual physical and because they were supplying a necessity, oil, those contracts for gold "in the ground" were/are implicitly backed by the Western central banks' "gold in the vault". As FOA predicts about the end times of the gold market, "Indeed, for every major player that was long the gold loan system, for the purpose of buying gold, cash outs in Euros will offer the only return. Official players >>in the oil sector<< would eventually be receiving American gold (but that is Another story)."

But if the futures market is relatively small, which Cook says it is in oil, and price is currently driven by the physical supply and demand, then forward sales or "lease options" are a good way to tie up physical product and drive up the price on the smaller futures market. I think this is what Cook is saying the Saudis might be doing. He is suggesting that in 2008 they leveraged their oil in the ground and exchanged it for control of physical oil coming from some other producers. And also, it is a different dynamic requiring different strategies for a commodity that gets consumed. And one that normally only the final consumer can really remove from the marketplace.

My understanding of what Cook is suggesting is that during the oil price spike in 2008, the Saudi's sold forward their oil in the ground to some big banks running investment ETF's etc... In exchange for these forward contracts the Saudi's received cash with which they began buying up the Nordic oil during the subsequent slump and storing it in tankers. So they leveraged their own oil in the ground during the highs and took control of some external supply during the lows in order to control supply and drive the price back up, doing it all with someone else's money while not having to alter their own production schedule too much.

This would explain why that oil hasn't been completely dumped now that prices have gone back up. It is because to the controllers of that oil, it is more valuable off market than on.

Cook's article is good, by the way. Here's a quote: "The outcome - which has the effect of monetizing oil in the ground - is very similar to the way in which some governments maintain their currency more or less pegged to the US dollar and illustrates the reality that oil is not priced in dollars: dollars are priced in oil."

I don't know if Cook is right or if Topaz is. But it is an interesting speculation. As Cook says, his article "is necessarily speculative in the absence of hard evidence".


Mike said...

i know what you mean......but that might be a little difficult
tulvig is difficult since i am in canada and just the shipping/custom fee's etc... would kill me.
i am going to talk to a local dealer that i bought from before and i know they sell 1000oz bars...see what they say but thanks for the idea as i was planning on using the currency middle man...and i can't think of anyone else that would do the swaps.

do you still think wafers by PAMP, RCM, JM) is bad compared to coins (eagles, maples)??

costata said...


Thank you for taking the time to explain the forwards/futures structure in the oil market.

In a perverse way the oil price manipulation is probably beneficial. Too low and the medium term supply position could become dire. Too high (say US$100+) for any extended period and most (all?) of the global economy is toast.

To All,

Fascinating exchanges of comments since I last dropped into "class". Thank you.

Museice said...

FOFOA: I'm curious as to your thoughts on After the Welfare State, what?

The article calculates the approximate price of gold that would be necessary in order to have the gold component of reserves resume the proportion it at one time took up of total central bank reserves, 70%. Answer... $20,000

A sudden increase in the price of Gold to $20,000... but...

"One consequence of instituting gold as the world's currency would be that the price of gold would disappear. Since there would be no other currency against which gold could be quoted, there would in fact be no price of gold. All prices would be gold prices, but gold itself would have no quotable price. Some people find it hard to visualize this situation, which would be quite normal."

SatyaPranava said...

@martijn: from my experience in washington, the last thing i'd do is to pay attention to what the leader of a party says after that party just lost its bread and butter seat in the senate. especially if that politician is in the white house. i considering it political pandering to populist rhetoric in hopes of looking like he's getting tough on the same big corps he's been bailing out. i.e. it's damage control for the 2010 and 2012 elections.

FOFOA said...

Hello Muse,

Another said: "how can paper currency that represents "the thoughts of a nation blowing in the wind" be used to value real money of ancient world class proportions, gold? It cannot! Any price you can think of will do, as in no price will work!"

This ancient, world class money from the distant past is now to be the most fought over asset of the future. In war and life, gold will be your "CHECKMATE"!

I like Hugo Salinas Price a lot and he is most definitely not a stranger to the words of Another. But I get the feeling that he, like so many others, is trying to contort the natural evolution of Freegold into the confines of a new gold standard. A GLOBAL gold standard. And this contortion relies on certain "changes" and international agreements that are at a minimum highly unlikely, and most probably totally impossible in today's political climate.

To me this is akin to pounding your fists into a bloody mess trying to beat your way through a brick wall when just a few steps away there is already an opening.

A few comments on his piece:

1. Adoption of gold as the world's currency; all other currencies to be simply expressions of each currency's gold content, in which each currency could be freely redeemed.

Yes, each currency should and will be freely redeemable in gold. Why "redeemable"? Because gold will be the wealth reserve, not the transactional currency!

And why does it have to be redeemable from the government or through the central bank? To my mind, this gives them too much power. For one thing, it gives them the power to cancel convertibility as they did in 1933 and 1971. It also gives them the power to change the rate of conversion, as in 1933. And it locks gold into a fixed exchange rate with the currency, a parity relationship from which Gresham's law will always inevitably emerge.

The more logical progression is for all currency to be freely redeemable in gold anywhere on Earth, at a price that makes it so. A price that is at the correct level where there is no advantage to either side of the trade. A price where a true Nash equilibrium emerges. A long-term >>sustainable<< price. A >>floating<< price. A new system that "does not require any additional international treaty or enabling legislation as a prerequisite or for motivation. A de facto, natural solution to the international reserve question."

2. As a consequence of gold being instituted as the world's currency, all international payments would have to be effected in gold. The bond component of world reserves, with bonds now having become payable in gold, would tend to vanish or fall substantially. Sovereign bonds have exploded in volume, swelling reserves to outlandish heights, because international payments have been made in irredeemable currencies since 1971. Those bonds which would not be payable in gold, because the issuing countries did not in fact have the necessary gold, even at $20,000 dollars an ounce, would have to be canceled through default.

To us little guys, the currency and government bonds are, and have been since 1971, redeemable in gold to some extent. We can sell our bonds and buy gold at the coin dealer with the money. The problem is that the price is far too low for the really big players to have confidence that their bonds can all be redeemed. And this lack of confidence trickles down through the whole system, even as the biggest giants of them all proclaim their confidence in the system. We are not blind. The market is not blind.

The solution to this problem is Freegold, and a price higher than even $20K. I believe Price makes the case for Freegold in point #2... QED.


FOFOA said...


3. The Real Bills market would have to be reactivated around the world, to support world trade. (See Prof. Antal E. Fekete's work at www.professorfekete.com)

This will work very well with Freegold, if this is the system the market chooses to adopt.

4. An end to credit expansion not based on real savings. Otherwise, the inflationary expansion of credit would require further increases in the price of gold. Or alternatively, it would require the devaluation (decrease in gold content) of currencies subject to such credit expansion. In either case this would amount to partial default. An end to the possibility of credit expansion not based on savings would imply an end to the world's system of central banks, because central banks were invented to enable the inveterate lust of bankers to expand credit not based on real savings. If such expansion were outlawed, central banks would have no reason for existence.

And here once again Price opts for the de jure solution (bloody fists) rather than the de facto one (the opening just feet away). He wants to FORCE the banks and world governments to stop fiat expansion rather than letting nature apply an appropriate level of incentive to do the same.

Note also that his "de jure" solution ends the central banks altogether. If there's one thing I can say with relative confidence it is that we will have central banks and fiat currencies for the rest of our lives, and probably our children's as well.

Raising the price of gold to $20,000 dollars an ounce would imply a corresponding devaluation in the value of all paper money. An endless number of articles have been published by well-known analysts that call for an absolutely indispensable reduction in the debt load oppressing the world. By devaluing debt through an increase in the price of gold and canceling non-payable debt, this objective would be attained.

ldo - I'm sorry, but I think this is happening anyway. Does Mr. Price REALLY think that a "de jure" raising of the price to a specific parity with dollar-denominated debt is what is needed? I mean, yeah, sure, they could try this. It might not work, and if it did it might only work temporarily as the world realized that gold was actually worth much more than the "de jure" price that Ben and Tim put on it. And anyway, "they" aren't going to do it. So the market will.

Would the measure be inflationary? It seems to me that although a new world price level might be the consequence, inflation as a dynamic phenomenon might be precluded by outlawing credit expansion based on the new, increased price of gold.

Here he dances around the flaw in his idea. So we are going to devalue once, and then never again?


FOFOA said...


The new, much higher price of gold would naturally benefit those countries holding larger reserves of gold, as well as private holders of gold. It would also affect gold producing countries, in the sense that instead of having to produce marketable goods for international trade, these countries would be able, to a certain extent, to import goods manufactured elsewhere in exchange for exported gold.

If all paper money became exchangeable for gold coin, then gold coin would once again be available to the public around the world. The public would once again regain control over government finances by refusing to purchase government bonds unless the interest rate were acceptable and the issuing governments were to demonstrate their credit-worthiness by limiting their expenditures and shunning fiscal deficits. Hoarded gold performs no beneficent social function; circulating gold is highly beneficial to society.

Consequently, the world's economy would stabilize and enter a natural period of real and healthy economic growth with exports balanced against imports. The nightmare we are living, would be over.

Here he is describing Freegold practically to a T. I suppose there is value in fighting for a de jure implementation of a fairer system. But personally I find the greatest value in letting people know what is actually coming so they can preserve their hard earned wealth. If I structured my approach as Mr. Price does, would you have gone all in?

A return to gold as the world's money means the Death of the Welfare State: let us be clear about this.

This part I totally agree with. We are now witnessing the death throes of socialism. Martin Armstrong describes it well in his confidence cycle. The "public confidence" cycle peaked at the New Deal and bottomed in the 80's. We are now full swing into the "private confidence" cycle. I can't remember which article described it best, but it might be this one.


FOFOA said...


The world today does not in fact have "popular government". The world is ruled by international bankers, a class of men not qualified to rule. The present world catastrophe is a clear demonstration of the fact that they rule, and that they are incompetent to rule.

The political theory of "popular government" promoted by the French Revolution of 1789 led to the Welfare State and has produced the world's bankruptcy. In point of fact, the world's monarchs were replaced by international bankers.

What political theory is going to displace the Welfare State? According to a new political theory, yet to be formulated, who – to the exclusion of the international bankers – is going to be legitimately entitled to rule the world's nations?

Moldbug writes about this topic as well.

I do like Hugo S. Price's writing a lot. And I like his calculation formula in this article but I would caution that a return to the early 20th century is the bare minimum for the "journey to ancient values" our yellow metal is on.

And the part you asked about... the part where he says, "...there would in fact be no price of gold."

Another way of saying there is no price for gold is to say there are infinite prices for gold. The price of an ounce of gold could be quoted in as many things as exist. A two bedroom house, a thousand barrels of oil, 100 acres of land in xyz province, 40,000 gallons of milk, etc...

But the fact of the matter is that he says there will be "no price of gold" because what he is describing is a true one world currency based on a new GLOBAL gold standard. Where all the governments of the world will come together and agree to have their own hands tied, to never again print in an attempt to bail themselves out, and to part with their own gold on an official, global exchange, at a parity decided by someone like Tim Geithner or Larry Summers?

Now how would you place the odds on that scenario? Versus the odds on a natural emergence of Freegold when the world finally dumps US Treasuries?

Sorry for such a long reply, but that's what you get with good articles! ;)


Topaz said...


The path from "here" to "there" will require a HUGE mental re-adjustment however, as the journey unfolds, explanations such as that above will be as shining beacons to illuminate the gloom.
Very well articulated Sir ...BRAVO!

Martijn said...


from my experience in washington, the last thing i'd do is to pay attention to what the leader of a party says after that party just lost its bread and butter seat in the senate.

I agree that action speaks louder than words and that Obama indeed has a reason to try to bend public opinion in his favor with regard to the upcoming elections. However, I do also believe that he is not too powerful even though being the president of the USA. Perhaps he is on board with the corporate agenda all the way, but I would also not be very surprised if he has been busy getting out of the net around him that is still in place from the Bush era.

Either way, I do not believe that the financial problems depend on presidential power too much, this does remain a crisis of the financial system, not one of presidential ethics.

Martijn said...


And why does it have to be redeemable from the government or through the central bank? To my mind, this gives them too much power. For one thing, it gives them the power to cancel convertibility as they did in 1933 and 1971. It also gives them the power to change the rate of conversion, as in 1933. And it locks gold into a fixed exchange rate with the currency, a parity relationship from which Gresham's law will always inevitably emerge.

If I'm correct you believe that we should think of the world how it will be, not how it should be.

Don't you think that governments would try rather hard to go for another gold standard instead of freegold, as a standard gives them quite some advantages as you (partly) indicate above?

Is there no chance for a new gold standard?

FOFOA said...


"Is there no chance for a new gold standard?"

Some would call Freegold a kind of a gold standard, just like some would say that gold is being REmonetized when I say it is being DEmonetized. I think the difference is that the value of the wealth reserve will float against the value of the transactional currency (remember my money triangle?). This was not the case during the gold standards of the past and it is not the case now. This is the change that is happening. Call it whatever you want. I call it the separation of monetary functions due to the failure of fiat to perform as a stable and sustainable wealth reserve. Yes, gold is returning to a monetary function as the wealth reserve, but not the common concept of money, the transactional currency.


Martijn said...

I think the difference is that the value of the wealth reserve will float against the value of the transactional currency (remember my money triangle?).

That was clear to me. Perhaps I did not use the right wording for my question. I mend to refer to the "old" gold standard but with a different price.

It would seem to me that a floating gold/currency price would offer them less control than a fixed one, and hence they would probably rather see the latter.

Why could or would they not reinstall a fixed (much higher) price on gold?

Martijn said...

I call it the separation of monetary functions due to the failure of fiat to perform as a stable and sustainable wealth reserve.

That failure is not necessarily inherent in fiat money, but is caused by the people in control off the fiat currency using it for their own goals - although one might argue the latter is inherent to human nature and hence to fiat money.

However, the guys in control of fiat money do not care so much for its performance as a stable and sustainable wealth reserve as they do for using it for their own goals.

They would not like to give up that influence and hence would rather see another gold standard with a fixed rate/price.

You argue that freegold should be brought about by the people, but what if those in power somehow get the big players to aboard of their "new" and fixed gold standard?

FOFOA said...


"Why could or would they not reinstall a fixed (much higher) price on gold?"

One reason: The Judgement of Value

Another reason: Confiscation Anatomy - A Different View

And one more: Bondage or Freegold?

And a couple more: Freegold; Your Own, Personal, Freegold

Seriously. Some of the questions you repeatedly ask me are total noob questions. How long have you been here? ;)


Kewl said...

I guess those in power would never abolish their fiat and would try to save it till the eventual end. They'll reach a point where any change won't be possible without harsh consequences. Market will have to do the job alone. Once people see real inflation everybody runs for PMs and here we are :)

Martijn said...


Sometimes I find myself looking at something from another angle causing the answers that I thought to have to seem less obvious, and often I do find myself asking things I already knew.

With regard to your answer to this particular question:

In "the judgement of value" you argue that there is a group of people distributing "needs" which eventually controls the value of the dollar. That by itself does not constitute a final argument as to why they would not jump on board of a new (international) currency on a gold standard. Those people have jumped on board of heaps of currencies throughout history.

"Bondage or freegold" argues that the current system is nearing its end and that US bonds are not the best investment for those wanting to maintain value. It also argues that a reserve currency is not required and that international trade could easily be settled by gold and that freegold would constitute a great (or the best) system for it. That however does also not provide a conclusive argument as to why (big) players would reject some sort of a new currency backed by a(n old) gold standard. It may not be the ideal solution for many, but people went along with suboptimal solutions in before.

In "freegold" you refer to lots of remarks hinting to freegold. That might indicate that some powerful people have noticed the possibilities of that system and that they might expect the world to go there, but it does not indicate how they would block a non-floating gold standard.

"Your own, personal freegold" again describes the shortcomings of our current system and a non-floating gold standard and the advantages of freegold, but many arguments are based on history, which "has always shown us that under any system but freegold the money supply will be inflated". Again that also shows us that people have gone along just as many times and fails to give a conslusive argument as to why the won't this time other than that the might have learned from history.

Again I do agree to the beauty and usability of freegold for the average man and the world at large, but that does not guarantee it to happen. Freegold does not benefit those in power, which does guarantee that some will fight it. I also agree that the outlook of the dollar and most other currencies is not rosy, that we have indebted ourselves beyond our means, that most (if not all) fiat-currencies will undergo drastic dynamics and that many are seeing that gold will provide shelter from those events. I do however not find much of an argument as to why some sort of new non-floating gold standard will be utterly rejected by all.

History does show us that such a gold standard does not work in the long run and at the same time tells us that people have fallen for it over and over again.

The only difference with previous history I can find is that now the world is on a total fiat system for the first time, but even though having been here for quite a while that alone does not tell me that freegold is inevitable.

FOFOA said...


I think you are missing the point of some of those posts. And I note that you skipped Confiscation Anatomy which had some specific reasons why the US cannot go back on a gold standard.

First of all, the point in Judgement of Value is that the issuer of a currency does not even have the power set its value. The receiver of that currency does. He who turns over manufactured goods or processed commodities decides what the value of that currency is. And because we are dealing with value, this same dynamic extends to the length of time that "receiver of currency" is willing to hang on to the currency --> Store of Value function.

So in today's world, "those in power" (as you say) do not have the say in the final outcome that you propose. This is the point in Judgement of Value.

In Bondage or Freegold the point is that for those that actually produce goods in the world, that the rest of the world wants and needs, the floating system is the best. Therefore there will not be any resistance to it when it emerges, from 75% of the world at the very least.

In today's "total world fiat system" as you say, it is only the US that benefits from the reserve function of the monetary triangle through the printing press. The rest of the world's printing governments do benefit to an extent from the printing press through the transactional function of their currencies by causing local price inflation (a local inflation tax), but only the US has "the exorbitant privilege". So switching to a float between the monetary functions only takes privilege away from one player, the US.

So when we talk about "those in power" wanting to continue "the exorbitant privilege", it is only the US that we are talking about. If you comprehend Another and FOA, and believe that they were not complete cranks, then you should understand that Europe's superficial "support" of the dollar is really just "supporting the dollar in its digging of its own grave".

If you look at Confiscation Anatomy, I put forward some arguments made by Another and FOA about why the US can never again bring its gold "into play" in any kind of a fixed exchange arrangement. This includes both the US official gold and its people's gold (confiscation). After reading the A/FOA archives more than three times, I have come to the conclusion that Another had first-hand knowledge of both the inner workings of the BIS and of the hidden agendas of the BIS. The kind of information that never gets made public through official channels. So whenever he mentions anything about the BIS, I pay special attention.

"Gold is off the table

The US gold hoard is now off the table. Think of a poker cheat who pockets his winnings yet still wants to play. When he loses he writes paper IOU's to the other players. Can he ever pull his money back out of his pocket without having it taken away? Think of an individual who declares his own insolvency and defaults on his obligations to pay, only to resurface later with a windfall inheritance. What problems will he face?

In 1971 the US refused to ship any more gold. It defaulted on its international obligations. It took its golden chips off the table but continued to play in the game. But the dollar didn't change. It still remained an international contract for gold. Watch the announcement: (Nixon Video)

This was cheating, plain and simple. The international financial system and the global market place run on procedure protocols that are not binding. They are not binding, but without them, international trade would stop altogether. Just because a rule is not binding does not mean it is not important. And just because a non binding rule is broken, does not mean it disappears.


FOFOA said...


Why do you think the US gold hoard was never publicly audited after this? And why do you think the book value of that gold was left frozen at $42 per ounce, never marked to market bringing it "back into play"?

There are two international bodies that facilitate the international financial and monetary system, the IMF and the BIS. These two bodies are in opposite camps. The IMF is in the dollar camp. Its sole purpose is to ensure that third world countries can pay their dollar-denominated debts in order to keep the dollar alive. If that debt from third world countries could no longer be serviced, it could no longer be held as an asset within the financial system. Therefore, the IMF issues highly leveraged dollar loans to these countries to make sure that payments continue. In exchange, it locks up real world capital as collateral for the loans. This is NOT a system that supports third world economies. It is a system that supports the dollar's reserve function at the EXPENSE of third world economies. If the IMF stopped functioning, so would the dollar. And the US government would lose its external funding.

The BIS, on the other hand, coordinates central bank transfers to facilitate international trade balance. If the BIS stopped functioning, so would international trade. This clearing system is fractal in that imbalances are first cleared locally, then regionally, then nationally, then internationally. If the BIS didn't deliver, food would not arrive at your local store, at least until a local production, distribution and clearing system was set up.

This leaves us with a one-sided dependence dynamic in which the BIS and the rest of the world could, if they wanted to, stop supporting the IMF and let the dollar die. But on the other side, the dollar cannot survive without the BIS. But why does this matter? What could make the dollar even think about abandoning the BIS?

Well, if the US ever put gold back on the table through another confiscation of its citizens' gold, the BIS would call in all of its outstanding claims in gold at the rate of $42 per ounce. And the BIS would not be alone. Other entities would have legal claims for gold at $20.67 per ounce, and others at $35 per ounce. How much gold was either confiscated or defaulted on without due process of law? Claims of perpetual entities never go away. If the US government ever exposed its own gold (or its citizens' gold through confiscation) to the light of day, it would expose itself to all kinds of claims and an international legal mess. Under international law, the US is still an OUTLAW when it comes to gold!

This is why gold is off the table. This is why we can never go back to a gold backed dollar. It is also why they cannot call in gold AGAIN under the same dollar that they did in 1933. To call in gold at a specific exchange rate now, the US would first have to back the dollar with gold at that rate and then call it in. That would expose the US gold to international legal challenges for redemption. If they simply called in the gold without backing the dollar, the US government would be exposed to thousands of internal law suits. These law suits would rightfully demand a retroactive reversal of 1933 before any new confiscation could take place. They would demand that US official gold be distributed to all citizens at $20 per ounce BEFORE it could be turned back in to the government.


FOFOA said...


The US government will never take this risk! It will never expose itself to this legal nightmare! The US is already a golden outlaw!

What if the US simply declares the dollar dead, confiscates the gold, and then starts a new gold backed currency? Wouldn't that work? I will tell you now that it would never be accepted on the international market as an exchange contract for gold! Even at $10,000 or $100,000 an ounce. The world is not that stupid. The US has defaulted on its gold obligations to the world TWICE now. The first default was 41% and the second was 100%. What will it be next time? No, the US will never be trusted to issue paper promises for gold again! Freegold is the only option!

The US government and the US dollar is caught up in this massive Catch-22 because of its own past cheating actions.

This is why the Fed will appear more and more INSANE in its futile attempts to save the current system, all the way to the fiery bottom. And this is why freegold is the only possible end to this system.

Bottom Line: It takes AAA credibility to gain the confidence needed to run a fractional reserve paper gold scheme. The US government spent all of its credibility on a failed scheme long ago. And now the current COMEX scheme will face the same fate, thanks to the inflating of paper contract supply to meet demand, far in excess of physical supply, in the sole support of the US dollar printing authority that needed support since it had already defaulted TWICE!

And when the dollar finally collapses in value, a THIRD and final default will take place. The US government's existing dollar-denominated debt of $11 trillion will become instantly worthless.

And once the printing press source of funding is gone, the US will be forced to settle its trade deficit with real money on a 1 to 1 basis, no more fractional reserve shenanigans. If this is done centrally, as it is now, then the government will face a whole world of claims saying the gold already belongs to them. For its past sins, the government cannot take this chance. The other way to settle an ongoing trade deficit is on the local level, through millions of small transactions.

This is freegold. And this will pit trader against foreign trader, rather than government against government, or central bank against central bank. It will allow for trade goods to flow across borders and keep the economy alive so that the government can continue to collect taxes.

Excerpts from Confiscation Anatomy - A Different View

Martijn said...

Thanks FOFOA.

I agree to most of what you are saying with some slight differences:

So in today's world, "those in power" (as you say) do not have the say in the final outcome that you propose. This is the point in Judgement of Value.
That is correct. However, if a new standard meets them far enough they might agree. I would not say that it is impossible for a government to set a standard they are likely to agree on.

So when we talk about "those in power" wanting to continue "the exorbitant privilege", it is only the US that we are talking about.
I was talking more generally about the ability to use inflation as a hidden tax. Al governments (those in power) have an interest in that.

If they could - and I am not arguing they can, although I wouldn't rule it out either - agree on a standard together that allows them to extract wealth from their people they probably will.

I have come to the conclusion that Another had first-hand knowledge of both the inner workings of the BIS and of the hidden agendas of the BIS. The kind of information that never gets made public through official channels.
I would agree that he is a grey cardinal.

Martijn said...

What if the US kills the Dollar and switches to the Amero, or what about some sort of larger currency, e.g. an SDR, would that really be impossible, would the world really not be "that stupid"?

And does gold necessarily have to be confiscated before calling for some new (nonfloating) gold standard?

FOFOA said...


I never said that gold had to be confiscated to implement a gold standard. I don't know where you got that. I only said that the factors that work against a gold standard apply to both the official gold and the people's gold (IF it were confiscated). And I said that the act of confiscation would be "putting gold into play". But so would a gold standard without confiscation. I was addressing all possibilities.

"I was talking more generally about the ability to use inflation as a hidden tax. Al governments (those in power) have an interest in that."

This is why we will have Freegold and not a gold standard. It is much easier to inflate a pure fiat currency. I have never said we will not have fiat currencies. Only that the saving function will switch from paper to gold.

If they all agreed to a gold exchange standard that would be tantamount to giving up the inflation tax.

We will still have inflation. That is why gold will FLOAT!

raptor said...

I loved the conversations between Martijn and FOFOA, thanx guys...

Like Martjin I'm also with the impression that gov. will try to do some stupid thing like gold standard or SDR or some such thing, before they are forced to do the right thing..

On most of the blogs, video, news..etc.. most of the commentators, pundits which get it...when the talk is about honest money they almost always think/comment/end_up with some sort of gold standard...

My point is that even ppl which want to change the status quo don't think of it in terms of freeGold, but GoldStandard..
and this may put the idea into the politicians heads to try to enforce some sort of GoldStandard.

S said...


I disagree that defacto freegold is the destination. A single floating store of value is an ideal end but it is a an every day referendum on the health of the transaction fx. Furthermore globali*tion is an an engineered solution to achieve imbalance and tangible benefit. While I agree with your well reasoned logic I tend to come down on the side of richeleu.

costata said...


"A single floating store of value is an ideal end but it is a an every day referendum on the health of the transaction fx."

Doesn't the forex market do the task highlighted in bold every second already? Who is talking about a "single store of value"? Unless I have completely misunderstood Freegold it identifies gold as the "ultimate" not "sole" store of value.

The problem with the existing system is the US dollar. If it wasn't the global de facto reserve currency and it just freely floated against all other currencies the forex market might have been able to correct the imbalances.

IMHO the USD has been "weaponised" as part of the the USA's "economic warfare" arsenal.

IMO The USD has to go. What takes its place? For those of us who have taken on board A/FOA/FOFOA's arguments the answer is Euro as a "template" for how to prolong the use of fiat in transactions and Freegold as the ultimate valuation benchmark for fiat and store of value for savings.

The issuers of the fiat currencies will still be able to steal through the inflation tax but they will have to do it slowly and in small increments. Business as usual for the rest of the world and a "world of hurt" for USA citizens (and anyone else) trapped in USD paper or paper gold.

FWIW IMO the Anglo-American bankers and US Govt have pissed off the Europeans (and others?) not because they steal but because they have been so blatant and rapacious that they have put the whole fiat game at risk.

costata said...


I notice in our regional newspaper a reference to an article in the Telegraph, London.

"EU spreads wings

Fifty-four European Union embassies have opened around the world since the Lisbon treaty came into force three weeks ago. They have led to fears in London that British consular facilities could be shut down as Brussels establishes itself as a world power" (my emphasis)

FOFOA, given the widely reported imminent failure of the Euro, isn't this a risky move by the EU? (smile)

Martijn said...

I never said that gold had to be confiscated to implement a gold standard. I don't know where you got that.
I didn't, it was just a question as I was not totally sure what you were thinking. However, China - while encouraging its public to buy gold - could go on a gold standard, right?

This is why we will have Freegold and not a gold standard. It is much easier to inflate a pure fiat currency.
Somehow this argument is not compelling (to me). If ease would be the only criteria and freegold would make inflating easier, we probably would have had freegold already. Would you agree that although more difficult, confiscating wealth through inflation is easier on a (non-floating) gold standard?

I have never said we will not have fiat currencies. Only that the saving function will switch from paper to gold.
I do know and understand what the separation of exchange and value storage functions is about, and we agree on fiat not going away.

If they all agreed to a gold exchange standard that would be tantamount to giving up the inflation tax.
I'm sorry for perhaps being a bit sturdy or numb, but I do not see that point. If they would agree and give a price close enough to satisfy those offering needs, it would work for now. However, over time they could still inflate I guess, and as before many might not notice.

Martijn said...

Doesn't the forex market do the task highlighted in bold every second already?
Perhaps not. The forex market compares the health of various transaction fixes to each other, but it could just as well be a wheelchair race as an olympic hundred meters. Comparing to a floating store of value provides for the objective measure the forex is lacking at the moment.

Martijn said...

IMO The USD has to go. What takes its place? For those of us who have taken on board A/FOA/FOFOA's arguments the answer is Euro as a "template" for how to prolong the use of fiat in transactions and Freegold as the ultimate valuation benchmark for fiat and store of value for savings.
It might very well play out that way and it seems like the euro has indeed placed its bets there, but IMHO that is not guaranteed.

Martijn said...

given the widely reported imminent failure of the Euro, isn't this a risky move by the EU?

Nice one.

Andy said...

If Freegold happens, what good is a true fiat to the government? They can inflate away, but won't actually be siphoning off any real wealth since, as stated on these pages, fiat will become a transactional currency not a store of wealth. That to me is the greatest argument against Freegold.

raptor said...


Amazing....you should see this..
It is long around 1 hour..

"The Biggest Game in Town" video was produced on January 8th 2000 and then was distributed only by VHS tapes. About 8,000 originals were distributed internationally and copy/distribution rights were given whereby about 140,000 1st, 2nd, and 3rd generation copies were circulated..

Michal said...


Firstly, even under FreeGold, fiat will have "some value". That is, since you hold it for "some time", it has the value of things you intend to buy with it at the time. So, during the time you hold fiat, the fractional price inflation (and ultimately, the price inflation of gold) equals to the government siphoning away your "wealth". If they do it carefully enough, I think they can easily get away with pehaps 3-5% inflation p.a. (just as it is nowadays). Just a guess.
Secondly, governments can always print their local currencies to settle transactions denominated in these local currencies. This would, of course, result in inflation - "siphoning of wealth" - just as it is done nowadays.

When I think about it, it seems to me that there will be no (technical) difference w.r.t. printing fiat/inflation under the current system and under FreeGold. The only (real) difference is the incentive for every individual/institution/country to store wealth in real terms if you save - and the demand to lose it if you spend (if you can afford it!). I believe this is a direct result of meritocracy - a reallocation of wealth to where it is wanted and valued most.
Thus, in a way, I agree that under FreeGold governments will not be able to inflate away indefinitely - but they cannot do so these days, too! Think Mugambe and others. The US can only get away with this for so long...

Please correct me if I got something wrong or did not explain myself properly.

A side-note:
FOFOA, do you agree that, w.r.t. nation-states, FreeGold ultimately leads to either 1) prudent governments (meritocracy!) or 2) smaller governments?

To all,

thank you for a great discussion!

costata said...


Bearing in mind I am a simpleton, I think you have captured a few crucial elements in your response to Andy and others.

1. Under Freegold fiat does not go away.

1.1 ALL Govts can still issue fiat.

1.2 The ability to apply the fiat currency inflation tax still persists but it is CONSTRAINED by being made visibly onerous to the sheople if the issuer overdoes it.

IMHO gold is the most likely candidate for the role of settlement "currency" because all fiat currencies are now debt based as opposed to being redeemable in a defined physical commodity. Except for one currency.....

The US$ repayable since 1973 in oil. (For the flipside of that coin I encourage new visitors to this blog to read the writings of A/FOA/FOFOA or Topaz the recently anointed FO of FOFOA (smile).)

You cannot settle a debt with a debt. Clearly the transaction is NOT "settled" if it is not concluded/ended. With a "debt-for-debt" transaction you can only time-shift settlement or transfer responsibility for settlement to a third party.

The latter option has become a global version of the children's game "pass the parcel". In other words a Ponzi scheme.

costata said...


You may recall encouraging me to research what the BIS/ECB was doing during 2001 as part of my failed "little research project". I did.

Preliminary conclusion: gold and oil may not flow in the same direction but gold and US treasury bonds CAN flow in the same direction.

Were the Chinese PAID (in many ways) to buy US debt? Please see below.


A Judas goat is a trained goat used at a slaughterhouse and in general animal herding. The Judas goat is trained to associate with sheep or cattle and other goats, leading them to a specific destination. In stockyards, a Judas goat will lead sheep to slaughter, while its own life is spared. Judas goats are also used to lead other animals to specific pens and on to trucks.[1]

The term is a reference to the biblical character Judas Iscariot.[2]" (my emphasis)

It will take me a few days to pull this analysis together due to other commitments.

On the raw data I strongly suggest you buy some physical gold (smile).

Jimmy said...

Did ECB save Deutsche Bank from Comex gold-default?

S said...


In short, freegold is a almost perfect hedge to debasement assuming away friction costs. Any and all inflation will be reflected in the shadow hedge. It may not be a direct peg but it is a tight collar, which is exactly why it will be resisted to the end as a single suppliment. Alternativily a mix of multiple commodites that have different supply dynamics and rely on different drivers (weather, mine grades, etc) makes for a much more compelling basket as it leaves plenty of room for opacity. That is what the government is after to accommidate those "creative" solutions in your name of course.

I dont put much credence in the lawsuit andgle as 11 aircraft carriers and mnyriad other weapons as yet unknown provide and adequate rebuttal to those seeking an injunction. I agree it is a crass analysis but it is what it is.

Seems a higher likihood is a shifting set of alliances (circa WWI/II) that seek to accomidate the growing pool of voices - as in the IMF voting diffusion that has been called for by some parties.

The scarcity of gold which makes it a great wealth store is the most problematic from the governement's perspective. Without fraud, it is hard to massage fundamentals. Conversly ocnsider all the talk and speculation about weather control. If indeed you believe that gov't are working toward such ends - why wouldnt they, as the Germans in WWII were -think of the implications for harvests etc.

Seems to me an accomidation will utlimitly be reached that will allow for continued gold appreciation and a basket approach with things the US believes it can control in some part. Cap-n-Trade is one such paradigm example - an emerging market if you will and one that harnesses growth elsewhere - no wonder the mature economies are for it.

I am just not sold on the wealth reserve element, though i am in agreement that the metal is anything but the barberious relic. Freegold is an affront to central bankers the world over which is why it will be resisted with alliances and accomidations undreamed of.

What will be traded: just inventory the marque assets of each player and there in lies what is most likely to be traded away.

No doubt the endgame is approaching with the Fed and Treasury finding themselves leading into the crisis and being led out. China refutes derivatives, germany says austerity is coming, china warns US over cyberwarfare and calls the US out in an editorial this weekend in People Daily (per FT), iran continued defiance and the recent story that opposition condemed the killing of the nuke scientist as outsider meddling etc.. The cooperation is fraying and there is nothing to stop the frieght train barring another rallying cry like a.....

....terrorist attack! Curious that the warnings are going off all over the world and the Yemen angle is at the fore.

Rinse, wash, repeat....

raptor said...


A picture is worth more than a thousand words...

John said...

I have been a lurker at this site for quite some time. I have kept up with the major posters and have read quite a bit of the Gold Trail, A/FOA.
It seems that a point is being missed. Martijn has alluded to it. FOFOA is presenting the ideal but has not confronted the central question. Does freegold allow TPTB to retain the power that they already have? If it doesn't, it is certain to meet major resistance. The other thing I have noticed is that there are many new paths for hot money. The GLD and SLV ETFs just got joined by platinum and palladium. As long as there are new places for dollars to go, the current system is extended. I recommend checking the bankers viewpoint. Fiat has done exactly what it was intended to do, ie. enslave the sheeple by burying them in debt.

Museice said...

Once again Harvey Organ's - The Daily Gold answers many questions. Read his post today.

John- Gold & Silver ETF's will be meaningless if there is no physical for sale.
Something is happening and I agree that it is proceeding much more rapidly than I anticipated. I think there are people like me who feel 'enough already, let's get this over with and see what happens'. There are very powerful individual and institutions who DO NOT want to be left standing without a chair.

If we are to believe 'Harvey', and I see no reason not to, the music is ending sooner than later.

I for one am glad. As FOFOA has stated, Freegold can't be forced on the world. It is simply the next natural progression.

John said...

I guess my point is that the next NATURAL step in the progression won't happen if it doesn't benefit the current power structure.

I'm not saying to avoid preparation but rather be realistic about expectations. Personally, I own physical and have made it a point to keep myself completely debt free. I own PMs but I will continue to use other avenues as well to keep from being cornered and to help add to my acquisitions of physical.

In regard to the ETFs, I was only commenting that 2 more have been added. Hot money has more places to go. It's not just the shares. It's the options and everything else that goes with it. We all know it's not backed. Cap and trade is another hot money receptacle. The more dollars that get sopped up the longer the game lasts. (the more time to aquire physical) Another anticipated a 20th century end game. Who says that the US$ can't last another 5 or 10 years.

Gody said...


I too have contended about the same point.

Sorry FOFOA and others. It is not that I do not agree with what is being said on paper/ idea/ concept.

John - Rest assured, that we shall have a gold system like FOFOA keeps saying. It may even be freegold with some caveats that are yet unknown. What I do know is this, before Another put forward this concept, there was no such thinking anywhere (that I know of anyway). A concept can be turned on its head by introducing some other variable (don't ask me what variable, I am not that smart but I am smart enough to recognise that it is possible, and freegold can be turned on its head; it turned every other thinking on its head concerning gold didn't it?).

Finally, they will still have control, whatever form that will take.

Topaz said...

Gody, John et-al.
Who could've accurately predicted/forseen this first 10 years of the new millenium through candid observervation in 1998-2000.
911, Terrists, Afghanistan, Iraq, Sub-prime and on and on. A strange set of circumstances indeed have unfolded...
...and I'm sure a scenario A/FOA could not ...in their wildest imaginations have contemplated.
If one was a complete cynic, one could quite easily conclude most/all of the above have been occurrences contrived to deflect just such a movement to a FreeGold environment.
Have no fear though, what perhaps can't be "arranged" in a gentlemanly manner ...is about to be foisted upon us thanks to Mr Market IMHO.
As we are transported through the Zero % and into the world of negativity, a strange thing will happen. That which has "future" connotations will be discounted whilst those things "of the present" will be exhaulted.
For a time Cash will masquerade as a "present" ...but the real-isation WILL dawn that Cash is actually an indebtedness of future gererations and ...VOILA ...(with a bit of ducking and weaving) ...FreeGold.

You probably need to think about this as it needs a lot of imagination and deep thinking from this current perspective. It can (and I believe WILL) come to pass though.

Gody said...


All I can say is let us watch and see.

All I know is that; they have always had control (caveat being, not so spiritually but that is another conversation not suited for this blog). So, they have always had control and will continue to have it.

Topaz said...

The point I also meant to make in the above was that, in a Specie or Gold Standard Fractional Reserve Currency System, when the Timeline is exhausted, Systemic Yields goes to Zero ...similar to a proverbial Plane landing on a runway.
In a full blown Fiat system, the Plane lands on Water ...and can sink ie: Yields can go into negative territory as there's nought but whimsy behind the numeraire. It simply amazes me, with the $billions spent on Econ education, that no-one is taking this perspective on head first - given the fundamentals of the curve ...and having devolved to this point over the last several Years.

Topaz said...


I'd be inclined to agree ...but there seems to be a lot of "theys" though ...and they're not necessarily all on the same page.

Yes we really can but watch and see.

Tekin said...

It took me quite a long time to understand that freegold, as described by A/FOA is not only about high gold prices. Freegold, if I at last understood it correctly, requires a change of import/export regime. Specifically, the importer is required to obtain the producer's currency, before initiating the import procedure. In today's world, it means that, US would have to have Yen and Yuan in order to import from Asia. I feel that, this is the crux of the problem. In the short term, US would have to issue bonds in Yen and Yuan.

I am not sure that, at this point in the history, US would object to gold rising to freegold levels (50k-100k), while maintaining the current financial structure. After clearing past debts, dollar would start another expansion and prosperity era.

I feel that the nature of the future export/import regime is critical subject.

Martijn said...

@Topaz, Gody

Cash is indeed also a debt to some extend, although it is hardly thinkable that people holding actual cash will ever be asked to pay of that debt with their other possession, so in that sence..

And voila freegold...

As we speak governments (mainly in the US and UK) are tightening their grip on people. Cash by itself has not really been a free choice, people did not knowingly choose for it, so why would they do so with gold?

Yes, the giants are flocking towards gold, but as you say, "they're not necessarily all on the same page"; those giants might be convinced into something else, and a fractional reserve gold standard might get enforced again if some requirements are taken into account by "them".

Meanwhile, Mr. Organ is arguing per Jim Willie that the physical gold stream on the exchanges really are drying up. It is (imho) highly really to happen someday, and maybe tomorrow. The only problem is that we have heard those stories calling for "it" before, and so far everything has remained in place. Timing does remain difficult...

Martijn said...

Gold backwardation fears revisited, uh oh!

It's a good read.

Martijn said...

How Long Before the Demand for Physical Gold Blows Through the Paper Supply?

golden tube said...


I am quoting from this very interesting podcast....see what they say the "price" of gold will be! please download the mp3 and listen, then make your own mind up!

DW: Well, it’s my understanding from what Christopher Story is saying that Obama’s Executive Order has now allowed INTERPOL to be holding people at gunpoint on both ends of these Federal Reserve transactions that’re necessary to execute the lien that was put on them from China, to the effect of some... what was it? $47 trillion dollars?

BF: Yes, I am also hearing that.The Rothschild people that contacted me have made this following offer to China and the Asians, and I think it’s a good one.They want to take gold they have stashed away in the Philippines and use it to back up all the dollars that were created through honest work.

In other words, not just derivatives, you know, “funny money”, but the rest of the dollars – back them up to 1/28th of an ounce of gold for each dollar.Then they want to merge it with the Hong Kong Dollar and rename it the Hong Kong Dollar.

The reason is because 90% of the dollars ever created are owned by people who are not Americans, and they don’t want that to become worthless paper.

So, they’re trying to sterilize, get rid of all this “funny money” created by the Feds as part of their plan to take over the U.S., and then make the rest legitimate again.

Now, what the Chinese have done, and this is very clever on their part, is they took all their dollars and they bought commodities and everything physical they could get their hands on.

So, they were buying a bunch of gold futures and they were demanding actual payment in physical gold. But, what happened was the Feds didn’t have the physical gold, so they sent tungsten coated with gold because it apparently weighs... it has the same density as gold.

DW: You have to dope it with a little bit of lead, but yes, basically it’s the same.

BF: Yeah. And I’ve confirmed this with someone who reports to the Politburo, so this is not something I heard on the Internet, or something -- you know?

DW: I understand.

BF: Then the Chinese said, “No, we want real gold”, and they don’t have it.They’ve been scrambling and scrambling and they’ve been begging us for gold and we’ve been saying, “No, buzz off”.

So what they’ve [The Rockefeller faction] done now is they’ve threatened to invade Venezuela and take over the oil fields there and then cut off the oil out of the Persian Gulf.

DW: Right, the Gulf of Aden.


more of the transcript available here


Kewl said...

Nice link, but I stopped reading at:
One group centered on the British empire would like to begin construction of massive free energy facilities to remove salt from sea-water and use the resulting fresh water to turn the deserts green.
This group also wants to pay the world’s deep sea fishing fleets to stop all fishing for two or three years in order to allow the oceans to replenish themselves.


raptor said...

"Fear the Boom and Bust" a Hayek vs. Keynes Rap Anthem


SatyaPranava said...

look i consider myself a fairly open guy, and I would put more stock in wilcock than I would fulford, but does anybody on here think that fulford offers anything of value? if so, i'm really curious to hear why.

golden tube said...

listen to the mp3 download where he mentions gold !, it is possible you know ,,, even on this partisan thread

SatyaPranava said...
This comment has been removed by the author.
SatyaPranava said...

let's try that again...

here's taylor's show

SatyaPranava said...

what i had said was that i had called into jay taylor's show today with GATA guests Bill Murphy & Chris Powell, and I asked them about the potentialities of FG in their opinion.

just thought i'd pass along. i think it's about 62 mins in, just after the commercial break.

Joshua Kane said...

Hey FOFOA - I've posted a new essay at TSIBR that covers the happenings and intersections in the shadowy worlds of 2010 terror and intelligence. Hopefully you can find something useful and/or interesting somewhere within 'On The Terror Front':

SatyaPranava said...

also, i couldn't quite get the exact question i wanted to ask out articulately, after relistening, but i asked anyway :)

Mike said...

FOFOA or anyone else's opinion

i just traded in my comex silver for gold coins

what is your opinion on platinum? should i trade it in for gold or hold on.

will platinum get treated as silver in this paper exchange crash? how will the new etf work out for platinum? it seems like its another instrument like the SLV and GLD to help the bankers but platinum can't afford a big price drop because there isn't too much companies out there getting this stuff.

RJ said...
This comment has been removed by the author.
Topaz said...


Good link re: GOFO, LIBOR, Lease Rates Sir M ...and I do also hold Professor Fekete in high esteem however, to suggest this revisiting of "backwardation" in Gold is due to a desire to hold Physical Metal above all else is IMHO putting the Cart before the Horse.
What the B-ation is, is a consequence of the $US Interest rate on short-term maturities going to Zero and beyond which impacts the Gold "futures" ...ie: it's to do with PaperGold.
The "positive" side of this is that YES ...it's a better option to hold Metal under these circumstances ...and there'll be little or no Metal to market ...as rates in fact go negative.
Ultimately, this Paper-Play will morph into what we hereabouts term FreeGold.
Apart from this one display of over-exhuberance though, I reckon the Professor is getting pretty close ;-)

TomB said...

golden tube: The Fulford stuff is an interesting read but I find most of it too far-fetched. I think it's much more likely that he's suffering from a mental disease than that he's inside a secret society that feeds him incredible information.

Mike said...

hey topaz, would you have an opinion on my platinum question since we last talked?

Topaz said...

Hi Mike:
I personally couldn't find any room in my Left Boot (ref: earlier comments) for PGM's ...and my proverbial Right Boot would currently be chock-a-block with $US Cash.

golden tube said...
This comment has been removed by the author.
golden tube said...

@tomB Yes some of Fulford's stuff may be far-fetched, on the other hand the PTB have to use conduits to communicate with the sheeple and he may be one them. My main point of posting the audio download is to do with alleged Rothchild's comments re "their" gold in the philippines, the future of the $US (poss merging it with the HK Dollar) and then Gold at 1/28 oz per dollar = 28 Dollars per Oz. Would that mean that actual cash notes (as opposed to digital dollars) could have so much buying power? it's worth a discussion surely!

S said...


Could you ocmment on why you like Tulver for coins vs. say a Kitco/Apmex(lower premiums, inventory, etc)? Or is it just a swap issue?

Mike said...


sorry i forgot that you did mention that and i don t think i want to include that in my right boot. it will probably be better to replace it with gold in the left boot.

FOFOA said...


It was the swap issue.

FOFOA said...


Thank you for letting us know about your radio appearance. Interesting discussion. Here are a couple more direct links. Jump to about 59:40 in the mp3...

mp3 download

Tuesday's Show

I note also that Chris Powell seemed a little snippy toward me on this latest post.


SatyaPranava said...

fofoa, i actually recall Bill being somewhat dismissive of the FG potential yesterday in the interview instead of Chris (unless I mixed the two of them up, which I don't think i did).

I hadn't read his post regarding your more recent comments before now, but note that anonymity can definitely hamper perceptions. And he definitely seems to be drawing a line in the sand for you.

I figure anyone who is anonymous is working for Ft. Bragg, or has other personal interests that they feel might be threatened. One never knows who is in which category, however.

though his attitude seems a little terse, he also seems complimentary of your analyses, even if wanting to take claim of his "public" turf.

I wanted to follow up, yesterday, but didn't get to ask my second question; they just disconnected me. either way, hopefully it can smoke a few folks out of the caves who may have insight or speculation into the potentialities of FG.


costata said...


Any thoughts on the silver/gold ratio breaking through 65:1? Is your crystal ball showing where to from here?

I am mulling the notion of a continued short term dip in gold and silver with silver taking a bigger hit. Then one more big run for silver with it again taking the lead before the "parting of the ways" with gold as the paper gold market unravels.

In short a spec buy of silver above, say, 70:1 with a view to arbitraging into gold at somewhere around 50:1.

One last fling you might say before sitting pat on our modest physical gold and (much smaller silver) holdings to await Freegold.

Topaz said...

Embarrassingly overweight Ag-R-us at this point so I can't even BEGIN to think of a strategy.
I was all so clear 3 years ago. Ag was driving down to the teens ...and I'd migrate to Au at that point, ...too easy ;-)
I DO like Ag on it's own merit though cos (I suppose I HAVE to eh?)
...mainly because the "wrong people" don't hold much of it in great wads.

Martijn said...

Hehe, Soros: "gold is the ultimate bubble"

costata said...


Thanks mate. Been there done that. I'll figure it out.


Soros, according to Martin Armstrong, lost about $2 billion from the Russian debt default. Another said he was being worked over along with a few other people months before that event.

BTW one of the prizes George Soros "received" from the Balkans "aggresive war" and colour revolution enterprise was a gold mine with $5 billion in contained gold in the Balkans. If Freegold is a reality George might get "worked over" yet again.

frycook said...

Offered this song recently to James McMurtry as I'd really dig how he might do it. It's most fun if you read it out loud and do a sort of "Big Bad John" thing with it. Enjoy!

Better gitcha some gold
Quick as ya can
'Cause they're just about done
Playin' kick the can

Time's runnin' short
This dollar's goin' down
Git out the casino
If ya don't wanna drown

In worthless paper
And leveraged debt
And all the promises yet
To be unmet

There ain't much time
So git a move on
Like the rich folks're doin'
'Fore it's all gone

Let the bankers wallow
In their paper pit
'N let 'em know
We won't fergit

How they played us for fools
And stripped us bare
Taxed our labors
'N gave us a scare

But now we seen the truth
We seen how it works
We seen the fraud
'N we seen the perks

It was a rigged shell-game
Right from the git
'N their promise ain't worth
A bucket o' spit

So gitcha some gold
Fer startin' over again
We got re-buildin' to do
It's just a matter of when

S said...

costata said...

Elaborate on the Soros issues. Not surprising at all that Soros is calling out gold and backing the dollar (even though he thinks it is bets of worst). Given his political leanings and reflexivity or whatever the hell his Popperesque philosophy is, coming out now seems odd? Is he talking about gold or is he warning central bankers about the unsustainable risk they are taking?

idi said...

FOFOA; I would cut Chris Powell and GATA a little slack if I were you. "Snippy" may be your trite characterization of Powell's exasperation with your rather obvious assertion that "countless" gold analysts (NOW) agree (PRIVATELY) with the (GATA promulgated) hypothesis that gold is a highly manipulated commodity.

You might therefore forgive Powell's understandable sensitivity in this regard.

You should also give GATA their full due of shining light on this very issue for years, when the party was in full swing and many such "gold analysts" (and the rest of the world) scorned them and their work.

They have forged a lonely and dangerous path for years. Recognition that they are in the vanguard of this profound effort could be more apparent on this blog. Credit where credit is due.

This is not to discount your own significant contribution to the understanding of where and how this dying era will finally end.

It is the valiant band of GATA patriots (and those like them who openly oppose a dark and monolithic force)that give me the ONLY hope for the salvation of a dying Republic.


Topaz said...

Hi Martijn:
Curiously enough Soros could be proven correct here ...but, as usual, it's NOT the full story.
Those people who persist in thinking of Gold ...in Dollar terms, are "about to" learn a very harsh lesson IMHO.
Those, who are content with Gold for Golds sake, will come out the other side shaken ...but not chastened.

SatyaPranava said...

topaz, so you're of the view that the dollar will be the last one standing? or that it at least will strengthen very considerably? can you exound? i've considered this possibility, but more in the context of them manipulating paper gold's price down so as to flush out the weak physical.

FOFOA said...

Hello Idi,

It is true, snippy was a poor choice of words. I have high regard for Chris Powell and GATA and I did not mean to transmit any disrespect through my comment.


costata said...


On the Soros Balkan gold play. I cannot offer more at present.

Some years ago when I came across the article I was in the process of trying to further my understanding of the geopolitical dynamics of the Balkans and the former Soviet satellites. Then my reaction was "ah ha the payoff for the colour revolutions in Ukraine and Georgia".

I will try to find the article and any other information if I can.

costata said...


I just caught up with the last couple of posts by Harvey Organ. Wow. So many critical factors appear to have merging time lines.

On the US bank situation I am searching for an article or blog post I read just after the US Govt increased the FDIC guarrantee limits.

The author claimed that a number of US bankers had obtained sound legal advice that the terms of the FDIC guarrantee would give them legal cover in a bankruptcy to have an empty vault ie. no (as in zero) physical depositor funds on hand. The argument was that from a legal perspective the "cash" was still there in the form of the US Govt guarrantee.

If true, this would make a mockery of Sheila Bair's talk of separating depositor "funds" from other liabilities.

Together with the decision, last September, not to renew the guarrantee for money market funds and the recent SEC decision to allow the funds to freeze redemptions, you have the key ingredients for a massive bank run.

Much as it goes against the grain IMHO some physical USD (as opposed to digital) may also be a good idea for our American friends.

On another level if we think of the FRN as a zero maturity bond it suggests that physical cash supply should be tightening as the short dated Treasuries go negative. Why hold negative return securities IF you can hold physical FRN?

This simpleton wonders if the big US banks have been hoarding cash over the past few months for a) a physical cash crunch and b) a vulture play on the smaller banks.

costata said...

FOFOA and Topaz,

I just finished reading Topaz' latest posts and FOFOA's comments so I see you are both way ahead of this simpleton.

FWIW I note that the pawn shop business in the US (and elsewhere) is going gangbusters. In a recent MSM interview I learned that JP Morgan is Numero Uno in the (highly profitable) facilitation of the US food stamp program.

Forgive my cynical mind but could some of the Giants, major Wall Street players and various friends be major shareholders and lenders to around 20,000 pawn shops and payday lenders in the USA.

(Re: my earlier comment) Could locking up US citizens' cash (even temporarily) feed the small silver and gold holders into the waiting arms of their friendly local pawn shop?

Topaz said...

PoG manipulation? ...maybe upwards ...there's no need to manipulate the price when the Market is doing it for you ..is there?
Short opinion on el-Bucko ...I feel it's going higher ...but it'll keep getting whacked on the way up...by the Dollar bloc.
From a Gold advocates/FreeGold perspective, we NEED this period to come and go quickly ...otherwise, if it's drawn out, it will appear like a natural phenomenon.


FOFOA said...

Read this article from a Freegold Thought propagation perspective. Ignore the Copenhagen carbon issue, focus on the gold...

Could creative accounting solve Copenhagen crisis?
London, 28 January 2010

A professor at Melbourne Business School has called for some simple creative accounting to solve the Copenhagen impasse.

The solution hinges on creating a multi-billion dollar fund to pay for carbon reduction schemes in developing countries.

The creative accounting involves using the difference between the book value of gold held at the International Monetary Fund (IMF) and its much higher market value.

The IMF holds bullion that was valued at just US$34/ounce when 170 countries first paid their membership. Because the IMF is charged with stabilising the world money supply and exchange rates, it was decided that its gold must remain fixed at US$34/ounce.

In the Seventies, when the market value of gold—price of gold on the streets— soared to US$900/ounce, governments around the world collectively decided to revalue the gold held in the coffers of their reserve banks to match. This benefited greatly the wealthy gold holding countries.

“At the time of agreement in 1978 to abolish the official price of gold, three-quarters of the world’s reserve asset gold was owned by seven countries—the US, Germany, France, Italy, Switzerland, the Netherlands and Belgium. With central banks free to re-value their gold at market prices, the seven countries registered gains of a staggering US$358 billion. (at 1980 prices). The per capita gains to the seven countries were US$553 on average and nearly US$6000 for Switzerland.

“The equivalent figure for African countries was US$3. They held just 0.2 per cent of their reserve assets in gold.”

Sampson proposes using the US$91 billion difference between the US$9 billion book-keeping value of IMF gold and its market value of $100 billion at today’s prices as collateral for a carbon reduction fund for developing countries.

His logic is based on what he considers to be a legitimate claim of developing countries. Aid giving governments forced these countries to hold Treasury Bills (returning less than 3 per cent) instead of gold, as gold was an immutably “fixed priced” asset without return. “They were told that the dollar was as good as gold”, Sampson says. “How wrong can you be?”

“Had these developing countries held their reserves in the same proportion as the seven gold holding countries (66 per cent), they would have been US$100 billion better off at the end of the 1970s (or $262 bn. in 2009 prices).”

Sampson lists three key justifications for using the book-keeping profits of IMF gold as collateral for a carbon reduction fund.

First, he says, using IMF gold for development purposes has already been accepted. The April 2009 G20 London meeting called for IMF gold sales to provide US$6 billion in concessional finance (not grants) for the 49 poorest countries of the world.

“At best a truly pathetic effort compared to the US$150 billion for the 15 wealthiest countries,” he added.

“Second, according to the Articles of the IMF, only the US could obstruct the use of IMF gold for this purpose and finally the gold profits belong to developing countries anyway. “

Most importantly, his third reason is that the gold profits “belong to the developing countries anyway”.

costata said...


It seems to me that more and more "eyes" are looking toward gold for possible solutions. To quote a respected blogger "I can feel it coming".

Jesse at Jesse's Crossroads Cafe has an interesting piece from a recent visitor to China. He comments on how easy it is to buy and sell gold now for the average citizen.


The Federal Reserve also alluded to a revaluation of their gold when they were questioned in 2008/2009 about their balance sheet strength.

I am reading an interesting piece over at The Automatic Earth titled "Welcome to the perfect fiancial storm"


Martijn said...

Eric the Carbonnel has two interesting posts on gold leasing guys. He argues - as does some article I believe I've posted above - that gold leasing is done because the USD is basically cash-strapped.

Articles can be found here and here.

Martijn said...


We'll have to see. If Soros is right in the perspective you mention, that might just be by accident.

It is highly likely that Soros operates (at least partly) in a geopolitical inner circle. It is unlikely that he operates on his own (all the time).
The FDICs games are quite rigged, but I believe they do not believe they have an alternative.
As for the physical dollar: it does fits in Exter's pyramid and I would expect it to fare reasonably well for a while.
As for banks hoarding cash: read deCarbonnels articles I've linke above.
Harvey Organ might be on to something, but again: stories about the comex about to go bust have been ousted regularly over the past years.

Shanti said...

"Most importantly, his third reason is that the gold profits “belong to the developing countries anyway”.

Interesting observation FOFOA !

This quote, seems to connect some dots in this article:


==> The financial power is clearly shifting towards Asia

Jimmy said...

Napoleon Bonaparte talked again about a new bretton woods system...

Mr. Sarkozy also repeated that France would place the quest for a new global monetary order at the center of its agenda in its chairmanship of the Group of Eight next year. The undervaluation of "certain currencies," Mr. Sarkozy said is bad for fair trade and competition could result in protectionism. "We will not allow monetary dumping," he said.

Jimmy said...

On Davos, Sarkozy won the title of Bank Basher In Chief with a rambling, ranting and only occasionally coherent speech about why a fundamental rethink of capitalism was needed.

"I feel bearish about the United States," Roubini told delegates here. "I'm also bearish about the eurozone, especially in the periphery... take Greece but the same problems occur in Italy, Spain and Portugal where there's not just a public debt sustainability problem but there is also a competitiveness problem. They're losing market share to China and Asia and their wages grew more than their productivity."

Jimmy said...

Growth of 5.7% in Q4???

costata said...


I read the Eric deCarbonnel articles. Thanks for the tip.

Jeff said...

another rickards interview on gold:


costata said...


Re: Soros gold interests in the Balkans

I cannot vouch for the source. The original article I read was from a mainstream media source. I cannot find that article.

However, there is a lot of corroroborating material on the hidden agenda for Kosovo "independence".


"In Kosovo, for example, he has invested $50m in an attempt to gain control of the Trepca mine complex, where there are vast reserves of gold, silver, lead and other minerals estimated to be worth in the region of $5bn.

He thus copied a pattern he has deployed to great effect over the whole of eastern Europe: of advocating "shock therapy" and "economic reform", then swooping in with his associates to buy valuable state assets at knock-down prices."

Article attributed to:
NEIL CLARK / New Statesman 2jun03

FWIW I would not trust a word Soros utters, especially on gold. Give me Harvey Organ any day.

golden tube said...

Soros ?

oh, you mean this guy~


Blondie said...

Central Banks are long gold because they are short currency.


Currency printing during hyperinflation is a short squeeze on the Central Bank. The value depreciating out of the currency is offset by the value appreciating into gold.


FOA’s front lawn dump quote is the ultimate perspective with regard to fractional reserve monetary systems. Everyone will come to appreciate this, sooner or later. (smile)

To be net long physical gold is to stand ready to benefit from the arbitrage of this squeeze. To build a long physical gold position is to hasten this squeeze.

Post a Comment